Noelle Knox
USA Today

BEFORE AND AFTER

The living room Before: In each room, you should decide which features to accentuate. In this case, it was the windows and the woodwork. All the original furniture was taken out, notably a large computer terminal, which seemed out of place in the sitting room of a Victorian-style house. After: The furniture has been arranged to draw the eye to the window. While more light is usually best in any room, the curtains are drawn half-way because the house next door is very close. Mirrors are added instead of paintings, which would distract from the woodwork. The Western-style chairs and the color choices are currently in vogue. There are no family photos. The catalogs on the table are upscale, and the books in the bookcase are about art and finance.

Before …

AFTER …

Breakfast nook Before: The space looks small and sterile. After: A small table was brought in and set so buyers can imagine eating in the room. A flower draws attention to the view outside the patio, where other plants were added. A bright picture was hung to give the room a cozy look. Before …

AFTER …

Playroom Before: This had been two rooms that were joined together, but the job was never completely finished. The walls needed painting. The room had a linoleum floor. It looked sad and empty. After: Walls were painted one color, and the floor was painted with high-gloss paint. A rug with the season’s most popular colors was put on the floor. Furniture was added, and a slipcover put on an old couch. Before …

AFTER …

Fran Freedman took down the family photos and most of her artwork. She had the fence in the front yard ripped out, and she got rid of half the clothes in her closet. And that was just for starters. She wasn’t redecorating. Rather, she was “staging” her house for a potential home buyer.

With 3.75 million homes on the market — a 7.3-month supply — sellers must work harder these days to attract buyers. Yet oddly enough, the trick to making your home stand out is often to make both the interior and exterior look generic, almost bland. And that’s where home staging comes in.

“The philosophy is the buyer must be able to picture themselves living in your home,” says Freedman, 65, a lawyer in Philadelphia. “They don’t want to see your family photos and your artwork. The décor should be understated so they can say, ‘This would be the perfect place for my…’ “

Does it work? When Coldwell Banker Residential Brokerage in Los Altos, Calif., looked at nearly 2,800 properties in eight U.S. cities in 2004, they found that the staged homes, on average, sold in half the time that the non-staged homes did. The sellers with staged homes ended up with 6.3% more than their asking price, on average, while sellers with non-staged homes sold for 1.6% more than the asking price.

The cost of hiring a company to stage your home tends to range from $1,800 to $3,800 but can go much higher, depending on the size of the house and the amount of work involved.

Freedman says Tailored Transitions, the company she used, “had a hard time convincing me and my husband to spend the money. People don’t spend money on this kind of thing. I’d never heard of staging.”

In the end, they spent $2,500 for the interior, $4,000 for the exterior, $500 to rent “props” like less eye-catching artwork and decorative pillows and $500 to move their excess furniture and boxes into storage. In hindsight, she says, it was worth every dime.

They listed their home this month for $949,000, and Freedman says, “I don’t know if we would have priced it that high when it wasn’t so attractive.”

Judee von Seldeneck put her staged home in Philadelphia on the market this month; it sold in one day, for $700,000.

From moving shrubs to planting flowers, to replacing the knobs on kitchen cabinets and ripping up the carpet on the stairs, every change was made to accentuate the house’s best features. There were even pumpkins on the porch to lend a homey, inviting look.

Inside, the stagers “put furniture that looked comfortable but not too heavy, not cluttered,” says von Seldeneck, CEO of an executive search firm, who’s “in my 60s.” The books on shelves, colors of the rug, the furniture — all were “geared more toward younger people.”

She spent $8,000 on the job and says, “It was the best money I ever spent.”

Short of hiring a company to do the work, there are some simple steps any seller can take to stage a home:

•Cleaning. The house should be Q-tip clean. Every surface should sparkle; every groove should be dirt-free. And above all, wash the windows.

•Clutter. Pack up family photos, stacks of paper, medicines on the bathroom counter, the books overflowing the bookcase. Hide trash cans, ashtrays, the laundry hamper, the kitchen sponge, the cat’s litter box and food dishes.

“Clutter eats equity,” says Barb Schwarz, the self-proclaimed inventor of home staging and author of Home Staging: The Winning Way to Sell Your House for More Money.

•Color. Dark walls make the house look smaller. Walls should be off-white, or have earthy tones if the room has lots of light. Ideally, the carpet would be “real estate beige.” Open or take down the curtains, so the rooms will have as much light as possible. Leave on the lights in darker areas.

•Focal point. To think like a professional stager, stand at the doorway of each room. What features do you want to accentuate? Where’s the focal point? (A room should have only one.) So if you have a fireplace and a big-screen TV, take out the TV. Arrange the furniture so the eye is drawn to the focal point.

•Furniture. Most rooms have too much furniture, which makes rooms look smaller. Reduce the number of pillows on the couch to zero, or have an odd number like three. Remove afghans and blankets. Reduce the number of paintings on the walls.

•Dining room. Take out the leaves from your dining table and put no more than four chairs around it. Set the table as if for a meal, and put an appealing centerpiece in the middle. Reduce the number of dishes in the china cabinet, leaving only a few.

•Kitchen. The exterior of the refrigerator should be bare. Store any appliances you don’t use daily out of sight. Hide the trash can, and put the sponge and soap under the sink. You can spruce up an outdated kitchen simply by changing the knobs and hinges.

•Master bedroom. Buy a new bedspread, if necessary. Clear off bedside tables and chests of drawers. Hide the alarm clock. For the closets, pack up any clothing you’re not using this season. It’ll make the space look larger.

•Bathroom. Replace bar soap with liquid. Coordinate all towels using one or two colors. Fold them in thirds and hang them neatly. Clear everything out of the shower except for one bottle of liquid soap and one bottle of shampoo. Clean or replace the shower curtain. Make sure all grout is clean and in good condition. Remove all cloth toilet lid covers, and keep the lid down. Hide the trash can.

•Outside. Keep the lawn mowed and the edges neat. Trim shrubs, especially around windows. Put flowering plants near the front door. Does the house need painting? Consider painting or staining the front door; it’s one of the least expensive ways to spruce up the entry. If there’s furniture on the porch, make sure it isn’t plastic but rather good wicker or wrought iron. Power-wash or stain the deck. Remove or hide old cans and bottles, auto parts, boats and RVs.

“When you start staging your house, emotionally, you need to say goodbye to your house,” says Starr Osborne, CEO of Tailored Transitions in Philadelphia, the staging firm Freedman hired. “It’s like hotel living. It’s not a comfortable experience, but your home will sell more quickly and for better money.”

The de-cluttering process is “one of the biggest challenges we find,” she says. “Sellers feel it’s an indictment of the way they live. You have to remember what you’re selling. You’re not selling your taste; you’re selling tastes the buyer wants to see.”

Freedman recalls it was “kind of traumatic” when all her family photos were packed away. Another tough moment was when she stood in front of her closet, wondering what she could throw out.

But in the end, Freedman says, the process was “cathartic.” “It made us realize we had too much,” she says. “When we move, we won’t use it all.”

USA Today

WASHINGTON (Reuters) — A slumping housing sector helped slow economic growth in the third quarter to its weakest pace in more than three years, the Commerce Department reported Friday.

Gross domestic product, which measures total economic activity within U.S. borders, expanded at a 1.6% annual rate during the third quarter, down from 2.6% annual rate in the second quarter for the slowest advance since 1.2% in the first quarter of 2003.

Third-quarter GDP growth was well below Wall Street analysts’ forecasts for a 2.2% rate of growth and reflected a range of influences that combined to slow the economy. Most striking was a 17.4% annual rate of contraction in spending on new housing — the biggest decline in 15½ years, since a 21.7% drop in the first quarter of 1991.

By contrast, the GDP report showed that business investment remained healthy and consumers picked up their spending pace, giving credence to forecasts that the economy retains enough vigor to keep growing at least at a moderate rate.

The drag on growth from a rapidly softening housing sector was expected, because other reports have shown prices are weakening for both new and existing homes and builders are offering incentives to try to reduce their inventories of unsold homes.

Non-residential investment, which serves as a proxy for business spending, rose at an 8.6% annual rate in the third quarter, close to double the second quarter’s 4.4%. Consumer spending, which accounts for roughly two-thirds of national economic activity, increased at a 3.1% annual rate, up from 2.6% in the second quarter.

Another eport Friday said consumer sentiment improved more than expected in October as consumers’ view of both future and current conditions improved.

The final October reading of the University of Michigan’s consumer sentiment index was 93.6, up from a preliminary 92.3 and September’s final reading of 85.4, said sources who saw the subscription-only report. The median forecast of economists polled by Reuters was for a final October reading of 92.5.

The White House said it is not worried about the slowdown in economic growth.

“Everybody expected this. You have a combination of rising energy prices and also rising interest rates, and now you’ve seen a reverse on both,” said White House press secretary Tony Snow.

The news was mixed on prices.

A gauge favored by the Federal Reserve — personal spending excluding food and energy — increased at a 2.3% annual rate during the third quarter, slower than the 2.7% posted during the second quarter.

But this gauge, measured on a year-over-year basis, was up 2.4% in the third quarter, which department officials said was the strongest rate since 1995.

Energy prices, which had surged in the summer, have since calmed down.

Gas prices are now hovering around $2.23 a gallon nationwide, compared with more than $3 a gallon in early summer. Oil prices are now just over $61 a barrel, down from $77.03, a record high close in mid-July.

That is supposed to help ease inflation and lead to better economic activity.

Lower energy prices leave people and companies with more money to spend on other things. If they spend and invest, that adds to economic growth. Many economists believe the economy will do better in the current October-to-December quarter, perhaps clocking in close to 3%.

The Fed highlighted its continuing concern over potential inflation pressures when it announced Wednesday that it was keeping interest rates steady for now, but it remained watchful about price rises.

John Bermingham
Province

Vancouver homeowners could be asked to shell out 6.3 per cent more in their property taxes to cover the city’s spending overruns.

In operating-budget estimates going before council Tuesday, budget staffer Annette Klein says the city’s funding shortfall amounts to a 4.9-per-cent tax increase. And $7.1 million in new spending could tack on another 1.4-per-cent to the property-tax bill.

“If we don’t make any changes in the budget . . . this is approximately what it would be to run the city,” said Klein. “On top of it, we have these funding requests.”

In July, the NPA-dominated council voted to cap future property-tax hikes at four per cent. “Now, what we’re going to do is keep working on this, and come back with some options on how to get to that four [per cent],” Klein said.

Next year’s inflation rate is pegged at two per cent.

Last year, council raised taxes four per cent after a gruelling budget process. It cut costs to social programs and community and arts groups. The city also eliminated the equivalent of 25 full-time jobs.

This year, the city’s front-line staff are looking for a wage increase. Their union, CUPE Local 15, is in collective bargaining with the city.

“Obviously, we’ll be looking for a wage increase, but at this point we are not talking about those numbers,” CUPE president Paul Faoro said yesterday.

He’s concerned another round of layoffs and service cuts are on the way. “We don’t believe the public wants a cut in public service,” he said.

Adding to pressure on the budget, the Vancouver Police Department is reviewing its staffing needs and may ask for extra patrol officers in January.

Meanwhile, Vancouver Mayor Sam Sullivan has promised to shift taxes off business over a 20-year period.

Sara McIntyre, B.C. director for the Canadian Taxpayers Federation, said cities like Vancouver have been ramping up property taxes for years.

McIntyre said total municipal revenues in B.C. have jumped 44 per cent in four years. She figures municipal spending has risen by a similar amount.

“You have a wish list drawn up by councillors,” she added. “Then they basically set the property tax rate to basically get that money. There’s no incentive to be fiscally responsible.”

In November, the public will be asked to give feedback on what city services they can and can’t do without in Vancouver, and what would be an acceptable tax increase.

© The Vancouver Province 2006

Noelle Knox
USA Today

Then: San Diego’s housing market was so hot that the town house next to Jeff Cruce’s was flipped from buyer to seller three times in three years. The owners, who never moved in, didn’t even need to put up a “For Sale” sign.

Now: Since August, Cruce and seven of his neighbors have put their town houses on the market (that’s nearly 20% of the units in the complex). All have cut their prices, including Cruce, who chopped his price last month by $30,000 to $559,000. Not one has received an offer yet. Each time one owner would lower the asking price, it put pressure on the others to follow, says Cruce, 38, a salesman who’s moving to Atlanta.

That domino effect, rippling through neighborhoods across the country, pushed down the nation’s median home price in September by the largest amount on record, the National Association of Realtors (NAR) said Wednesday.

The median price for a single-family home slipped 2.5% from September last year to $219,800, the sharpest annual drop since the NAR began tracking the data in 1969. The median-priced condominium fell 2.8% to $219,800, the fourth annual decline in a row.

At the same time, the volume of home sales fell for the sixth straight month, tumbling 14% in September compared with a year ago.

In the softest real estate markets, sellers are waking up to the harsh reality that they can’t get anywhere near what their neighbors sold their homes for last year. So they’re grudgingly reducing their asking prices and offering to pay closing costs.

At the same time, many buyers, emboldened by the transformed market, are low-balling sellers and getting deals they couldn’t have imagined last year.

Just ask Sevan Derderian and Reggie Johnson.

In 2004, Derderian bought a house in Las Vegas as an investment for $281,000. He found tenants, but he kicked them out after 10 months because their rent was always late.

“I found that it’s really hard to be a landlord from a state or two away,” says Derderian, 43, a salesman in Los Angeles. He held onto the property for another year, hoping prices would keep going up. Once the market turned south, though, he panicked.

He listed the house in the summer for $305,000. Having owned real estate only during boom years, he assumed it would sell in about a week. After a month, he cut the price to $289,900. Another week went by. He offered to pay nearly $9,000 toward a buyer’s closing costs.

Then along came Johnson, a 38-year-old truck driver, who snapped up the house and boasts, “I got a great deal.”

Derderian, meantime, lost about $25,000 from paying the mortgage on an empty home.

Where’s the bottom?

That’s a risk confronting sellers in 56 metro areas, including Las Vegas, San Diego, Phoenix, New York and Miami, that are expected to suffer annual price drops, according to a study this month by Moody’s Economy.com.

Prices in a few markets, such as Las Vegas and Portland, Ore., won’t bottom out until 2009, the study projected, and in many areas prices will stay flat through the end of the decade. (For a full list, click here.)

“It was surprising just how quickly the market seemed to turn,” says Mark Zandi, chief economist for Economy.com. “It was like, boom, boom, bust. It was like, ‘What happened?’ The psychology in the marketplace unraveled very rapidly.”

In fact, about half of American homeowners who thought of selling their homes in the past year have delayed putting their homes on the market, according to a USA TODAY/Gallup poll conducted this month.

And roughly one-third of those who had considered selling have abandoned the idea. (The poll of 1,007 adults has a margin of error of plus or minus 3 percentage points.)

Of course, home prices aren’t going to fall in every market. About one-third of the nation is expected to see moderate price growth for the rest of the year. Those areas include Dallas, Austin, Newark, Del., and Birmingham, Ala. — areas where prices didn’t test the stratosphere during the boom.

Even in the once-sizzling markets, homeowners and investors who bought their properties more than two years ago should still see modest gains if they sell in the current market.

Relocating can be costly

But it’s clearly a buyer’s market now. The number of homes for sale has bulged to a 7.3-month supply compared with 4.6 months last September. The backlog of homes for sale is thickest in the areas that witnessed the fastest price growth and investor activity.

“It’s frustrating,” says Cindy Holliday, a high school math teacher who recently took a job in Chicago. “Homes were selling for so much more a few months ago, and now nothing’s selling at all.”

Holliday and her husband were house hunting in Chicago in June when they put their home in Ocala, Fla., up for sale.

“Before we put our house on the market, houses were selling so fast we didn’t think we’d have a problem selling our house at all,” says Holliday, 31.

“When we got back down there (to Ocala), just about every other house on our street was for sale. It was very depressing.”

Though their house probably would have fetched nearly $200,000 earlier this year, they listed it at $179,000. A couple of weeks ago, they trimmed the price to $174,500.

But it’s no easier for sellers in Chicago, says Javier Diaz. He’s made several profitable real estate investments, but the three-unit apartment building he bought in Chicago earlier this year wasn’t one of them.

“I figured this year the property would go up 30 or 40 grand, but that didn’t happen,” says Diaz, 28.

He put it up for sale in September, asking $415,000. He’s already cut the price twice, to $375,000. That’s less than he owes on his loan, which means that if Diaz sells at that price, he’ll have to pull $5,000 out of his own pocket to pay the bank.

Being a mortgage broker, Diaz knows some investors who used their home equity like debit cards. He says of the quick decline in real estate, “It’s coming like a culture shock to many.”

‘Everyone was doing it’

Vicki di Bernardo agrees. “It taught us a lesson,” she says of the downturn in Las Vegas. “It was a little risky, but we got caught up in it. Everyone was doing it. … (Now) everyone is very, very nervous here about the real estate market.”

She recalls buying a single-family home in the Las Vegas suburb of Summerlin as an investment in 2003.

“We were on a huge waiting list, and our names came up, and we had to go in with a check and give it to them within a couple of hours or they’d go to the next on the list.”

She rented the house out for two years. But when her tenants moved out in February, she put it on the market for $574,000.

“In the first three months, we didn’t have one showing — not one,” says di Bernardo, 60, who works in human resources. At the end of May, she dropped the price to $519,000. Three weeks later, she came down to $499,000. Even then, only looky-loos came by.

“There was so much inventory” on the market, di Bernardo recalls. “So many builders had offered huge incentives, like no mortgage payments for 12 months or a swimming pool. We had it on the market for $479,000 when an offer came in at $460,000.”

She grabbed it. She still made $175,000, but that’s about $100,000 less than she’d have made if she sold last year.

Desperate builders a problem

Builders, with no emotional attachment to their homes, have become one of the biggest financial threats to individual sellers. New-home sales are down 16% this year. Building permits for single-family homes are off by 20%. Faced with a huge number of cancellations, builders began trying to lure buyers with eye-catching deals, such as free vacations, media rooms and landscaping.

That’s what’s hurting Bryan Rauch. In January, he bought a home in Anthem, Ariz., where Pulte Homes is offering a slew of incentives, including advice from re-sale experts to help buyers fix up and sell their current homes.

“The plan was to renovate it and flip it,” says Rauch, 37, a nurse-turned-real estate-investor.

He put the home back on the market in February, at $284,000, then lowered the price repeatedly until he hit $270,000. Still no buyers. After six months, he rented it out at a $500-a-month loss.

“The problem is the builder is giving away homes,” Rauch says. “Properties like this are now selling for the low $200s.”

But Rauch needs to cut his losses. So he’s putting the home back on the market at $260,000 and crossing his fingers — like a lot of other sellers around the country.

USA Today

WASHINGTON (AP) — The median price of a new home plunged in September the largest amount in more than 35 years, even as the pace of sales rose for a second month.

The Commerce Department said the median price for a new home sold in September was $217,100, down 9.7% from September 2005.

That was the lowest median price for a new home since September 2004 and the sharpest year-over-year decline since December 1970. The weakness in new-home prices was even sharper than a 2.5% fall in the price of existing homes last month, which had been the biggest drop on record.

The price decline for new homes came while the sales pace picked up, rising 5.3% to a seasonally adjusted annual rate of 1.075 million homes. It was the second consecutive increase in sales, after three months of declines.

Still, September sales were down 14.2% from September 2005.

The supply of homes available for sale at the current sales pace fell to 6.4 months’ worth from 6.8 months in August. There were 557,000 homes available for sale at the end of September, down 1.9% from 568,000 in August.

New-home sales rose 23.9% in the West in September and 6.9% in the South. They fell 34.5% in the Northeast and 6.3% in the Midwest.

The rise in sales last month was led by a 23.9% jump in the West. Sales were also up 6.9% in the South. Sales fell by 34.5% in the Northeast and were down 6.3% in the Midwest.

The Commerce Department’s report on new-home sales in September came a day after a real estate trade group said existing home sales slipped in September for a sixth straight month. The National Association of Realtors said home resales slowed to an annual rate of 6.18 million from a 6.30 million pace in August.