Metropolitan Phoenix’s housing market started 2005 with a bang but ended it amid concerns of a price bubble. Home values soared and houses sold within days in most neighborhoods during the first six months of the year. But then investors began to bail, listings climbed and asking prices stared surpassing home appraisals.

By September, the market was showing signs of cooling. In October, home prices slipped slightly.
—housing prices and sales by postal ZIP codes that shows all neighborhoods racked up big gains early in 2005. Increases from 30 to 50 percent were common as metropolitan Phoenix led the country in percentage gain of housing price. But prices began to level or dip during the last three months of the year.

The slowing has continued this year with metropolitan Phoenix’s overall median existing home prices inching down again. Resale listings exceeded 30,000 in January, nearly nine times the level of the same month of last year, says the Arizona Regional Multiple Listing Service. Selling time increased from about 5 1/2 days to 49. Sellers are frustrated because they are getting few offers, and many are cutting prices. Buyers seeing the slowing have become much more cautious.

Neil Brooks, a Century 21 agent in northeast Phoenix, said shoppers are trying lowball offers of $30,000 to $50,000 less than asking prices as a starting spot in negotiations.

“Last year, it was the sellers who were being very aggressive, and now it’s the buyers,” he said. “There’s so much inventory, they can sit back and spend their time looking at bazillions of homes.”

Most real estate market watchers say the Valley’s housing market is only reverting to a stable one after last year’s frenzy. Metropolitan Phoenix led the nation for home price increases with an almost 50 percent run-up during 2005. And that price includes a few dips late in the year.

Now sellers need to be more realistic and realize their homes aren’t going to be sold in just a few days, or a couple of hours, for thousands more than they are worth.

“The market has done a complete about-face,” said Barbara Sage, a northwest Valley and Sun City specialist at ERA Encore Realty. “Last year, 14 offers for a home would come across at once, clogging up the fax machine.”

Now, she said, after showing a property the seller’s agent will call and tell her the “owner is anxious to sell.” She tells them with a “yawn” that her buyer has a few more properties to look at.

“The days of multiple offers made on sight-unseen properties and offers well above list price are gone for now,” said Cecil Duarte of Serving Valleywide Realty. “The market has softened. Inventory ballooned, and the days are here again for buyers to negotiate on price, terms and even seller contributions toward closing costs.”

“Homes lasting on the market longer will affect prices,” he said. “If we get that speculated ‘dump and run’ by investors, I expect to see prices to get competitive, and sellers offering incentives like they did in the early 1990s.”

The slowdown has hit the new-home market as well. Builders that were overwhelmed with demand a year ago now are offering such freebies as thousands off spec homes, free pools or price cuts on upgrades to bring back the buyers. Top players and industry analysts disagree about the prospects for this year after a record 2005 when 63,570 new homes were permitted in the Valley.

Some look for a performance similar to last year as population gains and new jobs keep buyers coming. Others look for a steeper decline. The new-home median price increased nearly $100,000 to $299,000 last year, said analyst RL Brown, publisher of the Phoenix Housing Market Letter. And there is worry across the board that even with demand softening, higher costs for land and for materials, labor and city-approvals are pushing new-home prices beyond the comfort level of the mass-market buyer that volume builders rely on. High prices also remove a key incentive for people to move to Arizona.

Healthy slowdown

“Those kind of price increases cannot be sustained,” said Brown, who sees a slowing market as a positive change and predicts a 4 percent price increase for new homes this year.

Doug Fulton, of Tempe-based Fulton Homes, said the slowdown was obvious to him on a recent flying tour of Pinal County. He said the number of new-house slabs in Maricopa was down by a third or more compared with six months ago

Fulton, of Tempe-based Fulton Homes, said executives of public builders are under pressure from Wall Street to duplicate last year’s results in the Phoenix market this year. He said that would be difficult and said he would be happy with the 10 to 15 percent price increases he expects this year.

“It’s no longer ‘build it and they will come.’ That’s not what will happen in ‘06,” Fulton said. “It will be a battle. Corporate expectations are very high, but we are coming back to a more normal market.”

Investors made up at least a quarter of Valley resale home purchases last year but market professionals say that group of buyers is leaving.

John Foltz, president of Phoenix-based Realty Executives, said the experienced speculators are pretty much out of the market, leaving newbies who could get hurt by the slowdown.

He said the worst-case scenario for the resale market this year would be flat prices.

“We haven’t seen a decline in home prices in years, and I don’t think we will this year,” Foltz said. “For resale prices to decline, we would have to experience interest rates in excess of 10 percent and a job reduction of 40,000. Both are very, very unlikely.”

Buyer-seller standoff

Jay Butler, head of the Arizona Real Estate Center at Arizona State University Polytechnic, said the housing market needs to “cool down to sustain the appreciation it gained last year. I wouldn’t be surprised to see prices fall this year” as the market recovers from the investor buying binge.

“Investors played a key role in turning the Valley’s housing market upside down,” Butler said.

Pete Kanton of Arizona Realty Advisors is trying to sell several of his own Valley residential properties as well as some for clients.

“All are priced competitively, at or below what other homes of similar size and amenities have sold for in the areas,” he said. “All have been marketed on MLS, signs, classified ads and mailing to the neighborhood. But none have sold.”

“In addition to the normal drop in activity, the first quarter of the year the market appears to be in a ‘holding’ pattern,” Kanton said. “Buyers are anxiously waiting to see if sellers will begin those price reductions many have speculated about, and sellers are looking at comps their agent puts in front of them from middle to late summer and into last fall when the market peaked and not willing to lower their list price because others got that price.”

Timmy Carter is glad the housing market is slowing. Last spring, he looked for a home for weeks before finding a “doll house” near Central and Missouri avenues in Phoenix.

He made a full price offer. Later that day, he was told another buyer had made an offer for more. After a two-day bidding war, he got the house for $25,000 above the listed price. But then a week before closing, his “stomach was in knots” and he decided to go with a gut feeling and not close on the home.

He checked property records later and saw the house sold for the original price.

‘I was being shanked the whole time and my gut feeling proved me correct,” Carter said. “The market last year duped quite a few buyers. I am glad it’s over.”

Terry Mindham spent most of 2005 in Iraq training Iraqi police cadets so he missed out on most of the big runs up in the Valley’s housing market.

He now wants to move to Virginia, tired of the desert after his time in Iraq, and knows his 1,700-square-foot home in Surprise won’t sell fast or for the prices buyers in his neighborhood say they sold for last summer. So he has decided to sell it on his own “for sale by owner” to try to save money on commission.

“I plan to try selling myself for a while, pricing it so that the buyer actually gains a large part of what a Realtor would have added to the cost,” he said.

But Mindham said he would pay real agent agents 3 percent if they bring him a buyer.

“I am not pressured to sell so it’s worth my time to see if I can make a sale happen on my own,” he said.

A definite cooling

“Home prices in metro Phoenix are down or flat now,” said John Burns, a national real estate consultant. “Investors are selling. Listings are up. The market definitely is cooling.”

He thinks prices may fall slightly more in some outlying areas of the Valley but that prices in Scottsdale, Tempe and most of Phoenix will hold up.

Eric Brown, a veteran Valley home builder who heads Artisan Homes, said last summer when he predicted housing appreciation in 2006 would be half of what it was in 2005, he was “overly positive.”

Shannon Osborn put her home in the 85254 ZIP code in north Scottsdale on the market last December. She has lowered her price twice so it’s $25,000 less than where she started. Her real estate agent is running several ads, but so far the only potential buyers who have come to see it want to “flip the house” so they don’t even come close to the asking price.

“With what I owe and what I have put into it, I am not going to give it away,” she said. “My home is beautiful and all the new interior remodel is beautiful. So I am at a loss on ideas.”

Margie O’Campo de Castillo, past president Hispanic Association of Real Estate Professionals and head of Arizona Dream Realty, said the housing market still is strong.

“But homes won’t appreciate like last year,” she said. “Sellers can’t over inflate their prices anymore. If you don’t think the market is slowing, just look at all the open housesCatherine Reagor, Glen Creno, & Ryan Konig

Release the zoning hounds: The McMansion backlash has begun.

Reeling from the towering megahouses that have been cropping up in neighborhoods nationwide, communities aren’t just standing by and letting them flourish unchallenged anymore.

From Atlanta to Austin, Texas, and beyond, more governments have started imposing stricter building limits and even temporarily halted new construction while they try to get a handle on the explosion of these 4,000- to-10,000-square-foot homes, sometimes sneeringly called “garage mahals,” “Hummer houses” or “starter castles.”

“It’s happening in lots of places,” John Nolon, counsel to the Land Use Law Center at Pace Law School in New York, said of the backlash.

Super-size me
A drive around many American neighborhoods confirms it: Today’s homes are big. No, not big – huge. The average American home swelled from 983 square feet in 1950 to 2,349 square feet in 2004 – a 140% increase in size. And everything about them is bigger, from their three- and four-car garages to the professional-grade stoves and refrigerators. In 2004, 43% of new homes had 9-foot ceilings, up from less than 15% in the 1980s.

Outsized houses, and criticism of them, isn’t new – it’s happened since the Gilded Age, said Robert Lang, a professor and the director of the Metropolitan Institute, a research institute tied to Virginia Tech. The modern mega-house trend “is about a 20-year trend,” said Lang, “but it’s more obvious now; people are putting more money into housing than they have been in the past.”

Wrangling over the size of homes and their impact was once confined to areas where lots of money pooled – places like Aspen, Colo., and Fairfield County, Conn. Indeed, Pitkin County, home to Aspen, is now considering a 15,000-square-foot cap on homes – a limit discussed since a Saudi prince built a 55,000-square-foot manse there in the early 1990s.

But now mega-homes have started to appear in established city neighborhoods and suburbs nationwide. These places share one characteristic: “It’s confined to growth areas with some affluence in general,” said Pace’s Nolon. “You see it in areas like Santa Fe and Los Angeles and San Francisco and some parts of Atlanta – you probably don’t see it in Detroit.”

The White House next door
What’s behind the shift? People with money are looking back to close-in communities in or near big cities. Older, close-in communities often have more character. They also have a shorter commute.

“They love the neighborhood; the house needs improvement,” Lang says of the newcomers. Much of this post-war housing – “the housing stock that was the good life of 1955, which was defined by good job and meatloaf,” said Lang – is now tired and rather small by today’s standards. Many of the homes are simply bought for the lot, razed and replaced. Naperville, Ill., a city of 130,000 people with a historic downtown that sits about 25 miles west of downtown Chicago, has seen 325 “tear-downs” since 2001.

Communities that have been dealing with an influx of large homes include Lakewood, Colo.; Arlington, Va.; Cresskill, N.J.; Oak Park, a suburb of Dallas; Austin, Texas; and Atlanta. “There are 40,000 local governments in the United States, and they make the call on this,” said Nolon. “It’s all kind of a grand experiment at the local level.”

Many of those homes appear without much problem, said Lang. But it’s the “man bites dog” examples that get people scared – and showing up at city hall. In DeKalb County, Georgia, which includes part of Atlanta, “When it really hit the fan was in one particular community, when a developer built a replica of the White House,” recalled Vernon Jones, the county’s chief executive.

Austin’s fight
Austin typifies the McMansion craze – and the backlash that’s followed. Several of the city’s neighborhoods like Tarrytown and Travis Heights have seen an influx of large homes, said Kathie Tovo, president of the Bouldin Creek Neighborhood Association, who lives in a “funky, fun” area just south of downtown that also has seen some change. Just down the street from their modest home, Tovo and her architect husband bought a house as an investment. After they finished remodeling it, the home next door got knocked down and replaced by a 4,000-square-foot building housing two condominiums. “What had been not a tiny, but a modest-size and -scale cottage, has been replaced by something hugely bigger than what’s the scale along that street,” Tovo said. “The entire yard is now lined by this massive house,” she says of her house.

Tovo and others, including many elected officials, worry that the homes are not only out of character with many neighborhoods, but that they put stress on older infrastructure and too quickly raise property values and thus tax rates. This forces out longtime residents, including a more ethnically and economically diverse mix of people. “Some people have made the argument that this is infill,” Tovo said. “But it really isn’t; you don’t end up with more people, you just end up with the same number of people in bigger houses.”

Hollering ‘time out’
Many communities are trying different things to get a handle on the rapid changes and keep their character:

In January, the mayor of Atlanta imposed a brief moratorium on housing permits in five upscale Atlanta communities in the northeast part of the city. That has since expired, but the city is looking at rewriting some zoning codes to limit what gets built.
In Marin County, Calif.,which was forced to start dealing with the issue earlier than other places due to San Francisco-area wealth, a 1997 “big-and-tall ordinance” requires design review for any home that’s more than 4,000 square feet or over 30 feet high, said Brian Crawford, deputy director of planning services for the Marin County Community Development Agency. Why 4,000 square feet? “In 1997, 4,000 square feet was considered a large home.” Now, Crawford said, “It’s not unusual for us to get 6,000- to 8000-square-foot-home proposals. We had one recently that was 14,000 square feet.”
Earlier this year, the county bolstered its regulations to add an array of design considerations; planners can now consider the median home size of the surrounding neighborhood when deciding whether to approve a home, he said.
After two years of study, Georgia’s DeKalb County, which has seen McMansions appearing in older neighborhoods, put a new strategy on the books earlier this year: A neighborhood that doesn’t want the megahouses can gather the signatures of 60% of its residents, then petition the county’s board of commission for a zoning overlay. “You have to do it on a neighborhood-by-neighborhood basis,” said Jones, the county’s chief executive. “It gives the politicians, the elected officials a grasp of what the people really want in that area.” (Read about how you can fight for your neighborhood here.)
In February, Austin put in place interim rules that limit the maximum size of a new single-family home on any lot that previously had a house. For now, a builder can build up to the greatest of the following: 2,500 square feet; 20% larger than the home that was removed; or a 0.4-to-1 floor-to-area ratio for the lot. There also are limits on major additions to homes. Meanwhile, a task force is studying the issue.
Austin residents seem torn about the regulations. Tovo has gotten calls from upset residents who see all this as a threat to their ability to sell their existing homes and land for top dollar.
A McUpside to McMansions?
That concern speaks to what some people argue are the upsides of large houses – within reason:

Bigger homes can bring a lot more tax money to a small town that doesn’t have much of a commercial tax base. “If it’s an old, old neighborhood, any new development coming in can be good,” said Jones. Even a mega-house is better than a crack house, he said.
People who have lived in an area a long time and bought their house cheap stand to make a lot of money as property values increase, said Lang. “If you don’t think you can pay the taxes, sell the house, then downscale the living space and live somewhere else in a nice place,” he said. He is not particularly sympathetic to the argument that people should be able to live in a neighborhood forever. “Who said everything’s frozen for all time?” He added, “Some seniors live in an area where there’s housing abandonment. I’ll bet they’d like to trade.”
Making big houses go green
One strategy some governments have pursued in trying to discourage larger houses, or at least shrink their impact, is to make them pay their way, energy-wise:

Shrink the energy footprint. In Marin County, Calif., where planners are now making sustainability a hallmark of the county plan, newer rules require that any project of 3,500 square feet or more, whether a new home or a remodel, meet the energy budget of a 3,500 square-foot home. In short, the bigger the house, the more efficient (relatively speaking) it has to be, said Alec Hoffmann, the county’s green building program coordinator.
Think green. Also in Marin County, projects that must undergo design review, or get a variance – that is, any home over 4,000 square feet – must fill out a green-building checklist and meet a certain number of points.
Go big – and pay. In Pitkin County, Colo., home of Aspen, if a new home is more than 5,000 square feet, the builder must either provide onsite renewable energy (via something like solar panels) or pay a $5,000 fee to the Colorado Office of Resource Efficiency, which will use the money for renewable energy projects elsewhere. If the house is 10,000 square feet more, the fee goes up to $10,000 if no onsite renewable energy is provided. And if a home exceeds its property’s allocated energy budget as determined by local codes – due to a large spa, a heated driveway, etc. – the homeowner must “buy” energy from the Renewable Energy Mitigation Program, up to $100,000.
More supersized indigestion to come?
Are big houses – and big controversy – the future?

Some evidence suggests that for an increasing number of home buyers, bigger isn’t better. Many baby boomers are now empty-nesters who need less space. The average American home size, which zoomed starting in the 1980s, gained just 25 square feet between 2001 and 2004, said Steve Melman, director of economic services for the National Association of Home Builders. (Read more about the small-house trend here.)

Yet, said Melman, there’s plenty of people who apparently still want houses of 4,000 square feet and larger. Drawing an analogy, he said, “I think a lot of people still want that – they still want the SUVs even though the price of gasoline went up.” (The U.S. Census’ survey of Construction reported that 0.5% of new homes constructed in 2004 and 2005 were 6,000 square feet or larger – that might not seem like much, but that’s still 10,000 homes.)

Yet the backlash, too, is just getting started, say observers. “You’re going to see a lot more of this,” said Lang – especially in places like southern California and Florida that have all but run out of virgin land to build on, and where builders are eyeing older suburbs. “By 2020, this could be some nasty stuff; something could probably make its way to the Supreme Court."By Christopher Solomon

Encompass Realty, registered trademark, www.encompassrealty.com, Encompass Mortgage, www.encompassmortgage.net, Arizona commerical mortgage loan

When I bought my house, the seller lied. He promised in the purchase contract to replace or fix some things – a chipped bathroom sink, a rotten board on a gable, a leaky bathroom faucet. An hour before closing, during the final walk-through, I discovered that he hadn’t made the repairs. He hadn’t even started.

A lot of home sellers break the promises they make on binding legal contracts. There are a number of ways to deal with sellers who welsh on their contractual obligations to replace or fix things:

Shrug it off.
Have the seller reimburse the buyer at closing.
Extract a promise that the seller will make the repairs soon after closing.
Set up an escrow account, funded by the seller, to pay for the work.
Postpone the closing until the work is done.
Sue.
It seldom goes as far as the last option. “I think most people tend to cooperate at the end of the day,” says Neil Garfinkel, a partner with the Abrams Garfinkel Margolis Bergson law firm in New York. He specializes in real estate law. “Sellers want to leave with a good feeling and buyers want to leave with a good feeling. I don’t believe that a real-estate transaction should be adversarial.”

A common solution
That was the opinion of our attorney (he wasn’t Garfinkel) when my wife and I closed on our house in Jupiter, Fla., on New Year’s Eve 1999. All our attorney wanted was peace. But he was prepared to drop the bomb. He knew that our seller had scheduled back-to-back closings: the sale of his house to my wife and me, and then his purchase of a new house. A postponement of just two days might possibly blow apart his home purchase, and would crater everyone’s homestead tax exemption.

Under this pressure, the seller wrote us a personal check that more than paid for the repairs. The closing took an hour longer than expected because of the time we spent negotiating the amount of the check, but we closed on the scheduled day.

Transferring money from seller to buyer is a common solution to the broken-promise problem, Garfinkel says. The seller doesn’t have to write a check, and instead can give a credit against the buyer’s closing costs. Usually, the agreed-upon amount “is a guesstimate,” Garfinkel says. “But I’ve been doing this 15 years, and I think we’ve been pretty on-the-money when I’ve had a client guesstimate that it will cost X amount of dollars.”

Sometimes an amount can be agreed upon at closing, and sometimes the closing has to be postponed. As Garfinkel puts it: “They fight it out outside the table, when cooler heads prevail, and try to come back and do it another day.”

When the two parties can’t set a price but can agree on a range, the seller can put an agreed-upon sum in an escrow account. When the repairs are made, the contractors are either paid directly from escrow or by the buyer, who then is reimbursed from the escrow account.

Lawyers generally prefer not to go the escrow route because it’s unwieldy and time-consuming. Angry buyers and sellers sometimes hold up the escrow money out of spite. Garfinkel remembers a time when money was trapped in escrow for months because the buyer and seller were bickering over a crystal newel post. That’s the bottom post of a bannister, and feuding over one is as low as some sellers and buyers will descend in a dispute.

Letting it all go
Some buyers take broken promises more or less in stride. When John Stump bought his 1,600-square-foot ranch house, he recognized that the sellers had not maintained it well. That was OK, because he planned to make extensive renovations.

He didn’t expect what happened next.

Stump amended the purchase contract with a copy of an inspection report. The sellers agreed to make the repairs indicated on the inspection report.

“They indicated repairs they had made, but they hadn’t made them,” he says. “It wasn’t that they did a shabby job of repairing them, they just didn’t make repairs.”

Among other problems, the inspection report mentioned that a joist had been cut through to make room for a bathtub drain. The sellers promised to fix it, and later wrote “repaired” on that line item in the contract. “But it had not been repaired,” Stump says.

The rotted subfloor in the bathroom hadn’t been repaired, either, and the toilet wasn’t bolted to the floor – it was merely sitting on the wax seal. An attempt had been made to fix the water-damaged base of the basement stairs. A medicine cabinet had been removed and replaced by a cheap mirror with a plastic border. Door stoppers had been unscrewed from walls.

“It wasn’t spiteful,” Stump says. “These people had inherited the house. I don’t think they meant to do this. Somebody may have told them the repairs had been made, but they hadn’t.”

It was only after closing, and having someone crawl under the house, that he discovered that the hidden problems in the bathroom had not been repaired – the cut-through joist, the rotted subfloor, the unsecured toilet. He asked the previous owners to make fixes, and they sent someone who did a substandard job bridging the joist.

This is on top of the feral cat that had been living in the attic and the backyard deck that had to be removed because it had been built improperly and without a permit.

“I looked at these people and realized that the behavior was so outrageous, they didn’t understand the law,” Stump says. He realizes that he could have taken legal action. Instead, he says, “I just laughed it off. Was it worth legal hell for me and the sellers? No.”

Taking them to court
Legal hell or not, some people take the dispute to court. Laura Ricci did when electric outlets weren’t replaced as promised in the purchase contract.

After Ricci agreed to buy a house in Austin, Texas, the inspector discovered that the house had aluminum wiring. Aluminum wire isn’t a problem itself, but a fire hazard exists where aluminum wire is joined to outmoded electrical outlets, switches, light fixtures and junction boxes. Ricci’s inspector explained that an electrician would have to replace all the electrical outlets.

The seller agreed to have the work done, and presented receipts at closing to prove that the outlets had been replaced. “Shortly after we closed escrow, I had guys in there swarming the place, getting ready to work, and the electrician called and said, ‘Laura, I thought you told me that the electric outlets had been treated,’” Ricci recalls.

The electrician had checked two electrical outlets before calling Ricci. Neither had been replaced. Then, while he was on the phone, the electrician looked at a third outlet. That one had been replaced, as promised. Ricci heard a pause. “Oh, I know what happened,” the electrician told Ricci.

What tipped him off was the outline of the couch, visible on the carpet. The outlets behind the couch hadn’t been replaced. Outlets behind beds and large appliances had not been replaced, either. All the other outlets – the ones that had been out in the open and easy to get to – had been replaced. “If there was a piece of furniture there, the guy didn’t bother to look or open it up,” the electrician told her.

Ricci paid her electrician to finish the job, and took the matter to small-claims court. She says the original electrician – the one who did an incomplete job – told the judge that it wasn’t his job to move furniture and appliances. She says the judge found in her favor and the former owners wrote her a check right there in court.

Did the seller lie to Ricci? She doesn’t know. Maybe the seller didn’t know that the electrician had done an incomplete job. But Ricci was sure about one thing: She wasn’t going to pay for it.Holden Lewis

Encompass Realty, www.encompassrealty.com, Arizona Real Estate

There’s finally going to be a viable way to cash in on the housing price boom – or to guard against its decline – without going through the messy business of actually buying and selling properties.

On Tuesday, the Chicago Mercantile Exchange and Tradition Financial Services, together with Fiserv Case Shiller Weiss and Standard & Poor’s, announced the launch of S&P CME Housing Futures and Options.

These derivatives will enable investors to take a position on the direction of home prices either for the nation as a whole or for 10 major cities to start, including New York, Los Angeles and Chicago.

Of the three major asset classes, the bond, the stock and the housing markets, only the housing market, which represents some $20 trillion in assets, cannot be speculated on easily, said Robert Shiller, the Yale economist and author of “Irrational Exuberance,” the 2000 book that foresaw the bursting of the tech-stock bubble.

“How can it be that we have no way of trading it?” said Shiller.

With his partner, Karl Case, Shiller started developing the Case Shiller Home Price Indexes about 20 years ago. The pair claim it is now considered the most accurate measure of the residential real estate markets. The S&P CME Housing Futures and Options will be based on the data accumulated in these indexes, so accuracy is crucial for building trust among potential investors.

Who will use them?
Shiller sees these derivatives mostly as tools that large, institutional investors can use to reduce risks. Mortgage bankers, for example, could hedge against falling real estate markets that would increase their exposure to delinquencies and foreclosures.

But John Labuszewski, of the CME, says, “Although the main customers will be institutional, there is a surprising amount of interest on the part of retail consumers.”

So how would an ordinary consumer employ these tools?

Shiller says there are several ways including:

By direct investment: Investors could buy futures in housing prices and profit if home prices continue to increase (if the investor goes long) or if they fall (if the investor goes short).

By locking in home equity: Home owners intending to sell within a year or two can go short in home price futures. If the price of their house drops, that can recapture the loss on the investment.

Such hedging strategies should get easier, according to David Stiff, economist at Fiserv Case Shiller Weiss. He thinks home owners will eventually be able to buy home equity insurance that will protect against loss from falling home prices. Homeowners already have fire or storm insurance to protect them against losses, why not protection against losses from home price decreases?

Linking the price of a home to the index: A seller could peg the price of the home to the index by making it a multiple of the index for the city. A nice house in a prime neighborhood in Chicago, for example, might be listed at a constant 1,000 times the Chicago index value of 500, rather than simply at $500,000. Then as the index goes up and down, the home price changes as well. Both buyers and sellers would have confidence that the selling price was fair at the time of purchase.

It’s perhaps ironic that one of the moving forces behind this product launch is Shiller, who has warned that housing markets are probably peaking and primed to fall. Might not these derivatives make the housing markets volatile?

“Real estate already is volatile and risky – like the stock market,” says Shiller. “And the risk is increasing. The impression that real estate market only goes up is wrong. We need hedging for both sides.”

TFS says it will start trading S&P CME Housing Futures and Options in April. Les Christie

Encompass Realty, mark, US, www.encompassrealty.com, www.encompassmortgage.net, arizona commerical real estate, arizona real estate, arizona real estate agent

CNNMoney.com) - With signs pointing towards a slowing housing market, some workers in the real estate industry are already thinking about jumping ship, according to a news report published Monday.

Citing economists and recent national housing data, USA Today reported that some real estate agents, mortgage brokers and even appraisers will be squeezed as the housing market slows down. Some are even reconsidering their career choice after finding it difficult to drum up new business
And some businesses are already tightening their belts including Washington Mutual (Research), which closed 10 mortgage processing centers last month and fired 2,500 employees, according to USA Today. In November, the mortgage firm Ameriquest trimmed its payroll by 1,500.

Even though existing home sales fell for the fifth straight month in January and home building companies are reporting cancellation of home orders, some factors may stem the loss of real estate related jobs, according to the paper.

Commercial construction is expected to absorb some workers from the residential side, as the industry appears to be picking up steam while a demand for construction and possibly new homes along the Gulf Coast may drive job growth in the region, USA Today reported.

And the large number of Americans with adjustable rate mortgages may provide some comfort for those working in the mortgage industry, according to the paper, as homeowners with outstanding mortgages will probably want to refinance at some point in the future, hoping to lock in a fixed rate, according to the paper.

“That will kind of prop things (up) for a while in terms of activity,” Michael Montgomery, an economist at Global Insight in Lexington, Mass. told the paper.

Traditional thinking says you should expect to pay anywhere from 5% to 15% of your home’s value on landscaping. Even at the low end of that range, you’re looking at spending $10,500 if you live in the median-value American home worth $213,000.

That’s tough to stomach no matter how much you love the outdoors. Thankfully, you can do it right and still spend a fraction of that amount. Here’s how.

Get the most visual bang for your buck: First of all, realize that budget gardening can still be beautiful. Let’s say you’ve got less than $1,000 to spend. The first things you should focus on are improving your soil and adding trees, recommends Joanie Clarke, a design consultant for Classic Nursery and Landscape Co. in Redmond, Wash. “You can spend $500 on plants, but they’re not going to grow in clay or sand,” she says. Clarke advises amending your soil with compost and other ingredients to improve its quality. Buying soil, in comparison, can cost as much as $27 a yard plus delivery.

Take advantage of freebies

Your city, your friend: Cities often give away free trees, mulch and compost. In Seattle, for example, groups of neighbors can request 10-40 trees from the city in exchange for planting and maintaining them.
Demolition sites: These are great sources for bricks and stones, but make sure you have permission to remove them.
Fellow gardeners: See something you like in a neighbor’s yard? Offer to trade cuttings. Also, set up seed exchanges with other gardeners or check out existing exchanges online such as those on iVillage’s GardenWeb and GardenHere.com.
Avoid costly mistakes: Really think about how you’re going to use your outdoor space. If you plan a water feature but are annoyed by the noise of babbling brooks, you’re going to spend more money ripping it out and replacing it with something else later. Take the time to educate yourself and you’ll avoid common pitfalls such as planting a tree too close to your house.

Work with what you have: Preserving existing plants and trees can help you save the cost, materials and resources needed to establish a new planting. Educate yourself about plant care and pruning; that 12-foot magnolia in the back yard would likely cost you $65 and five years of growing to replace. (For tips on pruning, check out this page on the U.S. Forest Service site.) Similarly, knowing which areas in your yard are flood-prone and which are always in the sun can help you buy the right plants for the right conditions. Some areas might be better for swing sets or patios.

Hire yourself: The best way to save money in landscaping is to do as much work as possible yourself. A 3-gallon bush may cost $20, but the price skyrockets to $30 or $40 when it’s planted by a landscaping professional. A $3-to-$4 perennial will cost about $12 installed.

Know when to hire the pros: There are times when it makes sense to hire a pro. Beverly Katz of Exterior Designs in New Orleans suggests hiring help for jobs that take more muscle or design skill than you have, such as creating hardscapes, while you take on more manageable tasks such as planting small shrubs and perennials. (You can find landscape architects at the American Society of Landscape Architects Web site and certified landscape designers at the Association of Professional Landscape Designers Web site.)

When using pros, try to get a packaged deal: Check out nurseries that offer landscaping services. Many will offer discounts on plant material to their landscaping customers. Classic Nursery and Landscape Company in Redmond, Wash., for example, offers a 20% discount on all plant material for one year to their clients.

Hire a consultant: A full landscape design that includes drawings and a planting plan can cost anywhere from a couple of hundred dollars to more than $1,000, depending on the complexity of the design and the overall budget of the project, according to Katz. A less-expensive route is to draw your own plan and hire a landscape designer to review it. “I charge $100 to $150 an hour to consult. I’ll make notes and add to the plan,” said Katz.

Take a phased approach: Divide your plan into phases and pay as you go with funds on hand. You’ll save on loan or credit costs and be able to evaluate your progress and adjust plans before moving to the next phase.

Time your purchases: Buy trees, shrubs, perennials, soil and mulch late in the season when retailers want to be rid of them. Depending on your region that could be early fall, a great time for planting because it gives the plant time to develop roots before the summer heat arrives.

Check alternate resources: Look beyond stores for bargains. Arboretums, botanical centers, plant societies and gardening clubs often hold plant sales. You can join The National Arbor Day Foundation for $10 and receive 10 free trees shipped to you at no cost. At Free Trees and Plants, a retail Web site that helps train and employ the disabled, you only pay shipping and processing fees on all your orders.

Buy small: Purchase small-sized plants; five 1-gallon Shasta daisies at $3 apiece cost the same as one 3-gallon plant at $15 at Armstrong Nursery in Carlsbad, Calif. Depending on the species, the smaller plants could double in size in two years, giving you more plant for your money.

Protect foundations: Roots can damage concrete blocks, driveways and sidewalks, so plant large trees at least 30 feet from those areas.

Divide: Look around your yard for any perennials that can be divided and used elsewhere in the landscape. A one-gallon perennial can cost about $9 at a nursery, but you can easily divide the one you planted last year into four plants, saving $27.

Compost: Save money on fertilizers and mulch by composting your own, using yard waste and food scraps. Compost piles can be made of recycled 2 x 4s and chicken wire. All you need is access to the pile and enough space to turn it every now and again. You’ll pay as much as $5 per small bag of compost at your local home improvement store.

Think about maintenance: A large lawn is great if you don’t mind mowing. But if paying a yard guy $50 a week is part of your plan, make sure that goes into your budget.

Be water smart: According the Environmental Protection Agency, outdoor water use constitutes almost 20% of total home water use. Look for plants that are drought-tolerant to save on your water bill.

Finally, be patient. Plants will not fully mature for a good two to three years, longer for trees and many shrubs. Enjoy the process – and the money you save