Real Estate Agents The Estridge Group, Chevy Chase, Bethesda, Maryland, DC. Homes, Condos For Sale Bethesda & Washington DC Top Realtors
View Article  Home sales, prices in deep plunge

Home sales, prices in deep plunge

Realtors: Sales of existing homes fall 8.6% - much worse than expected - as median prices suffer worst decline since Depression.

By Les Christie, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- The number of existing homes sold during November plummeted 8.6% as prices plunged by record amounts, according to a closely watched housing industry report issued Tuesday.

The National Association of Realtors said that home sales dropped to an annualized rate of 4.49 million units. That was down from 4.98 in October and much less than the 4.93 million units projected by a consensus of industry analysts as reported by Briefing.com.

"The only region where we're seeing more sales are where bargain hunters are taking advantage of distressed sale prices," said Lawrence Yun, the Realtors' chief economist. "About 45% of transactions, nationally, were of distressed properties."

Yun blamed the financial market turmoil for the devastating report. For months, sales had hovered 4.9 million to 5.1 million.

"Today's figure reflects the stock market crash that began in October," he said.

The drop took place despite bargain prices as property values continued their decline. The median existing home sold for $181,300 in November, down 13.2% from a year ago when the median was $208,800.

Yun said that price drop was the largest the Realtors had ever recorded and probably the worst decline since the Great Depression.

Meanwhile, the glut of homes unsold expanded to 4.2 million in November. That represents 11.2 months of supply, at the current rate of sales, up from 10.2 months in October. Bloated inventories have barely budged over the past 12 months; last November there were 4.27 million existing homes on the market.

"At the risk of sounding like a broken record, November was another tough month for the housing market," said Mike Larson, a real estate analyst with Weiss Research. "It's not surprising considering what happened to credit markets this fall."

Existing home sales are now the weakest they have been since July 1997, and price drops have wiped out all the previous gains back to February 2004, Larson said.

Sales of new homes fared little better. They totaled 407,000 in November, according to estimates released jointly Tuesday by the U.S. Census Bureau and the Department of Housing and Urban Development. That was down 2.9% from 419,000 sold in October and 3.1% below Briefing.com's projection of 420,000.

New home sales have dropped 35.3% from last November, when an estimated 629,000 were sold.

The median sale price of new homes sold in November was $220,400, a slight increase of 0.9% from $218,400 in October. To top of page

View Article  6 Things You Should Know About the Fed Rate Cut

6 Things to Know About the Fed Rate Cut

U.S.News & World Report
Tuesday December 16, 3:32 pm ET

The Federal Reserve on Tuesday cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent. The decision signals that Fed Chief Ben Bernanke is more concerned with the rapidly deteriorating economy--which has been mired in a recession since December of last year--that the prospect of stoking inflation. "Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined," the rate-setting Federal Open Market Committee said in its statement. "Financial markets remain quite strained and credit conditions tight."

Here's how the Fed's actions affect you:

1. Fixed mortgage rates: Today's rate cut will have little if any impact on 30-year fixed mortgage rates, which are determined by factors that operate largely outside of the Federal Open Market Committee's reach, says Keith Gumbinger of HSH Associates. "Any change in the rate has little to do with long-term mortgage rates," he says. But in its statement the Fed said it could expand a recently announced program to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac that has already driven mortgage rates down to a very attractive 5.28 percent, according to HSH Associates. It also reiterated that it was looking at the possibility of buying long-term Treasury bonds. Both of these announcements could work to bring rates even lower.

2. Prime rate loans: The real impact of today's cut will be felt by consumers with loans that are tied to the prime rate, a benchmark rate that typically moves in lock step with the federal funds rate. "The only place where you would see a concrete impact at the consumer level would be things that are directly tied to prime," says Mike Larson, a real estate analyst at Weiss Research. Many home-equity lines of credit and certain credit cards with variable interest rates are tied to prime rate. As such, borrowers with these loans could see their interest rates decline.

3. Home-equity savings: Home-equity loans averaged 5.5 percent in October but dropped to 5.26 percent in November following the Fed's half-point cut. Gumbinger says he expects average rates on home-equity lines of credit to experience similar declines this time around--but not everyone will be able to take advantage of them. That's because many of the interest rates on these loans are already at their minimums, and are contractually prohibited to go any lower. So check the terms of your home-equity loan to see if you are eligible to cash in on the decline.

4. Target vs. effective: When credit markets are functioning normally, Fed rate cuts reduce banks' cost of funding, which allows them to widen profit margins and pass along savings to consumers in the form of lower interest rates. But today's credit conditions have changed all that. Although the Fed's target rate stood at 1 percent before today's cut, such funds were actually being traded in the market at much less than that--just 0.18 percent as of yesterday before the Fed's action. Although the Fed can usually control the effective rate by buying and selling government securities, the credit crisis has eroded its ability to do so. "Any juice that you would get from a funds rate cut in a normally functioning market, you're not really going to get that here," Larson says. "It's not going to lower the banking industry's cost of funds, because the banking industry's cost of funds is already below the target rate anyway." That means that interest rates tied to the federal funds rate won't decline as much as they otherwise would have.

5. Now what? Nariman Behravesh, chief economist at IHS Global Insight, expects rates to go all the way to zero in a matter of weeks. "The Fed has already cut the federal funds rate to 1 percent and is likely to take it all the way to zero by the end of January," Behravesh said in a recent report, issued before today's announcement. "Once the overnight rate is at zero, the Fed may have to engage in 'quantitative easing' [direct purchases of long-term Treasuries]." Even if it doesn't bring rates all the way to zero, the Fed signaled Tuesday that it's not about to push rates higher anytime soon. "The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time," the Fed said in the statement.

6. Expect more unexpectedness. With only less than a quarter of a percentage point left to cut, look for the Fed to get even more creative in its efforts to revive the financial markets. New programs to support different corners of the credit market could certainly be introduced in 2009. "The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity," the Fed said in the statement.

View Article  Plug Your Home's Costly Leaks Before Winter
Plug Your Home's Costly Leaks Before Winter
Pinpoint problems with an energy audit and save big bucks.

About one-third of the $2,000 that a typical U.S. household spends each year on energy goes toward heating and cooling the great outdoors. And as the price of fuel climbs, that wasted energy takes a bigger bite of your budget.

This winter, the Department of Energy forecasts, the cost of natural gas will increase by some 18% compared with last year, and residential heating oil (most commonly used in the Northeast) will rise by 23%. Electricity rates will rise 10%.

One easy way to keep utility bills in check is to do a home-energy audit. Although an audit's scope depends on the age, size and design of the house, a typical audit takes three to four hours and costs $250 to $600. The resulting report can serve as a road map to improve your home's energy efficiency and comfort.

Getting personal. My husband and I ordered an energy audit for our northern Virginia house last summer. We hired Bill Gray, of Gaithersburg, Md., an energy auditor certified by Maryland's Home Performance With Energy Star program.

Gray arrived with his black bags of tools and diagnostic equipment in the company of Glenn Dickey, technical-services director of the Maryland program. The duo then inspected our house like Holmes and Watson. For the next three hours, they peered inside and out, basement to attic. They measured our home's volume, poked their flashlights into voids, and ran tests designed to measure the efficiency of our furnace and the leakiness of our home's exterior.

The "blower-door test" provided a big clue to the results of our audit. Gray covered our front-door opening with a ripstop nylon cover, into which he inserted a large fan that depressurized the house. As I stood in the basement stairwell, I felt a door-slamming breeze rush upstairs as air was sucked into the basement through gaps in our home's exterior.

Later, on the second floor, Gray held up a thermographic scanner, which translates heat and cold into color images -- from blue to black for cold, and from yellow, orange and red to white for heat. It was a hot August day, and I could see white halos around our canister lights and the attic hatch from 95-degree air infiltrating from the attic.

When we reviewed the results, we learned that, among other things, the air flow in our house was twice what was necessary for healthful living -- the equivalent of leaving a window half-open all the time.

The fix list. The top three items on our punch list, as with most audits, are to seal the house's exterior, plug the ductwork and add insulation. Gray recommended that in the basement we seal the gap between the top of the foundation wall and the framing above it with inexpensive foam insulation (such as Great Stuff Insulating Foam, $5 for a 12-ounce can), and add fiberglass insulation to the band board (or rim joist) to which the floor joists are attached.

In the attic, he found unsealed joints in the ductwork and gaps between the drywall and framing at the tops of our second-story walls -- both common problems and a likely source of dust in our house. The solution? Several hours in the attic with a $20 bucket of duct mastic, a special sealant, and more foam insulation to seal the tops of the walls.

We also need a new attic hatch ($200) to keep hot and cold air out of our living space. Or we could upgrade our current hatch for about $35 (visit www.ehow.com and search for "attic hatch"). And we need to seal the gaps where utility hoses and lines penetrate our home's exterior (cost: $3 for a 1-pound block of Duct Seal from an electrical supplier). Thermal shades for basement windows are about $100 apiece, and replacing a leaky cellar window with an Andersen window with a low-E coating would cost $103, if we do the work ourselves. New weatherstripping around our doors will run about $50. (I'm not sure how to keep the cats from destroying it this time.)

Other items on our to-do list include a furnace tune-up, at a cost of $80. Turns out the combustion efficiency of ours is less than the rated 93%. And we're losing heat from our hot-water heater. A blanket and top cost about $25; preformed foam pipe-insulation sleeves are $3. Or better yet, because the water heater is 11 years old, we should replace it with a higher-efficiency model. A GE 50-gallon natural-gas water heater costs about $800. Beginning in January 2009, you'll find Energy StarÐlabeled gas, solar and heat-pump water heaters (about $1,000 to $2,000 installed, excluding solar).

Finally, unplugging the nearly empty refrigerator in the basement will trim about $70 a year off our electric bill.

What will it cost? We're lucky, because we made the really expensive fixes -- such as replacing the heating and cooling system and windows -- when we renovated. And we're handy, so we can do most of the work.

What it will cost you depends on your house and region, says Chandler von Schrader, an Energy Star program analyst. For example, in New York, where the state's Home Performance program has closed nearly 20,000 cases, the average job has been about $8,000; in Austin, Tex., it's been about $4,500 to $5,000; and in California, where the program is just now kicking in, up to $20,000. Those are big numbers, but you needn't do everything at once, and you'll probably get the biggest bang for your buck with the least-expensive improvements.

You may be able to offset the cost with incentives from your state or your utility provider -- typically a rebate or exemption from state sales tax on the purchase of Energy Star appliances. Under New Jersey's Home Performance program, the more fixes you make, the bigger the incentive -- usually a low-interest loan and cash back combined, to a maximum of 50% of the job cost or $5,000, whichever is less.

Incentives are listed on the Web site of your utility company, your state's Home Performance With Energy Star program and your state energy office (at www.naseo.org, click on "member center"). Or check North Carolina State University's database (www.dsireusa.org). Note that federal incentives expired at the end of 2007.

Finding an auditor. Before you call an auditor, try Energy Star's Home Energy Yardstick (www.energystar.gov). Plug in your zip code and some of your utility history (check a recent bill for monthly usage over the past year), and you'll find out how your energy use compares with your neighbors'.

On the Energy Star Web site (and probably on your local utility's site), you can try a free online audit and find information and advice on saving energy.

For a rigorous evaluation, you'll need an on-site visit. Energy auditors typically come to the job with experience in home inspection, as Bill Gray did, or in heating and cooling and other building trades.

The Maryland Home Performance With Energy Star program that subsidized Gray's training and certified him is one of 26 such programs; most are co-sponsored by a utility or state energy office (to find one, visit www.energystar.gov and click on 'home improvement' and 'home energy audits').

Home Performance auditors have a vested interest in their clients making the fixes because their continued accreditation depends on it.

Or you can try the Residential Energy Services Network (Resnet), which primarily audits and rates new homes for Energy Star certification. At www.natresnet.org, click on "consumer information" and "find a certified rater").

With the slowdown in the housing market, Resnet auditors have begun auditing existing homes. Contractors who do audits and propose to do the fixes raise the question of conflict of interest. Home Performance and Resnet auditors must disclose that. Your best protection is to seek multiple bids for the work.