Are We in a Recession?

NAR recently released their observations on the economy and the housing
market. Lawrence Yun, Chief Economist of NAR stated that we are not in a
recession and speculated that home prices in certain areas such as Miami, Las
Vegas and Phoenix could go up as much as 50% over the next five years.

Here are our thoughts on this matter:
According to the Bureau of Economic Analysis, GDP increased at an annual rate
of 0.6% in the first quarter of 2008. GDP is estimated quarterly. This is an
"advance" estimate and subject to further revision. A more complete estimate
will be released at the end of May.

According to Bernard Baumohl, 3-3.5% annual growth rate is considered the
pace the economy has to grow for people to feel prosperous. GDP figures are
released quarterly and lag behind more current monthly indicators. Even though
GDP figures are a little dated, historically, GDP growth rates have proven to be
quite different than what the market expects.

According to BEA, the last quarter’s increase in GDP is attributed to:
• Personal consumption expenditures for services
• Private inventory investment
• Exports of goods and services
• Government spending

This offsets the negative contributions due to:
• Residential fixed investment (construction of homes, etc)
• Personal consumption expenditures for durable goods

So technically speaking (according to the advance data estimates), we are NOT
in a recession. If the upcoming revision of the GDP shows a decline, we still have
to have two consecutive quarterly declines in GDP for a recession. Regarding
NAR’s forecast for home prices, our previous research indicates NAR has been
overly optimistic with their predictions in the past. We suspect that this may be
true in this instance as well.

Even if we are not technically in a recession, the market seems to think
otherwise. A survey of 52 economists, conducted in April found that 67% of them
believe we ARE in a recession. On April 30th, an NBC/WSJ consumer poll found
that 81% of Americans agree. The pros and public alike – believe we are in a
recession. Wisdom of the crowd, perception is reality, what you see is what you
get. If it’s true for you, it’s true – any way you want to posture it. We’re saying that
if it walks like one and talks like one, it is one, and we might need to face that
reality.

It May Be Time to Think About Buying a House

By RON LIEBER
Published: December 5, 2008 in the NY Times

Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.

Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.
That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.
Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.

If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.

But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.

As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas.

This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.

Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms.

When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”
The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord.

Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.

You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.

John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.

While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.”

For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.
Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”
One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.

Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.
Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.

Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.

“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”

Add Instant Charm

Source: My Home Ideas/www.MyHomeIdeas.com

Transform your home into a quaint cottage with these instant updates.

Add a Picket Fence

The big idea: Frame your cottage by installing a picket fence around your lawn. Anchor posts with bright flowers for a pop of color, or plant a climbing vine that spills over the top.
Notice the details: Pickets come in a variety of shapes and sizes. Four feet is a standard height, and the tops can sit side by side or form a gently sloping pattern.

Go Dutch

The big idea: Say hello to your neighbors--and furry friends--with a Dutch door. The swinging upper sash invites cool breezes and natural light and adds a casual and friendly feel to any entryway or kitchen.
Notice the details: Original to Netherland farmhouses, a Dutch door is divided horizontally, so the top and bottom open independently of each other. Closing the lower part creates a gate, keeping small children and pets contained.

Dress Up Your Porch

The big idea: Create a welcoming outdoor room by transforming a porch into extra living space. Approach the decorating as you do inside: Combine comfortable furniture (weather-resistant works best) and eye-catching yet durable accessories for a space that invites lounging.
Notice the details: Explore vintage shops for colorful accents, like an antique birdbath turned into an urn for flowers, to blend with outdoor fabric.

Install Beaded Board

The big idea: Cover plain walls with beaded board to add a layer of texture and cottage character. Named for the thin, rounded "bead" that separates each wooden strip, beaded board is a classic choice for traditional paneling or wainscoting and creates a time-honored look.
Notice the details: Use beaded board on a ceiling to visually lengthen or widen a space. It also camouflages damaged walls and covers up unsightly popcorn ceilings.

Install a Farmhouse Sink
The big idea: No cottage is complete without a farmhouse, or apron-front, sink. Because of its depth and wide base, the style is ideal for fitting cookie sheets and family dinner-size pots and pans.
Notice the details: A two-handled faucet that's mounted on top, like this vintage bridge-style model, swings out of the way and complements the old feel of the sink.

Paint a Wooden Floor

The big idea: Paint an overscale pattern on the floor for high drama. Whether you choose a bold, geometric design or solid wash of color, a painted floor makes a big impression.
Notice the details: Durable porch paint and a polyurethane topcoat allow a floor to withstand foot traffic. If you prefer a worn look, skip the topcoat and use latex paint that will chip and scratch naturally.

Open Up Your Shelves

The big idea: Update basic or stock kitchen cabinets by removing the doors to show off your favorite collections. Open shelves not only keep items within easy reach but they also make a decorative statements out of cookbooks and appliances.
Notice the details: Add architectural interest by applying beaded-board paneling along your shelves' back wall.

Plant a Window Box
The big idea: Hang window boxes on the front of your cottage for a romantic look. Overflowing with lush annuals and punctuated with various textures and bursts of seasonal color, these containers will seamlessly blend your house and garden and instantly boost curb appeal.
Notice the details: Proper scale is essential when adding window boxes. The planter should be the same width as the window to avoid a wimpy, barely there look.

Did I Ask You?!

Too funny to pass up! Take some tips from this guy on how NOT to do business.

10 Great Backyard Ideas

Source: My Home Ideas/www.MyHomeIdeas.com

Finished in a weekend or less, these fun, easy projects will help transform your backyard into a personal oasis.

Simple Flagstone Path

A mortarless flagstone path is a practically foolproof project.

"It's not very technical and doesn't require any power tools," says garden designer Tom Piergrossi. "Still, there's enough artistry involved to make it satisfying."


Party Umbrella

Dress up some lanterns with ribbon, add simple fabric panels to a plain umbrella, and you've created the perfect setting for a romantic dinner alfresco.

Butterfly Buffet

Fill your garden with nectar-rich flowering plants, and monarchs and other winged beauties will drop by regularly.

This 8- x 10-foot butterfly garden uses only long-growing perennials for years of easy of care.

Backyard Bocce

For after-dinner fun with friends, make like a Roman and roll bocce balls toward a target pallino.

Long familiar in places like California's Napa Valley, bocce is appearing in backyards across the West.


Storage Bench

A coiled hose is a necessary evil in a garden -- you need one, but when it's not in use, who wants to see it?

Instead, conceal one or two hoses in this handsome bench built from common 1 x 6 boards.

3 Easy Pots

Beautiful perennials can thrive for years in a single container.

Grow just one, pair companion plants, or have fun mixing a variety of complementary colors and textures.

Decorative Bricks

You can make a charming little patio like this in just one weekend.

Tuck it into a border or garden corner, where you can linger with a Sunday morning latte or an evening glass of wine.

Planter Fountain

In this simple homemade fountain, an azalea container supports a strawberry pot and hides a small water pump.

A low terra-cotta bowl forms the base and catches falling water.

Build a Beach

If distance discourages regular visits to the beach, try turning a corner of your yard into a quirky personal seashore like this one in Sunset's test garden in Menlo Park, California.

Night Lights

In his backyard ramada, artist Jeff Zischke houses candles in antique carriage lamps and ordinary mason jars.

"That flickering glow just draws people in like moths."