Greenwich Real Estate News - 8 Reasons Why You Should Work With a REALTOR

Not all real estate practitioners are REALTORS. The term REALTOR is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS and subscribes to its strict Code of Ethics. Here are a few reasons why it pays to work with a REALTOR.

1. Navigate a complicated process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.

2. Information and opinions. REALTORS can provide local community information on utilities, zoning, schools, and more. They'll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

3. Help finding the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.

4. Negotiating skills. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

5. Property marketing power. Real estate doesn't sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner's contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR, you do not have to allow strangers into your home. Your REALTOR will generally prescreen and accompany qualified prospects through your property.

6. Someone who speaks the language. If you don't know a CMA from a PUD, you can understand why it's important to work with a professional who is immersed in the industry and knows the real estate language.

7. Experience. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.

8. Objective voice. A home often symbolizes family, rest, and security - it's not just four walls and a roof. Because of this, homebuying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they'll every make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.

Greenwich Real Estate Market Explained

Bubble Trouble? Not Likely.

By CHRIS MAYER and TODD SINAI

For the past several years, Chicken Littles have squawked that the sky -- or the ceiling -- is about to fall on the housing market. And it's tempting to believe them. The market sure feels like a bubble: The rampant growth of house prices over the past decade, the rising price of houses relative to rent and the astonishing gap in many cities between price and income are almost unprecedented in recent history. The last time things felt this way, in the late 1980s, real house prices subsequently dropped by one-third in cities like Boston and Los Angeles.

Yet basic economic logic suggests that this apparent evidence of a bubble is anything but. Even in the highest-price cities, housing is, at most, slightly more expensive than average. Here's why: While house prices over the last decade have gone through the roof, the annual cost of owning a house has not.

Greenwich Real Estate Market Explained

Rate Hikes Won't Cause a Housing Crash

We disagree with the persistent argument that the U.S. housing market is fragile and that the economy's growth is dependent on continued low interest rates. We expect a durable, relatively steady U.S. expansion into 2006. Katrina will slow third quarter GDP, but should add to fourth quarter GDP. Interest rates will probably rise substantially from here. This won't be good for the housing boom, but we don't think it will cause a substantial slowdown in the economy or in housing. We maintain our view that housing, while frothy, is not a fragile factor in the economy, though it may experience periodic local slowdowns and is distorted by tax policy and low interest rates.

Some observations:

• By destroying homes, Katrina and the flooding should add to new home construction and, with the related increase in construction costs, to the price of many new and existing homes.
• The median price of a U.S. home has increased sharply, but not out of line with increases taking place in other countries.
• Since March 2001, the beginning of the last recession, roughly> 44% of job growth has been in real estate, residential construction and credit intermediation (19% if measured from the end of the recession). This lifted their share in total payroll employment to 4% from 3.5% and gives rise to the contention that a slowdown in residential construction would necessarily slow the whole economy. More likely, job creation would shift to other parts of the economy if the pressure for residential construction eased.
• As a percentage of GDP, construction (residential and non-residential) is well below pre-1990 levels.
• Residential construction has increased its share of GDP, but non-residential investment has declined. The economy grew 3.6% in the year ending June 2005. Of that, residential investment contributed 0.34%, roughly 10%, of the growth.
• In the second quarter of 2005, approximately 5% of the economy's GDP was residential investment, up from the 1990s but in line with prior decades and the needs of the baby boom echo. Part of the strength in residential investment owes to the growth in the rate of formation of households headed by people 29 and under (i.e. those likely to need housing). 343,000 such households were created during 2003.
• The dollar value of new home sales has increased faster than GDP. This reflects record new home sales, the expansion in the size of new homes, and also the increase in the value of U.S. land (a positive side-effect of a long, healthy reflationary expansion.)

Greenwich Real Estate Market Explained

Home Sales Are Expected To Hit New Highs

REUTERS NEWS SERVICE

U.S. home sales are close to peaking but should hold historically high levels into next year, the National Association of Realtors' top economist said.

Chief Economist David Lereah, in a monthly forecast yesterday, nudged his estimates higher for sales of previously owned and new homes in 2005.

He said existing-home sales should rise 2.9% to 6.98 million this year, up from his previous forecast of 6.97 million and higher than the 2004 record of 6.78 million.

Sales of new homes should climb 4.8% to 1.26 million in 2005, which also would be a record, the Realtors group said.

Housing, now in a boom of more than four years, has defied economists' expectations for a slowdown this year as long-term mortgage rates remain low. That has led economists over the past two months to boost their 2005 targets and forecast another record year for sales and construction.

But fixed 30-year mortgage rates have begun to move higher over the past five weeks, according to mortgage-finance company Freddie Mac. Industry analysts also have begun to point to anecdotal evidence of slowing sales and rising inventory of homes available for sale in some of the priciest areas.

The Realtors group said home sales should begin to ease off record levels during the second half.

"The housing market is probably close to a peak right now in terms of sales activity, but there is tremendous momentum," Mr. Lereah said.

Greenwich Real Estste Market Explained

What Housing Bubble?

By NEIL BARSKY

If you want to be scared out of your wits these days, you basically have two choices: go watch Steven Spielberg's latest, or listen to the hysterical warnings of economists and journalists about the imminent popping of our so-called housing bubble. Robert Shiller, the ubiquitous Yale economist, says home prices could fall 50% from their peak. Taking things a step further, The Economist recently went so far as to call the global housing boom "the biggest bubble in history."

In a free country, it is fair game for the media and economists to scare homeowners with words of gloom and doom, however knee-jerk, consensual and misguided they may be. But housing is a serious business; for most of us, it is our most valuable asset. For generations of immigrants, home ownership has represented the realization of the American dream.

The reality is this: There is no housing bubble in this country. Our strong housing market is a function of myriad factors with real economic underpinnings: low interest rates, local job growth, the emotional attachment one has for one's home, one's view of one's future earning- power, and parental contributions, all have done their part to contribute to rising home prices. Over the past quarter-century, there has been an explosion of second-home purchases, a continued influx of immigrants, and a significant reduction in existing housing inventory through tear-downs. Not all of these trends are accurately reflected in the unending stream of data published daily. Home prices on average have risen at a 6% annual pace since 1999, and 13% over the past year.

What we do have is a serious housing shortage and housing affordability crisis. Despite robust construction, unsold inventory stands at four months, well below its 25-year average. Private builders complain they can't get land permitted to meet demand. Low-income housing advocates complain housing prices are out of reach for many Americans, and that government subsidies have been slashed.

I am not an economist, though if you keep reading, you'll find I can use selective data points to my advantage with the best of them. I was a real estate reporter for this newspaper through several real estate crises, as well as a Wall Street REIT analyst; I am now a money manager. I currently own stocks in several homebuilders; so I am putting my money where my mouth is.

Of course, over the past 25 years we have seen numerous real estate busts. However, steep price declines have typically been driven by local economic factors -- oil woes lead to weakness in Texas in the '80s; aerospace and defense layoffs soften up prices in LA in the '90s; a contraction on Wall Street hurts New York co-op prices.

What we have never seen in this country is a collapse of home prices without also seeing local economic weakness or significant capacity growth. Absent those factors, housing markets just don't collapse under their own weight. Herewith are some of the myths put forth by the housing bubble Chicken Littles.

• Myth #1. There is too much capacity: According to Census data, over the past 10 years, housing permits have averaged about 1.63 million units per year -- including multifamily units. Household formation has averaged 1.49 million families per year. So far, so good. But here is where the data gets murky. Roughly 6% of the new home sales were for second homes (I have seen estimates that the number is actually twice as high), according to UBS. And while there are no precise numbers on this, approximately 360,000 units every year were torn down either because they were nonfunctional, or because they were "tear-downs." When the latter two numbers are taken into account, the real number of new homes is closer to 1.2 million, or 19% fewer than the average number of new households formed each year.

• Myth #2. Risky mortgage products are fueling house appreciation: Sages from Warren Buffett to Alan Greenspan have warned of the increased risk from the use of new mortgage products, particularly adjustable-rate mortgages and interest-only mortgages. The theory here is that buyers are extending themselves to make payments, and when their mortgages reset they will be in trouble. Put aside the fact that only a year ago Mr. Greenspan was advocating the use of ARMs ("American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," he told the Credit Union National Association last year), these concerns are wildly overstated. As virtually every mortgagee in the country knows, most ARMs are fixed rate for the first two to seven years. Virtually all have 2% interest-rate caps. The average American owns his home for seven years. Why pay several hundred basis points to lock in rates he is highly unlikely to take advantage of? Moreover, very little equity has been paid off by a homeowner in the first seven years of a 30-year loan, so consumers have been effectively overspending on interest rates for generations. As Mr. Greenspan said in his 2004 speech, "the traditional fixed-rate mortgage may be an expensive method of financing a home."

• Myth #3. Speculators are Driving Home Prices: The media today is chock-full of stories of day-trading dot-com refugees who have found their calling buying homes and condos "on spec," with the hope of flipping the property for a higher price. Earlier this month, one Wall Street analyst published an article with the catchy headline: "Investors Gone Wild: An Analysis of Real Estate Speculation." Scary stuff. Here, again, some common-sense thinking is in order. In Manhattan, where I live, friends buy apartments kicking and screaming, convinced they top-ticked the housing market. Is Manhattan special? Are speculators flipping Palm Beach mansions? Bay Area three-bedroom homes? Newton, Mass., Tudor homes? I don't think so. Yet these markets are experiencing the same price appreciation as Las Vegas, Phoenix and Florida, where real estate investors are supposedly driving prices higher.

Anyone waiting for prices to collapse before buying a home is likely to be in for a disappointment. According to the Homeownership Alliance, new household formation, replacement demand and second-home demand will require about two million homes per year to be built over the next decade. This year, the number is likely to be around two million, the highest number since the 1970s -- even as the number of households has grown by over 50% since 1975. Therefore, there is a large cumulative deficit in housing that will take years to correct even if annual housing starts continue at these record levels.

To the cynical, it is seductive to claim that every piece of good news is a bit fraudulent. And real estate has certainly been subject to boom and bust cycles. But bubbles happen when prices become unhinged from intrinsic value. Homes are not stocks; their "intrinsic value" can only be in the eye of the beholder. A house has utility. Rational people might be willing to pay more for a water view, or for living close to work, or for a larger loo. Such voluntary economic decisions are neither irrational nor exuberant.

It's time to stop being alarmist about home prices. To the extent policy makers want to modulate home-price appreciation, they would do well to relax zoning laws, or stimulate development of low-income housing through tax subsidies. Since those things are not likely to happen overnight, housing prices are likely to cool off slowly, if at all.

Mr. Barsky is managing partner of Alson Capital Partners, LLC.

Greenwich Real Estate Market Explained

DEJA VU AND THE HOUSING BUBBLE

THE FINANCIAL PRESS IS PERENNIALLY BEARISH ON HOUSING—AND PERENNIALLY WRONG
by DAVID M. MICHONSKI

The popular press is full of speculation that the United States, as well as other countries, is in a “housing bubble” that is about to burst. Barron’s, Money magazine, and The Economist have all run recent feature stories about the irrational run-up in home prices and the potential for a crash. The Economist has published a series of articles with titles like “Castles in Hot Air,’ “House of Cards, “Bubble Trouble”, and “Betting the House.” These accounts have necessarily raised concerns among the general public…..”

Sound familiar? It should. It was written about the coming housing crash. When? September of 2003, about two years ago.

Marc Faber, the well known Zurich based money manager, and frequent contributor to Barron’s, suggested that a 10% to 20% drop in housing is in the offing. That was in the January 2003 Barron’s Market Roundtable, 30 months ago. Or in terms of price appreciation about 25 percent ago.

Jonathan Laing of Barron’s staff wrote a piece about bubbles and financial manias. He frets about the US housing bubble that, he says, “could explode.” That was January 18, 2003.

It is all déjà vu. It also just keeps recurring.

The financial press (not just Barron’s) seems to be perennially bearish on housing and therefore perennially wrong. Just look at what most of them were writing at the time of the last great buying opportunity, back in 1989 to 1991.

In May/June 1989 Money printed an article titled “It’s time to rethink your biggest investment.”

Aren’t you glad you didn’t? 1989 was a great time to buy.

Jonathan Laing of Barron’s wrote a piece in December of 1989 about “Crumbling Castles” and unbelievably how “demographics” would worsen a collapse of home prices.

Demographics? The demographics of housing were just changing positively for the next 30 years as the Baby Boomers were heading into peak earnings. Barron’s in that year also ran a front page article quoting a study that predicted housing prices could fall as much as 3% a year during the 1990’s.

In February of 1990 Forbes ran an article called “Home, no-so-sweet home” followed by Fortune in July of that year who ran an article titledincredibly, “Does it still pay to own a house?” Uhh, yeah.

In October of 1990 Newsweek ran a cover story about the housing bust, complete with “special section” titled “The Big Bust.” Aren’t you glad you didn’t keep that “special section?”

The negativity continued, all the way into 1992. Business Week published another head turner when it titled an article in April 1992: “Those huge hikes in home values are built on quicksand.”

That was 13 years ago and at least 100% ago in terms of price appreciation.

The ultimate article, however, was the cover story with picture that Barron’s ran in its August 22, 1988 issue called “The Coming Collapse of Home Prices” featuring a house poised on a cliff ready to fall off. It featured an interview with Comstock Partners’, Stan Salvigsen and Michael Aronstein, two of the hottest gurus on the Street back then. Aronstein’s prediction was for a decline of 50% in housing values. Salvigsen’s advice in 1988? “Sell and rent.” To make you feel better he told Barron’s readers in the interview that “I rent in Manhattan and so does Mike.” Now don’t you feel good that you didn’t buy then?

Why does the financial press think they know anything about housing?

The question has dogged me for 20 years. I don’t understand why they think they do. At your peril you will look to and listen to what Barron’s and the rest of the financial press prints about housing or buying a home.

What is it about housing and real estate that the financial press just doesn’t get?

Maybe it is that Wall Street is just too analytical and rational in its thinking. Wall Street is about being unemotional and looking objectively and analytically at everything. It is about doing your research. The guys on the street think they can figure it all out if they just do their “homework.”

Most consumers, especially first time buyers, however, approach real estate differently. They just want a home. They want a place to live. They do crazy things like empty their savings accounts, scrape together every last nickel and hit up all their relatives for a down payment, all primarily because they are motivated by the desire for home ownership. The first time homebuyer wants his own place. It is, after all, quintessentially human to love one’s own. Loving one’s own and therefore wanting to own it may not be the most rational of choices and may not be quantifiable by analysts, but it is the drive behind most home ownership.

Housing is thus one of the most personal and emotional decisions consumers ever make. Further, it is full of taste and subjectivity, adding to the emotionality. It is the opposite of Wall Street thinking. Might it not stand to reason that Wall Street’s quantitative models just may not be able to understand what drives housing? Adding to the emotionality, housing is a status symbol, both for the first time buyer and for the wealthy buyer. For the wealthy it is perhaps the biggest status symbol of all. Bigger than the car. Bigger than the club. Bigger than the jewelry and the kids’ schools. People buy and sell houses to demonstrate where they are on life’s pecking order. People want us to know what town they live in, how big their house is, or how prestigious their building is. Housing is a measure of how far you have come in the world. It is a way for people to put a sign out that says “I made it. Come see.” That does not exactly lend itself to Wall Street “quant” analysis.

Perhaps it is this emotional and status aspect to housing that is at the heart of why the crash that Wall Street keeps predicting is so unlikely. And there are other reasons why Armageddon may be put off, for a few generations.

There is the investment issue. The Wall Street lens through which it wants always to look at everything is whether it is a good investment. My observation is that most people’s stock portfolios do not fare as well as their housing “investment.” It is usually that home, which someone bought fearing it was the top of the market, fearing the next crash, fearing the leverage, and for which they emptied their bank accounts and aggravated their “liquidity ratios”, it is that house that pays for the kids’ college, the daughter’s wedding, that serves as the retirement nest egg for its occupants, not their IRA account.

Most people know this. Common man knowledge asserts at parties and on street corners that “my house was the best investment I ever made.” And common man knowledge has its roots in fact. Because the fact is that since the end of World War II when the National Association of Realtors started keeping records, the average price of a US home has never gone down. Not in the recession of 1974, not during the high interest rates of 1980, not after the stock market crash of 1987. No, not ever. Yes, pockets of overbuilding and thus oversupply have led to declines locally. For instance, the overbuilding of the 1980’s in Manhattan led to the downturn of 1990-1992. The aftermath of the oil boom led to housing price declines in Texas and Denver. But the national average price of homes has never declined. Can anyone on Wall Street say that about their investment portfolios?

The very nice lady in the periodicals department of the library who helped me research this article asked what it was about? I told her it was about the folly of the financial press in always predicting a crash in the housing market. “I wish it would crash,” she said. “Then maybe I could buy a home. It certainly would do better than my 401K.”

Could it this competition for funds that makes Wall Streeters always so bearish on housing? Wall Street makes its money by attracting your money. Your 401K, your IRA. Surely our friends on the Street prefer that your money not go out of their hands into something called real estate. Of course that does not shade people’s judgment on Wall Street, right?

Aronstein and Salvigsen, in that famous 1988 Barron’s article with the house falling off the cliff, were both renting. Is it possible that someone predicting a 50% decline in housing was secretly hoping to “buy on the dip”? Of course not because as we all know so well there are no conflicts of interest on Wall Street, right?

I just read that someone called Michael Swanson has written a tome called ‘Housing Market to Crash.’ It is a “full report on the coming wipe out…..” It emanates from a website called www.wallstreetwindow.com. I wonder if he rents, too.

Déjà vu.

Greenwich Real Estate Market Explained

Basic Instinct

from The Wall Street Journal

By LIONEL TIGER

They have an irrational enthusiasm for a rational model of human economic behavior, and therefore economists can coolly confuse apples with prickly pears and conclude that all asset classes are the same. Owning a house in which one lives and owning a thousand shares of last season's aerated dot-com are supposed to involve comparable economic decisions. If dot-com shares plummet because their companies do nothing anyone is willing to pay for, then that is fairly a bubble. But it's supposed to be a bubble, too, if housing prices rise persistently.

There are good reasons. The world is ever more efficient and produces more assets nearly everywhere which people want to use. Immigrants come to countries like this and want a deck and a rec room and work like a Dickens character to acquire them -- and house their relatives, too. There are now relatively few straightforward ways to earn generous interest and profits because current enterprise is more efficiently low-cost than ever and pricing is global. Some places like New York are discernibly more fun and intricate, and people like inhaling them whatever the ruckus and cost. Finally, people have to live somewhere -- it's a philosophically existential veterinarian obligation. They develop primitively firm affections about where they store their slippers and where the kids whoop when they surprise Dad.

Terms such as "housing bubble" are so self-evidently admonitory, and commentators so secure in their Deep Concern, that owners of modest castles of sheetrock now endure the fear that their prized irreplaceable haven is a birchbark canoe careening down a rocky rapids.

In his lively study, "The Mystery of Capital," Hernando De Soto shows how seemingly disorganized slums in poor countries maintain a precisely gauged metric of rights and obligations. People know their ground, stand their ground, and enjoy their ground. Mr. De Soto also advises to listen "for where the dogs bark," because that's where the boundaries are. Basic territoriality and allegiance thrive. The cumbersome legalism involved in securing a search warrant to ruffle through your bedroom reflects the severity of a home's importance.

The emotionality of a dwelling is primordial, economically wholly different from ownership of a stash in a Bermuda hedge fund or a tranche of a leveraged buyout or an ormolu desk at which Napoleon or de Villepin wrote poetry. The most popular recreation in America is gardening. People surround their houses with frilly plants and especially with lawns -- an astonishingly costly national extravagance. To an anthropologist's eye, lawns suggest a Paleolithic savannah-dweller eager to see fierce beasts and bad guys before they reach the front porch. And what else but emotionally nutritious satisfaction could induce an indolent and sanitized population to grub in mud for weeds and grin with pride at their perky thorny roses and their copious specimens of zucchini, the world's worst vegetable?

All assets are not the same.

Of course there are real issues in the housing market. The entrepreneurs who've problems placing their funds into profitable adventures have now created a host of new "products" (what a degraded use of the word) which permit marginal or intrepid borrowers to pay little or no principal on mortgages, adjust their interest rates, or put off a grown-up reckoning by postponing for years when they must repay principal at a higher rate of interest than they bought into. This may become a disaster about which neither borrower nor lender should have been so cavalier. But in a sense, no more a setback than paying rent and having to show for it only a notice about next year's 6% increase. Of course their income could rise too, as well as fall. There's always the real estate industry's Old Best Friend -- inflation. And to top or bottom it all off, the government subsidizes interest with a tax deduction. Housebubblers are using OPM -- Other People's Money.

However, there is no question many individual owners will be pained, evicted, wiped out, or in extended fiscal conniption. So may be their unduly experimental lenders who will have to mine for bread in a pile of stones. Some vain vendors have already had to reduce their colorful prices -- Jack Welch, Ozzy Osbourne, pick your starlet -- because buyers aren't wholly feckless. But again this is at the margins and in gossip columns. The broad flow of housing transactions offers countless people a decisively advantageous accomplishment of their life cycle. They root themselves in a place which is theirs and is illuminated with the clarity of genuine autonomy. The accidents are always too many and too poignant, especially among the buyers for investment (not shelter) -- who have made uncoerced adult choices.

Meanwhile the center holds. The national housing situation is a triumph overall. If other societies blow similar bubbles, too, it's not because they're foolish but because they have the itch for homes and the scratch for them as well.

Mr. Tiger, professor of anthropology at Rutgers, is author of "The Decline of Males" (St. Martin's, 2000).

Greenwich Real Estate Market Explained

People Are Talking…

By ROBERT J. SHILLER

The home price boom in the U.S. has had a peculiar form since it began in the late 1990s: Home price increases have been getting stronger and stronger each year, year after year.

According to the inflation-adjusted Case-Shiller home price index from Fiserv CSW, Inc., real U.S. home prices, after falling 0.5% in 1996, rose 2.1% in 1997, 5.4% in 1998, 5.4% in 1999, 5.8% in 2000, 5.8% in 2001, 8.1% in 2002, 8.5% in 2003, and 11.2% in 2004. Each year over nearly a decade was as strong as, or stronger than, the year before it. Other bubble countries, the U.K. and Australia, have not shown this pattern: Growth rates of home prices have been slowing there for years now.

The upward pattern is a little less regular but even more striking in some U.S. cities. In Los Angeles, real home prices, after falling 2.7% in 1996, rose 4.1% in 1997, 10.3% in 1998, 4.5% in 1999, 7.7% in 2000, 7.9% in 2001, 16.9% in 2002, 19.2% in 2003, and 23.2% in 2004.

It doesn't take a lot of expertise to see that there is a trend in home price growth rates in the U.S., and nothing could be more natural than to extrapolate this trend. Just last month sales of existing homes set another record. So why not jump into investments in the real-estate market now?

There is nothing clear on the horizon to break the trend. Of course, the Fed has been raising rates, but it has been doing that for almost a year now with little effect. When they raised rates in 1999 and 2000, and when they cut interest rates drastically in 2001, there was no noticeable effect on the trend in home prices either.

Are those experts preaching efficient markets and diversification just hopelessly naïve? What concrete reason is there not to invest heavily in real estate? Many of us, in fact, are kicking ourselves for not exploiting this obvious investment opportunity years ago.

The biggest uncertainty, for many of us, is just that this pattern of home prices looks like a mass-psychological phenomenon called a bubble. The trend is creating the trend, as more and more herdlike investors notice the trend and pile into the market. If that is what is happening, it can't go on forever. We worry that if we invest in this market, it will be just our luck that it will be a sign that we are among the last investors doing this, and that the market will turn suddenly afterwards.

Some experts are saying that real-estate markets never change suddenly. Actually, what they are saying is only a half truth. Real-estate markets tend to be uneventful from year to year but sometimes do change very fast. Real home prices in Sydney, Australia, rose 12.8% in 2003 and then dropped 2.5% in 2004, a pretty sharp bursting of their bubble. We have seen that sort of thing happen in the U.S., too. Real home prices in high-tech San Francisco rose 26.5% in 2000 and then fell 5.7% in 2001, when the stock-market tech bubble crashed.

Prices quickly rebounded in San Francisco after 2001, but we have no assurance that they will rebound the next time. There is also a lot of historical precedent for gradually sagging real-estate markets. The first half of the 20th century was a time of generally falling real home prices, and real home prices fell over a third in the 50 years from 1894 to 1944. Looking forward, as long as home prices are high relative to construction costs, home builders will have an incentive to increase supply. Home price increases have been fast outpacing construction cost increases during this boom.

So, a sharp reversal in the uptrend in home prices, followed by years of sagging home prices, is certainly a real possibility.

What makes for sudden sharp reversals of trend and sudden drops in home prices? There is no received doctrine among the experts on this point, basically since there are not many major real-estate bubbles to study, and the few that we do have to look at have more special events as part of them than we can possibly sort through. With so many relevant economic factors, it is too easy for economists to overfit their models and delude themselves into thinking that economic fundamentals explain everything, with no need to resort to investor psychology.

But prices in speculative markets are ultimately determined in people's minds, by what they are willing to pay. If people change their minds, prices can change instantly and dramatically. Something has been going on in the minds of Americans that has been leading to an ever-strengthening housing market starting in 1997. That something can change.

There is a widespread perception that something big and exogenous has to happen to break the bubble. People say: Sure, after the real-estate boom of the 1980s, Los Angeles home prices fell 41% in real terms between its peak in late 1989 and its bottom in early 1997, but that was a time when the defense and aerospace industries were contracting in Southern California. They say that contraction is the real explanation of the price drop there.

Special factors may help explain the most extreme price declines, but talk and high prices are the main things that end bubbles. The intensity of talk about the high prices right now is enormous, suggesting an emerging change of public thinking that may signal the end of the bubble.

A similar volume of talk occurred in Australia in late 2003, almost exactly when their housing boom ended. The peak of newspaper articles about the housing bubble in Australia was in September 2003, when the IMF's September World Economic Outlook described an Australian housing bubble and when the Australian Treasury warned of a housing bubble. This was after the Reserve Bank of Australia had been warning of a housing bubble for a year.

Such talk from authorities hasn't happened in the U.S. until now. On May 16, five Federal agencies including the Federal Reserve issued new guidelines for home equity lending, where, they said, lending standards "have not kept pace with the product's rapid growth." On May 20, Federal Reserve Chairman Alan Greenspan said that we are in "a lot of local bubbles" in markets for homes. The volume of public talk about the housing bubble set a new record in May.

Forecasters are naturally wary of predicting turning points. The upward momentum in home price growth rates has been so strong that it seems to be a slam dunk to forecast major home price increases again for the rest of this year. Maybe that is the right forecast. But, beware.

Greenwich Real Estate Market Explained

Warren Buffett: On real estate

"A lot of the psychological well being of the American public comes from how well they've done with their house over the years. If indeed there's been a bubble, and it's pricked at some point, the net effect on Berkshire might well be positive [because the company's financial strength would allow it to buy real-estate-related businesses at bargain prices]....

"Certainly at the high end of the real estate market in some areas, you've seen extraordinary movement.... People go crazy in economics periodically, in all kinds of ways. Residential housing has different behavioral characteristics, simply because people live there. But when you get prices increasing faster than the underlying costs, sometimes there can be pretty serious consequences."

Link to the entire article in CNN News:

http://money.cnn.com/2005/05/01/news/fortune500/buffett_talks/index.htm?cnn=yes

Greenwich Real Estate News - Tips on Telling if you are “Home Buyer Ready”

Even if you want to buy a home for the first time, there are many things to consider. These things include: knowing the market, advertising, getting your home ready, and much more. It is a big step and a big investment. So, if you are not quite sure if you are ready to be a home buyer, here are some tips to help you know for sure. This way you can better prepare yourself and have fewer worries in the future.

Ask your real estate agent
As real estate agents, they have plenty of knowledge about home buying and selling, they will be able to answer any questions you may have about home buying or being ready to buy a home. They are an excellent first resource.

Conform to the market
It is important that before you buy a home, you do your research of the market and know the market. It is also a good idea to have realistic expectations of home prices and other factors in the market. If you don’t, you are not quite ready to be home buyer.

Have Enough Savings
If you are ready to be a home buyer, you will have enough savings to put money towards two or three months of mortgage payments. If you do not have this kind of savings yet, it is a good idea to put off buying a home until you do.

Steady Employment
It is important that possible homebuyers have been at a job for at least two years and have steady employment. This way you will have enough for an emergency fund. If you are between jobs or do not have steady income, it’s a good idea to put off home buying until employment becomes more steady.

Plans to stay in the Area
It is a good idea before buying a home, that you have every intention to stay in the area for a while and do not plan to move for at least a couple years. If your job requires traveling most of the time, buying a home may not be the best choice right now.

These tips on being ready to be a homebuyer will help you and your loved ones decide if you are in fact ready for a new home or if you need to do more in order to be ready. This way you will only buy a home when you are truly ready and have fewer worries and will be better able to enjoy your new home in the future.

Greenwich Real Estate Market Explained

Top Ten Ways to Maximize Your Property's Curb Appeal

by Karen Rauch Carter

I've done it, and I'm sure Realtors experience it all the time: When a potential buyer says "There's no need to get out" when you drive up to a property that you intended to show them. The buyer has already made up their mind based upon the curb appeal of the home.

As a feng shui consultant (and licensed landscape architect,) I help buyers find the most suitable property for them, and I help sellers get homes and properties in their best shape to sell. This article is a compilation of items that I find to be the top subliminal "deal-breakers" from a curb appeal standpoint. Some are common sense and some require a little feng shui boost - like using a mirror or a chime - to get the job done. If your listing passes this checklist - I'm confident that you'll at least get the potential buyers in the house!

There are two main goals to maximizing a home's curb appeal:

1. Remove or reduce the quantity of "red flags" in view from the curb.

2. Create the most enjoyable trip from the curb to the front door as possible.

Here are some ideas to consider:

1. A Visible Address is a Must

Make sure the address is clearly visible from the street. Preferably, the numbers should be in a horizontal line versus vertically, or on a diagonal line and be lit at night - at least while the home is listed.

2. Maximize the Front Door Appeal

The front door equals the mouth of that home's body. Energy must be able to find it easily and then enter. The trip from the street to the threshold should be easy to navigate; ie: no "trips" in sidewalk, no thorns grabbing you along the way, no cob webs to go through, no dead plants in pots along the way.

The actual front door should be clean and fresh. If there is a screen door, it must be in tip-top shape and dust-free. If the door is in shadow because of solar orientation, keep the porch light on. Add color and fresh items such as foliage to attract energy towards the door.

If the door is not visible from the street, hang a metal chime somewhere near the door on the non-hinged side of the door. The actual door should be able to open fully, and not stick or squeak. A welcome mat is always welcomed here.

If there is a doorbell - it must work. If there is no doorbell, consider adding a knocker to the door.

3. Make the Plants Work for You

Nothing says "creepy" like ill-maintained plants. Their weak and droopy energy tells the story of how life will be if you buy this home! Plants should be clean, and their droppings picked up.

Plants can be up against the walls and foundation, but not "touching them." Trees touching the eaves and roof, and vines clinging to the walls takes away health energy from those living within the home. There should be no white flowers touching the building - long story - it's just a traditional feng shui thing. Happy, healthy, and colorful and well maintained plants say "someone cares," and "this home is capable of taking care of you."

If there are sick, weak, or poorly trimmed plants (I'm thinking of trees that have been "topped" and look like a big trunk with a few sprigs growing out of the top) they are distractions to buyers as well as weak energy and should be removed. In this case, less is definitely more.

If there is a tree, shrub, boulder or any other landscape item directly in line with the front door (say, within at least 50 feet or so,) it's best to have it removed. This subconsciously creates blocks with the home, as if it is hiding from the very people who want to buy it! It also makes the home struggle to hold health energy for those who live there. A gate is the exception here.

4. Have a Clearly Defined Edge Between Lawn and Planting Beds. This Boundary Mirrors Boundaries in Life

Grass growing into the planting beds not only create a maintenance problem, but it also shows up as lack of boundaries in life. Clearly define planting beds with mow strips (any material is fine) and you will help buyers subconsciously understand this home's front yard. They will subconsciously "feel safe."

5. Use Color to Your Advantage

Color can be an easy way to add energy to a home's curb appeal. Red attracts - use it when the door is out of view or the home seems "lost," or people have a hard time finding the home. Yellow evokes friendly and clear communication, green is simply the color of life, and blues are more introverted and quiet - perhaps what a home on a busy street needs. Orange is subjective, but can create boundaries and a healthy appetite! I would not usually recommend a lot of white.

6. Balance Offensive Neighboring Buildings and Landscape Issues

If there is a church, cemetery, funeral home, school, commercial building within the visual "neighborhood" of the home, try adding landscape screening to block these views. You may want to hide a mirror in the landscape facing the negative item in question with the intention of deflecting its energy away from your home. (No one has to see your secret cures to make them work!)

If the offensive building (or even a tree, or "T" of the street) is directly in line with your front door, hang a mirror above the door facing the item with the intention of pushing it away if you can't do anything about it (like removing the tree.)

If you have significantly taller buildings next to your home and your home is "in its shadow," apply a mirror on that side of the house and face it towards the taller building with the same "pushing away" intentions.

7. Clear the Clutter

Clutter is one of the more obvious "red flags" and should be removed immediately. Extra cars, pots full of dead plants, the kids bikes, garden tools, old holiday decorations (get the lights down!) all need to go. The trash cans should not be visible from the street. Basically, any "personal affects" other than a fresh plant-filled pot or a working water fountain should go.

8. Check Lighting Levels Both Day and Night

Landscape, security, and aesthetic lighting should be in good working order to put the home "in it's best light" for a potential buyer. If the home sits lower than the street, consider placing an uplight on each corner of the home, with the light pointing up at the eave. Keep this light on at all times (at least while the home is for sale.)

9. Attend to General Maintenance Issues

Peeling paint, dead spots in the yard, broken pickets in the fence, etc. will not give you that warm and fuzzy feeling as a buyer! Dripping hose bibs and broken irrigation heads won't either. The front facade and front yard MUST appear in good working order.

Also, take the five senses into consideration: If you can smell a compost pile - it has to go. If you can hear the train next door - cure it or any other offensive noise by hanging a chime between the house and the noise.

10. If You Have the Chance To Design the Front Yard From Scratch, Consider Shape and Element-balancing Characteristics of Walkways, Planting, and Other Front Yard Amenities

Now is the time to put all your feng shui knowledge to work.

1. Consider free-form and undulating shapes (like sidewalks) and water element items in the front yard.

2. Make a "transition space" (like a porch) between the walk and the threshold to "slow down" the chi before entering the home.

3. Use color to your draw attention towards your door.

4. The sidewalk should connect the street and the door - not just the driveway and the door.

5. Create strong mow strips shape and lines within the landscape.

6. Appeal to all five senses.

7. New sod goes a long way to make the home look fresh.

8. A moving object like a flag, whirligig, chime, water fountain in the front yard can attract new buyers!