"I like to see a man proud of the place in which he lives.  I like to see a man live so that his place will be proud of him." - Abraham Lincoln Featured In This Issue Special Days and Events On the Road to Stabilization - With a Few Caution Lights Sticking to a budget? Tips for affordable and easy home upgrades Cooking Corner Special Days and Events July 4 – Independence Day July 11 – World Population Day The birth flower for July is the Larkspur. The birth stone for July is the Ruby. On the Road to Stabilization – With a Few Caution Lights by Lawrence Yun, NAR Chief Economist We saw some encouraging figures for housing over the past month. Existing-home sales rose to a 5.8 million unit annualized pace in April. Pending sales were also strong (based on contract signings in April – the final month of the home buyer tax credit). That signals that existing-home sales will likely beat that 5.8 million unit level in May and June. New home sales and starts were up – and rose by double-digit percentages from year ago levels. These are all good signs for a stabilizing housing market. But – of course – there are some cautionary signs ahead. A big, albeit temporary, slump is on the way. Contract signings for May and June will be very weak. Do not be at all surprised if the pace of existing-home sales falls to 10-year lows of around 4.5 million annualized units for a couple of months before the housing market tries to get back on its own feet absent any government stimulus. If resales bounce back to a 5.5 million unit annualized pace toward year’s end then the housing market can be said to be fully back on a healthy track. It will be well short of the 7 million unit sales set in 2005, but that was an artificially fired-up figure resulting from terribly lax mortgage underwriting standards and a sizable number of speculative home purchases. Getting back to 5.5 million annual existing-home sales will correspond to the level of home sales back in 2001. Back then, there were 130 million payroll job holders in the country. Today the worst in the job market appears to have passed. Excluding the artificial Census-related jobs, the private sector still added 495,000 in the first five months of this year and the total employment stands also at 130 million. One big difference in the housing market now versus then is mortgage rates. The average 30-year fixed rate so far this year has averaged around 5.0 percent, compared to the average 7.0 percent rate in 2001. And while underwriting standards were not very stringent in 2001, they were not necessarily lax either. Provided that mortgage rates remain reasonable favorable for the foreseeable future – that is, remain at or under 6 percent – and if jobs continue to be added to the economy – my forecast is for 1 million new jobs in the second half of the year and another 2 million in 2011 – then home sales should easily be able to churn out a 5.5 million unit annual sales pace. Remember that total sales were 4.9 million in 2008 and 5.2 million in 2009, so settling in at 5.5 million will be a respectable improvement from the past two years. Moreover, home prices are also searching to find a place to settle comfortably after the volatile fluctuations of the recent past. The national median home price of $170,000 is slightly undervalued in relation to median income. Historically, the price-to-income ratio has bounced around minimally from 2.6 to 3.0 in the years prior to the housing bubble years. In 2005, the ratio reached 3.4 – virtually off the charts. Currently the ratio is back down to earth and stands at 2.4, implying, if anything, a slight undervaluation. A recovering economy and income growth could therefore pressure prices to bump back up to a normal historical line. However, by another metric that compares home prices to rent, home values are slightly overvalued. And it could imply overvaluation for some time. Why? Because rents have been falling due to higher rental vacancy rates. With one metric implying slight undervaluation while another slight overvaluation, perhaps one can say for all intent and purposes prices may be back to where they should be. But here’s a caution light again. If the post-tax credit home sales slump lasts for much longer, housing inventory will increase rather than steady out. Should that occur, then home prices will surely fall further. However, the second dip in home values will not be anything on the order of magnitude as the sharp first dip, when prices fell on average by 30 percent from their peak. If on the other hand, home sales have essentially bottomed out, settle down in the 5.5 million unit range in an expanding job-creating economy, then home prices could easily firm up. The bottom line? Prices may decline further, but the second dip will be so shallow that it will not be that meaningful. If anything, home prices have a better chance of rising. From my viewpoint, both home sales and home prices have reached the point of equilibrium. A slightly more tilt this or that way will naturally be at play always but the tilting will be not that eventful. Over the next five years, expect home sales to rise by about 2 percent annually. This growth rate is higher than the projected population or projected job growth rate. But part of the increase will come from a recovery in the second-home market. As for prices, do not expect any robust gains. At best home price appreciation will beat CPI inflation by one percentage point. How will this impact the real estate industry? Based on these sales and price projections, the gross industry revenue from residential home sales will rise steadily. The industry revenue for last year is estimated at $49 billion, the lowest in eight years. I project $52 billion in 2010. Further increases are in the cards in the subsequent years with about $70 billion set for 2015. (These estimates are at the national level.) Still, revenue will be far short of the $85 billion generated during the frenzied and unsustainable period in 2005. At the local level there will always be more eventful movements in home sales and home prices. Some markets will do much better and some much worse compared to national trends. A year ago, I mentioned San Diego and Houston as the markets set to outperform the rest. Both markets did quite well, relatively speaking, on both sales and price. Over the next 12 months, I will be watching Lexington, Ky and Washington, D.C. to outperform. Reprinted from REALTOR® Magazine [June, 2010] with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2010. All rights reserved. Sticking to a budget? Tips for affordable and easy home upgrades Living on a budget is the norm, rather than the exception, in the current economy. Whether you're trying to entice potential homebuyers or just want to give your living space a quick spruce up, here are a few tips for making a big impact in the look of your home without breaking the bank: Start small. Small improvements – like a fresh coat of paint or an attractive new floor – truly update a home because people's eyes tend to notice surface areas first. Experts agree that these upgrades make all the difference to prospective buyers as well. According to the International Association of Home Stagers, investing in small upgrades can increase a home's value as much as 7 percent – and a new floor has been proven to return nearly twice the value for every dollar spent. Shop around. From mattresses and dining room sets to LCD televisions and sofas, you might be surprised to find the home decor items on your shopping list at budget-friendly spots like thrift stores, boutiques and warehouse clubs. For example, quality flooring is available at Sam's Club. Traditional Living laminate flooring combines low-maintenance and authentic good looks with the outstanding value pricing for which Sam's Club is known. Its glueless click installation makes Traditional Living flooring an ideal weekend do-it-yourself project - saving additional money on installation. The superior protective surface provides durability and scratch-resistance to stand up to years of heavy foot traffic from kids and pets. "More consumers are on the hunt for retail locations that offer premium home products at bargain prices," says Sherrie Towne, assistant marketing manager of SimpleSolutions, LLC, which distributes Traditional Living. "For example, the cost of a Sam's Club membership plus the cost of Traditional Living laminate floors is approximately 30 percent less than the price of premium laminate purchased at another retailer." Accessorize, accessorize, accessorize. If a new sofa or coffee table isn't in the budget, infuse a room with energy and color by adding simple finishing touches like pillows, artwork and rugs. Flea markets, estate auctions and garage sales are unexpected sources of one-of-a-kind - and often inexpensive - accessories that add color and personality. In the bathroom or kitchen, swap out existing hardware on cabinets and drawers to quickly create a more up-to-date look. Clear the clutter. Piles of papers, toys and books can detract attention from the unique items that make a house a home. If your space - and your budget - is tight, organize everyday items with furniture that pulls double duty such as a storage ottoman or a bookshelf with built-in compartments. And if you're putting your home on the market, professional home stagers suggest removing one-third of furniture from public areas like living and family rooms to create the illusion of extra space. For more information on the Traditional Living collection, visit www.traditionalliving.com or www.samsclub.com. Courtesy of ARA Content Cooking Corner Roasted Summer Vegetable Salad Courtesy FoodNetwork.com 1 ear corn - grilled, shucked, and cut off the cob 1 red pepper -- roasted, peeled, and cut into a 1/2-inch dice 1 tomato -- grilled, peeled, seeded, and cut into a 1/2-inch dice 2 zucchini or other summer squash -- cut into 1/2-inch slices, grilled, and cut into 1/2-inch dice 1 tablespoon lime juice 1 tablespoon lemon juice 2 tablespoons white wine vinegar 2 ounces extra virgin olive oil Salt and pepper Combine all ingredients. Marinate for 30 minutes. Adjust seasonings to taste. Hope you've enjoyed July’s Newsletter. Please call or send an e-mail if you have any questions about buying, selling, or investing in real estate.