Friday, July 31, 2009

Fla. Tax Collections Take Hit, But it Could be Worse


TALLAHASSEE, Fla. – July 31, 2009 – Florida’s school districts could have a half-billion dollars less to spend in 2010 under gloomy new forecasts approved by state economists on Thursday.

While there are glimmers of hope in the national economy, the meltdown in the real estate market continues to drag down property values in Florida. Economists forecast that Florida’s total property values in 2010 will decline to $1.88 trillion compared to $2.52 trillion in 2007 when the market peaked.

The one piece of good news: In March, economists had predicted a much steeper decline this year and in 2010, saying property values subject to school taxes would decline by 12 percent this year and 6.6 percent next year. Instead, this year’s decline is now projected at 10.7 percent, and the decline next year will be roughly 5.5 percent.

“We’re slightly less pessimistic than we were,” says Amy Baker, coordinator of the Office of Economic and Demographic Research.

But economists warned that foreclosures and other problems in the real estate market could take a while to work themselves out before it results in an upswing in property values. The new estimates forecast that taxable values for schools won’t fully rebound until 2013.

“We’re still trying to figure out a very dynamic market,” said Bob McKee, staff director of the Senate Finance and Tax committee.

It also takes time for changes in the economy to be fully accounted for because annual tax rolls adopted in July are based on property values as of Jan. 1. The estimates adopted on Thursday could require budget cuts for school districts in 2010 unless tax rates are raised or state lawmakers pour in more state aid.

The drop in real estate values is also having another effect: A dramatic decline in the difference between what homes are worth and how much is counted toward property taxes.

Homeowners in Florida get a break on their property taxes because voters can shield some of the value of their home from taxes due to the Save Our Homes constitutional amendment passed in 1992. Annual assessment increases are capped at 3 percent or the increase in the consumer price index, whichever is lower.

Out-of-state residents and business owners in the past have complained that Save Our Homes has created an unfair taxing system that penalizes those who don’t have a homestead here.

But the gap between what homes were worth and how much is counted for tax purposes was $427 billion in 2007. Now it is just $168 billion and that gap is expected to drop to $115 billion in 2010. The gap is expected to creep back up once the economy begins to recover.

Source: News Service of Florida, Gary Fineout

Bulk Purchases Latest Condo Trend in Florida


MIAMI – July 31, 2009 – They’re lurking, holding bags of cash and eyeing distressed condo markets.

Big-time cash investors are snapping up South Florida condo units in bulk. There have been at least seven purchases of 10 or more condos this year, including four since June, according to county records. Investors are re-selling the units or renting them until the market recovers.

Last month, Tom D. Sullivan and Jorge Arevalo shelled out $14.6 million for 51 oceanfront, condo-hotel units in the One Bal Harbour complex from developer WCI Communities, which is reorganizing under bankruptcy protection.

“It didn’t take 10 years of research to see it was a pretty good deal,” said Sullivan, founder of Lumber Liquidators Inc.

That’s because existing condo prices in Miami have fallen by half since the peak in December 2006, and investors think they see the bottom. There’s also plenty of selection. Miami has a two-year supply of condos for sale, at the current demand, according to the local Realtors associations.

Since 2003, nearly 23,000 units have been built or are still under construction in greater downtown Miami, said Peter Zalewski, a principal with Condo Vultures Realty. In June, developers were still holding about 9,400 units, he said. Banks own about 5,000 local homes and condos.

Desperate to get them off their books, banks and developers are auctioning off Miami condos by the dozen. That’s where investor Ed Pascoe, an antiques dealer, snapped up 56 units for $4 million in a 135-unit building in February.

This month, he started offering the units for rent at $1,000 a month, or for sale from $99,000 to $299,000, according to his broker Brian Carter. Pascoe declined to comment.

By paying monthly fees on time, these new owners can be a financial relief for homeowners associations struggling to cover the costs of maintenance and insurance in a building dotted with empty units. While lenders and developers are obligated by law to keep up with association fees, it doesn’t always happen.

The cash for some of these deals is coming from groups of private investors. One multibillion-dollar firm, Contrarian Capital Management LLC in Greenwich, Conn., is looking closely at bulk purchases in Florida, according to Gil Tenzer, the firm’s real estate portfolio manager.

He’s not the only one.

“We’re getting much closer on several deals,” said Jay Massirman, managing partner of Rivergate Residential, a Miami-based real estate investment firm. Massirman said he has researched dozens of bulk purchases for investors.

Unlike the condo investors of the boom years, who borrowed recklessly with the intention on flipping the units within months, more investors today are using cash and thinking strategically.

“They have the money and the knowledge and wherewithal to hold them until the market turns around,” said Jennifer Drake, a real estate attorney with Becker & Poliakoff.

Talk of bulk condo purchases has reached San Diego, where “there’s some scurrying about in the local market on the part of investment groups who have explored the idea,” said Gary London, president of The London Group Realty Advisors.

And, if values stay depressed in troubled condo markets like Phoenix or Las Vegas, developers and banks could make bulk deals with cash investors at a discount to unload their unsold units. So, for now, Florida is the testing ground, and investors with deep pockets are watching.

Tuesday, July 28, 2009

Your Credit Report - Helpful Tips for Home Buyers

by Brandon Cornett

When was the last time you saw a copy of your credit report? Do you know your credit score? Do you even know if it's good or bad?

If you can't answer these questions, you have some homework to do -- especially if you're planning to apply for a mortgage loan in the near future.

Here are some step-by-step instructions to help you obtain your credit reports, review them for accuracy, and correct any errors you come across.

Step 1 - Understand how your credit affects you.
When you apply for a home mortgage loan (or some other major purchase), you can be sure your credit will go under the microscope. Mortgage lenders will analyze your credit to find out what risk category you fall into.

When your credit score is high, your risk factor is low. In this scenario, you'll have a good chance of qualifying for a loan. But when the opposite is true -- low credit score and high risk factor -- you could have trouble obtaining a loan.

Credit reports are maintained by three credit reporting companies (sometimes called credit bureaus or agencies): Experian, Equifax and TransUnion. Your credit score is based on the information contained in these credit reports. Three agencies, three reports, three credit scores ... all about you!

Step 2 - Request copies of your credit report.
According to the Fair Credit Reporting Act (FCRA), you are entitled to one free credit report per year from each of the credit reporting companies -- Equifax, Experian, and TransUnion. To request your credit reports from all three companies, visit www.AnnualCreditReport.com, or call 1-877-322-8228.

If you request your report online, you should have access to it immediately. If you request your credit report through the toll-free number, it will be processed and mailed to you within 15 days.

Your credit report will not come with a credit score, so you'll need to purchase this separately. You can obtain your credit score by visiting www.MyFICO.com. This website is owned by Fair Isaac's, the organization that converts your credit reports into credit scores. Here's a quote from Fair Isaac's:

"FICO scores are your credit rating. Most lenders base approval on them. You have three FICO scores, one for each credit bureau, and you can only get all three from myFICO."

Step 3 - Review your credit reports for errors.
Examine your credit reports closely for any errors or inaccuracies. Make sure your personal information is correct and up to date. Check for loans or lines of credit that aren't yours, as this could be an indication of credit fraud. Anything at all that seems out of place, write it down for further investigation.

Step 4 - Start the correction process immediately.
Under the Fair Credit Reporting Act (FCRA), credit reporting companies are responsible for correcting inaccurate or incomplete information in your credit report. So don't hesitate to exercise your rights under this law.

If you only find errors on one report (for example, the one provided by Experian), you only need to contact the company associated with that report. Visit the company's website to find instructions on how to begin the correction process. By law, each credit reporting company must publish their correction requirements.

You can find these instructions on each company's website:
www.experian.com
www.transunion.com
www.transunion.com

Tell the company in writing what information is inaccurate. File a copy of your initial request, as well as any subsequent communication (such as their response to you). Start a folder and label it with "credit report" to keep your documents together. Keep the folder secure, as it will obviously contain sensitive information.

Home Buying Steps - 10 Basic Steps to Buying a Home

by Brandon Cornett

This tutorial is designed to teach you about the various steps to buying a home. Though the home buying process differs from one buyer to the next, there are certain home buying steps that most buyers go through.

So without further ado, here are the home buying steps you are likely to face during your home buying process. (This sequence may be slightly different for you, based on your own unique circumstances.)


Step 1. Examine Your Finances

One of the first home buying steps should always be a good review of one's financial situation. You can bet that a mortgage lender will put your finances under the microscope, so you should do the same. The articles below will teach you how to judge your buying power and review your credit situation -- two very important steps to buying a home.



Step 2. Choose a Type of Mortgage

Generally speaking, the next home buying step is choosing a type of mortgage loan. This part of the home buying process requires careful consideration on your part, because your mortgage will stay with you for some time (until you sell, refinance or pay the mortgage off). The articles below will help you negotiate the all-important home buying step of mortgage selection.



Step 3. Get Pre-Approved

There are actually two home buying steps rolled into one here, but there so closely related I've listed them together. Our next step to buying a home will be choosing a mortgage lender and getting pre-approved. Pre-approval will help you immensely during the home buying process. For one thing, it will show sellers that you are serious about buying their home (and financially capable). This can make a big difference in whether or not they accept your offer.


Step 4. Find a Real Estate Agent

Continuing along in our steps to buying a home, we will need to find a qualified real estate agent to help us through the remaining home buying steps. The home buying process can move pretty fast, and there's a lot at stake financially. So having a skilled agent on your side can help you avoid making costly mistakes, especially if it's your first time buying a home.



Step 5. Choose a Neighborhood

Some buyers will neglect this particular home buying step, rushing off to look at houses without doing the proper research on neighborhoods. Which neighborhood you choose is almost as important as which home you choose. Neighborhoods have a direct influence on quality of life, social and recreational satisfaction, property values, commute time, educational opportunities and more. So doing a little neighborhood research is a crucial step to buying a home.



Step 6. Start House Hunting

Let's review our home buying steps up to this point. You've got your finances in order, been pre-approved for a certain type of mortgage, found a good agent, and narrowed your search to a few select neighborhoods. Excellent! You're ready for one of the most exciting steps to buying a home -- the house hunting process. Here are some tips to help make your experience a good one.



Step 7. Make an Offer

Once you find a home you like, you'll need to make an offer on it. For this home buying step, work closely with your agent to determine a reasonable offer amount based on recent, comparable sales in the area (referred to as "comps"). The articles will below will give you a good base of knowledge and make you more comfortable with the offer process.



Step 8. Get a Home Appraisal

To be honest, there's not much you need to do for this next home buying step. Your lender will arrange for the appraisal, and you basically have to stand by and watch (while hoping that the home appraises for the price you've agreed to pay).




Step 9. Get a Home Inspection

The main home inspection is one of several inspections you should have done on the home. A home inspection is an important home buying step that should not be skipped. After all, it will give you the peace of mind of knowing what condition the home is truly in. Read the articles below for more information on this crucial step to buying a home.


Step 10. Settlement / Closing
The period between offer acceptance and the final settlement is known as escrow. You've probably heard somebody say, "My house is in escrow." During this part of the home buying process, you might have additional inspections (for radon, pests, etc.), and you'll likely have some more paperwork to finalize as you move toward the closing / settlement date. The articles below will tell you what to expect leading up to and during the settlement process.

Friday, July 24, 2009

Is Sarasota Inventory Really Dropping? No.


If you read the papers you see data that reflects the answer to this question is, yes. Data shows inventory level is down and there is a small squeak of an increase in price. What this does not reflect is the moratorium that was enacted in December 2008 restricting lenders ability to file for foreclosure.

Well that flood gate has been opened and we can expect a new wave of sweet deals coming to the market place. Yes, it's unfortunate that it is happening but more importantly if you are the kind of person who can see opportunity in chaos you can find yourself buying property at prices from nearly 2 decades ago.

- Dill
Search Properties

Monday, July 13, 2009

Mortgage Defaults: Many Are Intentional, Study Finds


Tuesday, Jul. 07, 2009 / By Barbara Kiviat

Up to 26% of U.S. homeowners who stop paying their mortgage may be doing so intentionally, not because they can't make the payments but because they don't want to put money into a house that's worth less than what they owe. That finding, from a paper by economists at the University of Chicago, Northwestern University and the European University Institute, raises some doubt about the approach the Obama Administration has taken toward stabilizing the housing market. The current approach focuses on whether or not homeowners can afford their monthly payments, and largely ignores the fact that some 20% of homeowners owe more than their house is worth — a situation known as negative equity, or being "underwater," which, according to the paper's findings, may itself trigger default.

The paper's authors caution that their statistics are not exact and should be taken primarily as an indication that there is a looming problem, one that needs to be addressed. The 26% figure comes from a series of consumer surveys that feed into the Booth Chicago/Kellogg School Financial Trust Index. In December 2008 and again in March 2009, 1,000 people were surveyed and asked, among other things, if they knew anyone who had defaulted on a mortgage, and if they knew anyone who had defaulted on a mortgage even if he or she could afford to make the monthly payment. By taking the ratio of the two answers, the economists calculated that more than a quarter of defaults are, as they put it, "strategic." (Read "Home Sales Perk Up, but Expensive Houses Languish.")

"They can still afford to pay but they decide not to," says Paola Sapienza, a finance professor at Northwestern University and one of the paper's authors. "It's very easy to do this in the U.S." Even though there are serious consequences to reneging on a home loan — including wrecked credit, not being able to buy another house for years to come, the cost of moving and the social stigma associated with being a person who does not honor one's commitments — lenders tend not to pursue former homeowners for the money they are owed because of the prohibitive cost of tracking down such people and suing them.

Notably, other survey data included in the paper suggest the percentage of intentional defaults may be much lower than 26%. The researchers also asked if respondents themselves would welsh on their mortgages if they were $50,000 underwater. Among the people for whom $50,000 represented less than 10% of their home's value, none would walk away. However, once $50,000 represented between 10% and 20% of the house's value, 5% said they would walk away, and when the shortfall reached 50% of home's value, a full 17% said they would. (See "Renting a Modernist House.")

When the shortfall amount in question was $100,000, the walk-away responses accelerated at a faster rate. Some 7% of people said they would intentionally default when a $100,000 shortfall represented less than 10% of their house's value. Once that shortfall represented between 50% and 60% of the home's value, an entire 25% of respondents said they would walk away. The hesitation to intentionally default when the theoretical amount of negative equity was $50,000, even when representing the same percentage of a home's value, may relate to the high fixed costs that come with walking away, such as moving.

What is not clear is how the survey results map onto what is actually happening in the U.S. today. It is true that in some areas of the country homes have lost half their value. It is also true, according to data aggregator First American CoreLogic, that there are five states where more than 30% of mortgage holders are underwater and another 15 states where at least 15% of homeowners are. However, this sort of data does not indicate how much homeowners are underwater — or their attitudes about future home prices. If a homeowner believes house prices will recover during the time he intends to live in his house — which could easily be 10 or 15 years — then the incentive to walk away stops making sense from an economic perspective.

Christopher Foote, a senior economist at the Federal Reserve Bank of Boston, who studied negative equity in Massachusetts during the late 1980s and early 1990s when home prices dropped 23%, argues that most walk-aways are likely driven by the combination of two things: both negative equity and an economic hardship, such as job loss. (See 10 ways your job will change.)

More recently, Foote and his colleagues have studied patterns of mortgage nonpayment, and found that in certain states there is a disproportionate number of people who suddenly stop making payments and never try to catch up. This, they surmise, might be an indication of walk-aways — as opposed to struggling borrowers desperately trying to stay in their homes, making payments when they can. The states with more sudden stops are California, Florida, Nevada and Arizona — places where property prices have plummeted and more than 30% of homeowners are underwater. "That's consistent with the idea that there should be more walk-aways in those states," says Foote. "But outside of those states, I would think that walk-aways are more rare than people think."

Data from the new paper also point to the likelihood of mass walk-aways being a highly localized event. Sapienza and her colleagues plotted data on late mortgage payments and home-price declines and found very little relationship between the two when house prices in a metropolitan area had dropped less than 20% from their peak. However, once prices had fallen more than 20%, a disproportionate number of people wound up behind on their mortgage payments, even when the unemployment rate (a measure of means to pay) was held constant.

The research also suggests that social cues can play a large role in deciding to walk away. The researchers found that even though 81% of people surveyed considered it immoral to intentionally default, those respondents who said they knew somebody who had were nearly twice as likely to say they themselves would. People who live in areas with high foreclosure rates were also more likely to say they'd be willing to walk away. "Once you see everyone else doing it, maybe the stigma goes down," says Sapienza. "It's also possible that there's a multiplication effect: if I know other people are walking away, the value of my house deteriorates." Which then would create the problem anew.

Saturday, July 11, 2009

Real Estate Funnies: County Property Taxes

This one cracked me up... scroll down... - Dill

YOUR HOUSE AS SEEN BY... YOURSELF:

YOUR BUYER:

YOUR LENDER:

YOUR APPRAISER:

YOUR COUNTY'S TAX ASSESSOR:

Home Again: After Two-and-a-Half Years, Teardown is Complete

Advice for those brave enough to invest in home improvement.

By NANCY KEATES THE WALL STREET JOURNAL

It's a wrap. Thirty months after making the decision to tear down and rebuild, my husband and I have moved into a brand new house on the lot where we lived for 10 years. Moving into a new house is like coming home to a gift–though one we will pay dearly for every month.

The new house is 1,000 square feet bigger and 50% more expensive than we initially planned. And the housing crash and the recession have made the decision much riskier. But being intimately involved in the design and construction of our home is an unparalleled experience–and a challenge I would gladly take on again.

We now have a house big enough (five bedrooms, three bathrooms) for our two sons to run around in the winter when the rain in Portland makes playing outside difficult; and we have a guest bedroom where our parents and friends can stay.

For this final Teardown Diary column, I offer lessons learned and advice for future home builders and renovators still willing to invest in home improvement in this uncertain environment.

Assume the final bill will be at least 50% more expensive than the initial calculations. Even though most home-building books and Web sites warn this will happen, it can be hard for novices to believe that individual cunning or just plain frugality can't make an exception. It isn't just one aspect of the process that causes the bloat. It is everything from the design getting more ambitious, to the price of materials going up and dealing with miscalculations by a contractor or architect. Cost overruns also come from the little decisions adding up: When faced with an option of slightly more expensive but significantly better performing fill-in-the-blank (water heater, windows, alarm system, etc.) most people choose to upgrade.

Decide if you want an architect who is passionate about the project. Our architect, Dave Giulietti of Giulietti Schouten, is said by other architects to be one of Portland's best. He did an excellent job explaining the design steps, figuring out what we wanted through an extensive questionnaire and helping sort through our wants and needs. The house he designed for us is beautifully sited and exactly what we asked for (though we all could have worked harder to keep the size down). (See photos.) The rooms are proportioned so they aren't too big or too small, the ceilings are high enough (10 feet on the first floor) without feeling cathedral. Whenever the contractors had a question or some detail wasn't fully worked out, Mr. Giulietti stepped in to take care of it.

The new house (right) is on almost the exact same footprint as the old house (left). It is just two stories taller. The yard and landscaping did not change.

But we never felt Mr. Gulietti's heart was fully in our project. His firm handles all kinds of architecture, but its pride is its contemporary designs. Drawing a Colonial–what is essentially a "period piece" as one worker called it–isn't his dream. A week after our home was finished, a card came in the mail from his firm advertising its new and in-progress projects. They were all modern and there was no mention of our house. Mr. Giulietti's response: "I certainly enjoy designing modern houses more. But the mission that I built the firm on is to provide good design and architectural services to our clients, no matter the size, budget and type of project…" Passion in an architect can make the project more exciting. But it has a downside: Sometimes architects take over and don't listen to the client's needs, resulting in a design and a final price that is way off base.

Check the contractor's references. It is amazing how many people are told that the right contractor is the keystone for the building process–and they still don't check references carefully or ignore previous homeowners's complaints. All the self-help books on building and renovation say the most important decision is to find a good contractor. We asked everyone we could find who had used JDL Development and never heard a bad word about them. They came through for us 100%.


Of course JDL isn't cheap–they charged us a 17.5% fee. It is possible to find contractors who charge a lower percentage or a fixed price. But in my opinion it is more cost effective to splurge on the security of knowing that someone is looking after every little detail to make sure it is done right than to scrimp on the contractor and spend more on materials or finishes. Our project managers, Dave Lyons and Ron Boersma, built our house as if it was their own. Now, four weeks after move-in, Ron has been available to help solve problems like the squeaking garage door and an incorrectly placed shower head.

Read the fine print of the loan agreement.Some readers gave me a hard time when I ("a financial journalist!") complained I didn't know when I signed our loan--which covered construction through to permanent financing, or home mortgage--that the bank could change its mind and not extend the loan amount it said it would. We didn't see the final contract until we were in the title office, faced with hundreds of pages of tiny type in unfamiliar language punctuated by dollar amounts that didn't always add up. It was confusing and frightening and I would never go into that again without the help of a real estate attorney.

When the housing market tanked and credit froze, banks started changing their lending guidelines. We worried the appraisal of our property at completion would show its value had declined from the initial appraisal because of the overall drop in housing prices.
Luckily the value of our home actually increased and Wells Fargo came through, extending a 30-year fixed Jumbo loan for 6.5%. It is higher than some Jumbo loans out there. One mortgage broker said if we could get that rate for a Jumbo we should take it; another said he could find us one for 6.25%. But we had started the process with Wells Fargo, formed good relationships with the loan officers and had already handed over reams of financial statements. Others haven't been as lucky, getting stuck with construction loans they cannot convert to permanent financing.

Ask anyone and everyone about their construction experiences. It was by accident one evening at a cocktail party that two women told me how bad window installations had caused leaking and structural problems in their new homes; they gave me a list of questions to ask my contractor. It turned out the subcontractor had cut some steps in installing our windows.
I quizzed neighbors and friends who had built or remodeled their homes about their mistakes and good decisions. One sat in on a meeting with me between the contractor and the heating and air company to determine the best system for our house. She also took a look at our initial design and suggested moving the first floor playroom to a part of the house where the mess they inevitably create wouldn't be visible from the front entry. Another friend pointed out that the color options the designer had chosen for our walls were not the kinds of colors I had really liked when I showed her magazine cuttings. She spent hours with me finding just the right hues–and also gave me all her favorite lighting catalogues.

This kind of sourcing can go beyond acquaintances. When I saw a new house built to look like an old Colonial in another newspaper, I called the architect to get the exterior paint color. Just one call to the owner of a pretty home on a design blog on the Internet opened up a new world of tiles. Confused by conflicting information from different types of insulation manufacturers prompted a query to the government agency in charge of testing insulation.

Don't be afraid to read and learn about subjects that seem intimidating. When we first started, as I wrote back then, I didn't know the difference between a Colonial and a Tudor. I certainly didn't know about the existence of on-demand water heaters or that most home insurances won't cover for earthquakes if you have a slate roof. I learned: For example, it is necessary to understand how different types of insulation work in order to make the cost benefit decisions that will work best for your budget and your house. Different roofing materials are appropriate for different climates and environments. An on-demand hot water heater might or might not make sense for the way your family uses water.

The same principle holds true for design decisions. There may be some innate talent in choosing how one color plays against another in the placement of living room furniture. But there's also a logic that is learnable; and the more you study it, the more you understand.
Read, study, ask, listen, watch–those are the golden rules of home building. The other truism is that the first time is just practice. Now we are really ready to build a new house.

Wednesday, July 8, 2009

Cracked Houses: What the Boom Built


By M.P. McQueen THE WALL STREET JOURNAL JULY 8, 2009

Robert and Kay Lynn lay in bed shortly after closing on their new home in the Blue Oaks subdivision in Rancho Murieta, Calif., abutting an 18-hole golf course. They were listening to the “pop, pop, pop” of what they thought were acorns falling onto the roof.

The Lynns soon realized those were not acorns dropping on the roof.

“Little did we know it was the house cracking,” says Mrs. Lynn, 67 years old. Mr. Lynn, 68, says they bought the property in 2002 for $357,000 as a weekend home and an investment. The stucco house was moving and shifting, with part of it subtly pitching toward the golf course, resulting in cracks and fissures in the walls, ceiling and floors, the couple says.

Many of their neighbors say they had similar problems. In the Sacramento Valley subdivision of about 250 houses, more than half the residents have reported some type of flaw. The Lynns and dozens of their neighbors last year filed construction-defect lawsuits against the builders, and the lead case is expected to go to trial next week. They are seeking enough money to permanently repair the houses, a figure expected to total millions of dollars.

A spokeswoman for the builders, Reynen & Bardis Development LLC, said they would have no comment pending litigation, but a response the company’s attorneys filed with California Superior Court said time limits for some of the plaintiffs’ claims had run out.

Whatever the outcome of the case, hundreds of thousands of people from

California to Georgia say their almost-new homes need costly repairs because of construction defects. The furious pace of home building from the late 1990s through the first half of the 2000s contributed to a surge in defects, experts say. It caused shortages of both skilled construction workers and quality materials. Many municipalities also fell behind inspecting and certifying new homes.

At the height of the boom in 2005, more than two million houses were built in the U.S., according to the National Association of Home Builders, a trade group. Criterium Engineers, a national building-inspection firm, estimates that 17% of newly constructed houses built in 2006 had at least two significant defects, up from 15% in 2003.

Residential construction-defect claims filed with insurance companies in the current housing slump have been receding, “but the ones that are being filed are pretty severe in terms of the total damage alleged,” says Paul Amirata, vice president of claims for Axa Insurance Co. in New York, a unit of AXA SA.

James Wadhams, a Nevada lobbyist who represents builders and insurers, says homeowners are filing lawsuits mainly because home inspectors and attorneys are “prospecting” in new subdivisions. Like California, Texas and Florida, Nevada experienced a surge in construction-defect claims in recent years.

Because of tumbling real-estate values, those stuck with faulty houses say repairs often cost more than the homes are now worth. Many say they can’t refinance their mortgages or sell, and they have no equity to leverage for repairs.

Defects are also a concern for those shopping for a home. Owners generally are required to disclose housing defects to potential buyers. Buyers of new homes should scrutinize purchase and warranty contracts with a real-estate attorney, with special attention to arbitration clauses and liability releases.

One of the best defenses against buying a defective house is a thorough inspection by a state-licensed building-inspection engineer, experts say.

Charlene Croal, 34, a consultant, says it would cost $228,000 to fix her nearly nine-year-old house in North Branch, Minn., though the house would be valued at only $190,000 today if it were in good condition. Its interior is riddled with mold because of water seepage, partly caused by a faulty roof and poorly installed windows, she says. She and her husband relocated their family of seven because of health problems linked to the mold, says Ms. Croal, who did not name the builder.


Owners of defective properties say they’re finding it even harder to get repairs now because of rising builder bankruptcies. Some builders, especially smaller ones, also carried inadequate liability insurance, construction experts say. Other homeowners say they are hamstrung by mandatory binding arbitration clauses in purchase contracts and new-home warranties, as well as “right to cure” laws, which require homeowners to notify builders and give them a chance to remedy a defect before the homeowners can file a lawsuit. More than 30 states have some type of right-to-cure legislation, according to the home-builders group.

The NAHB says it “strongly supports” the option of using “alternative dispute resolution including mandatory, binding arbitration in consumer contracts,” saying litigation is an inefficient means to resolve construction-defect disputes.

In Rancho Murieta, residents say they just want to save their homes. It turned out that much of Blue Oaks Estates was built on clay soil that expands in the rainy season and contracts in the scorching summers, the builder, Reynen & Bardis, acknowledges. This is damaging the homes’ foundations and subtly twisting the frames, causing homes to slowly pull apart—as evidenced by cracking floors, walls and ceilings, separating gutters, and jammed windows and doors.

At first Reynen & Bardis made numerous attempts to address the problems, repurchasing about 50 houses, and installing new drainage systems and foundation underpinnings on scores of others, the company says. But it stopped making repairs on houses in the subdivision in November 2007, saying it could no longer afford them.

By law in California and many other states, builders are on the hook for certain new home defects for up to 10 years, depending on the circumstances and state laws.

In April 2008, John D. Reynen, co-owner of the firm, filed for personal bankruptcy protection, saying he owed creditors nearly $1 billion. Months later, his partner, Christo Bardis, also filed for personal bankruptcy. The partners had personally guaranteed hundreds of millions in bank loans to buy thousands of acres of land for development from Bakersfield, Calif., to Reno, Nev. None of the business entities of Reynen & Bardis is bankrupt, says a spokeswoman.

Even Rancho Murieta residents whose homes are OK say they are being affected. Michael Yager, 61, a retired real-estate agent and firefighter, says his bank would not refinance his mortgage unless he paid for a $7,000 engineering study certifying the house is structurally sound. Mr. Yager’s home was built later with a different type of foundation and hasn’t had problems.

“It’s given the whole community a bad name,” he says.

Mr. Lynn, a retired bank executive, says losing money on a defective house was worse than losing retirement money in the stock market.

“The one thing that won’t get better is this house, which will always have foundation problems,” he says. “It has driven me from retirement to doing part-time work at the golf course, and I thought I was financially stable for the rest of my life.”

Rip Out. Remodel. Repeat.


By Teri Karush Rogers, New York Times

KELLY GIESEN is three months into her second New York renovation in five years — a 10th-floor one-bedroom across the street from the American Museum of Natural History — and she is already dreaming of taking on another, bigger project in the same building. This is on top of the three renovations she did in Baltimore over the previous 10 years. Ms. Giesen is well acquainted with the unpleasant side of home remodeling, like her recent two-day stint scouring blackened porcelain in the bathroom and vomiting in reaction to chemical fumes. And she admits that renovation “definitely disrupts your life a little,” preventing her, for example, from bringing home a potential boyfriend.

Still, she finds the process invigorating. “I would never buy a ‘done’ apartment,” she said. “This way I get everything I want. I like to do it from soup to nuts.” Each day of a renovation, she added, is like a treasure hunt. “Sometimes you’ll come home and the doors have been done or the floors are done or the ceiling has been chipped back,” said Ms. Giesen, 40, who works in marketing and sales at Pfizer in Manhattan. “It’s the hint of progress: I’m one step closer to getting into this bathroom.”

As torturous as home renovation is for most people — its pain is often likened to that of childbirth, and most of those who go through it avoid doing it again for years, until the worst memories have faded — there are some, like Ms. Giesen, who cannot get enough of it. Like the people who move from Botox injections to eyelifts to cheek implants, there are renovators who become more than a little compulsive about the work they are doing, and who pursue their ideals through a never-ending series of projects.

“When you’re in the middle of one you’ll swear you’ll never do another because every house has its problems,” said Greg Kristiansen, 41, an interior designer at the Hunt & Gather home furnishings and accessories store in Portland, Ore. Mr. Kristiansen has redone a half-dozen homes in the past decade. He and his partner, Jerry Hagerman, 41, a contractor, are almost finished with their second project in 10 months. Mr. Kristiansen said he loves hearing praise from neighborhood residents when a house is done. “And, of course, you sell it for three times what you paid,” he added.

“For me it’s always been this elusive concept of getting it right,” said Christopher P. Wilson, 47, a director of operations for the Manhattan real estate firm Stribling & Associates, who has been renovating every 18 to 36 months since he was 23. With each project “you think you’ve been cured of the bug and this is the one you’re going to get perfect,” said Mr. Wilson, who is finishing a house in East Hampton, N.Y., and a condo in Ft. Lauderdale, Fla. “But you move in and nothing is ever perfect. It’s almost like an addiction you can’t shake.”

“Almost” may be putting it mildly. Most of the decorators, architects and contractors interviewed for this article said that serial renovators are far outnumbered by serial decorators, for reasons having to do with budget and time constraints. But they also said that the numbers of both groups had multiplied in recent years along with the explosion of home-improvement magazines and TV shows, the real estate boom and the heightened nesting instinct that many attribute to the social anxieties since 9/11. And there was agreement among many that some serial renovators go too far for their own good.

“I’ve had a few clients over the last 20 years that basically, as soon as you’re done, they say, I’m going to live with this for six months and then change it,” said Lee J. Stahl, the president of the Renovated Home, a design and contracting firm in New York. The life expectancy of a high-end kitchen or bathroom is about 20 years, he said, but some clients are not interested in waiting even a fraction of that. He recalled one who asked him to “rip out” a bathroom that had been remodeled for $75,000 less than a year before. Like a plastic surgeon, he said, in cases like this he sometimes has “to say no, there’s nothing wrong with their nose,” even though “they might go somewhere else — they might go to someone more driven by the dollar than the reality.”

The serial renovator does not seem to fit any single profile, but Mr. Stahl said he has observed patterns among the renovators he encounters in his work. They are often creative industry types, he said, typically between their late 30’s and mid-50’s. Many have never had children or are empty-nesters, he added; the all-consuming needs of a child can impede the impulse to build.

Theories about the causes of serial renovation abound. Mr. Stahl cites the need of certain people to “make sure they have the latest and greatest thing all the time,” but also the social dimension of the habit: “They’re bored. They become attached to us; they don’t view us as contractors. They view us as their inner circle.”

Irene S. Azar, a Manhattan psychotherapist, sees a link between the serial renovator’s need to “do it over and over again” and the compulsive behavior of other groups — workaholics, say, who use work to avoid addressing festering issues in their lives. (And, as with other compulsive behaviors, the patterns may form early: many serial renovators, including Ms. Giesen and Mr. Wilson, said they moved frequently during childhood.)

Ms. Azar is echoed by Heidi Semler, an interior designer in Portland, Ore., who has observed that “there are a lot of people who may have other things in their lives that aren’t working who put a lot of energy into making their house perfect.” And Kevin Harris, an architect in Baton Rouge, La., who says he has worked on some 380 renovations in the last 25 years, has often noticed how seductive and addictive the cause and effect aspect of renovation can be for his clients. “You can get up in the morning, talk to the carpenters and say, ‘I’d like this to be done,’ and when you come back it’s framed up and you feel like it’s the pyramids — it’s that power, that rush,” he said.

MS. GIESEN, certainly, seems compelled by that daily one-step-closer feeling, and by the larger drama of transformation involved in renovation. “It’s taking something that’s awful and turning it into something beautiful,” she said.

When she visited her new apartment with a friend in April, just before the closing, they found towers of junk, a stomach-churning stench and “thousands of roaches” (in addition to the dead ones stacked six inches deep in the cupboards). “It looks like a crime scene,” the friend remarked about the dwelling in the otherwise pristine building.

But Ms. Giesen went ahead and paid $700,000 for the place, and set about transforming it into what she says will be a soothing taupe-and-cream throwback to old Hollywood glamour, with a mix of French-style antiques and contemporary details like the rippled linen curtains that will hang around her bed on a ceiling-mounted track. (Her last project, a studio down the hall, consumed $75,000 in renovation costs and months of her life, and was recently featured on HGTV’s “Small Space, Big Style.”)

Ms. Giesen strives to live as stylishly as possible during her renovations. On a recent Sunday the apartment was an orderly shell of primed drywall and masonite-protected wood floors, with a faint scent of Verbena home perfume by L’Occitane in the air.

Lining the walls of the living room and the dining area were nearly two dozen architectural salvage pieces, including a five-foot mirror with egg-and-dart molding rescued by a salvage store from the Plaza Hotel, arched French doors, four antique Venetian mirrors and a pair of tall wood and plaster pilasters, all collected in the months before the renovation began in April. Ms. Giesen took hold of a pilaster and demonstrated how she moves the objects around like gigantic chess pieces, rocking them back and forth on each corner, in a continuing effort to see where each belongs. Like many serial renovators, she describes renovation as an important creative outlet in her life.

So does Greg Matusky, a child of unhandy parents and the president of the financial communications firm Gregory FCA in Ardmore, Pa. “The whole act of creating is really liberating,” he said, adding that the renovation process also seems to have a rejuvenating effect on his marriage. “I read a book once that said there’s different ways to be a couple, and one strategy is to be a partnership,” said Mr. Matusky, 45, not elaborating on what the other strategies might be. “Home renovation is a real partnership between my wife and I. Our relationship is never as good as when we have a renovation project going on.”

Mr. Matusky, who said he was obsessed with the home remodeling show “This Old House” in his 20’s, bought his first house in 1987 and spent six years renovating it. He bought his second “utter disaster,” a five-bedroom English Tudor in Ardmore, a Philadelphia suburb, with his wife, Judy, a part-time dietician, in 1993; they spent more than a decade replacing all the wood floors and subfloors, putting in a new kitchen, redoing the basement, turning the side porch into a family room, building a backyard gazebo and a cedar tree house, and installing a stamped concrete patio.

This year the Matuskys completed another extensive renovation of the same house, this one for $200,000, which included a family room and another renovation of the kitchen that extended it into the old garage.

For three months they lived in the basement, along with their three teenage children and a large Crock-Pot.

His wife, who said she enjoys the teamwork of renovation and is happy to have him at home instead of on the golf course, nevertheless stopped short of his blithe assessment of all the work. “After a couple of weeks trying to eat in the basement, that gets old pretty quickly,” she said.

Indeed, while many couples view serial renovations as a way to become closer, said Mimi Maddock McMakin, the owner of Kemble Interiors in Palm Beach and Manhattan, others can wind up in therapy. And Ms. Azar, the psychotherapist, said she had seen apartments become power struggles, as renovations led to discussions of money and the “different ways they want to live.”

And even when spouses are in full agreement about the value of renovation, other family members may not be. Salita Armour, 48, a serial renovator and real estate flipper in Austin, Tex., says she has remodeled 26 houses in 26 years. Her husband supports her in her habit, she says, largely because of its profitability, but also because of his own hunger for novelty. (Ms. Armour said he switches cars every four months.)

But the couple’s 17-year-old son, Shane, said he finds the construction process, which his mother clearly enjoys, “kind of lame, because you know how slow it is.” He added that he and his sister “have grown up like this, so it’s not like any big deal, but it’s kind of a pain in the butt moving all that stuff again and again.”

Matt Tarlow, the 31-year-old son of Shannon Brown, an interior decorator in Portland, Ore., had a stronger reaction to his mother’s ceaseless renovating. By her account, Ms. Brown, 60, moves and renovates every 9 to 36 months; seven times in the last 10 years. When he was growing up, Mr. Tarlow said, “we’d stay at a place for maybe two years, three years if we were lucky.” Then, after he was in college and she divorced, “one lasted six months,” he said. “It got to be such a joke with everyone around Christmas and Thanksgiving that we’d take wagers” about how long Ms. Brown might stay in one place.

The chaos caused by one renovation led to a year of strained relations between mother and son, said Mr. Tarlow, who, although he sells real estate in Los Angeles, calls himself a stable renter.

Ms. Brown, for her part, is philosophical about the effects of her habit on her family. “The only regret I do have is I do think probably there were times this was hard on my kids,” she said, though she added that she moved 9 or 10 times as a child and always found it kind of exciting. “As a parent, you have your life,” Ms. Brown said. “It’s basically what I do. I’m a nomad. Once I get half done with something, it’s not that I lose interest, but once you know exactly what it’s going to look and feel like, you see something else and go, ‘Look what I can do with that!’ ”

McMansions Out of Favor, For Now


Americans want smaller homes, but will the desire for less square footage outlast the recession?

By JUNE FLETCHER, Wall Street Journal

A new study out Monday by the American Institute of Architects shows that Americans have fallen out of love with McMansions. The 500 residential architects surveyed said that only 4% of their clients wanted more square footage in their homes this year, compared to 16% last year.

This desire isn't surprising, given both the recession and the fact that the most recent U.S. Census shows that there are 77 million people in the "empty-nester" phase of life, from ages 45 to 64, and 61 million in the first-time buyer category, from 20 to 34.

So at least for the near future, empty-nesters and young adults will dominate the housing market. The question is, will smaller, more affordable housing be there for them?

On the surface, at least, it looks like that might be the case. A survey released this month by the National Association of Home Builders shows that the average home started during the first quarter of 2009 was 2,335 square feet, down from 2,629 square feet during the second quarter of 2008. And 59% of builders surveyed in May by the trade association said that they are planning on building smaller homes in the coming year. Only 1% reported that they would be building bigger homes..

But don't write the obituary for McMansions just yet. Although mass-produced behemoths more than 3,000-square-feet in size have only been common (and commonly criticized), since the late '90s, home sizes have never been influenced by need alone. The builder association's report also points out that houses ballooned most—about 1,000 square feet—during the period between 1970 and 2008, when household size dropped from 3.11 to 2.57. Homes are getting smaller now because people feel poorer, but all that will change once the recession ends and consumer confidence is restored. Significantly, the builder association projects that home sizes will "stabilize" at around 2,500 square feet over the next five years—the same size homes were at the height of the boom in 2007.

While smaller homes may make more sense in terms of energy efficiency, labor costs and even how they look on today's small lots, they aren't an easy sell, especially in established suburban neighborhoods. Small houses on small lots—or condos and townhouses—require more dense zoning than is currently on the books in suburbia. Unless an area is already blighted and abandoned, the "threat" of higher density inevitably resurrects "not in my backyard" fears of more noise, traffic and overcrowded schools, which often results in considerable citizen pushback and bad publicity for the builder. That is, of course, why sprawl happened in the first place—builders almost always find it less of a hassle to build on undeveloped land than to create so-called "infill" housing.

Still, if the recession is forcing consumers to re-examine both their need for status space and their knee-jerk opposition to higher density, even temporarily, then builders will follow suit—at least temporarily. A story in this month's Urban Land, the magazine of the Urban Land Institute, notes that several big suburban builders, including K. Hovnanian, KB Homes and Toll Brothers, have started divisions for building urban housing, while other companies have started to convert failed suburban shopping malls, office parks, car dealerships and even golf courses into denser mixed-used buildings.

Monday, July 6, 2009

CITY OF SRQ CALL FOR SIDEWALK ART


I love seeing the city making an effort to keep growing the collection of public art. We already have the finest beaches and cityscape but pretty art breaks up all the gray matter of buildings and cement in downtown. Initiatives like this help build community. Thanks City of Sarasota! -- Dill

Sarasota, FL: The City of Sarasota is issuing a Call to Artists for unique sidewalk inlays for the Downtown Sarasota Historic District. The inlays will replace dozens of 16 x 16 grey tiles along the Main Street sidewalk.

Selected local professional artists will be paid $250 to create a one of a kind 16 x 16 inlay. Preferred materials include but are not limited to: stoneware ceramic, granite, stainless steel, synthetics, or alternative materials with specifications proving adequate durability with no sharp edges or slick surfaces.

Applications and supporting documents for the Call to Artists are available on-line at: www.sarasotagov.com/PublicArt Proposals must include: two (2) jpeg files of the proposed design: 72dpi and 300 dpi drawings must be to scale; a detailed description of the materials to be used to produce the inlay; the dimensional thickness of the inlay when completed.

The deadline for submissions is July 28, 2009. Interested professional artists shall reside in Sarasota County or Manatee County.

This initial Call to Artists will replace 32 of the 97 grey tiles along Main Street. The Public Art Committee will announce future Call to Artists to swap out the remaining grey tiles, giving downtown Sarasota a unique sense of place. "We want people to know they are in a special area of downtown," said Ernie Ritz, downtown business owner who proposed the inlay project. "By seeing these wonderful creations, they will know they are in a special place." Last month, the U.S. Department of the Interior acknowledged the area is distinctive by placing the Downtown Sarasota Historic District on the National Register of Historic Places.

All submissions will be reviewed by the Public Art Committee during its regular meeting August 12th in the Commission Chambers at City Hall. It is anticipated the 32 designs selected will be installed on S. Main Street in September or October beginning at Sarasota News & Books and moving north.

PUBLIC INPUT SOUGHT ON PROPOSED BUDGET


Sarasota, FL - City Commissioners would like to hear your comments about the proposed fiscal year 2009-10 budget prior to the budget workshops when the Commission will begin the decision making process to set the millage rate. A public comment session on the proposed budget will be held Wed., July 15, 2009 at 6 pm in the Commission Chambers at City Hall, 1565 First Street.

Citizens will be given three minutes to comment on the proposed budget. There will be no formal staff presentation.

The proposed budget, including an executive summary, will be posted on the City's website www.sarasotagov.com after 5pm on Thurs., July 9, 2009.