Fed Chairman Alan Greenspan has assured us there is no housing bubble. Consumers aren’t taking on unaffordable mortgages, lenders aren’t being imprudent, there’s nothing to see here, folks—move along now.

Forgive me if I’m not so sanguine.

I will concede Greenspan’s point that a nationwide decline in home prices is unlikely. In the United States, we haven’t experienced such a coast-to-coast phenomenon since the Great Depression.

But I see bubbly local markets all over the country, particularly on the coasts. And the loose lending practices that helped lead to real estate recessions in the past can’t hold a candle to the free-for-all we’re experiencing now.

Some markets riskier than ever

There’s been a huge rise in subprime, zero-down and interest-only loans in recent years. People who would have been laughed out of the bank a couple of decades ago because of poor credit or lack of a down payment are now eagerly sought after, while those with more solid finances are urged to stretch further and further to buy ever more lavish homes.

All this could be putting some real estate markets more at risk than they’ve ever been.

Consider:

Nearly 9% of the mortgages made last year were subprime, or made to people with troubled credit or uncertain finances. That’s up from 4.5% in 1994. In terms of volume, $388 billion in subprime-mortgage loans were originated in the first nine months of this year—more than triple the amount made eight years ago, according to Inside Mortgage Finance Publications, a Bethesda, Md., company that provides news and statistics to the residential-lending industry.

Zero-down loans totaled more than $80 billion last year. They were virtually nonexistent a decade ago. Another relatively recent phenomenon is the 125% loan. It allows people to borrow more than their homes are worth.

More than one-third of mortgage applications in recent weeks have been for adjustable, rather than fixed-rate, mortgages. ARMs expose consumers to more risk, because their payments can rise along with interest rates.

Interest-only loans were, until five years ago, almost exclusively a product for the wealthy, who had plenty of real estate exposure in their portfolio. Now they’re being pushed as a viable alternative for the average Joe—who is probably underestimating the potential risk he’s taking on. (For more details, see “Can you handle an interest-only loan?") Interest-only loans now make up 25% of all the loans that are securitized, or sold to investors, and are even being pushed in the subprime market.
Borrowing trouble

These trends worry some regulators and mortgage analysts, who fear that the loans are enticing some borrowers to buy more home than they can really afford. Folks with adjustable and interest-only mortgages are particularly vulnerable: When a homeowner is already stretching to pay the mortgage and the payment isn’t fixed, it doesn’t take much of an interest-rate bump to make that loan unaffordable.

“There’s a lot of concern that . . . these loans are going to go bad,” said Andrew Analore, editor of Inside B&C Lending, an Inside Mortgage Finance publication.

And higher interest rates are all but certain. Not only is the Fed raising short-term rates, but a ballooning federal deficit is starting to make bond investors nervous, which could drive up longer-term rates over time.

Faced with higher payments, homeowners who have drained all the equity in their home or who didn’t put anything down to begin with are much more likely to simply walk away. The same is true for those with troubled credit. (The serious delinquency rate, where borrowers are 90 days overdue or in foreclosure, is 1 in 12 for the subprime market, versus about 1 in 100 for the prime.)

Which cities are most vulnerable?

A spiking foreclosure rate can set off a vicious cycle in vulnerable markets. Lenders don’t want to hang on to foreclosed homes, so they slash the price for quick sales. That depresses the value of surrounding homes, which can wipe out the equity of other, overextended borrowers, who now become more likely to hand over their keys to the bank, which leads to another round of fire sales and depressed values.

Lenders—and investors who buy mortgages—get more cautious, as well, once they’ve been burned. The easy money starts to dry up and appraisals get more cautious, making it harder to get deals done. Potential homebuyers start to delay their purchases, waiting for prices to fall further, which helps fuel the decline.

This was the cycle that helped drive home prices down more than 20% in Southern California in the early- to mid-1990s and delivered similar blows to Boston, Dallas, Houston and Anchorage in the mid- to late-1980s. All these markets had experienced phenomenal price increases before the helium started to escape.

Predicting which cities are most vulnerable now, though, is tricky. In the past, bubbles have continued as long as the local economies remained strong and populations rose. It took a strong economic shock, such as sharply lower oil prices for Texas or rapid downsizing of the defense industry for California, to really pop the balloon.

Cities that have experienced only modest price appreciation are almost certainly less vulnerable to these kinds of crashes. It’s unlikely that Peoria, Ill., or Sheboygan, Wis., where markets have appreciated about 20% in the past five years, could stumble as hard as San Diego, where home prices spiked that much in 12 months. (If you want to see how your city has appreciated, visit the Office of Federal Housing Enterprise Oversight’s House Price Index.)

Living in a bubble? 4 tips

So what should you do if you suspect you’re living in a bubble? Here’s my advice:

Don’t try to time the market. Prices may crash, or they may not. Even if you truly are living in a bubble market, remember that bubbles can persist for a very long time. People who delay home purchases waiting for prices to drop could be waiting for years—and perhaps forever.

Buy only if you can stay put. In normal markets, it can take three to five years for home prices to appreciate enough to offset the costs of buying and selling. If the market really tanks, it can take a decade or longer.

Boost your equity, if you can. A bigger down payment when you buy, and extra mortgage principal payments afterward, can help you build a financial cushion. If worse comes to worst, prices drop and you lose your job, at least you’ll be able to sell your home for more than the mortgage rather than suffer a foreclosure, which will devastate your credit. (Before you make extra mortgage payments, though, make sure the rest of your finances are in good shape: that you’ve paid off your credit cards and other debt, established an emergency fund and contributed to your retirement funds.)

Consider downsizing now, if that was already in your plans. On the other hand, if you intend to move to a cheaper area or house in the next few years, it may be smart to pull up stakes now. Sure, you may forgo a bit more appreciation, maybe even a lot more. But you’ll have locked in your profits.Liz Pulliam

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Pricing to obtain the highest selling price possible depends on an unbiased analysis of the comparable sales data for your neighborhood. Although tempting, it usually doesn’t make sense to select a list price for your home based on the one stupendous sale in your neighborhood.

Eliminate the oddities

Recently a home sold in the desirable Crocker Highlands neighborhood in Oakland, Calif., for a precedent-setting price. The house was listed at a reasonable price, taking into account that it lacked a garage. But, nonetheless, eight buyers put their best foot forward in hopes of being the lucky one. The property sold for considerably over the asking price, even though it had no garage. The draw was one of the most incredible parklike backyards in the neighborhood. A garage could be built. But, the backyard was irreplaceable.

It would be risky to use the sale price of an exceptional property like this as the basis for deciding on what price to ask for your home. A more prudent approach would be to delete this exception from the other comparable property sales in the neighborhood and use the remaining properties to help set the price.

Be realistic

Sellers can be their own worst enemies when it comes to selecting a list price for their home. Even though intentions are good, it’s hard to be objective when comparing your own home to listings in the neighborhood that have recently sold. This is because, after years of living in your home, you’ve come to accept its defects. Buyers, however, won’t be as forgiving.

So, if your home is up a lot of stairs, you’ll need to discount this factor in the pricing, even though you’ve come to live with this. Or, if your house is near a freeway, your list price should be discounted accordingly even though you no longer notice the noise.

In order to price your home right for the market, you must have a good sense of how buyers will perceive your home. First, ask yourself why you’re selling. If you’re selling because the house no longer suits your needs, make a list of the reasons why your home no longer works for you. This exercise may help you to be more realistic about the pros and cons of your home.

Know your market

The other factor to keep in mind is that different pricing strategies work for different markets. If you’re selling a home in Texas where the market is soft and there are plenty of homes for sale, you’ll want to list at a price that undercuts your competition. When buyers have plenty to choose from, you need to distinguish yourself from the pack.

In a hot market, like you currently find in the San Francisco Bay area, many sellers are finding a reverse pricing strategy brings the best results. Instead of pricing higher than you expect to sell for and negotiating down from there, you list at the low end of what you expect to sell for and let the market bid the price up.

To ensure that you don’t sell too low using this strategy, you need to expose your home to the market for a week or two before entertaining offers. If you do use this strategy, be sure that you don’t list for a price that’s lower than you’re willing to accept if you don’t get multiple offers. Even in a hot market, it’s nearly impossible to convince a buyer to pay more than the list price if there aren’t multiple offers.Dian Hymer

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For Derrik Dyka, the biggest obstacle to successful real estate investing isn’t a meltdown in property values or tenants who wreck an apartment or don’t pay their rent.

“It’s overconfidence,” says Dyka, a 34-year-old Minneapolis investor who turns old apartments into new condominiums. If you’re expecting to cash in on the 21st century’s first gold rush without breaking a sweat, it would be wise to take Dyka’s words to heart. The margin of error for making money in real estate is closing fast.

It’s not surprising that real estate tempts so many Americans today. Over the past five years, home prices have soared and rags-to-riches tales abound. But so much real estate has become so expensive that Real Estate Research Corp. in Chicago reports that many real estate pros say now is a better time to sell than buy. As San Diego real estate investor Chuck Wise observes about the area where he operates, today’s buyers are like “lambs being shorn.”

Of course, that doesn’t mean that all deals are doomed to fail. But it does mean that it’s time for would-be investors to pay more attention to the perils of owning property, not just the potential profits.

Watch your cash flow

The most common entree into real estate investing is the single-family house. Investors bought almost one-fourth of all homes sold in 2004, according to the National Association of Realtors. If you’re one of those buyers and your income from that property (after taxes) exceeds your expenses by $100 or $200 a month, you’re in good shape.

But because prices and property taxes are so high in many areas, and there’s so much competition for attractive rental properties, it’s increasingly difficult to find deals that generate enough income to more than cover your expenses—what’s called positive cash flow. In areas such as the leafy suburbs of New York City and Boston, where a modest three-bedroom house can easily cost $600,000, there’s no way you can collect enough rent to cover the steep property taxes and payments on a $500,000 mortgage. Figure monthly out-of-pocket expenses of more than $3,000, if not $4,000. The pool of renters who will pay that much is small.

So be ready to set your sights lower and get your hands dirty. Instead of a well-located home in pristine condition, look for a fixer-upper off the beaten track for maybe $150,000 that you can rent for $1,000 a month. The numbers work if you’re willing to spend weekends, say, painting the walls and, if you’re capable, making repairs that would otherwise require professional help. The hidden profit from home improvements is why “ugly real estate often makes more money than the nice stuff,” says Kelley Pace, head of Louisiana State University’s real-estate research institute.

Mind the cap

You can quickly figure out whether a house or condo is likely to generate positive cash flow. For more complex properties, such as a small office building or retail space, check the cap rate, a single number that can tell you if you’re overpaying.

The cap rate—cap is short for capitalization—is a property’s net operating income as a percentage of its price. The figure is real estate’s version of a bond yield. If a property sells for $500,000 and generates net income of $50,000 (rents minus expenses), the cap rate is 50,000 divided by 500,000, or 10%. The lower the cap rate, the more you pay for each dollar of annual income.

In 2000, the average cap rate on commercial property in the U.S. was 10%. Since then, because of relentless price appreciation, the average cap rate has sunk to 8%. That alone suggests that wringing further gains out of commercial property is unlikely.

If you want to invest in a commercial property, aim for a purchase price that results in a 10% cap rate. But remember that the cap rate also depends on how much you collect in rent. Ask the broker for details about the tenants’ leases, including how rents compare with those of other nearby properties and when the leases are up for renewal. The property should come with an information packet that is more like a stock prospectus than a real estate agent’s fact sheet on a single-family house. If necessary, hire a property inspector. Then take all the information to a lawyer who specializes in real estate. If you have any doubts about the property, walk away.

Don’t be in a rush

With so many people hungry to invest, you may think that real estate is a race to the swift. Joyce Bone knows better. A 37-year-old businesswoman and investor in Norcross, Ga., Bone has learned the value of patience the hard way. “I allowed myself to be rushed,” she recalls. “If the seller is trying to get you to hurry and close, someone is hiding an ugly truth.”

In 2001, Bone was driving on a busy highway near her home when her 6-year-old son, thinking about free fun on Mom’s nickel, shouted, “The putt-putt’s for sale!” Bone saw the four-acre site as a perfect location for a few storefronts and some townhouses. She recruited a partner, put up $250,000 in cash and bought a 50% interest in the property.

The details are complicated but, as Bone explains, one problem led to another. There were zoning roadblocks and the headaches of running the miniature-golf course before it could be demolished. Then, the other investor turned out to be more trouble than he was worth. In 2004, Bone gave up and sold at a loss. The misadventure taught her to think twice before her next purchase. “I fell in love with an idea,” she says ruefully.

Know who’s paying

You could snag a property at what appears to be a giveaway price and still fail to make money because you can’t keep tenants, or you have tenants who aren’t worth keeping. Pamela Candler learned this lesson from her own nightmare of an investment.

Early last year, Candler, 36, of Springdale, Ark., bought a two-bedroom house at a foreclosure auction in a low-income section of Kansas City, Mo., where she had once lived. She paid $18,000 cash and spent $3,000 on repairs. Although she subsequently cut the rent, the house has been empty the entire time Candler has owned it, and she has hired a property manager to find a tenant who is interested in renting with an option to buy. On top of that, Candler says, she’s had frequent vacancies in another of her Kansas City houses. Much of the problem may stem from being an out-of-town investor, says Candler, who is ready to sell her properties and swear off being an absentee landlord.

As Candler’s experience shows, you need a system for finding reliable renters. At the very least, pay for credit checks on potential tenants and see if they have any outstanding judgments in the local courts for unpaid rent. If you just put up a sign expecting the perfect tenant to walk through the door, you’re dreaming.

Have an exit strategy

Flipping is yesterday’s news. If you fantasize about buying something—anything—and quickly unloading for a fortune, keep in mind that the pros predict that values may be peaking. Better to think long term. How long? Some experts say a minimum of three to five years, which should be long enough to ride out a possible downturn.

The ideal exit strategy is to be free to wait for as long as it takes to get the price you want. In 1976, Jim Scott of Mojave, Calif., and his father paid $30,000 cash for ten acres of almond trees and desert at a Los Angeles County crossroads called Quartz Hill, in the Antelope Valley about 75 miles north of L.A. Over the years, Scott rejected several offers that he considered paltry before finally accepting one last winter for $750,000.

Scott, now 54, regrets that it took 29 years to sell the property and that his father, who died in 1988, wasn’t around for the payoff. “I envisioned selling it a lot sooner,” he says. Moreover, the 12% annualized return, although satisfactory, is slightly less than he could have earned, and with fewer headaches, in an S&P 500 index fund. Still, Scott is content because he, not the short-term fluctuations of the markets (real estate or stock), determined the ultimate outcome of the investment.

Make sure it’s for you

Even if you’re new to real-estate investing, you probably sense the financial issues involved—property-value trends, the interest-rate picture and whether you can make a deal work so that your income exceeds outlays. But a direct investment in real estate also requires specialized business skills. If you plan to stay personally involved—and many investors want to because they like to fix up and show off their places—you’ll have regular dealings with tenants, contractors and local officials. That may end up costing more money and requiring more time than you anticipated. You could hire a property manager, but that could clip 8% to 10% of your income, and you’re still not assured full occupancy, satisfied tenants and an absence of structural problems.

Derrik Dyka, who has invested in real estate for eight years, admits that he’s still learning. Because his specialty is rehabs, he hires a lot of contractors. He found himself getting steamed this past winter, even in icy Minneapolis, because one contractor demanded a 20% price increase. Dyka remembers another time when a bill for plumbing work came in $20,000 above the quote. Price shocks of this sort aren’t unusual because older buildings can hide big problems. Still, a contractor may sense that you have more money than savvy and try to take advantage of you—especially now, when most contractors have plenty of work. Dyka’s advice: Negotiate contracts to lock in as much of the cost as possible in advance.

Rob Hill, a Nashville real estate lawyer and investor, says the best property investors master both the finances and the nuts and bolts. To get a feel for what it’s like to be a hands-on real estate investor, we recommend Hill’s book, “What No One Ever Tells You About Investing in Real Estate: Real Life Advice From 101 Successful Investors” (Dearborn Trade Publishing).

It isn’t about getting rich quickly by leveraging yourself to the hilt or turning yourself into a slumlord. Rather, the book is a collection of practical real-life occurrences. After reading it, you may conclude that investing directly in property is not for you, at least not now when the margin of error is so slim. Don’t sweat it. You can always turn to real-estate stocks and mutual funds

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If you’re having difficulty finding a home to buy, here are six ways to maximize your opportunities:

1. Find a good agent in the area like Manny Caballero, Encompass Realty & Investments LLC in Arizona or areas where you want to buy. To protect yourself when you buy a home, adopt a long-range horizon. Don’t buy unless you plan to hold the property for at least 5-10 years. This way you can ride out any downturns in the market and sell when the market improves. Try to avoid getting into a situation where you are forced to sell in a down market. If you have any questions about how long you’ll be staying in the area, postpone your buying plans until there’s more certainty in your life.

2. Make sure that you and your agent are on the same page. Share your wish list with your agent. It’s a good idea to visit at least several homes with your agent initially to make sure that you and your agent agree on what it is that you want.

For example, one agent didn’t show a contemporary-style home to a buyer because she thought the buyer wanted an older, traditional-style home. The buyer bought a contemporary home through another agent. It turned out what she really wanted was a home with architectural distinctiveness. It made no difference to her whether the style was traditional or contemporary.

3. Look at every listing that might work for you. This is how you learn the idiosyncrasies of the local housing market. After you look for a while, you may find that your wish list is too restrictive. You’ll have to compromise no matter what or where you buy. But, before you can decide how you’ll be willing to compromise, you need to know what your options are.

For instance, you may ideally want a three-car garage. After looking, you discover you’ll be lucky to find a two-car garage in the neighborhood where you hope to live. So, you will need to make a choice. Either you drop the requirement for a three-car garage, or you start looking in neighborhoods where three-car garages are available. Be sure to let your agent know if you make changes to your wish list.

4. Broaden your search to increase your options. You might consider more than one neighborhood or area. Or, you might open yourself to different architectural styles. The broader your options, the more listings you’ll see and the less frustrated you’ll become.

5. Don’t overlook expired or withdrawn listings. Recently, home buyers who were having a difficult time finding a home to buy asked their agent about a listing they saw months before when they first started looking. The listing hadn’t sold. There had been an accepted offer, but it fell apart over inspections issues. The listing was off the market while the sellers completed repairs. The buyers’ agent contacted the listing agent who said the sellers were planning to re-market the house when the repairs were complete. The buyers made an offer before the listing went back on the market. It was accepted and the transaction closed.

6. Let friends and colleagues know what you’re looking for. One buyer got a tip from a co-worker that a home was coming on the market in her neighborhood. The elderly seller wanted to avoid a full marketing campaign because of her ill health. This fortunate buyer was able to buy the property before it went on the market…

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In 2005, the rich got richer for the third year in a row, according to Forbes’ list, “The 400 Richest Americans.” They will need that extra money, because the priciest real estate in the country is also going up.

The average price of the properties on our list of the Ten Most Expensive Homes in America is up about 5% this year, to $58.1 million from $55.25 million. That’s more than 216 times the average home-sale price as of August 2005, according to the National Association of Realtors. While that might seem expensive to most people, it’s just one-tenth of one percent of Bill Gates’ net worth, estimated at $51 billion. Meanwhile, your average American home-owning household has 32.3% of its net worth tied up in its home, according to the U.S. Census Bureau.

What makes the most expensive homes so expensive? For one thing, they are located in some of the most desirable parts of the country, concentrated on the coasts and in inland areas that we associate with great wealth, such as the Hamptons, Florida, Los Angeles and Lake Tahoe.

For another, they are often quite vast. We’d be hard pressed to even take an average, because we would have to factor in main houses, guest houses, staff quarters and spacious pool cabanas. The smallest main home on our list is 6,650 square feet, but it is part of a multibuilding compound on Miami’s Star Island, with a total of 13 bedrooms and a 10,000-bottle wine cellar. One property has a carriage house that itself is nearly seven times larger than your average American abode – which is 2,349 square feet, according to the National Association of Home Builders.

But to reach an asking price that tops $45 million, a property has to be not just large, but very special indeed, laden with luxurious details and possessing some rare feature that would be difficult – if not impossible – to obtain in any other way.

A ballroom – or a golf course?
The most expensive home on our list, for example, is a magnificent estate set on a practically unheard-of 60 acres of land in Bridgehampton, N.Y. – and far more. Three Ponds features a golf course designed by Rees Jones, its own pro shop, 14 gardens and three ponds stocked with fish.

The second most expensive property on the list has a feature that is historic as well as extravagant: The original ballroom at the top of New York’s Pierre hotel, built in 1920. It has an 18-foot-high fireplace, spectacular city views and enough space for nearly 300 guests. You couldn’t rebuild it for any amount of cash.

For our list, we sought out the priciest homes currently on the market. There may be others that are being shopped around privately at higher prices, and there are certainly homes that are worth even more, though they aren’t up for sale. Larry Ellison, head of software giant Oracle, reportedly spent more than $100 million to create his Japanese-inspired palace in Woodside, Calif. Microsoft founder Bill Gates’ family compound in Medina, Wash., has an assessed value of around $140 million. And as far as we know, he’s not looking for buyers.

Which may be a good thing, since the pool of potential buyers is painfully small for such expensive properties, and they can linger on the market for months, and even years. That’s why there are perennial entries on our list – the top two properties are the same as in 2004, for example. But the ranks have also changed a good deal over the past year. About half of the properties appear for the first time, including a $65 million Malibu estate that overlooks the ocean, and a pedigreed Manhattan townhouse that, at $50 million, is the most expensive in New York history.

Do billionaires pay retail?
They replace residences that have dropped off the list for various reasons. The home of late billionaire Marvin Davis, which was last listed for just under $60 million, sold for a reported $46 million earlier this year. Others houses were taken off the market, are being sold in parts (like the top floors of Trump World Tower in New York) or had their asking prices slashed and no longer make the cut.

But sometimes the opposite happens, and a home that has been on the market for years just keeps increasing in price. The Robert Taylor Ranch, in Brentwood, Calif., was once owned by the late film star and has been on and off the market for years. It reappeared in 2000 with a price tag of $29 million. By the time our 2004 list rolled around, the asking price was $50 million, and this year it was jacked up to $60 million.

Will these houses sell for their astronomical asking prices? Two things are certain: One, at some point in the future, a house will go on the market for more than the current $75 million record; and two, billionaires didn’t get rich by throwing their money around. If the homes of most billionaires are anything to judge by, even the ultra-wealthy might find the thought of spending $75 million for a house too rich for their blood.

No. 1
Price: $75 million
Location: Bridgehampton, N.Y.

For the ultimate price, you can have the ultimate in luxury–60 acres of coveted Hamptons farmland transformed into an uber-estate. There is the grand main house, which totals more than 25,000 square feet and has a great room with a 28-foot-high domed ceiling. The 14 gardens include vegetable, hydrangea and butterfly plantings, as well as a rose garden modeled after the one at the Brooklyn Botanic Garden. And how could a home be considered complete without its own U.S. Golf Association-rated course designed by Rees Jones? The grass tennis court, 75-foot pool and three large ponds are just extras. Three Ponds is listed with Susan Breitenbach at Allan M. Schneider & Associates.

No. 2
Price: $70 million
Location: New York, N.Y.

The apartment that tops The Pierre hotel is more than a penthouse–it’s a mansion in the sky. The top three floors were converted into a residence in the late 1980s; they include the hotel’s original ballroom–now a stupendous salon–and 360-degree views of the city. The penthouse has five master bedrooms, seven full baths, three half baths and four terraces. It is graced with Versailles-patterned oak floors, a black-marble staircase and 18th-century English paneling. And if the price seems a bit steep, the penthouse is available in two parts–one at $59 million and the other at just $11 million. It is listed with Elizabeth Lee Sample and Brenda Powers at Brown Harris Stevens, an affiliate of Christie’s Great Estates.

No. 3
Price: $65 million
Location: Malibu, Calif.

It’s a nice home–but is it a $65 million home? With seven bedrooms and 11 baths, this house is large, though not over-the-top. But check out the land that accompanies it–nearly seven flat acres, a rarity in Malibu. The property has panoramic ocean views, as well as a private road to the beach, riding ring, swimming pool, tennis court and guard house. It is listed with Jan Horn and Chris Cortazzo at Coldwell Banker-Beverly Hills North.

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A rule change by the South Dakota Real Estate Commission allowing Realtors to offer incentives to home buyers has been met with mixed reactions from the agents.

Aberdeen, S.D. Realtor Sheryl Erickson, who now offers free use of her agency’s cargo van for moving purposes, said it’s an important service to be able to offer to clients. But others wonder where the line should be drawn for what Realtors can offer as incentives.

According to the Associated Press, one Sioux Falls broker offers a free weekend in Las Vegas to buyers who purchase one of his three featured homes.
The rule change came last month, and Erickson said the ability to offer the van has helped her serve her clients better.

“It’s just a standard cargo van,” she said. “A few people have used it so far.”
She added she’s only had the van about a month and hopes to see it used more in the future.

“Some people have professional movers, and some don’t,” Erickson said. “Some people also have small vehicles.”

The idea came from observing Realtors in other communities, Erickson said, and the van is available to both buyers and sellers who work with her agency.

Bob Kiesz, president of the Aberdeen Board of Realtors, said concerns have risen over whether the ability to offer incentives could ultimately damage the real estate industry’s credibility.

He said ideas have been raised about state legislation being proposed to control or eliminate Realtors’ ability to offer these incentives.

Other incentives that have been offered include rebates and other discounts, the Associated Press reported.

“There are some feelings that it’s not conducive to our industry,” Kiesz said, noting that was the opinion of some attendees at the North Dakota and South Dakota Realtors convention. “Some are for it and some are against it.”

Kiesz said the major concerns are whether there ought to be a limit on the types of incentives offered.

“The question is, ‘How far does it go?’ ” he said.

He called it an “issue of controversy” and said to expect proposed legislation possibly as soon as the state Legislature’s 2006 session.

“Right now it’s just in the beginning stages of conversation,” Kiesz said.

Pending home sales have risen to a record level, defying some expectations of a cooling market, according to the National Association of Realtors®.

The Pending Home Sales Index,* based on contracts signed in August, rose 3.2 percent to a reading of 129.5, and is 4.7 percent higher than August 2004. The previous record was 128.1 in October 2004.

The index, which is a leading indicator for the housing sector, is derived from pending sales of existing homes. A sale is described as pending when the contract has been signed but the transaction has not been finalized. Pending home sales typically close within one or two months of signing.

David Lereah, NAR’s chief economist, said strong demand and favorable market conditions are driving home sales, but the cloud of Hurricane Katrina is hanging over some of the data. “Home sales remain at remarkable levels, but there is ambiguity regarding pending home sales in parts of the South since many transactions in the disaster zone will be postponed. It’s unclear how much of that disruption may be offset by spiking sales in surrounding areas,” he said. “Even so, national sales should stay close to record levels over the next two months and housing will continue to support the economy.”

Direct data from many hard-hit areas will be unavailable until affected multiple listing services are restored to operation. An estimated 28,000 Realtors® lost homes and businesses in Katrina. The Realtors® Relief Foundation has collected nearly $4.8 million to provide emergency relief for hurricane victims. Funds are targeted for homeowners and affected NAR members alike.

A Pending Home Sales Index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed, and was the first of four consecutive record years for existing-home sales. Sales in 2001 were fairly close to the higher volume of home sales expected in the coming decade, well above the levels that were seen in the mid-1990s, so an index of 100 is considered to be historically strong.

Regionally, the PHSI in the West rose 7.6 percent to 136.7 in August and was 8.7 percent higher than August 2004. The index in the Midwest increased 2.8 percent to a level of 119.4, and was 0.5 above a year ago. In the South, the index rose 2.2 percent to 142.1, and was 7.6 percent higher than August 2004. The Northeast index declined 0.5 percent to 108.5 in August, and was 2.2 percent lower than a year ago.

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The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1 million members involved in all aspects of the residential and commercial real estate industries.

* The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.

Existing-home sales for September will be released October 25; the next Pending Home Sales Index will be on November 3.