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Thursday, April 22, 2004

Columbus, Ohio New Homes Outpace Existing Homes

by Blanche Evans

Columbus, Ohio existing home sales have slowed, but builder products continue to move quickly.

"Weather and the war meant a slow start to the market last year but the market came on strong with the Central Ohio MLS showing the year ending up with a 7.4 percent increase in the number of sales in 2003," says Realtor Dan Gregor. "The 1st quarter of the new year continued that end of year trend showing a substantial 12.2 percent increase in activity over the same period in 2003. The average sale prices however did not show any increase. They remained pretty much stable.

Gregor says, "Building activity has continued to be strong, spurred on by lower interest rates and numerous incentives and concessions by production builders. Buyers and sellers today will find both opportunities and difficulty in the marketplace today depending on the location and price range. Sellers who have owned their property for 5 years or more are the ones most likely to be in a position to take advantage of the current market conditions."

Says Realtor Andrew Show, "The city of Columbus is the state capital. The city has gradually grown into the most populous and exciting metro city in the state of Ohio, while still maintaining its midwestern roots and excellent transportation system.

About the market, Show advises, "Lower-priced homes in the metro Columbus area (under $225,000), if in good condition, are selling quickly, but higher priced home sales are still soft."

"Sales of existing home prices have slowed," says Realtor Greg Harrison, "due to the high demand for new homes with lower interest rates, But don't try to sell that new built home until the builder is out of the subdivison. Existing homes are taking a little longer unless they are priced right. Being out of the market by just 3 percent can add months to the selling time."

Published: April 22, 2004

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Blanche Evans is the publisher of Agent News and the associate editor of Realty Times, the Internet's largest independent real estate news service. She is the author of two best-selling real estate books: The Hottest e-Careers In Real Estate, Real Estate Education Company, an Internet marketing primer for real estate professionals, and homesurfing.net: The Insider's Guide To Buying And Selling Your Home Using The Internet, Dearborn, a consumer homebuying and selling guide. In 2000, she was recognized by the editors of REALTOR(r) Magazines as one of the "25 Most Influential People In Real Estate," and in 2003 when the "Most Influential" list was updated, she was recognized as one of nine "Notables." She is also a frequent contributor to "Your Money" on CNN fn.
E-mail Blanche at: blanche@realtytimes.com

For more articles by Blanche, Click Here

Copyright © 2004 Realty Times. All Rights Reserved.

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Health Canada Issues Advisory About Vermiculite Insulation

by Jim Adair

A new advisory from Health Canada warns homeowners to stay away from vermiculite insulation that may contain asbestos.

The insulation, which was used in Canada until the mid-1980s, and sold primarily under er the brand name of Zonolite, may contain asbestos. When fibres from asbestos are in the air people breath, they can cause lung cancer or other serious respiratory illnesses. While not all vermiculite insulation contains asbestos, it's best to assume the worst and take precautions if you have it in your home.

Health Canada says that if the insulation is sealed behind wallboards and floorboards, isolated in an attic, or otherwise sealed from the living areas of the home, there is "currently no evidence of risk to your health." However, when the insulation is moved during maintenance, renovation or demolition work, fibres can be released into the air and become a hazard.

Photos of vermiculite insulation are available at the Health Canada link above, and at the U.S. Environmental Protection Agency's website.

If you know you have vermiculite-based insulation in your attic, Health Canada says don't allow children to play there, and don't use the area for storage because moving things around could disturb the insulation. If you must go into the attic, walk on boards and use a respirator mask. Regular dust masks will not protect against asbestos fibres. Seal all cracks and holes in the ceilings of the rooms below the insulation, including light fixtures and the attic hatch, to prevent insulation from sifting through.

If you suspect there is vermiculite-based insulation in the walls, seal all cracks and holes. Aply caulking around window and door frames, along baseboards and around electrical outlets.

Most importantly, if you must renovate or repair the area, hire a contractor who is trained to deal with asbestos removal. They are listed in the Yellow Pages under Asbestos. Asbestos is a natural mineral that can resist high temperatures, and is a good insulator. It has been used for hundreds of applications -- the ancient Greeks wove it into oil lamp wicks, funeral shrouds and ceremonial tablecloths, says Canada Mortgage and Housing Corp.

It's still used in some industries, and in some household products such as roofing, flooring and appliances. The products are regulated under the Hazardous Products Act, and are encapsulated and sealed to reduce the escape of fibres.

The vermiculite ore, used to make the insulation that may contain asbestos, came from the Libby Mine in Montana, which was in operation from 1920 to 1990. It has been more than 10 years since the insulation was sold in Canada, and Health Canada says it wasn't widely used here after the mid-1980s.

"However, to be safe and in the absence of evidence to the contrary, it is reasonable to assume that if your building has older vermiculite-based insulation, it may contain some asbestos," says Health Canada.

"Asbestos related illnesses are usually associated with frequent and prolonged exposure to asbestos," says the federal agency. "The time it takes to develop a disease from exposure to asbestos is usually long -- up to decades."

How the exposure can affect you depends on the concentration of asbestos fibres in the air, how long the exposure lasted, how often you were exposed, the size of the fibres inhaled and the amount of time since the initial exposure.

"When inhaled in significant quantities, asbestos fibres can cause asbestosis (a scarring of the lungs which makes breathing difficult), mesothelioma (a rare cancer of the lining of the chest or abdominal cavity) and lung cancer," says Health Canada. "The link between exposure to asbestos and other types of cancers is less clear.

"Based on current information, there is no evidence that vermiculite currently available for horticultural purposes (such as potting plants) is a health risk when used as directed." Health Canada says if you are concerned about exposure to the material, talk to your doctor. Minimize further exposure to asbestos by following the guidelines above.

Smoking and exposure to second-hand tobacco smoke and other irritants also increases your chances of developing lung cancer.

For more information, Canadians are encouraged to visit the website above or call Health Canada at 1-800-443-0395.

Published: April 22, 2004

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Jim Adair is editor of REM, Canada's leading business magazine for real estate professionals. He is also editor-in-chief of Canadian Homes & Cottages, the country's largest building and renovation magazine. Email him at jimhc@pathcom.com

Copyright © 2004 Realty Times. All Rights Reserved.

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Interest-Only Loans Are Not Suited For Everyone

by Henry Savage

Question: I purchased a home in Southern California with my sister and a good friend about six months ago. We are first-time home buyers and plan on selling the property in two or three years after the property has appreciated considerably in value.

We have a 1st trust mortgage that's fixed for five years at 5.25 percent in the amount of $344,000. We also have a 2nd trust in the amount of $87,000 at 9.75 percent. Our total payment, excluding taxes and insurance, is about $2,800. My roommate's acquaintance is in the mortgage business and suggested that if we refinance to an interest only loan we could cut our payments in half. This is something that I find hard to believe. Is this possible, and if so, is it something that you would recommend? I might add that both of our existing loans carry a two year prepayment penalty in the amount of six months' interest.

Answer: No, I don't think refinancing to an interest-only mortgage would be in your best interest.

Your roommate's acquaintance is correct in that some interest-only adjustable-rate mortgages will cut a mortgage payment in half. A $344,000 loan at 5.25 percent amortized over 30 years will make a principal and interest (P&I) payment of about $1,900 per month. The same loan amount borrowed on an interest-only LIBOR ARM at 3.125 percent would require a payment of only about $900 per month.

This may look great on the surface, but I caution against making such a move for several reasons.

The most obvious obstacle is your prepayment penalty, which is a killer. We're talking penalties of over $9,000 on the first trust and over $4,200 on the second trusts. Believe me, you do not want to incur more than $13,000 in penalties to refi to an interest-only loan. Frankly, I question your original loan officer's judgment if he recommended loans that carry prepayment penalties. You have expressed to me that your plan is to hold the property for two or three years. With such a short holding period, prepayment penalties should have been avoided.

'Nuff said about that. Even if your existing loans carried no penalty for early payoff, I would question the wisdom of refinancing to an interest-only loan. Let's assume for the moment that you are considering a monthly LIBOR interest-only ARM with a current rate of 3.125 percent. This is surely one of my favorite products but it's not for everyone, including you. Here's why.

First, because you purchased your house by taking out a first and second trust, I'm assuming that you put, at most, only five percent down. Taking out two loans in exchange for one loan eliminates private mortgage insurance, or PMI. That's typically a smart move, although 9.75 percent for a second trust is pretty high. You may have been better off by obtaining one loan and paying the PMI. If you refinance both of these loans to a LIBOR ARM, you will be forced to pay PMI, something that could cost somewhere in the range of $400-$500 per month.

To avoid PMI, you'd have to refinance only the first trust. This is questionable as well. Why? Well, your current rate is fixed at 5.25 percent for five years. Is it better to refinance to a monthly ARM with a current rate of 3.125 percent? Even though I believe short term rates will remain low for a while, there's no guarantee that the LIBOR won't start creeping up. The bottom line here is that you'd be trading five years of interest rate security for an ARM with a lower rate that can adjust monthly. Consider this carefully.

The last thing I'd like you to consider is the wisdom of paying interest-only on a highly leveraged property. What I mean by this is simple. You have only five percent equity in the property and are considering a loan that allows payments that doesn't bring down principal balance. Your plan on holding the property for two or three years and then selling, taking a nice profit.

That's fine and dandy, but what if the property doesn't appreciate? What if the market turns and in two years from now you find that your home is worth 10 percent less than what you paid? You would then be "upside down," meaning you would owe more on your home than it would be worth. I'm not saying this will happen, but it's happened before and it's certainly possible. A recent column I wrote on the subject generated a lot of response that basically shared my concerns of an overvalued real estate market.

To sum up, my advice would be to stay put, primarily because of your prepayment penalties. If you can convince your lender to waive them, have an experienced loan officer carefully look at the numbers before deciding to jump into a refinance.

Published: April 22, 2004

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Henry Savage, the president of PMC Mortgage Corporation in Alexandria, VA, is a mortgage columnist whose work has appeared in numerous consumer, real estate, and mortgage publications. Mr. Savage welcomes your questions for possible use in this column, however because of the volume of mail received, Mr. Savage cannot answer questions individually.

Copyright © 2004 Realty Times. All Rights Reserved.

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Building Active Adult? Don't Assume Everyone Is Rich

by Al Heavens

When it comes to active adult housing, the majority of builders in that niche are focusing on the higher end of the market.

That's not difficult to understand. That's where the money is, or so builders think. But there is a large segment of the population climbing up into the 55-and-older segment that doesn't have huge stock portfolios or lots of money in the bank.

But many do seem to have enough equity in their current houses that can buy them a reasonable home at a reasonable price.

These buyers are teachers, police officers and people who work in the trades.

They make up a substantial portion of the millions of baby boomers who are entering the over-55 active-adult market each year.

Although they have seen the values of their current homes appreciate rapidly since the mid-1990s, these buyers focus on getting the most for what they pay.

The houses they gravitate to are smaller -- 1,170 to 2,174 square feet (the typical new home has about 2,300 square feet, according to the National Association of Home Builders). So floor plans should be open and flexible to create the illusion of space.

Although conventional wisdom suggests that active-adult housing be one-story, some buyers are willing to have a second floor, if the master bedroom is on the first floor.

Storage is extremely important, since most of these people are moving out of houses that seem like barns by comparison.

In many areas of the country, basements are not an option. So storage is offered elsewhere, including above the garage.

Any storage space you can squeeze in will sell. And if the competition doesn't offer it, make sure you do.

Such buyers visit a development repeatedly before coming to a decision. When they do make a decision, and if the builder has done his or her homework, these buyers will be saying that while they know the houses are more expensive, they also know that the builder has thought about their needs.

Remember, this is an emotional decision.

Lot size does not seem to be that important to these buyers. A lot of them are coming from townhouses in the cities, so a big yard isn't important.

When some buyers do suggest that the lots are too small, you need to ask them what they are leaving behind and why. If the answer is an acre and that it is too much yard to maintain, the wind goes out of the argument.

Although amenities such as golf courses, walking trails and clubhouses attract active-adult buyers in all income groups, you can't overdo it.

Builders should be careful not to get carried away when outfitting these amenities. Clubhouses are a marketing tool, but if you focus too much on the interior merchandising, you'll hear the couple whispering, "I don't think this is for us."

A builder needs to drum into the sales staff that if these people like you, they will listen to you, and if they trust you, they will buy from you.

They also come to buy, not to be sold to, so don't try selling them on you. Let them make the decision.

What seems to be selling to these buyers?

Energy savings, for one thing. A growing percentage of new construction is part of the Energy Star program and is built and furnished with appliances in such a way that allows buyers to save about 25 percent on utility bills each year.

In marketing energy savings, a builder needs to ask buyers how long they lived in their current house. If the answer is 20 years or more, it leaks heat and air conditioning, so saving energy will be a big selling point.

Keep the house square, simple and make it furnishable. A square house is the least expensive to build and can easily be bumped out where the buyer wants to put an option.

Studies are a popular option and are not expensive for a builder to add, since it can simply mean two walls and a floor that is flush with the living room. The configuration also provides storage space that can be turned into work space.

Sunrooms and screened-in porches also are popular among these buyers.

A five-fixture bath isn't as important as two walk-in closets. And a five-foot shower seems to sell better than a Jacuzzi hot tub that the kids will use when they visit, but the homeowners won't.

If they want that they can go down to the swimming pool at the clubhouse.

Published: April 22, 2004

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Homes Being Built For Boomers To Age Comfortably

Aging Boomers Feathering Their Nests

The Emphasis Is On "Active" In Active Adult Communities

Builders Must Be Upfront With Buyers

Homebuilders, Remodelers Angling for the Baby Boomer Market

Boomers Trend Toward "Age-In-Place" Housing

Al Heavens is a syndicated columnist who writes about real estate and home improvement. He appears regularly as the "Gadgeteer" on the Discovery Channel's twice-daily Home Matters Program.

Copyright © 2004 Realty Times. All Rights Reserved.

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