November sales provide some sense of relief

Cincinnati's market activity spiked upward in November reflecting a push by many buyers to close on homes before the original tax credit deadline of Nov. 31. The same trend was seen nationally as existing home sales managed to post considerable gains and even managed to eke out a small tick up in prices.

Click for November's Charts

Some of the key stats from November:

• Local inventory rose modestly to 8 months worth of active homes compared to 12.6 months in Nov. 2008. (Inventory usually has a slight rise during the winter months.)
• The local average sales price went up to 146.6K vs. 144.7K last year.
  
• Local sales came in at 1,570 for the month. A whopping 33% increase over Nov. of '08. The national figures were even higher at 44% over '08. Looking back through 1998, however, would suggest this figure is more in line with historical averages.

For a while, the yearly sales figures for 2009 looked like they would be worse than 2008. With the increase in sales rates over the past few months, we are just a hair behind total '08 sales and might even exceed it when December's numbers come in.

The one area that still reflects pressure: new home construction, down 11.3% from the previous year. While the construction industry has been hit hard, this continues an important step in the market correction and will ultimately help clear the overhang of inventory.

Projections for housing remain uncertain as foreclosures are expected to continue their upward climb. The upward curve we saw in house sales through 2005 is now mirrored in foreclosures with a seeming 5-year lag - about the duration of many adjustable rate mortages! While home prices have stabilized for the most part, many housing economists suggest that prices will remain under pressure through 2010 and, at best, will likely stay flat. One other interesting sign of the times - a recent Wall Street Journal article illustrates how homebuyers are taking longer and looking at more properties before purchase.

Do you know your homeowner deductions?

Time once again to remind homeowners of some important tax issues as we prepare for the new year.

Ohio Homestead exemption: This special allowance enables homeowners that are disabled or above 65 to exempt $25,000 of home value from property taxes. There are no income limits on this exemption. Additionally, ALL homeowners are eligible for a 2.5% tax deduction for their primary home (no second homes or investment property). You may want to check your county auditor's office if you believe you are not receiving this deduction for any reason.

Filings must be done between the first Monday of January and the first Monday of June of the targeted tax year. For more information on filing for the homestead exemption or an appeal of the 2.5% deduction, consult these county auditor websites:

• Hamilton County Auditor
• Butler County Auditor
• Clermont County Auditor
• Warren County Auditor
  

Butler County re-evaluates property: Homeowners in Butler County may see some adjustments on their next tax bill. As promised, the county auditor has conducted a new assessment to account for the declining market since 2006. See the full news release for information.

Assessment Complaint Period: If you anticipate challenging the current assessment on your home, the period to do so is from January 1 through March 31. Check your county auditor site (see links above) for more information on the required process.

Homebuyer Tax Credit: The current tax credit requires homebuyers to be under contract by April 30th 2010 (with closing to occur by June 30th). Both first time and some existing homeowners are eligible for the credit. For full details on eligibility, see the Board of Realtors FAQ.

Energy improvement credits: If you made efficiency improvements in your home during 2009, check to see if you are eligible for tax credits at the Energy Star website.

Pro-rated taxes often confusing during closings

Both consumers and real estate agents alike often struggle to understand Ohio's pro-ration of taxes at closing. The latter part of the year is especially troublesome as sellers are often surprised by the amount that shows up on their HUD statement as it can be nearly a full year's tax that they get charged.

So what happens?

First, it's important to understand that Ohio property taxes are paid 6 months to 1 year in arrears. For example, the bills for your taxes from January through June of '09 are actually mailed in December of the current year or January of the following year. When you sell your home, the title company is required to collect the amount of taxes incurred while you still owned the property but are, as yet, unpaid.

Sellers often believe their tax bills are already paid since they are included with a mortgage payment. The thing to remember here is that funds are escrowed to pay future bills. What sellers overlook is that they will be refunded those amounts when the mortgage is paid off. (According to at least one title company, there are a few occasions where the mortgage payoff is reduced by the escrowed funds - but this is rare.)

Buyers, on the other hand, see the tax amount on their side of the closing statement as an "amount paid on their behalf." This is to address the situation where, initially, the buyer will actually receive a tax bill for the period before they lived in the home. In many cases, the buyer will be depositing at least 6 months of taxes with their new lender in an escrow account and won't realize that the initial tax bills paid from escrow were for the earlier period.

It really does balance out on both sides, but those that aren't familiar with this idiosyncrasy of Ohio real estate can sometimes get a little bit of a rude reminder at closing time.

Can hot water recycling save money?

Tired of waiting several minutes for hot water to reach your faucets in the morning, watching water wasted running down the drain? One technology that has gained some attention recently are "hot water recirculators" that promise to make hot water almost instantly available wherever you need it.

The notion of a hot water "recirculator" sounds pretty good on paper: less water used waiting for hot water to reach the tap, potential for less energy used for water heating, and relatively inexpensive to buy and install. Some localities have even implemented rebate programs for installing one of these devices as they have been shown to help conserve water.

While there are variations among designs, the basic operation consists of some way of returning cold water to the heat source until the temperature reaches a set level or alternately, keep hot water lines in the home filled with water at a set temperature.

So far, detailed third-party analysis of the savings obtained from these devices seems to be lacking. Water conservation seems the biggest return among users - not so much on the energy side. Without some hard data comparing different systems it's difficult to make a clear recommendation, but it seems reasonable that there are situations where the devices will come in handy and achieve some savings. Following are some pluses and minuses that you may want to consider:

Pluses -

• Reduces wait time for hot water at your tap
  
• "Unused" cold water not simply going down the drain, reduces waste
  
• Possibility for saving money on utility bills (should evaluate as a combination of water, gas, and electric usage)
  

Minuses -

• Some devices may not be usable or effective in certain situations (such as coupled with a tankless water heater)
• Some devices target only a specific location or faucet, not for the whole house
  
• May require installation of additional electric outlets adding to overall cost
• Other plumbing options may be available that are more cost-effective

While some of these devices may be cheap and easy to install, I would recommend checking with a plumbing professional to see if this is really the best option for your situation.

For more information, check out these websites:

• Demo and installation of pump attached to water heater (Lowe's product demo)
• Homeowner's experience with recirculation vs. tankless and solar
  
• Detailed analysis of a particular type of system at Oak Ridge National Laboratory
• Toolbase overview of hot water recirculator
  

October sales reflect tax credit uncertainty

Portions of October's home sales numbers quickly illustrated the effect that the first-time homebuyer tax credit had on the market. As uncertainty lingered on whether the credit would be extended (and, for better or worse, now expanded), the impact was seen most significantly in new home construction. According to the National Association of Home Builders:

• Housing production fell 10.6% in October
• Single family starts declined 6.8% and multi-family dropped 34.6%
• New permits declined 4% to an annualized rate of 552,000 units. Near the multi-decade lows seen earlier this year.
  

New housing was the "canary in the mine" since builders were the first to tell customers they could not guarantee closing on a home by the original credit deadline. It's somewhat likely that the big drop off in construction was what prompted implementation of the expanded credit.

While new home construction was worrisome, existing home sales continued to show positive signs we've seen in the past few months. Key stats in the Cincinnati area include:

• Inventory to sales (or absorption rate) stayed steady at 7.5 months.
• Inventory continues to come down which could help stabilize prices. However, a point of concern continues to be the expected downstream foreclosure volume as delinquencies hit an all-time recorded high.
  
• Average sale prices, while still down at approx. $150,000, seemed to be flattening out from earlier declines

(click to see related charts)

Now that the credit has been expanded beyond just first-time buyers, there's some expectation that sales will stay relatively active through the winter and the "spring market" will arrive early next year - possibly as soon as January.

Top 10 winter energy saving ideas

Scarier than Halloween, it's nearing time again for those winter heating bills. Gas and energy prices might give us a little bit of a break this year, but don't overlook some basic ways to keep dollars in your pocket. Here's 10 reminders for winter energy savings:

1. Have routine maintenance performed on your heating system. This includes changing filters. If you have a media filter that gets changed once every 6 months, now might be a good time to do it.
2. Insulate and close air leaks. Usually the cheapest way to save money on your heating bills.
   
3. Fix those window and door drafts. Storm windows, caulk, weatherstripping, plastic seal - whatever it takes.
4. If you have a fireplace, but don't use it, you may want to insert a chimney balloon into the flue to avoid your heat going up the chimney. A piece of insulation may serve the same purpose - but don't forget it's there!
   
5. If you are still doing some fall landscaping, look for ways to plant evergreens that will block cold northerly winds.
   
6. Have a hot tub? Empty and winterize unless you really plan to use it during the winter months.
   
7. Use windows and sunlight to your advantage. Let the sun shine in during the day whenever possible to gain some natural heating.
8. Program your thermostat for lower temperatures while you are away or sleeping. Don't have a programmable thermostat? Inexpensive ones can be purchased for less than $50 at places like Lowe's and Home Depot. Usually easy to install too. Another big bang for the buck item.
   
9. Reverse ceiling fans to push hot air off ceilings (especially helpful in rooms with a cathedral ceiling).
10. Put an insulation blanket on your water heater tank and limit the temperature to 120 degrees.
    

Visit energysavers.gov for even more ideas.

September sales reflect rush to beat credit deadline

Right on cue, buyers appeared to rush the door before the December 1 tax credit deadline. In the Cincinnati market, home sales increased over 10% on a year over year basis. Some of the local and national figures that grabbed headlines include:

• A 9.2% increase nationally (10.55% locally) from September '08 in existing home sales
• A 6.4% increase in the pending home sales index, with 7 monthly increases in a row making it the longest streak since 2001.
  
• A 1.2% increase in the national average home price from the previous month. The 4th month in a row for increases.
  
• The level of sales to inventory continues to outperform the 3 previous years. Locally, the ratio fell to 7.4 months of inventory. Particularly unusual to see a drop from August to September.
  

While many analysts are declaring that a market bottom has formed, there are still many signs that the market recovery will be bumpy at best. Some of the telling signs include:

• The average price year over year is still down 11.3%, much of this attributable to first-time buyer purchases at the lower end of home sales.
  
• New home sales dropped dramatically - 3.6%. A big fall off likely due to builders no longer able to guarantee completion before the tax credit deadline.
• The "shadow" market is gaining attention. That's the large inventory of homes still sitting on the books from banks waiting for foreclosure action.
  

Debate continues on whether to extend the tax credit beyond December and what will happen if it goes away "suddenly." Some are still trying to make it under the wire with such last minute ideas as using short term land contracts or lease-purchase arrangements. The latest news at the time of writing is that the credit is likely to be extended to April, 2010 with some expansion - but nothing is definite yet.

Another potential impact on the market are changes to FHA lending rules on condominiums. Currently, rules are expected to take effect December 7th on what condos qualify for an FHA mortgage. While the actual guidelines are still being tweaked (and thus causing two delays on implementation so far from the original Oct. 1 date), it appears the gist of the changes is to avoid a majority of condos in a given development being financed through FHA loans and minimize the level of risk.

If nothing else, the winter home market may prove a bit more interesting than usual.

• September sales statistics from the Cincinnati MLS

New RESPA guidelines should help understand mortgages

Effective January, 2010, consumers should see some new information from their lender when applying for a mortgage and when they go to closing.

RESPA (Real Estate Settlement Procedures Act) guidelines were revised as a result of the subprime debacle to try and put more (and presumably clearer) information in the hands of consumers when shopping for a mortgage and at the time of closing to ensure they are getting what they expected.

Highlights of the anticipated changes that will impact most consumers include:

• A modified "good faith estimate" that identifies what fees a consumer should expect to pay - and perhaps more importantly - which of them can change at closing and by how much.
  
• A modified "HUD-1" statement provided at closing that shows a clearer comparison of your actual charges against the original estimate and a better representation of seller paid items (if applicable).
  

The good faith estimate sample published by HUD includes a section that encourages a borrower to do some comparison shopping and better evaluate the overall fees a lender will charge. Some aspects of the form also show which items the consumer can shop around for (such as title services).

The new HUD-1 statement has a section that summarizes much of what is in the fine print of mortgage documents. As anyone who's been through a closing will tell you, there is a large volume of paperwork and trying to catch all the details can be rather challenging. The summary data should be able to help you quickly assess whether the numbers look like they are supposed to and avoid any "surprises" down the road.

As with any change of this magnitude, expect a few hiccups along the way. That said, the changes look like they will help consumers get a better understanding of what exactly they are signing up for. For a closer look at the forthcoming revisions, visit the HUD RESPA website.

Cincinnati market stats mixed in August

As expected with a stabilizing market, August's stats were something of a mixed bag. However, the trends for Cincinnati continued to be mostly positive. Some of the notable highlights from the Cincinnati MLS statistics include:

• The total number of sales transactions continued to match rates from 1996 - 1997. A trend we've seen for the entire year and possibly representative of a "normal" rate of sales.
  
• Inventory vs. sales (aka "absorption rate") came in at 7.5 months. Better than August '07 and '08, but slipping back above the '06 rate.
• Sales for August were up 2.0% year over year, but down from July. This reflected national existing home sales which slipped a bit on a month to month basis (down 2.7%) although they still gained 3.4% year over year.
  

See charts from August

As noted in previous columns, we are seeing that the rush is on for first-time buyers to beat the clock on the tax credit and we will probably see that reflected in September and October numbers - with a potential drop off in November. Since sales have to close by November 30th, the recommendation has been that buyers need to be under contract by Oct. 15th to make the cut. With some financial incentives ending, the statistics over the next few months will tell the tale on how quickly the market returns to a balanced state.

Financing incentives begin to wind down

As the housing market has begun to show signs of a pulse, banks and federal agencies are looking at taking the patient out of ICU. What's uncertain at this stage is how the market will react without the supports that were used to stabilize it.

First up is the first-time buyer's tax credit slated to end as of Nov. 30th. All evidence suggests this program has been significant in prompting sales at the lower end of the market. In the Cincinnati area, homes below $150,000 were a majority of sales in August while those above that price continue to languish (with an average of 68 days on market vs. 82 days, not accounting for listings that were renewed after expiration).

There is a fair amount of lobbying to extend the credit, but no indications that will happen. It's not unlikely that Congress will wait to see whether there is a significant adverse impact before any additional extension.

The second significant event is the winding down of the Federal Reserve's purchase of mortgage-backed securities. Earlier this year, the Fed initiated a $1.25 Trillion (yes, that's a T) purchase of the securities in an effort to lower mortgage rates. Again, all the evidence points to this being successful as mortgage rates have been at historic lows for the better part of the year.

At the Fed meeting that ended last week (9/23), it was announced the program would be extended through the first quarter of 2010, but no additional funds would be provided. In effect, the Fed stated they were aiming for a "smooth transition" to normal market operation. Economists expect that mortgage rates may increase by up to 1/2 a percentage point when this program ends.

While not an official incentive effort, the Federal Housing Administration also announced that it will implement several steps that effectively tighten its lending standards due to an increasing level of delinquencies. FHA loans have been an outsized portion of loans in the past year as it has become the financing of choice for low equity mortgages.

There are still a number of incentive programs that remain in effect. However, for many who are suffering from "bailout fatigue," the movement towards ending these programs has been welcome news. On the other hand, many homeowners as well as real estate and related professionals are concerned that sales and prices will once again begin to fall. High inventory rates and new foreclosures will continue to weigh on the market, but the therapy to get the market standing on its own feet may have just begun.

WaterSense label seeks Energy Star status

If you've been in the market for new plumbing fixtures recently, you may have noticed a lot more fixtures being identified with the WaterSense label. This EPA program seeks to do for water conservation what Energy Star has for energy efficiency. While there are specific criteria that apply, generally those products defined as meeting WaterSense guidelines are 20% more efficient than the average product in the same category. Additionally, rebates and other incentives are being offered in areas where water shortages are of concern.

The Wall Street Journal reported recently that new guidelines are now being published that will allow homebuilders to voluntarily label homes with the WaterSense label if they meet guidelines for overall usage. However, since much of a homeowner's usage comes from landscaping, the guidelines are creating a bit of angst among turf companies. Areas of the country such as the dry Southwest in particular have been instituting programs to rebate homeowners for converting their lush lawns back to a more natural desert landscape. The WSJ article goes into some great detail about the pros and cons of the program.

While the Cincinnati area does not currently have the same water shortage concerns that other areas of the country do, the practice of xeriscaping (landscaping using more drought-resistant and native plants) has been gaining traction. Some landscaping companies in the area, such as Marvin's Organic Gardens, have made xeriscaping and water conservation practices a key part of their service.

Water conservation practices may not be high on your priority list, but it's not out of the question we could see the cost of water usage continue to increase with population growth and other factors. From a purely practical standpoint, here are few water conservation practices that could help your bottom line:

• Look for WaterSense labeled products when installing new fixtures
• Fix any leaks as soon as possible. Leaky toilets can waste up to 500 gallons a day.
  
• Use a rain barrel for watering of plants when needed
• Use xeriscaping to reduce landscape water needs
• Let lawns go dormant during dry summer periods based on the type of grass you have. If watering your lawn, be sure to follow good watering techniques.
  

For more water saving tips, check out H20use.org.

July Housing Stats - Will positive trends continue?

With economists and news media reporting housing as the good news for a change, it would be easy to think the worst is now behind us. This month's statistics definitely continue the trends in a positive direction, but underlying the movement are temporary factors that will likely keep the pressure on sellers and prices flat for a long time to come.

The good news in July's statistics include:

• The absorption rate (rate of sales to inventory) fell to 7 months in the Cincinnati area. This is the lowest rate in 3 years.
  
• The number of year over year July sales increased by 150.
• On a national level, existing home sales increased for the 4th month in a row. The first time that has occurred in 5 years.
• Single family home starts increased 1.7% to an annual rate of 490,000.
• The Case-Schiller price index reflected a 3% gain for the April - June period. The first quarterly increase in 3 years.
  

So, why continue to keep a lid on enthusiasm? The biggest reasons are:

• The first-time buyer credit deadline is bringing more buyers into the market, but primarily at the lower end of the market. No one is sure what will happen when the credit ends.
  
• Large banks are holding foreclosures off the market while attempting loan modifications. Inventory levels are expected to increase as they end a self-imposed moratorium. Foreclosures are likely to pervade the market as banks work through remaining subprime and adjustable rate mortgages, with a peak in foreclosures around the fall of 2010.

One important note to first-time buyers - closings are often taking longer than the usual 30 days. 45 to 60 days is not unusual. If the tax credit is important to your purchase plans, I recommend getting a contract no later than October 15th.

For a detailed look at July stats, see the charts below:

• Sales vs. Inventory
  
• Sales rate
  

203K offers path to rehab foreclosures

Many prospective homebuyers initially think of foreclosures and short sales as the way to get a bargain home. Unfortunately, most experience a shock when they see the condition of most of those "bargain" properties. The vast majority need at least some level of rehab conditioning - paint and carpet being a minimum level to start, but there's usually a number of both minor and major fixes needed beyond that.

For those that can envision a home after it's fixed up, the FHA 203K program can provide the funds needed to make improvements. The 203K allows a homebuyer to include up to $35,000 of upgrades into their mortgage, but it does take some effort to make it happen.

The first thing to expect if you use a 203K is that it will take longer to process and there's additional significant paperwork (which your lender should assist you with). Closings are currently running an additional 15 - 30 days over a standard loan. Additionally, the homebuyer will need to line up estimates from contractors for the improvements to be made and supply those to the lender.

The biggest hurdle to get over with the rehab loan is the appraisal of the "as improved" value of the home. In a typical home purchase, the appraiser is looking simply at the current "as is" value of the property and your loan is approved (or not) based on that value. With the 203K, they must make a determination of the home's value after the work is done. There is some flexibility with the value assessment relative to cost of improvement, but essentially the lender needs to see that it will be a worthwhile investment.

After the loan closes, funds are disbursed to contractors once work is complete and inspected. Keep this in mind when lining up contractors that will perform the work as they need to understand the 203K requirements for payment.

If you are looking at homes that need work, keep the 203K in mind as one possible option for finding the bargain home and making it livable. For more information about the 203K program and whether it would work for you, visit the official FHA Website.

Energy Star rating for homes undergoing changes

The Energy Star rating for homes has long been a basic standard for consumers looking for energy efficiency, but as building codes have improved, the current guideline is starting to show its age.

One of the primary measures to get the Energy Star rating is the Home Energy Rating Standard (HERS). The HERS rating system by itself can be a strong indicator of how energy efficient a home is by providing a numeric indicator of energy performance. Although the overall process is a bit more complex, in our area a HERS rating of 85 or less is the basic measure for receiving the Energy Star label.

As defined now, most builders are very close or even surpassing the required rating guidelines simply by following local building codes and international standards. Since the Energy Star standard is supposed to identify those that exceed the norm by at least 15%, it is in danger of no longer achieving its defined purpose. In the meantime, other more comprehensive guidelines such as LEED and NAHB Green have achieved recognition for higher standards of performance.

The comment period for the new proposed guidelines closed on July 10th and will likely prompt at least some changes, but some of the more significant updates may include:

• Indirect energy measures. Factors such as water usage and indoor air quality will be evaluated (already included in standards like LEED).
  
• House size consideration. Under the current standard, larger homes get an advantage over smaller homes in the evaluation and thus obtain qualification easier.
• Cost effectiveness policy. Inclusion of certain efficiency measures will attempt to ensure that improvements pay for themselves when included in a mortgage.
• Application of State codes. Where state codes are more restrictive, they will be used as a baseline measure.

The Energy Star label has a distinct advantage of being widely known by the public as a measure of efficiency. If nothing else, the fact that the bar will be raised in 2011 is solid evidence that building science has gone through significant advancements in improving energy efficiency. We should expect to see that translated into continuing methods for lowering everyone's utility bills.

A glimmer of light in the long housing tunnel

Although no one's claiming an end to the housing slump, it's hard not to consider the positives in June's housing statistics as signs of life beginning to emerge.

Some of the good news at both the local and national levels include:

• The inventory vs. sales rate in Cincinnati dropped to 7.2 months. This is the first time the monthly rate has been below the previous year since 2006. In fact, the rate was actually lower than the June 2007 rate.
  
• June 2009 sales volume was higher than June 2008 volume. The first year over year volume increase in 37 months.
  
• Nationally, median housing prices had their first month over month increase in over 3 years.
• New home construction had an 11% increase over the previous month.
  

While all of the above are positives, I have to do a reality check as there are still many headwinds buffeting the housing market before we are likely to see a sustained upturn. Some of these still include:

• Distressed property sales are still an outsized portion of the market and are likely to remain so for the foreseeable future.
  
• Average sales prices were still down year over year. 15% lower than this time last year (again, an attribute likely accountable to foreclosures and other distress sales). On a national level that figure was 17% lower, but also less of a decrease than seen in earlier months.
  
• There's some reasonable expectation the market will get temporary support through the end of the year by first-time buyers taking advantage of the tax credit along with efforts to keep mortgage rates very low. No one knows quite what to expect if and when those elements go away.
  

So, while the market appears to be reaching the stabilization point, there should be no illusions that home prices are going to bounce back up anytime soon. On the other hand, buyers should be aware that well priced homes are getting snatched up quickly - even getting multiple offers in a matter of days.

For charts of June's statistics, see the links below

• June sales vs. inventory (Cincinnati MLS)
  
• June sales rates (Cincinnati MLS)
  
• National existing home sales
  

Solar power options really do exist in Cincinnati

Cincinnati isn't necessarily known as a hotbed of activity for solar power products, but with available tax credits and other incentives, the available options are more attractive than one would think.

After speaking with a number of vendors in the area, I've identified several solar powered products than can be quite cost effective. The list below shows some of the options and incentives available along with some local vendors to contact for more information.

Solar lighting:

This is a "passive solar" option that acts similarly to a skylight, but is far more efficient in limiting the thermal impact on your home. The "light" can even be controlled and diffused where a skylight is more or less an overhead window. (See a Solatube example). When used in an existing home, they can qualify towards the $1500 tax credit for efficiency improvements.

Solar Attic Fans:

I've discussed these previously, but these fans help move air through your attic much in the same way as an electric fan and passive vents. They operate by using a small solar electric panel to power the fan as long as daylight is available and provide the advantage of free operation. While passive venting is also free, it usually doesn't provide enough air movement to keep the attic as cool as it should be.

Solar attic fans can qualify for a 30% renewable energy tax credit and are not subject to the $1500 limit.

Solar water heaters:

These systems can be a little pricey, generally in the $5000 and up range, but eliminate approximately 50% of water heating requirements from other sources according to Energy Star research. These usually have a gas or electric water heater as backup, but can also be coupled with a geothermal system to produce hot water with nearly no additional utility cost.

Along with the 30% renewable energy credit, some vendors have local incentives such a $30 per 1000 BTU rebate through Green Energy Ohio. Overall, the incentives can take almost half off the total system cost.

Solar electric panels:

Solar panels have been around for a long time, and yes, they are still rather cost prohibitive for the typical consumer. Nevertheless, current incentives and tax credits can make this a cost effective option for some homeowners.

A typical home installation in this area is likely to run $22,000 or more and might eliminate about a third to half of your electric bill assuming average use and ability to place panels in an optimal spot. That might not seem like much, but when you add the 30% renewable energy credit plus a local Ohio incentive of a $3 per watt rebate, then you are getting into the territory of the system paying for itself if built into a mortgage.

Some additional benefits with these installations is that you can arrange for a battery backup system that kicks in during an outage, or tying into existing utility and "selling" electricity that you aren't using during the day. Again - not necessarily an option for everyone, but could be worth a look if your home has good southern exposure.

For more information about products and installation, check the websites of these local vendors:

• First Day Natural Lighting
• Home Energy Checkup
• Blue Chip Solar & Wind
• Third Sun Solar & Wind
  

Appraisals the new hurdle in home sales

As if sellers weren't having a hard enough time in this market... over the past few months, more sales contracts are falling apart - and more are happening due to low appraisals.

In "normal" housing markets, it's less common that problems arise once a contract is signed, but here's a quick look at issues that are happening with some frequency now:

• Home Inspections - always good practice, but when the market was slanted towards sellers many buyers were waiving the inspection process. Now, buyers are often expecting the sellers to fix even minor issues or canceling a contract.
• Financing - as most everyone is aware, lenders are giving far more scrutiny to the buyer and financing can fall through even after someone has been pre-approved. Sometimes a new lender can be found, many times not.
  
• Appraisals - the concern is now that appraisers are being overly conservative in the valuation of a property. If the house does not appraise, then the buyer is faced with paying the difference, or the seller is asked to reduce the sales price (or somewhere in between). After sometimes difficult negotiations up to that point, you often have a situation where neither party feels they should budge.
  

A lot of press has been given to the recently implemented HVCC or Home Valuation Code of Conduct. The guidelines stem from an agreement between Fannie Mae, Freddie Mac, and New York's State Attorney General to eliminate conflicts of interest. Without going into a lot of detail, essentially it seeks to ensure the independence of home appraisers.

As things of this nature often do, a fair amount of confusion exists over what's OK and what's not. And as one would expect, the (over)reaction is to err on the side of caution. With a number of sales being canceled due to low valuations, many are pointing the finger at the use of inexperienced and out-of-area appraisers (i.e., they don't know the local market). While the intent of the HVCC may have been positive, the law of unintended consequences is having a significant impact.

The complexities and issues in today's housing market will take time to sort out and may require an abundance of calm and patience whether buying or selling, but it's still important to note that many home sales can and do get done without problems.

May 2009 - Local market in flux?

Those looking to sell in the current market are hopeful for any signs of a turnaround, but May's numbers are showing it could be a slow slog before inventory and pricing change in their favor. Continuing the trend from April, the market does show signs of at least beginning to flatten out with a mixed bag of positives and negatives. Nobody's expecting a sellers market anytime soon, but we could at least be moving to some semblance of a balanced market in the not too distant future.

Some highlights from May:

• inventory to sales dropped to 8.5 months, about the same as last year at this time but on lower sales volume
  
• distressed property sales were about 40% of the market, a bit of a drop from prior months
• inventory continues to drop below 2006 figures, aided by more leasing and lease/option arrangements (see this month's column on "owner financing")
• Nationally, month over month sales increased 2.4% for the second month in a row, but was down 3.6% from May of last year.
  

For a full snapshot of May statistics, see the following charts:

• Local inventory vs. sales (absorption rates) & average sales price chart
  
• Local sales and inventory volume charts
• National existing home sales
  

How efficient is my window

If your thinking of taking advantage of the current energy tax credits to replace your windows, you might want to consider just how much bang for the buck you will get.

Getting an energy efficient window may be one of the most complex and least understood improvements that can be made to a home. For example, what does it mean to have a low-E window? What about gas-filled, double-pane windows? How much will you save by replacing your old single-pane window if it's still in good shape? Unfortunately, your window vendor may not be familiar with what works best in your situation and how much you stand to save.

Before laying out big bucks, here's some factors you should be aware of and discuss with your contractor:

Ratings:

You should see the following factors included on the "NFRC label" (National Fenestration Rating Council) included with a particular window. You'll want one rated appropriately for the local area.

• U-factor: this is a measure of heat transfer or insulation value. The Energy Star recommendation for the Cincinnati area is < .40 for windows and doors. If you are closer to Dayton, the suggested rating is < .35.
• Solar Heat Gain Coefficient (SHGC): identifies how much solar heat passes through the window. The suggested rating can vary based on the U-factor, but in Cincinnati you'll probably want a rating < .40. Further north, the rating becomes something of a non-issue as long as you get the right U-factor (although a higher heat gain further north can be a plus for longer winters)
• Visual Transmittance (VT) is a rating from 0 to 1 indicating how much light passes through (the closer to 1, the more light comes through).
  
• Air Leakage (AL): Measures air passage per minute. The lower here, the better. The baseline standard is <= .3
• Condensation Resistance (CR): Rated from 0 to 100 on how much condensation will build up on the window. This is another rating where the higher, the better.
  

Technology:

When evaluating the type of window you want to use, here are construction factors to consider.

• Low-E coating: a mettalic coating placed on the window surface that allows light to pass through, but is useful in reducing the U-factor of a window.
  
• Gas fill: A typical double-pane window will use Argon or Krypton gas between panes to increase the insulating value.
  
• Frames: Perhaps the most commonly marketed windows are either insulated vinyl or wood. Many prefer the look of wood, but from a maintenance and efficiency perspective the insulated vinyl may be a better bet. Other frame types exist including aluminum and wood clad.
  
• Spacers: used to hold the window panes at a certain distance apart, manufacturers have made improvements in the type of spacer used to further increase the insulation value
  

Savings:

Most homeowners automatically assume that replacing windows will translate into big savings, especially if they use an Energy Star rated window. However, the Energy Star office study shows that savings in our area equate to about $377 per year in a typical 2000 sq. ft. home when replacing single pane windows. As an energy auditor often tells me, this is one of the least efficient paybacks for a home. If you just laid out $10,000 for new windows, it could take over 25 years for the savings to pay for those windows - just about time to think about replacing them again.

The bottom line here is if you are replacing your windows in a typical home (and not for special applications like passive solar heating), it's good to consider the energy efficiency of the window, but be sure you are doing it for the right reasons. Replacing rotten or deteriorating windows and increasing the attractiveness of the home may be stronger considerations than the few dollars you'll save on energy bills.

Other resources:

You can find more detailed information about window technologies, ratings, and other energy saving tips at the following sites:

• Efficient Windows Collaborative
• Department of Energy's window tips

The Return of Owner Financing

When banks were handing out money with 100% financing and going light on credit checks, owner financing (aka "rent to own") fell out of fashion. As credit and the need for down payments has tightened, demand for owner financed lease arrangements has increased sharply.

There is a risk element involved with leasing of a home, so good tenant screening and some form of landlord insurance is important. That said, homeowners who want/need to move and have enough equity in their home may be able to take advantage of this demand and weather this buyer's market a bit better than most. Following is a brief overview of common lease arrangements and some of the pros and cons (as always, you should seek professional legal and tax advice to evaluate your personal situation).

• Lease/option - this is what most think of as a "rent to own" arrangement. The buyer/tenant pays for the right to purchase the home within an established time (e.g., within 1 year) at an agreed to price. If the buyer chooses not to purchase the home within that period, then they usually forfeit the "option fee" to the seller. Depending on how agreements are setup, the option fee, and possibly even a portion of the rent, may be applied to the down payment at time of purchase. A common element in a lease/option agreement is that the seller is relieved of the property maintenance since it is assumed the buyer will exercise the option.
  
• Lease/purchase - a step above a lease/option, this arrangement requires the buyer to write a purchase contract that must be executed within a set period of time. This is probably the most preferred method by sellers since the buyers would perform any inspections and complete negotiations on the sales contract up front. As with the lease option, a deposit is usually setup as part of the down payment, but is forfeit if the buyer defaults on the agreement.
  
• Land contracts - this is owner financing in its purest form. Essentially, the seller is acting as the bank and holds a note for buyer, charging a set interest rate for a certain period of time. In Ohio, the buyer gains equity in the property while the seller holds the deed. Notably, this form of financing can be a bit more complex from an accounting and tax perspective, but may also hold advantages for both the buyer and seller.
  
• Renting/leasing your home - For those who have the opportunity to use their current home as investment property, this option can provide a nice income for those who are relatively handy and can handle routine maintenance calls and tenant screening (or are able to pay a property manager to handle these actions). This option may have an added advantage that owners can rent their home until such time that market demand and home prices stabilize.
  

One point to note is that most lenders will accept lease payments as income when trying to qualify for another loan. However, in the current lending environment, the restrictions may be tighter and require the lease to be "seasoned," i.e., already in place for 6 months to 1 year, before they use it as part of your qualifications.

While owner financing receives mixed reviews from real estate agents (mostly due to the fact that sales commissions are delayed at best, and lost through default of the buyer at worst), they nonetheless have become a factor in the current housing market. Anyone looking at selling a home in this market may want to consider this approach in the marketing of their home.

April housing stats "less worse"?

The stock market rallied in April on news that things were "less worse" than imagined and economic declines were slowing. Those same sentiments were partly reflected in April housing statistics as inventory continued a narrowly downward trend and month to month prices decreased at a slower pace nationally.

Meanwhile, in the local Cincinnati area, showings seem to be up, but the rate of sales and average prices still dropped. Agents in our office indicate that while clients are busy this spring, prospective buyers are looking at more homes and waiting to find the "great" deal. Where the typical buyer may have looked at 8 - 10 houses a few years ago, some are reporting that buyers are looking at 30, 40, or 50 houses before making a decision. (The lesson usually learned - there is no "perfect" house, only where you can accept compromise.)

Some key highlights in the April numbers:

• Looking back to 1990 through 2009 for the month of April, our unit sales levels, dollar volume of sales and average sale price are at the 1993 levels.
• April 2009 unit sales were down about 16% from April 2008. Total dollar volume was down about 24% from April 2008. The average sale price was down 10%.
• The active residential inventory continues to decline, down from 2008 and 2007 and below 2006, headed towards 2005 levels…this is good…very good. Inventory is being reduced not only by sales but also by properties being leased.
• January-April YTD for 2009 show dollar volume of sales and units sold at 1992-94 levels; average sales price at the same level.
• Properties subject to lender approval (i.e. lender-owned, HUD, short sale) continue to have a huge influence on sale prices as they make up about 40% of the sales in April.

For a complete view of monthly stats, see the charts below

• April 2009 sales rate
• April 2009 absorption rate
  

Tech Focus: Solar Screens vs. your old windows

It's hard to avoid all the commercials touting the benefits of new high efficiency windows for your home - especially now that you could be eligible for a tax credit when you replace old windows. But before you lay out big cash for new windows, you may want to consider an option you may not be familiar with: solar screens.

Solar screens fit over your existing windows to help block UV rays and reduce the amount of heat coming into your home. They are typically made of a mesh material in varying levels of "blockage" ranging from 70 - 90% and come in both fixed and roll-up versions. In some ways, these screens act similar to the "glare film" you may have seen at hardware stores, but with significant advantages - and a far better look.

As you might imagine, solar screens appear to be far more common in hot, sunny areas like Texas and Arizona as compared to Cincinnati. Yet that doesn't mean we can't benefit from their use. While the main goal for homeowners in those more sunny areas is to reflect heat and reduce AC usage, some of these screens are meant to be "flipped" in the wintertime so that they act as solar heat collectors. Some of the advantages that are routinely touted by vendors include:

• Achieves energy savings between 30 and 40% in both summer and winter
  
• Reduces sunlight damage/fading of indoor furnishings and artwork
• Provides privacy without losing outdoor views
• Reduces or eliminates air leakage through windows

Yes, surely, they are the best thing since sliced bread! Flip comments aside, when you compare the cost of a new window ($200 and up) vs. the cost of a screen (in the $50 and up range) it's just basic economics to evaluate which one is going let you actually save money.

There are many valid reasons for replacing old windows, but buying them simply for energy-efficiency should probably not be your primary driver. That, however, I leave as a discussion for another day....

Check these vendors to see some of the many options available for solar screens:

• In'Flector Window Insulators
• blindsgalore (retailer)
• North Solar Screen
  

Insurers advance benefits for green building

A recent Wall Street Journal article identified that insurers are beginning to discount premiums for homes built to green standards such as LEED in addition to discounts for drivers of hybrid and fuel-efficient vehicles.

After a bit of digging around, I did find that Fireman's Fund insurance - one of the companies highlighted in the story - does offer discounts in Ohio of 5% on premiums for homes that are LEED or NAHB Green certified. Additionally, they have made provisions for implementing green features in homes that are rebuilt after a fire or other catastrophic event.

Notably, Fireman's Fund focuses on an affluent market, generally of homes in the price range of $600,000 or more. So far, I have been unable to find a "mainstream" insurer (e.g., Allstate, State Farm, etc.) that offers similar discounts. Nevertheless, it's not uncommon for new products to be adopted at the high end then make their way to the mass market. Other insurers are likely to offer incentives in the same way to help distinguish themselves or stay competitive as the products mature.

If you are looking at new construction, or even updating your home to incorporate more energy-efficient features, I recommend checking with your insurance company to see if a discount may be available. I'll also include a list of any insurers I find offering these discounts on the references page of my website at www.EcofficientLiving.com.

Are we there yet? Signs in March indicate bottom may be near

Trends in the housing market through the end of March suggest we might be seeing a bit of stabilization in the market, if not necessarily improving conditions for sellers.

On the plus side this month, total inventory continued to decrease dropping below the peak levels in 2006 - 2008. Likewise, the increasing gaps in inventory to sales (or absorption rate) seen over the past couple of years appeared to be leveling off. The rate was 10.1 months of inventory compared to 9.8 months of inventory at this time last year - even with a lower number of sales for the period.

At the national level, the Case Shiller Price Index showed decelerating price declines and first-time buyers were an increasing volume of sales accounting for 53% of transactions.

Areas to watch continue to be the level of foreclosure and short sales. This month the volume in the Cincinnati MLS was approximately 40% of sales compared to near 50% in January and February. While this might be a good sign, many banks delayed foreclosures while new government programs were put into effect. Banks have now started up foreclosure proceedings again which could put more inventory on the market in the coming months.

Cincinnati market data snapshots:

• March '09 sales vs. inventory
• March '09 absorption rate
  

Demand-response switches could save you money

The temperature today in Cincinnati rose above 80 degrees for the first time in a good while. While our springtime has been on the cooler side so far, folks will be trying out their air conditioners very soon.

A recent Wall Street Journal article highlighted how some companies are poised to benefit from devices that manage peak energy demand such as those made by "Comverge". The devices reduce or shut off power during periods of high usage, mostly during hot summer days. Locally, Duke Energy has been making a power-saving device available for some time. The "Power Manager" program adds a switch to a home's air conditioning unit so that it may cycle off at certain intervals. Just signing up for the program will fetch you between $25-35.

While cycling off your AC during the hottest of days may seem like an unpleasant thought, Duke offers a couple of different installation methods which might ease the process. The program that offers that highest savings on your bill cycles your AC off for longer periods. Duke's information suggests this may cause the temperature to rise 3 to 4 degrees during this period. However, if your home is relatively well insulated and sealed, then it would be reasonable to expect that the change in temperature you'd experience would be reduced. For those concerned with these longer outages, the optional installation minimizes the outage duration. That option, of course, does reduce the savings you will receive as a program participant.

If you are looking to save a few bucks these days - and who isn't? - I certainly recommend checking out this program to see what it might do for you. At the same time, review my previous article on maintaining your AC along with these summer preparation tips from "frugaldad" that could also help keep more money in your pocket.

Local lenders have credit flowing - at a glacial pace

Looking to refinance your current mortgage? Expect delays ahead. Local lenders I've been talking to in the Cincinnati area are all singing the same tune: they are swamped with people trying to refinance their homes, and those that can refinance will have lots of additional scrutiny to get approved.

Several events have mortgage lenders log-jammed:

• Rates have reached historic low levels
  
• First-time buyers are entering the market to take advantage of the $8000 tax credit
  
• Loan guidelines and rules are changing frequently
• The Making Home Affordable program was implemented to help reduce foreclosures
  

One of the areas where the process is particularly backlogged is in underwriting. As housing declined, many of these lenders laid off underwriters and are now understaffed as new loans make their way through processing. Many are scrambling to bring new personnel on board, but training of new staff requires time from the experienced underwriters causing further delays.

In most cases, lenders prioritize new purchase mortgages ahead of refinancing. Even with priority, some new purchases are taking 45 - 60 days to close compared to a typical period of 30 days. Those in position to refinance should also expect far greater scrutiny of their finances before being approved and expect the process to take anywhere from 30 - 90 days - or longer.

Here are some tips you may want to consider should you want to refinance:

• Be sure to have all your financial records in order including 2 years of tax statements, 30 days of recent pay stubs or other income verification, bank statements and documentation of any assets.
  
• Be prepared to explain any extraordinary and undocumented deposits (lenders will want to know the source of any external funds)
  
• Evaluate fees and requirements on different loan types. For example, an FHA cash-out refi requires two appraisals.
• Different lenders have different programs. Do a little homework to find out which program will work best for you.
  

Good luck!

Tech Focus: What's in an Energy Audit

Have you thought about getting an energy audit, but not sure whether it's worth the time and expense? And what about the different types of audits? Should you do one on your own, get a "free" audit from the utility company, or pay a certified auditor for an evaluation that includes a "blower door test" and possibly thermal imaging?

Self-evaluations and Free tests

Whether doing your own audit or having someone from the utility company take a look at your home will, in my opinion, provide about the same level of results. A self-audit requires a bit of homework to identify issues you may have in your home and how to correct them. (And taking the time to understand how your home functions can be extremely valuable.)

Guidance on doing it yourself can be found through the Energy Star program Home Improvement website. This information focuses on the biggest losers of energy first, air sealing and insulation, and works its way up to bigger ticket items such as heating and cooling systems.

Audits that are conducted as part of a utility's customer service often follows a similar approach without the need of a homeowner doing research. Generally, the auditor will go through your home to identify issues that are costing you money such as where air leaks are occurring or where you don't have enough insulation. They may also be able to evaluate items such as your heating and cooling system and make specific recommendations about what should be updated or corrected to reduce your utility bills.

Note that I haven't mentioned replacing windows up to now. A common misconception is that replacing your windows will save big money, but far too often the return is limited and ineffective without fixing other things first. Your home is a system and if you don't look at the whole picture, you might as well throw your money right out of those new windows.

That leads to a discussion of benefits with...

Professional Energy Audits

Your typical professional energy auditor is certified through RESNET and is qualified to perform audits that allow a new home to be labeled as ENERGY STAR rated or provided funds for updates through an Energy Improvement Mortgage.

There are a few significant differences you should expect from a professional audit including:

• A blower door air leakage test
• Infrared (thermal) imaging of trouble zones
• Pre-audit interview and questionnaire
• Analysis of past utility bills
• Personalized report of energy findings
• Financial analysis report that prioritizes upgrades for comfort and return on investment
• HERS rating

Without going into too much detail, the approach used during these audits is far more systematic at identifying problems in your home and what improvements will get you the biggest bang for your buck.

Where I see these audits really paying for themselves is in the interview / financial analysis aspects. When evaluating an existing home, these auditors take the time to discuss exactly what you hope to achieve and make specific recommendations that fulfill stated goals. For example, if you expect to live in your home for only 5 years, then they can identify specific improvements that will save you money for that period of time. Similarly, if you plan to make upgrades with funds from a mortgage, then the auditor will produce a report of cost-effective improvements that will lower your total monthly costs over the term of the loan (and improve the value of your home at the same time).

• See a sample audit report

To learn more about these audits, check the websites of these Certified auditors in the Cincinnati area:

• Emotiv / Chris Dwyer
• Home Energy Checkup / Dale Dennis
• Professional Energy Consulting / Don Simon
  

Thanks to Chris Dwyer @ Emotiv for input to this article

February housing in review - have we hit bottom yet?

Buyers waiting for a bottom in the housing market may be starting to dip their toes in the water. Some of the hardest hit markets (i.e., California, Arizona, and Florida) are seeing a big upswing of investors buying foreclosures and existing home sales took their biggest month to month increase in 6 years.

In the Cincinnati market, home sales - while still lower on a year to year basis - rose 22% from January to February. Another positive aspect: total inventory continues to decline, dropping below February 2006 levels. That said, foreclosures and other distress sales continue to make up a significant level of sales - nearly 50% of the volume - pushing the average sales price down 18% below last year's level. Also, the absorption rate (months of inventory at current sales rate) remains above previous year's levels.

• Chart - February sales vs. inventory
• Chart - February absorption rate
• National statistics
  

In the past month, mortgage interest rates dipped below 5% as the Fed implemented steps to buy mortgage backed securities. Economists vary on whether rates will go much lower, but there does seem to be consistency in expecting rates to hover around the 5% mark for most of the year. Coupled with the tax credit for first-time buyers, we can reasonably expect demand to pick up as affordability of homes compares favorably with rental rates.

We have a long way to go before the market is back to a balanced level, but the bottom fishing seems to have begun in earnest.

"Victory Gardens" - back in fashion

Hoping to save some money this year by starting a garden? I keep hearing this notion bandied about, and I admit I'm jumping on the bandwagon too.

The victory gardens popular during World War II have seemingly made a comeback with the downturn in the economy and the focus on locally grown food. While the motivation is a little different this time around, it nonetheless could make productive use of our yards - especially those of us on larger suburban lots.

If you plan on giving it a go, here's some options you might consider:

• Create a raised bed for planting vegetables and herbs. A raised bed allows for plants to be placed closer to one another and reduces the area required for growing (and produces more food per sq. ft.). In the Cincinnati area, you can learn about raised bed gardening at the Civic Garden Center of Greater Cincinnati
  
• Start composting. Not everyone has the space to create a composting pile that won't offend the neighbors, but it's the ultimate in recycling and makes for great fertilizer. If you do start composting, be sure you have the right "mix" of ingredients. The state of PA has a good primer on composting here.
  
• Coordinate with neighbors or colleagues at work. If others you know are planning a garden, find out what they are doing and then plant something different. For example, one person might have lots of tomatoes, another bell peppers, and a third herbs and eggplant. Come harvest time, you can exchange and "share the bounty."

For more information about establishing a garden visit the National Gardening Association website.

Happy growing!

January housing sales take a vacation

Although we saw an increase in showing activity during January, it seemed many potential buyers were in a wait and see mode as the inventory absorption rate spiked upwards to 14.4 months and sales took a hard dip to their lowest January rate since 1996 with 912 total sales.

• January absorption rate chart
• January sales chart

While some of the January figures are at least seasonable in nature, other factors that appeared to be in play included debate on the recovery bill (and the related homebuyer credit),

It would appear investors were an outsized portion of the market in January. Nationally, it was estimated that 45% of sales were "distressed" properties (i.e., lender owned or mediated). In the Cincinnati area this same trend was seen with an estimated 40% that were distressed sales. A point to note on this statistic: it is likely that the average price drops being reported are in large measure due the high volume of distress sales.

• View national housing indicators through the end of February.

A couple of positives: base inventory and homes being leased. Even though the absorption rate increased above last year's number, the active inventory dropped from 15,050 in January '08 to 13,132 in 2009. Along with that, more homes are being leased and taken off the market. With builders continuing their decline in new homes built, these trends should help the overall market stabilize.

The overarching message is that if you are going to sell in this market, then you must be realistic about expectations (and unless you have to sell - don't). Condition is the key factor to selling your home quickly unless it is "bargain priced."

Tech Focus: House Ventilation and Solar Attic Fans

With the weather still on the cold side, you're probably not thinking much about how to keep your house cooler during the summer. Although most of us don't think about ventilation until those hot and humid days, good home ventilation is important year round.

Attic ventilation is important for several reasons. In the summer it's important to move heated, stale air out of an attic space that would otherwise keep the house feeling "stuffy" and likely cause you to turn up your air conditioner. Just as important though, proper ventilation is necessary to keep down moisture levels that could lead to mold and a shortened roof life.

Older homes often use a passive ventilation system using a combination of soffit, gable, and rooftop vents. Many homeowners install thermostat-controlled fans to assist ventilation during very hot days. While these can be a good way to help cool the home, solar powered fans can be a great alternative and run automatically from sunrise to sunset. In some cases, they can provide a significant savings on installation since running a new outlet to your attic might cost more than the unit itself. If you already have a powered vent, you may be able to convert your current unit to operate on solar power and eliminate the electricity cost.

Kevin Yount, of First Day Natural Lighting, is a local installer of Solatube lighting and attic fans. When I spoke with him about the impact of a solar fan running during the winter, he pointed out that ventilation is just as important during the winter months to prevent ice damming. The critical issue is having sufficient insulation and air sealing so that you are not losing heat from the conditioned part of the house during the winter, or losing cooling in the summer. Kevin says that in his view, the ideal temperature of the attic should be roughly equal to the outside temperature.

And since we are all concerned about job growth these days, ABC News recently highlighted Sunrise Solar, an Indiana manufacturer that builds solar units and is poised for growth with implementation of the economic recovery bill along with his suppliers. (See the video clip on ABC.)

So before those hot, humid summer days come rolling along, consider whether your home has adequate ventilation and the advantages of solar fans including:

• Low cost to install, free to operate
• Prevents shortened roof life
• Helps keep home more comfortable, potentially reducing air conditioning costs
• Creates green jobs for installers and manufacturers
  

And to ensure any fan meets its full potential:

• Install adequate insulation and seal air gaps to keep from losing conditioned air
  
• Make sure soffit vents are open so that outside air is pulled through the attic, not indoor air

To help find a solar fan option for your home, check out some of these sites:

1. First Day Natural Lighting
2. Sunrise Solar
   
3. Solar Direct

To learn more about home ventilation and systems visit these sites:

Energy Star DIY Guide
DOE Energy Efficiency and Renewable Energy - Ventilation Overview

Thinking of investing in foreclosures? Look before you leap

With an abundance of foreclosures on the market and the current stock market a somewhat iffy proposition, many investors are taking a look at available foreclosures and short sales to see if housing is a better place to put their money. There are definitely deals to be had, but before you leap into this market consider these issues:

• Are you looking for short-term or long-term opportunities? This market isn’t quite right for “flip this house” type venturing. There are some rehab / resale investors out there, but I would say they are the exception rather than the norm – and they’ve generally been in this business for a while. In the current environment you should be prepared to fix, rent, and hold the property for a minimum of 3 – 5 years.
• Manage your expectations. Yes, deals are out there, but that doesn’t mean you’ll find a castle for $50K. A majority of foreclosures and short sales need a good amount of work to get them back into decent condition. Remember that the folks who lived here could not pay their mortgage, so don’t expect them to have kept up the maintenance.
• Manage your expectations – Part II. Banks aren’t taking just any offer that comes along. Don’t expect to throw out an offer of 50% of the list price and have it accepted unless the house is in VERY bad condition. Conversely, foreclosures that are in relatively good shape and priced aggressively are getting multiple offers and even going above asking price in a matter of days. Yes –there really are bidding wars in this market.
• Funding. Although there does seem to be some recent thawing with banks being more open to investment lending, rates and points for investment loans can be a bit steep and you can expect to need 20 – 25% down. You’ll also need enough to cover repair costs and make mortgage payments until you have it rented. This is truly a “time is money” situation. The ideal scenario? Pay cash to buy and fix the property, get a lease, then put a mortgage on the house to regain some liquidity and achieve higher (i.e., leveraged) return on equity. If you have equity in your primary home, a second mortgage may be another option for funding.
• Can you be a landlord? Not everyone is cut out to be a property manager. A short list of responsibilities includes screening possible tenants, general repairs (not to mention the possible 2 AM water leak call), and debt collector if payments run late. You can pay to have this part handled for you, but that will eat into your returns. Paid property management is not typical for the average investor.

These concerns aside, real estate can be a fantastic long-term investment, especially when buying in a market such as we have now. Historical returns on real estate rival that of stocks, and usually beat them when leverage and tax advantages are thrown in.

Still ready to jump in? Great! Give me a call. I am ready to help you locate a property that will fit your budget and investment objectives.

Should your next home be LEED certified?

If you are concerned about your home being more energy and eco-friendly, then you may have already heard of the LEED (Leadership in Energy and Environmental Design) certification some builders are pursuing for their new homes. While only a handful of homes in the Cincinnati metro have been certified, its time to ask whether the certification is worth it, if it will be the standard to follow, and whether we can expect to see more homes getting certified.

The LEED certification has primarily been focused in commercial buildings as the overall operational cost and "health" of the buildings is of greater concern and where it is easier to achieve long-term savings. Keystone Park was the first office building in Cincinnati to reach a silver level 'Core and Shell' standard. Several other buildings have achieved various levels for new construction standards. In the commercial world, the additional cost in building to LEED standards has already proven its worth financially.

The LEED standard for homes was first published in December 2007 and is now beginning to gain some traction. So, to the first question for residential development - is it worth it? Some will surely see the practice as worth almost any extra cost relative to the reduced environmental impact. Statistics on cost are a little difficult to come by, but consider that of 36 LEED homes in Hamilton County, only 3 were available below $400,000 suggesting that builders see effective margins only at the upper end of home sales. Furthermore, most of these homes were over 3800 sq. ft. in size. While it is commendable to build using standards that lessen the environmental impact, it's also fair to ask how green you are in a 4000 sq. ft. home.

One immediate impact in the city of Cincinnati is a special tax abatement for LEED certified properties. That's probably worth the price of admission itself. What we won't know for a while is whether the certification or its environmentally friendly features will add value on the resale. What I would also hope to see is a standard that builders apply to homes that are more in line with the median sales price for our area.

The US Green Building Council, which is the sponsor of LEED (and is not a government organization), itself acknowledges that there are over 70 different green building standards in existence today. Whether LEED is the "best" standard is a highly debatable subject, nevertheless it does have certain advantages including a nationally recognized organization, a system for 3rd party verification, and a process to measure the effectiveness of the standards and make improvements.

Can we expect more LEED-certified homes? Undoubtedly. If nothing else, some builders will see LEED as a marketing advantage to eco-conscious consumers. We already see this with Energy Star rated homes as the value has proven itself. The longer-term question will be how soon LEED-certified homes are available at mid-price points and yet profitable for builders. As with any new technical approach, costs are almost certain to go down over time as use increases.

Ultimately, having a home that is LEED certified can provide you with an assurance that your home was built to a specific standard. It's in your best interest though to work with a real estate professional that can help you sort through the variety of "green" building standards coming on the market to determine what's best for your situation.

For more information on LEED, visit the Cincinnati chapter of the US Green Building Council.

December and 2008 housing in review. Back to reality?

December and 2008 numbers are in, and, as you’d expect, the Cincinnati housing market shows a considerable slowing of transactions for the year. On the plus side, the “absorption rate” – or how much inventory is available at the current sales rate – fell to 10.4 months in December. This is better than December 2007’s rate of 10.8 months and a good drop after November spiked to 12.6 months. Some drop was expected as sellers took homes off the market during the holidays and banks held off foreclosures. Nevertheless, you sometimes take the good where you can find it.

Some other highlights for December and 2008 is that sales averaged 56 per day. After 2005 peaked at 79 per day, this would appear as a pretty significant decline. However, if you strike out the “bubble years” between 2001 and 2007, the “sales per day” figure is relatively in line with the mid 1990’s to 2000 reflecting a more sustainable level of home sales.

View December’s monthly absorption rate and the sales vs. inventory charts

While I and other agents I talk to have seen an increase in buyer activity after the first of the year, there are still a few aspects that will keep inventory rates slanted towards buyers for a while including:

• high number of foreclosures and distressed sales continuing to enter the market, keeping inventory high
• difference in value expectations between buyers and sellers (many sellers still expecting ’07 prices, many buyers expecting 25% or more off the asking price).

Positive trends likely to help the market in the near future include:

• mortgage rates at historical lows, increasing affordability
• first-time buyer tax credit of $7500 (especially if converted to a permanent credit that does not require repayment)
• more sellers willing to offer lease/purchase or land contracts on their homes

As the statistics return more in line to historical norms, the question will be whether 2009 is a transitional year or if the market “over-corrects” before stabilizing. Stay tuned….

New year reminders for Ohio homeowners

The new year dawns and our minds inevitably turn to….taxes. Perhaps one of the lesser highlights of the year, but an important one nonetheless. If you are a homeowner, then you should be aware of the following tax-related issues.

Ohio Homestead exemption: This special allowance enables homeowners that are disabled or senior citizens to shield $25,000 of home value from property taxes. The catch is you must sign up for this exemption between January 8th and June 2nd. Check the Ohio Department of Taxation website for details.

New home property assessments: Homeowners in Hamilton, Butler, and Clermont counties received new property assessments in 2008. Many individuals were surprised to see their values go up when all the news stories suggests home prices are down. While many factors go into the assessments, you do have the option to appeal in case you think your assessment is too high. Again there are time limits though. For example, in Hamilton county you must file a complaint on the valuation prior to March 31, 2009. For more information on the appeals process, consult these county auditor websites:

• Hamilton County Auditor
• Butler County Auditor
• Clermont County Auditor
  

Energy improvement credits: Most energy efficiency credits expired at the end of 2007, only to be renewed in 2009. However, certain renewable energy incentives for geothermal and solar based equipment were available for '08 (along with hybrid vehicle credits). For a complete overview of energy based tax changes, see the Alliance to Save Energy website.

Itemized tax deductions: The granddaddy of tax deductions is real property taxes and mortgage interest. A majority of homeowners find that they benefit when they itemize deductions vs. taking the standard deduction. If you do your own taxes, most tax software will determine which method will benefit you the most.

Points and Mortgage Insurance: This is another area where certain mortgage fees may be deductible. If you paid points or mortgage insurance when you purchased or refinanced a home, then you will want to take the appropriate deductions.

Investors: Those of you with rental property are probably already familiar with rules around depreciation and passive activity investments, but work with your tax advisor to take full advantage of improvements and other deductions.

For all the details on homeowner tax deductions and credits, go to IRS.gov.