Housing

Nearly half of all homeowners said they think their local real estate market will collapse within the next three years. That is according to a recent survey by the Experian-Gallup Personal Credit Index. 16% says it is very likely and 31% say it is somewhat likely. This number has been steadily going up since May of 2005.

On January 18, the Chicago Mercantile Exchange (CME) rolled out their futures contracts for the New York market. Since May 2006, the CME has been launching housing futures for ten select markets. They are marketed as financial tools that make it possible to trade on US real estate values. Why buy a real home and watch the value slowly rise when you can just rent and buy a futures contract?

It was a bad week for housing news. The National Association of Realtors reported that sales of existing homes declined 0.8% in December. This was a bigger drop than expected. The worst news was that sales fell by 8.4%. This was the largest annual slide since 1989. Back then sales fell 14.8%. Some economists tried to find something positive and could only come up with the median price of a home rising 1.1% for the year. Then their next positive spin was that the bottom was probably reached and things would begin to improve.

An article was published on Jan 21 in the New York Times about women paying higher mortgage rates than men. Article
It was based on a study by The Consumer Federation of America (CFA), which is a nonprofit advocacy group. It determined that women were 32% more likely to get a sub-prime loan.

In this day of HGTV and the dizzying array of shelter magazines, it’s no wonder that American spend enormous amounts of money on decorating. Forget the presents, think about the decorations. Americans spent $3.3 billion on outdoor holiday décor in 2004, up 4.5% from 2003, according to Unity Marketing research. They are still tabulating 2006, no word on 2005.

The National Retail Federation says individual spending on holiday decorations in general is up 36% since 2003. The housing boom spawned a cottage industry of retail home décor stores. Pottery Barn, Restoration hardware and Crate and Barrel to name a few. Since furniture shopping dwindles down during the holidays, they have been very crafty in devise ways to keep the spending going in the stores.

The holiday season is here and people are hosting parties. Good manners will mean that you don’t show up to someone’s house empty handed. Your mother would be horrified if you did. Hosting a party takes time and money. Granted some hosts have plenty of money and hire caterers and party planners. For them, the most they do is make decisions and sign the check.

However, many hosts do it all themselves. The house cleaning begins days in advance. The menu gets planned and then the shopping list is developed. The obligatory trip to the liquor store is generally the most expensive part of the pre-planning. You buy almost everything because you wouldn’t want to tell a guest that you don’t have such and such liquor. If you don’t have the right decorations, you’ll buy some for the party. You start with a budget and then, of course, go way over.

Shelter is one of the most basic needs in life. Yet, for many people the ability to own a home is a pipe dream. Habitat for Humanity is a charity organization the helps low-income families get a home.

The homes aren’t just handed to them. The families that are chosen must be able to provide “sweat equity” and be able to repay the mortgage on the home. The average home costs $60,000. There is no profit in the sales price. Volunteers and the homeowners build the homes. That’s where the “sweat equity” comes in.

Thanksgiving Day usually signal most newspapers to begin their onslaught of dysfunctional family articles. You know the ones. Pithy, witty descriptions of families that don’t get along. In New York you usually get an article about a Manhattanite having to leave the wonderful confines of Gotham for the hinterlands. The horror!

Magazines provide helpful steps to navigate these difficult times. The beauty magazines focus on how to deal with not getting to sleep with your boyfriend when you go home. Or how to not gain weight during the feast fest of the year. They make it all sound so gloomy.

The housing market is sliding faster than a California home on a hillside. While the news from the Commerce Department shouldn’t be all that surprising, it made the stock market pause. The major indexes traded down and sent people into worry mode.

However by the end of the day, the market recovered and all was good in Gotham City. How could this news have caught anyone by surprise? KB Homes gave advance notice of that in its annual report. KB came right out and stated the company would build fewer homes. It doesn’t take a genius to realize if companies create more supply than demand then prices will fall and those companies will create less supply.

KB Homes CEO Bruce Karatz resigned on Monday November 13 over continuing bad press surrounding his stock options. Karatz is the most recent executive forced out due to the issue of back dating options. Companies frequently award their top people with low priced options and then allow them to sell at certain dates. The executives usually make a bundle of money on this.

The purpose of the option is that the executive is supposed to be motivated to increase the share price. The unsavory part comes in when the company sets the price of the option at the lowest possible price, thus allowing the executive to cash out in a more profitable manner. It then doesn’t matter whether the executive accomplished his goal of increasing the value of the shares. While not necessarily against the law, it’s done at the expense of the shareholder. The very people these executives are supposedly protecting and working for.

Public housing in New Orleans is the subject of great debate. One of the oldest public housing developments in the country has the potential of getting torn down. For many people this complex was their home. Yes, it had lots of crime and was pretty run down, but it was home. Poverty is never very pretty.

There is an acute shortage of affordable housing in New Orleans whether you are poor or not. My sister-in-law lost everything in Katrina. She has a good job and was able to load up her car and drive out early before the storm appeared to be headed her way. All she had left was what she fit in that little car. She still has her job, but can’t move back to New Orleans.

Some parts of this country are against immigrant workers. They conveniently forget that immigrants built this country. But nevertheless, they feel threatened by this population. Understood.

But in some parts of the country, there aren’t too many Americans willing to do things like construction work or landscaping work. We’ve had a worker helping us do some stone work at our house. We pay Laurio in cash and he’s happy to have the work. There is no American in our area willing to work this hard for $100 or have the necessary skills. Admittedly, there are some Americans willing to do stone work in my area, but they are too expensive. Ironically they are descendents from the original Italian immigrant stone workers that moved to this area to build the Croton Dam.

The British government commissioned a report on global warming recently and warned of apocalyptic effects. They said if greenhouse gases remain unchecked that world temperatures could rise and result in floods, drought and famines. The pointed comments of the study seem to be directed at the industrial nations that did not join the Kyoto Protocol.

President Bush says the Kyoto initiative is “unrealistic” and will cause layoffs and price increases. Yet, the market is certainly moving in that direction. Sustainability is a frequently used word in the building trades. Builders have already begun moving to products that are reliant on Mother Nature.

Whenever there is chance for fast money, markets get out of balance. When the stock market was surging, there were numerous stories of people becoming day traders. It was FAST money. Kindergarten teachers were quitting their jobs to become day traders, because it was so easy. Actors with no previous knowledge or interest in the stock market were now spending their days in E-trade. That was the sign that the end was near. The market corrected. The end of the Dow was proclaimed and these same people went back to their day jobs. Of course the market is still alive and doing just fine.

The leaves are changing and the mornings are colder. Homeowners’ thoughts are turning to heating oil. Oil prices are usually felt at the gas pump when cars are filled up. It’s also felt as the temperatures go down and the oil truck pulls up to your house for a delivery. Most homes in the Northeast are heated by heating oil. It’s cheaper than trying to heat a house with electricity.

However, cheap is relative when home heating oil was $2.99 a gallon last year. If the tank holds 400 gallons, well a fill up can get very expensive. Biodiesel is a new alternative that has been developed.