Next year may be to appliance buyers what 2009 was to car buyers: time for government rebates.
Modeled after the popular Cash for Clunkers program, which was intended to get cars with low gas mileage off the road, a federal appliance rebate program is launching in early 2010. It offers a boost to people buying energy-efficient clothes washers, refrigerators and other appliances — those that qualify for the federal "Energy Star" designation — and to manufacturers, whose sales fell 10 percent in 2008 and another 12 percent through mid-December this year.
The program has only $300 million, one-tenth as much money as Cash for Clunkers, or about $1 per U.S resident, so it could run out fast. States are receiving roughly the same amount per capita, with California getting the most at $35.2 million, but what's eligible varies by state.
Here's what to keep in mind as you decide whether to swap your washer for that supposedly whisper-quiet model or your old white refrigerator for a shapely stainless-steel number.
• WHAT'S MY STATE OFFERING? For state by state information, visit the federal Web site http://energysavers.gov and click on "state appliance rebate program" on the right.
California residents, for example, can get cash back on three types of appliances: $100 for washing machines, $75 for refrigerators and $50 for room air conditioners. Wisconsin offers rebates on washers and fridges plus $200 for boilers or furnaces, $75 for central air conditioning or geothermal heat pumps, $50 for freezers and $25 for dishwashers.
(Also in effect through Dec. 31, 2010, is a federal tax credit for 30 percent of the cost up to $1,500 on equipment for a primary residence.)
• HOW DO I KNOW IT'S A DEAL? Joe McGuire, president of the Association of Home Appliance Manufacturers, said buying Energy Star appliances can mean hearty power savings. But it's important to make sure you save enough in water and energy bills over time to justify paying for a new unit.
"A good example is a 10-year-old clothes washer," he said. "With Energy Star, you could reduce utility costs by $145 a year and save 5,000 gallons of water a year."
At that rate, a typical $500 to $700 dishwasher would pay for itself in four years. In larger households that use more power and water for laundry, the payoff can come much sooner.
It's probably not worth replacing appliances less than five to seven years old just because rebates are available, unless you plan to upgrade to a far more efficient model. That's because newer appliances are already more efficient. But switching from a top-loading to front-loading clothes washer could in itself cut water use enough to make a purchase worthwhile.
The older the appliance, the greater the possibility of saving money by buying a new one. McGuire says a 20-year-old refrigerator uses three times as much power as Energy Star-approved units made today, some of which run on less than 60 watts.
"You would save over $250 a year on an average 20-year-old refrigerator if you replaced it," McGuire said. "That's about $1,200 over five years. That is real savings to consumers."
The Department of Energy estimates Americans saved more than $19 billion on utilities last year using Energy Star products.
• WHEN WILL IT END? Rebates will be available until February 2012 or the money's gone. And Jen Stutsman, a spokeswoman for the Department of Energy, expects the funds to run out fast.
By VINNEE TONG, AP Business Writer
NEW YORK (Reuters) – U.S. home buyers are less willing to buy foreclosed properties than they were six months ago, citing risks like hidden costs, but demand could grow because of the government's expanded tax credit, a survey showed on Tuesday.
A continued drop in demand for the glut of foreclosed properties would add a fresh layer of pain to a housing market just emerging from a three-year nosedive.
The percentage of Americans at least somewhat likely to consider buying a foreclosed home fell to 43 percent in November, sharply below May's 55 percent, according to a survey by Harris Interactive.
The survey was conducted November 5-9 on behalf of Trulia.com, a real estate search engine, and RealtyTrac, which tracks foreclosures.
Buyer expectations are becoming more realistic, Trulia Chief Executive Pete Flint said on a conference call.
Next year "government interventions will start to disappear, shadow inventory will hit the market and mortgage rates will start to rise" to around 6 percent from under 5 percent, he said. "We're in a false state of stability."
Shadow inventory includes houses that banks now hold but have yet to put up for sale.
Double-digit unemployment will push more owners into foreclosure, further destabilizing the housing market and pressing prices down another 5 to 10 percent, said Flint.
Some closely watched measures show prices have toppled by about 30 percent on average from 2006 peaks. Although prices are rising in some areas, the survey found lingering concern about buying now, when prices could fall still further.
Demand for foreclosed properties, which are often deeply discounted compared with other homes on the market, is of particular concern. RealtyTrac expects over 3 million properties will receive at least one foreclosure notice this year, up from a record 2.3 million last year.
About half of those properties will ultimately go back to banks, RealtyTrac said last week.
The company reported that November was the fourth straight month of declines in foreclosure actions, thanks to various loan modification efforts. But it said many of those problem mortgages would fail anyway.
Foreclosures could escalate to 4 million in 2010, RealtyTrac Senior Vice president Rick Sharga said.
"Unemployment, negative equity are driving factors, as is credit availability," he said. "We don't believe we will get back to normal levels of foreclosure activity on a month-to-month basis until probably the end of 2012, and we will still be going through the shadow inventory well into 2013."
Banks will place the unsold homes on the market at a measured pace to thwart prices on all homes from falling off a cliff anew, he said.
AGE, MARITAL STATUS MATTER
Real estate investors, renters and homeowners looking to "trade up" to a larger house still show strong interest in foreclosed properties, the survey found. Although overall demand dropped, a large share of current homeowners looking to trade up are willing to consider such a purchase.
About 24 percent of homeowners are at least somewhat likely to trade up to a larger home. Of these, 88 percent are at least somewhat likely to consider a foreclosure, the survey found.
Demand from those buyers could rise due to the government's new $6,500 tax credit for current homeowners who buy a new home. These are the "trade-up" or "move-up" buyers.
Buyers looking to lock in that incentive, as well as buyers wanting to take advantage of the $8,000 first-time homebuyer credit, need to sign contracts by the end of April and close on mortgage loans by the end of June.
Fifty-seven percent of renters are at least somewhat likely to buy a distressed home. Demand from renters, as well as all adults, fades as ages rise.
Marital status also impacts demand, with more never-married adults willing to consider a foreclosed property than those who are married, divorced or widowed.
Two-thirds of buyers expect to get a discount of at least 30 percent for a foreclosure.
The survey found that 95 percent of foreclosure buyers are willing to invest in renovations, with more than half expecting to spend 20 percent or more of the purchase price to improve the property. Such spending can help stimulate the economy.
By Lynn Adler Lynn Adler – Tue Dec 15
Properties in these cities stay on the market longest, and sell for less than asking price.
Prospective buyers eying real estate deals in foreclosure-ridden Florida, where home prices have plummeted and unsold properties clog the market, might find fewer bargains than they'd expected. That's because sellers in Orlando, Miami, Jacksonville and Tampa are likely to put their properties on the market for more than what they're worth.
They're not alone. In these markets and elsewhere across the country, homeowners still have an inflated sense of what their properties will fetch. Only 49% of U.S. homeowners believe their home's value has decreased in the past year, whereas prices have plunged for 72% of homes, according to a survey released last month by Zillow.com.
"Sellers are notoriously slow to adapt to declining market conditions," says Jonathan Miller, president and CEO of Miller Samuel Real Estate Appraisers. "Another way to look at it is that they're chasing the market down."
Behind the Numbers
To find the cities with the most overpriced homes, we ranked the 40 largest Metropolitan Statistical Areas--geographic entities defined by the U.S. Office of Management and Budget, for use in collecting statistics--in four measures. Using data provided to Forbes by Altos Research, a Mountain View, Calif.-based real estate research firm, we ranked each metro on the percentage of homes that had seen price reductions, an indicator of inflated pricing; the median number of days spent on the market (the longer homes stay on the market, the more likely they are to be overvalued); and the ratio of median list price (or asking price) to median absorbed price.
The absorbed price of a home is what it was priced when it went off the market. It differs very slightly from sale price, as not all sales in this category have necessarily closed. But data on absorbed homes is more current, because home sales can take months to close after the price is set. The data from Altos Research is based on a 90-day rolling average as of the last week in November.
We also included the five-year forecast for the percentage change in the S&P/Case Shiller Home Price Index, from Moody's Economy.com. In markets where home prices are expected to rise precipitously, a home priced above the average sale price may earn its investment. Thus, we ranked homes with a positive housing outlook as less overpriced. We averaged the scores for these four measures to arrive at a final ranking.
Trouble Moving Pricier Homes
In some markets, a glut of unsold high-end homes causes a discrepancy between a metro's median asking price and the median price at which it exits the market. Miami, the second-most-overpriced city, illustrates this trend. The median asking price here is high, at $490,197, (by comparison, the median asking price for the Altos 20-city composite, a measure used by the firm to approximate national prices, is $390,939). The homes going off the market sell for 19% below asking price.
The problem is financing. Although government stimulus programs have spurred some home buying activity in the lower-priced market, would-be buyers of more expensive homes are strapped for credit. In most markets including Miami, Fannie Mae considers loans for homes above $420,000 or so to be "jumbo loans" that typically have higher interest rates. As sales of these homes are tight, home prices are hit--but prices are slower to budge.
"The high-end market is going down more than the overall market, but sellers in that market don't necessarily see themselves as being different from other sellers," says Miller. "So it's causing the spread between the ask price and contract price to widen."
In Orlando, the most overpriced large metro by our measures, homes are listed at 43% higher than what they sell for--a median $202,381.
"The demand in Orlando is really only for the least expensive properties," says Mike Simonsen, CEO of Altos Research. "The market as a whole is overpriced, in that people are not buying on the high end, they're buying on the entry level."
Underwater Can Become Overpriced
But that doesn't mean that cheaper homes are moving faster in all markets. The 23% of American homeowners who owe more on their homes than what they are worth would be unable to pay back their loans if they budged on their asking price. Most have no choice but to wait out the market even though values continue to drop.
"The people selling now are the people that have to sell," says Miller. "Some sellers simply can't adapt to the market. Maybe they bought a year ago and now they're underwater. They will wait."
Take Phoenix, the No. 12 most overpriced city, where 64% of homeowners are underwater, according to Zillow.com's most recent Negative Equity Report. In that metro, homes are listed for 22% more than when they are sold, among the highest spread of all the cities we surveyed. Homeowners there simply can't afford to drop their prices.
Some of the cities that were ranked most overpriced, like Chicago and San Antonio, had about average discrepancies between asking price and sale prices. By the strictest definition, they aren't tremendously overpriced. But red flags fly for other, more subtle signs that their list prices may be out of whack.
In the largely healthy Chicago metro, rampant overbuilding in suburbs like Naperville has kept homes on the market for an average of six months--sellers aren't pricing them to move fast. In San Antonio, 42% of homes have knocked asking prices down, a sign that the market disagrees with sellers on their initial price.
"There's the straight list-to-absorbed price ratio, but a lot of metros are in this common range of about 115%," says Simonsen. "So then you have to look at other factors, like how many homes have price reductions."
Las Vegas, a market that has yet to emerge from the wreckage of the foreclosure crisis--one in every 68 homes was in foreclosure in October, according to RealtyTrac--is among the least overpriced large metro, a fact that may seem surprising. But although its housing market may take a long time to recover, homes are listed at a median $168,161, far lower than most large metros, suggesting that sellers have gotten pragmatic about pricing. And government initiatives like the first-time home buyer tax credit have spurred demand among budget buyers.
"In Las Vegas, it looks like homeowners are pricing homes to clear the market," says Delores Conway, a visiting real estate economist at the Simon School at the University of Rochester. "And it's because there's financing available at the low end."
Sellers don't necessarily cling to optimistic asking prices out of stubbornness or cluelessness. Many can't change their price--either because they're trapped in a slow-moving high-end market, or because their homes are underwater, and selling at a loss isn't an option.
"People don't have negotiating power," says Miller. "They're not being greedy, but they just can't be as flexible as the market demands."
America's Top 5 Most Overpriced Markets
1. Orlando-Kissimmee, FL Metro Area
2. Miami-Fort Lauderdale-Pompano Beach, FL Metro Area
3. Jacksonville, FL Metro Area
4. Baltimore-Towson, MD Metro Area
5. Chicago-Naperville-Joliet, IL-IN-WI Metro Area
Francesca Levy, Forbes.com Dec 10th, 2009
Before you bid on a home, check for potentially dicey, and pricey, problems.
In most states, home sellers must disclose any defect they know about that could affect how desirable -- and marketable -- their home is before they sign a purchase contract. Even in the six states that lack a "mandatory seller's property condition disclosure" (Alabama, Arkansas, Kansas, Vermont, West Virginia and Wyoming), the state's licensing agency may require real estate agents to tell buyers what they know. In all states, real estate agents who belong to the National Association of Realtors are obligated by their code of ethics to disclose any defects they know about.
But you may have fallen in love with a house, and spent hours preparing a purchase contract, before the disclosures are made. You should always make your purchase contract contingent on a professional home inspection ($300 to $350). Home inspectors could miss hidden problems, however, such as a basement that floods during a downpour.
This list of red flags, recommended by Kathleen Kuhn, president of HouseMaster, a nationally franchised home-inspection company, and Bill Richardson, president of the American Society of Home Inspectors, can help you identify potentially pricey problems. You can use your observations to winnow your choices or to factor in condition when you negotiate price with the seller.
Poor water pressure. Aside from issues of comfort and convenience, low water flow may indicate plumbing problems, such as corroded pipes that will need to be replaced down the road. Tearing out old plumbing and replacing it with copper pipes can run $2,000 to $15,000 or more in a typical 1,500-square-foot home. A less costly alternative is cross-linked polyethylene (PEX) piping, which unlike rigid copper piping, is flexible and easier to install (approved for potable use in all U.S. model plumbing and mechanical codes, but may not be approved in local building codes).
Among tests you can do: Run water in a bathroom sink and check for weak flow. Flush the toilet while the water is running. Does the faucet flow drop off during the flush? In the bathroom located farthest from the water heater, turn on the hot water. Is there an unduly long delay before the water turns hot?
Ceiling stains. Something's leaking. If the stain appears beneath a bathroom, odds are the shower is leaking. It may merely need recaulking or regrouting, but it could also require ripping out tile and replacing the shower pan, a much more costly process (about $1,500). Most roof leaks result from neglected flashing that seals "valleys" in the roof or around a chimney or vents (cost to repair: $200 to $500). But roof leaks may also mean it's time to replace shingles -- at $100 to $350 per 100 square feet for asphalt shingles and $210 to $1,000 for wood shingles.
Troublesome doors. Are the doors hard to close? Do they swing open by themselves or fail to open fully? If you have one bad door, it may simply have been installed incorrectly. But more than one may indicate a serious structural issue, such as a foundation that has settled or framing that is deteriorating. Fixing this problem can require structural and geotechnical engineering reports and thousands of dollars in repairs.
Overloaded electrical outlets or lots of extension cords. Today's electrical demands may exceed the capacity of homes built as little as a decade ago, says Kuhn. You'll spend $75 to $250 to have an electrician add a 120-volt outlet to an existing circuit. Or, if the electrical system is very outdated, it may require a new electric panel. A new, 100-amp panel will cost $1,500 to $2,500.
Exterior features that slope toward the home. A porch, patio, driveway or grading that slopes toward the home all but guarantees water in the basement. And that may lead to structural decay, mold and insect infestation. In the basement, a musty smell may indicate previous flooding or ongoing moisture problems. Check the walls for stains, dark or light, which are tell-tale signs that water has penetrated the walls.
Solving the problem may be as simple and cheap as adding gutter extensions or regrading soil away from the home, or it could require thousands of dollars to excavate and build drains. Some homes may require exterior drains (one at the bottom of a sloped driveway, for example) as well as buried drains.
Odors. Cigarette smoke and pet odors can be hard to get rid of. And if a home smells too clean -- heavy with the scent of cleaning products (especially bleach) or plug-in deodorizers -- the seller may be trying to cover up an odor, such as mold or urine. If so, you need to inquire further, says Richardson, of the American Society of Home Inspectors.
Synthetic stucco siding. This must be installed precisely or else moisture will be trapped behind it, resulting in mold and decay. In the worst case, the siding will have to be replaced. For a medium-sized house (1,250 square feet of exterior surface area), replacing vinyl siding can cost $2,500 to $8,750, while wood or fiber cement siding can cost $5,600 to $10,000 or more. Especially in humid climates, you may want to pay for a special inspection. HouseMaster charges $600 and up, depending on how much of the material has been used and the size of the house.
If you find out before you close your purchase that the seller deliberately misrepresented or failed to fully disclose the home's condition, you may have the right to rescind the contract under state law. If it's a done deal, you'll probably have to sue the seller to recoup your damages. In some states you can also seek repayment of your legal costs. Consult with a lawyer who specializes in real estate fraud. If you have reason to believe that the seller's agent was negligent, you can take it up with the local Board of Realtors (www.nar.com, click on "local and state associations") and the state's licensing agency (to find yours, visit the Web site of the Association of Real Estate License Law Officials).
Source: Pat Mertz Esswein, Associate Editor, Kiplinger's Personal Finance Dec 7th, 2009
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