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Hurricanes, Housing, Bubbles....you know the rest

The wrath of Wilma has left nearly one million Florida residents without power. At particular risk are the elderly and sick. It's absolutely criminal that this isn't getting more media attention. The disaster relief efforts have had two tries to get it right, and botched the job yet again. It's a miracle there haven't been more deaths.

I know people on all sides of the political spectrum are salivating over the Libby indictments and the choice of "Little Scalia" to take the Supreme Court bench, but we have some major natural disasters to contend with, and the effects of these will be felt for a long time to come. Pay attention.

A blogger over at the Daily KOS has a heart-rending, yet optimistic look at life after Katrina. These are the kinds of accounts we need to remind us of how far-reaching these catastrophes are. Things don't magically get better just because talking heads and pundits stop paying attention.

Here's an interesting look at how the hurricanes' wake is fueling a real estate boom. It's all there--buying decrepit properties and flipping them, pushing out longtime residents for new development, and speculators pushing prices to stratospheric levels. The housing boom--and bubble--in a nutshell. As I predicted, the massive reconstruction effort will be what keeps the economy ticking, but the long-term costs will be onerous indeed.

How to bargain for a house, courtesy of the WSJ. This is heartening for buyers who've been feeling priced out of the market, and it should also give you an idea of just how absurd the prices have gotten. To wit:

"A year ago, you never would hear about going back for a price reduction," says Stephen Baird, president of Baird & Warner. "Now you hear it a little bit." To move a full-floor condo with a view of Lake Michigan, his firm cut the price to $2.975 million from $3.5 million.

Oh, $2.975 million? What a bargain! Man, it must be the 2-for-1 special at CVS this week!

Still, it's nice to see realtors and sellers actually putting effort into moving a property again. There is hope.

Speaking of the WSJ, I wanted to recommend an excellent article by June Fletcher on the importance of deciding whether to rent or buy. It came out on Friday, but the WSJ's online version hid it behind their fascist for-pay content wall. Bastards. If you want an idea of where Fletcher's coming from, listen to a recent NPR interview with her. She name-drops Las Vegas, which is appropriate given their continually exploding prices.

As an aside, I'd take the gangsters and strippers sunbathing in the nude over the rows of clone office buildings and McCondos any day. I'm just sayin'.

John Snow is sharing Ben Bernanke's Kool-Aid, as he declares that there is no housing bubble. Well, he's actually right about that. There is no single housing bubble. The bubbles are localized and regional, as evinced by softening prices in the Northeast and urban sectors of the Midwest, while the Rust Belt and the Gulf Coast boom. So props to him on that.

Of course, his solution to our economic woes is to put China in debt to us. I guess he must've gargled that Kool-Aid with castor oil. Oh, well, can't win 'em all.

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Friday Housing News

Even as the media stands transfixed at the indictment of Scooter Libby, we housing junkies are scouring the files for more clues as to what hopeful new Fed Chairman Ben Bernanke is going to bring to the table. The more I dig up, the less impressed I get.

So, what? Bernanke changes his opinion on deficits and spending as soon as he gets a new office? Or he's determined to eat his cake and have it too--cut taxes, rein in spending, stop inflation, and fiddle around with interest rates all at once?

The Kool-Aid must be mighty tasty these days. I was talking to a fellow blogger the other day who already evinced despair that Bernanke was going to be emulating Greenspan at his worst. I was hopeful, but that hope is fading faster than Karl Rove's chances of avoiding indictment. :)

Rates on 30-year mortgages increase, and ARM rates climb with them. This seems like it's gonna be a number- crunching game until the pundits decide if housing is booming, slowing, both, or neither.

CNN Money has a fascinating study of how brokers make bank on home closings. It flat-out states what buyers in this market have known all along: Unqualified "brokers" are jumping into the market to make huge commissions off controlling the flow of home sales information and keeping sellers and buyers from cutting out the middleman. That lawsuit didn't come out of nowhere, after all.

If some goofball can join the NAR, hand out some business cards, and say they can sell a house, the seller can get on the Web and put their property up for sale themselves. There shouldn't be a $12,000 difference between the two either.

The Small Business Administration is coming under heavy fire for not approving a single Rita loan. The money quotes:

The high rejection rate is being described by officials as the result of a new computer system that takes all applications into account, not just loans that are seriously considered for approval by the agency. SBA officials, however, conceded that the rejection rate for Rita-related loans is quite likely to top 70 percent _ much higher than the traditional 50 percent to 55 percent for most disaster recovery efforts.

"We're dealing with areas where there's a lot of low-income people," said Herb Mitchell, head of the SBA's disaster assistance office.

So the people that need the loans the most are the least likely to get them, thanks in no small part to a dehumanized system that doesn't even work right. It's almost Terry Gilliam-esque in its Byzantine amorality.

Of course, the lack of aid from the national level isn't stopping states from getting help to those who need it. Real charity always starts at home, as they say.

But just so you don't get any misconceptions as to what Big Gummint is doing to protect you, federal agencies are already investigating fraudulent Katrina claims. If they approached actually getting aid and comfort to displaced families with the same kind of zealotry that they'll no doubt nail any money-grubbers, I think the FEMAville population would drop by a factor of 50 in a week.

Posted at 09:48 PM | TrackBack

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Hurricane Housing: FEMAVille Special Edition

You can all step off the ledges and take the nooses off the ceiling fans, because I'm back, and ready to rumble. It seems that I'm not the only one who's back in town, as Mike Brown's contract has been extended yet again.

Brownie, take a lesson from Harriet Miers and get the hell out of Dodge before the lynch mob decides to make the decision for you.

To give you an idea of how Brown's monumental incompetence continues to resonate through the Katrina cleanup, it seems that mobile home owners are being evicted to make room for higher-paying FEMA trailers. Displacing some families to help other displaced families? That's just sick. And remember, those FEMA trailers cost taxpayers more because Bush refused to go through the HUD program. :) Again, there are vacant apartments and affordable housing units all over the country, and we're paying for these trailers....why, exactly?

Here's some more fun with FEMA, specifically their checking out the flood damage in Massachusetts. I wonder how long it'll take them to declare it a disaster area, if ever. And speaking of disasters, Gov. Jeb Bush does his brother a solid by taking the hit for FEMA's failure to respond properly to Wilma. Stop me if any of these quotes sound familiar to you:

We did not perform to where we want to be," the governor said at a news conference Wednesday in Tallahassee, adding that criticism of the federal response was misdirected. "This is our responsibility."

"This is like the Third World," said Claudia Shaw, who spent several hours in a gas line. "We live in a state where we suffer from these storms every year. Where is the planning?"

Homeland Security Secretary Michael Chertoff, who oversees FEMA, asked victims to have patience as he surveyed crumpled boats, shattered mobile homes and snaking lines of cars at fuel stations along the storm's path.

There are only two things certain in life....death, and FEMA not getting the job done. You can always find ways to evade taxes. :)

The House has passed legislation that will, if made into law, tighten the purse strings at Fannie Mae and Freddie Mac. Although the big measure of opposition to the bill is coming from its provision banning nonprofit groups from engaging in voter advocacy, the idea of Fannie and Freddie unloading their portfolios onto the market would definitely send speculators, investors, and buyers heads all a-spinnin'. I think the idea is to try and privatize some of their portfolios in the hopes that greedy developers will snap them up and keep the boom going.

On the other hand, the accounting scandals at Fannie and Freddie both indicate they're unable and unwilling to keep their own houses in order. When you're carrying that much debt, regulation should be mandatory at every step.

I found some interesting takes on the usage of eminent domain by states or local authorities to increase revenue. For example, D.C. seized property to make way for their new baseball stadium, displacing a good number of local businesses, "adult" and otherwise. As a D.C. resident, I know that the heart of our club scene is right where the bulldozers will be digging, thus driving a stake in the heart of the District's already weak nightlife. Many of the property owners have made out like bandits, but some, it seems, value their homes and their livelihoods more than a cash-out.

And then again, some do not.

To give you an idea of how high-stakes the property industry is in areas like D.C., a building near the Capitol recently sold for 80 million. Ironically, the building houses the FDIC, who is currently asking bankers to to take it easy on borrowers affected by Hurricane Wilma.

I wonder if the building in Arlington the FDIC is moving to is on the list of military offices scheduled to be vacated as part of the military's Base Realignment And Closure effort. Donald Rumsfeld had said a few months ago that many Pentagon-supporting offices would move out of the Northern Virginia area because of "security concerns."

There's an irony in here somewhere.

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Katrina Housing: Picking The Bones Clean

The Wall Street Journal reports that much of the funds collected for Katrina relief have yet to be spent.

I think it's interesting that NOW they're suddenly talking about oversight in the spending process, when they were throwing money around like it was Powerball when the hurricane hit. And of course, the idea that FEMA should have sole control over the money disbursement should scare anyone who's ever tried to call for disaster assistance.

Here's an interesting stat from that article:

Of the $18.3 billion total, $6.6 billion is for housing, to pay for evacuees' hotel or rental costs and to buy manufactured housing.

How many billions could they cut from that total just by moving the evacuees into waiting apartments or homes, I wonder? It's not like overzealous New Orleans landlords aren't helping the problem along. (Registration may be required for that link--I'm not sure.)

The money quote: Now, with city officials eager to begin rebuilding, those tenants' belongings are keeping precious apartment space out of the market, landlords said. That's space where imported workers could live.

"Imported?" That's an interesting euphemism. I wonder if it has anything to do with people being where they shouldn't.

Nah. Couldn't be. Don't worry about it, though, because FEMA residents are now safe to own guns.

Yeah, between finding a job, getting insurance, education for the kids, a car, and dealing with a mountain of bills, gun ownership was their first priority, I'm certain. :)

Two similar-but-different looks at September housing sales, courtesy of Reuters-via-Yahoo and AP-via-USA TODAY. You can tell a lot about the conflicted state of the market from these two stories. The Reuters story keeps it pretty flat and sticks to the basics. The AP story starts off really enthusiastic, and then goes on for multiple paragraphs about how low consumer confidence may cause pain for retailers and realtors alike.

And of course, both articles quote David Lereah, like he's the Yoda of real estate trends. Quoth the sage:

"The outlook for housing in my opinion is mixed," said David Lereah, the group's chief economist, citing strong construction data but rising interest rates that are expected to dampen buyer demand.

"There's some air coming out of these hot markets," Lereah said, noting he expects some slowing in home sales and price appreciation. "Going forward we're looking for a soft landing in the housing sector."

This just in...Real estate prognosticator goes to Hell for pointing out what we knew all along, and major media is just now catching on to.

News at eleven!

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Housing Bubble: And The (Boom) Beat Goes On...

The New York Times takes a gander at the inexhaustible housing boom.

The money quote:

What is different now? One factor is the way houses are financed. It used to be that banks and savings and loan associations made mortgage loans, and they would be cut off when the Fed pushed up interest rates above the levels the banks could pay on savings. But those rules are long gone, and the Fed cannot turn the housing market on or off.

Indeed, as the current boom shows, the Fed has some trouble even slowing a boom. Long-term interest rates have not risen with the short-term rates the Fed does control, and the financial system has responded with creative mortgages that let homebuyers hold down monthly payments even as the purchase price rises.

I think the phrase "hold down monthly payments" should be rewritten to read "Borrow against their future equity by making teeny, tiny payments, only to be gobsmacked when their monthly payments double and they don't have the capital put aside to soften the blow," but other than that, it's an OK read.

Since Ben Bernanke is the new hotness at the Fed, let's see what he's got to say about fears of an overextended market:

"The administration will continue to monitor" developments in the housing market, Bernanke said. "However, our best defenses against potential problems in housing markets are vigilant lenders and banking regulators, together with perspective and good sense on the part of borrowers."

Sigh. Looks like someone's been drinking from Greenspan's Kool-Aid thermos. The disconnect here is startling. Borrowers--notice he says "borrowers," NOT "buyers"--are being encouraged to abandon good sense and go for insane negative-option ARMs that actually leave the home buyer poorer than when they started out.

That's what I fear this huge boom in the Midwest is all about. Lenders will target naive buyers in the red states to go for jumbo mortgages and take out loans with not nearly enough income, credit, or documentation to their name, which will lead to huge boosts in home sales, but also to foreclosures, bankruptcies, and God knows how much job loss. Call me a conspiracy theorist, but there's no room left in the coastal markets, so we're turning inward in order to preserve our crumbling economic base.

The irony should escape no one, nor should the metaphor.

Bubble Meter lays the smackdown on the rosy forecasts of "market corrections," while Jeffrey Lacker shows us why he is, in fact, lacking.

And the beat goes on. Boom, bap...

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Your New Fed Chairman Is....Ben Bernanke

AP via Yahoo has the story, while CNN Money reminds us why we should care.

So what makes Bernanke a significant choice to head the Fed? Have a look at this speech he gave to the Federal Reserve Board in April. There's a lot of dry financial jargon and boring legalese to sift through, so I'll quote a few of his salient points:

The weakening of new capital investment after the drop in equity prices did not much change the net effect of the global saving glut on the U.S. current account. The transmission mechanism changed, however, as low real interest rates rather than high stock prices became a principal cause of lower U.S. saving. In particular, during the past few years, the key asset-price effects of the global saving glut appear to have occurred in the market for residential investment, as low mortgage rates have supported record levels of home construction and strong gains in housing prices. Indeed, increases in home values, together with a stock-market recovery that began in 2003, have recently returned the wealth-to-income ratio of U.S. households to 5.4, not far from its peak value of 6.2 in 1999 and above its long-run (1960-2003) average of 4.8. The expansion of U.S. housing wealth, much of it easily accessible to households through cash-out refinancing and home equity lines of credit, has kept the U.S. national saving rate low--and indeed, together with the significant worsening of the federal budget outlook, helped to drive it lower. As U.S. business investment has recently begun a cyclical recovery while residential investment has remained strong, the domestic saving shortfall has continued to widen, implying a rise in the current account deficit and increasing dependence of the United States on capital inflows.

So he flat-out admits that it was the boom in construction, coupled with low interest rates and "creative mortgages" that spurred Americans to spend, spend, spend. So far, so good.

Basic economic logic thus suggests that, in the longer term, the industrial countries as a group should be running current account surpluses and lending on net to the developing world, not the other way around. If financial capital were to flow in this "natural" direction, savers in the industrial countries would potentially earn higher returns and enjoy increased diversification, and borrowers in the developing world would have the funds to make the capital investments needed to promote growth and higher living standards. Of course, to ensure that capital flows to developing countries yield these benefits, the developing countries would need to make further progress toward improving conditions for investment, as I will discuss further in a bit.

This sounds a hell of a lot like John Snow's recent plea to China to spend more, save less, and use plastic. Note also the barely constrained air of superiority--"How DARE these second-rate nations be lending US money?"

Because investment by businesses in equipment and structures has been relatively low in recent years (for cyclical and other reasons) and because the tax and financial systems in the United States and many other countries are designed to promote homeownership, much of the recent capital inflow into the developed world has shown up in higher rates of home construction and in higher home prices. Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things. However, in the long run, productivity gains are more likely to be driven by nonresidential investment, such as business purchases of new machines. The greater the extent to which capital inflows act to augment residential construction and especially current consumption spending, the greater the future economic burden of repaying the foreign debt is likely to be. (Emphases added)

In other words, outsourcing has driven our manufacturing base into the toilet, and housing is all that's propping us up. The solution, of course, is to put other nations in debt to us so we can keep our housing boom going and not have to worry about it. :)

As my Yiddish-speaking dad would say, this is "bubbemeiser."

Brad DeLong's talkbacks have some zinger comments about Bernanke, particularly these:

Here is Dr. Bernanke waving off any possibility of a housing price bubble:

All the above was from Dr. Bernanke's testimony before the Joint Economic Committee last Thursday.

What's that the kids say? "OWNED!"

Speaking of Brad DeLong, check out this commentary on Bernanke's "glut theory." Doesn't hold up a particularly great amount of water with a concentrated analysis, I think.

All of this is going to be important to you, the homeowner or homebuyer, because the Fed under Greenspan cut interest rates to sell Bush's corporate tax cuts and fuel the housing boom. Now that the markets are dividing and major housing hubs are slowing down, interest rates are going up, and stagflation may be upon us, how Bernanke decides to address these problems will be absolutely crucial to the market's future for the next few years or so.

Tinfoil hats, phasers, and snark at the ready!

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Friday Housing News

Courtesy of Housing Finance, it seems that the National Multi-Housing Council has finally caused FEMA to reevaluate its stance on housing Katrina and Rita evacuees in expensive hotels and nasty trailers while affordable housing sits vacant. While I'm fairly certain that the loud mainstream media outcry over this had a little something to do with it, kudos nonetheless go to the NMHC for spearheading the charge. Now we can finally get our fellow Americans into real homes, real apartments, with real chances to rebuild their lives and futures.

If you want a good first-hand look at how bad FEMAville life can get, take a look at this story from the path of Wilma. Just awful. And one valuable point--the influx of contractors to rebuild the businesses and homes is actually contributing to price increases of housing in the area, thus locking residents out. This absolutely needs to be watched as the building effort to get New Orleans and the Gulf Coast back on their feet begins.

I mentioned New Urbanism when discussing the possibility of a housing slump reviving dormant urban markets. Well, it seems that the architects of the Gulf Coast rebuilding effort have gone me one better, as the plans for the massive reconstruction project are advocating urban design principles for the construction.

And what's holding up the actual rebuilding itself? I'll give you a four-letter guess, and the first word is "F," as in "Eff you, Mike Brown!"

The money quote:

While the overall mood at the conclusion of the forum - at the Isle of Capri casino hotel in Biloxi - was upbeat, some architects expressed frustration that clear guidelines for rebuilding were not yet available from FEMA. During the forum, the architects had only advisory maps of so-called high-velocity zones to work from. "We spent a lot of time trying to understand the new FEMA rules," Mr. Duany said. "That has not been a satisfying experience."

"They say the rules will not be ready for 18 months," he added. "That's half of World War II. Forget it - you can't wait that long."

Unbelievable. This whole agency needs to be gutted and rebuilt from the bottom up if it is to have any credibility and usability in the future.

Builder Online finds September housing still on a roll. I guess it's this kind of rosy "Screw the bubble" thinking that leaves bubble watchers in a perpetual state of "Is it or isn't it" suspended animation. There's a larger picture to consider, however.

I posted on Wednesday that new housing construction is focusing on the Midwest, and even the most wildly divergent market reports agree that the markets are cooling in pricey regions like the Bay Area, the D.C. Metro area, and so on. Now, bear in mind that the President's Tax Reform Panel wanted to take a shot at limiting the mortgage-interest deduction to the highest levels of FHA-insured loans, somewhere around $312,000.

That would body slam the most expensive markets--which are mostly in "blue" states, Northern Virginia notwithstanding--and accelerate the drive for homebuilding in the Midwest. On the other hand, this would lower the rates for housing overall, which might reopen the market to priced-out buyers in red and blue states alike.

I don't think that there's any deliberate collusion at work here, but the patterns are fascinating to witness nonetheless.

Back to Builder Online--while perusing one of their "sister sites," Remodeling Online, I came across a little gem on how contractors can cancel building contracts. This is hilarious. Did you know that contractors can get out of the "right to rescind" notification rule if you sign a contract in an office, a showroom, or a store?

Whenever employing home improvement contractors, make sure to read up on both the FTC guidance and your own state's rules for contracting agreeements, and definitely do the actual signing in your home. Oh, and make sure to avoid any of those terrible mandatory binding arbitration clauses. They're pure poison.

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Wednesday Housing News

New home construction hits seven-month high. Another take on it, courtesy of Bloomberg.

If the boom is continuing in the Midwest, that's where I see a sort of "bubble layering" taking place. The speculators and developers will eat up all the usable land they can to satisfy the insatiable demand for new homes and keep themselves in business. The major housing markets will see price slips and "corrections," as is evidenced by this MarketWatch report, found via the almighty Housing Bubble blog.

The big markets are softening, because there's just no land to go around and prices are too high. So developers are pushing inward, building new homes wherever they can and pushing buyers to take advantage. It's not a disconnect, just another sign that a bubble in one market is a flat tire in another.

I wonder, though...what do homebuyers really consider when they hear stuff like this? What job markets in the Midwest could support this housing boom, besides, y'know, housing and construction? And will Katrina/Rita reconstruction further the boom's "life support," or put an end to it because of high prices, loss of jobs, and inflationary warnings?

The development company at the center of the Kelo vs. New London eminent domain issue has been dumped by New London's city council. No doubt the bad publicity being poured on this small Connecticut hamlet has a lot to do with it. I'd like to think that it also has a small bit to do with the notion that stealing someone's home just to build shopping centers and office complexes is--gasp--wrong. If businesses like the NLDC took all the homes they wanted and built all the offices they wanted, who would be there to work in them? I sure as hell wouldn't fraternize any mall built where my backyard used to be. ;)

President Bush has sent in his own tax proposal to the table discussing tax reform. I'm sorry, but this just seems like crap. Eliminating virtually all corporate taxes? Limiting the mortgage deduction? Removing deductions for state and local taxes? Don't be fooled..."simplifying" the tax code is itself code, in this case standing for "We're taking more of your money and investing it for our buddies in 'seeing-eye' trusts and nontaxable offshore accounts in the Caymans." No thank you. This is as dead as Harriet Miers' nomination, only not as funny. ;)

Here's a fascinating essay on the decline of modern architecture and how "Peak Oil" may cause the end of civilization as we know it. If you can get through the first five paragraphs of pompous self-aggrandizement and gasbaggery, the conclusions Kunstler comes up with are worth hearing:

Yes, a lot of this talk about urban planning and related issues is somewhat academic at this point, in the face of the socio-political tidal wave of the global peak oil crisis coming at us. These days, I often tell audiences that in the decades ahead, the New Urbanism [compact, pedestrian-friendly mixed-use neighbourhoods] will be the Only Urbanism. Suburban development will come to a shockingly abrupt end.

The trouble is, we will be a much poorer society and we will not make an easy transition back to traditional living arrangements. The failure of suburbia will have turbulent political ramifications. There will be a fire-sale of distressed properties out there as the value of suburban real estate plummets. There will be a political fight over the table scraps of the 20th century. A lot of people will lose jobs. Vocational niches will disappear. A new social class of economic losers will emerge: the formerly middle class. They will be pissed off about the loss of their ‘entitlement’ to ‘the American Dream’. They will create a lot of political mischief. They may vote for maniacs who promise to make all this trouble magically go away. There will be a tremendous need to produce more food locally, and a lot of trouble making that happen, from the reallocation of land to the technical problems of food production with much-reduced fossil fuel inputs. A lot of people may starve and certain parts of the US may become violent. Some places, such as Phoenix and Las Vegas, will literally dry up and blow away over the next one hundred years. The survivors elsewhere will be living in much more traditional environments, though they will be surrounded by many ruins and relics of a former age”.

Very "Mad Max"-ian, isn't it? It's odd to think that twenty or thirty years ago, pundits were prophesizing that cities would be abandoned and turned into prisons, a la "Escape from New York." Now a new generation is claiming the exact opposite--that we'll return to feudalist existences, where many classes of citizens lived together in huge, isolated urban enclaves, with lonely roads and wilderness in between.

Guess I better get my tank of gas and rusty armored mask ready to go.

Posted at 08:39 PM | TrackBack

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Katrina Housing: Trailer Park Travails

A look at FEMA trailer park life. You leave this article with a curious mix of optimism and cynicism. The former, because it's great to see the evacuees finally getting more in the way of living standards, amenities, and opportunities. Cynical, because I know for a fact that we can do better still, and we're wasting money and delaying peoples' chances for a new start.

The money quote:
"I don't think this is the most effective way of dealing with the situation," says Ronald Utt, a senior fellow at the Heritage Foundation in Washington and a former US Housing and Urban Development official. "The much more cost-effective way for the American taxpayer and socially effective way for the evacuees is to use the existing HUD voucher program."

But FEMA officials say the sheer number of people needing homes - roughly 400,000 - has made housing them extremely difficult. All options are being employed, the agency says.

Tell that to the Atlanta-Journal Constitution and the Washington Post. The Post even flat-out says what needs to be said:

Could it be because this administration, which was trying to cut Section 8 funding before the floods, simply doesn't want to admit that traditional anti-poverty programs sometimes work?

It could indeed.

Federal Reserve Governor Susan Bies tells bankers to shape up when it comes to encouraging speculative housing investment and preventing predatory loans. Read the full text of her speech for some interesting insights:

Still, affordability products pose special risks--for instance, there is a greater likelihood that borrowers will experience negative amortization, that is, since the monthly payments do not cover current accruing interest, their mortgage balances will increase over time. Since borrowers with traditional mortgages expect the amortization of their loans will decrease their balances and build equity in their homes, we would expect lenders to clearly communicate to borrowers that this may not happen with non-traditional products.

As you have seen in recent headlines, the data show that African-American and Hispanic borrowers obtain higher-priced mortgage loans much more frequently than do whites or Asian-Americans. For example, African-American borrowers obtained higher-priced conventional home purchase loans in 2004 more than three-and-one-half times as often as white borrowers; Hispanics, more than twice as often as whites.1 Such great disparities raise legal issues of compliance with fair lending laws as well as basic ethical, social, and economic questions.

Greenspan's response? More blathering about "economic flexibility" and "impressive rates of growth." This guy can't get out of office fast enough.

I mentioned the consequences of not having flood insurance earlier, and now it seems that the chickens have come home to drown. Killer quote:

"A sizable portion of properties continue to receive insurance rates that are far from actuarially sound," Sen. Richard Shelby, a Alabama Republican and Banking Committee chairman, said in a prepared statement.

"I believe the continuation of subsidized rates, particularly for properties that have suffered repetitive losses and those that are vacation homes, represents a financial drain on the flood insurance fund while encouraging families to remain living in harms way," Shelby said.

You're all heart, Shelby. What a guy.

I linked to an article yesterday that discussed the areas which would be hurt the hardest in the event of a housing slump, among them being Baltimore. As it happens, my man Bubble Meter has some beautiful pictures of rehabbed and on-the-market housing in Charm City.

The pictures and the comments tell a very important story. Baltimore has cheap housing and is a major construction hub. But if the market falls, there will be less construction, meaning fewer jobs, which means markets will go down, which means economic slump. This will continue to contribute to the crime and poverty which riddles the city.

However, if people are priced out of the market in D.C., they may flock north to cities like Baltimore and brave the interminable commute to work just to get a handle on the cheaper housing. Ironically, those HUD grants I mentioned earlier could probably net you a fairly nice place in the Baltimore Metro area.

So more people will come to the city, thus requiring more jobs, and an influx of services, which will uplift the economy. This is the type of thinking that helped shape the New Urbanist movement.

I really think we're moving away from the commuter-centric, massive McMansion, gated community, isolationist style of living, and back to a city-centered, communal, cultured system. This could be the start of it, if we have the courage and the financial sense to see it through.

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Katrina Housing: Floods, FEMA, and Failure

One of the primary concerns in the massive rebuilding effort in New Orleans is the fact that many of the hardest-hit residents don't have flood insurance. Flooding insurance often has to be purchased as a separate policy from your basic homeowners' coverage, and the calculations as to whether or not a home qualifies for coverage would make scholars of the Kabbalah blanch. As the Washington Post reports, the end result of that conundrum is thousands of families with destroyed homes and no insurance to provide them any relief.

Not to mention that, again, $43 million cut from the Army Corps of Engineers' budgets for the levees in 2004 could have saved us over $120 billion now. Somehow, the phrase "Penny wise, pound foolish" comes to mind, but just doesn't cut it.

Because I can never go a day without reminding you of just how bad FEMA screwed up, The SF Chronicle has a mind-boggling look at the communication breakdown at FEMA's highest levels in the first days of the hurricane. (It's amazing how prescient Led Zeppelin seems about this thing, isn't it?)

FEMAInfo provides an overview of the failures and boondoggles FEMA has involved itself in, or caused, when it comes to disaster rescue and relief efforts. Certainly not an unbiased site, but one well worth perusing.

Consumer Reports has an overview of flood insurance that breaks it down to the bare essentials. Of course, they're relying on FEMA data, so take the advice for what it's worth. Even if the messenger is discredited, the message itself is sound: If you're at even the slightest risk of flooding in your area, get flood insurance. A few hundred dollars a month could save you hundreds of thousands of dollars in the long term.

No downpayment mortgages for hurricane victims, courtesy of HUD.

Now, this is fantastic news, but there's also a curious disconnect. The limit of the mortgage is $312,895...certainly not chump change by any means, but the message is strongly encouraging hurricane evacuees to move elsewhere in the country. However, with housing prices still in the mesosphere (As opposed to the stratosphere until just recently), $300k is not going to get you prime digs. I'd definitely be interested in finding out which regions have the most affordable housing and potential for receiving families dislocated by Katrina and Rita.

I also wonder if this is going to sabotage the frenzied efforts by Gulf Coast businesses and officials to get people to come back. We need that part of the country to survive, for culture, for economics, and for rebuilding. The economy will improve no matter where these families move to, but as I've said before, expecting impoverished, dislocated people to spend like madmen is just a fool's errand. Ok, there's the stupidity of the FEMA debit card spending sprees, but maybe we can call that the ultimate form of "retail therapy." ;)

Posted at 04:52 PM | TrackBack

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Mortgage & Loan: The new "investor class"

MSNBC has a very telling look at the new breed of equity-based investors.

It's too broad a brush stroke to say that the new class of buyers are all fueled by massive equity, driven by stratospheric prices. Many of these folks are, or will be, savvy investors who took a lucky break in the market. I wouldn't call flippers "gutsy," though. More like "risky" or "impulsive." Here's a money quote:

“The guy that’s going out making $80,000 a year and buying a million-dollar house because he can, and he’s living in the house — these are homeowners who are creating concern over a bubble,” Hooker said.

What this tells me is that the market is so far out of balance that was once considered a decent salary in ANY economy is now apparently not enough to get into the high-rollers' markets.

The problem also has to do with land shortages. Space gets bought out, prices rise, and buyers are priced so far out of the choice markets that they have to buy properties way off the beaten path. That means more money spent on transit, more time spent in the commute, and distance from the things that made living in a certain area attractive.

An article on the importance of location from the Washington Times points this up nicely. I particularly like this story for the way it drives home the notion that high-end luxury buyers are driving market prices just as much as free-wheeling lenders. It's not all "risky" buyers who got no-document loans with wack credit scores. Just mostly. :) The money quote:

"The time and length of someone's commute is of primary importance, so buyers are looking at a property's proximity to Metro," says Mr. Himali. "Within the city, parking is also very important. It's rare to find a condominium or even a home which includes a garage or parking space. Recently an outdoor parking space, not even in a garage, just the parking space, sold for $110,000 in the Dupont Circle neighborhood."

Six figures for a parking space. Don't tell ME the market isn't headed for a correction.

Business Week has a very interesting report on what areas might be hurt in a housing slump. I was told that Baltimore is hot right now for property and investing, so that's a good example of the knife edge the economy is dancing on. What happens when interest rates continue to rise, lenders get more skittish, and the market slows down? What'll sustain these local economies?

The big boomers (Cali, D.C., and NYC) aren't representative of the market as a whole. People will flock to these areas for jobs, opportunity, cachet--call it what you will. But outside those regions, the reverberations from a housing slide could mean serious pains for investors. Perhaps that's why the folks in the MSNBC article are buying homes in the cheap parts of the country. They've seen their future, and speculation isn't in it.

Funny story of the day, courtesy of DCist: Arlington is a suburban conformist death trap. I'd say that's accurate. Ask Scooter Libby and Karl Rove if you don't believe me. ;)

Posted at 05:13 PM | TrackBack

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Friday Housing News

The big news today is that mortgage rates have topped 6 percent. The MSNBC article flat-out admits that the low rates were what spurred the housing boom and kicked us out of recession. Somehow I doubt that'll work this time.

The killer quote:

Duncan noted that some home buyers may resort to adjustable rate mortgages (ARMs) which initially have lower borrowing costs.

“As fixed rates rise, ARMs will become a bigger factor,” said Stephen LaDue, president of Affiliated Mortgage of Wauwatosa, Wisconsin. “The rate of increase in home values will slow or will start to stagnate,” he said.

Now wait a second. Wasn't the preponderance of ARMs and their bretheren what fostered availability of home loans in the first place? Why would they become more popular as rates go up and lenders become more gun-shy? And why would you risk an adjustable-rate mortgage with home values slowing down? You're effectively paying more for less.

If you believe NAR, 2005 is continuing to be a record year for home sales, but even they concede that 2006 may see a cooling off of the trend:

NAR President Al Mansell of Salt Lake City said some easing in home sales is expected in 2006. “The rise in mortgage interest rates is likely to have a slight braking action on the housing market, and the upside of that is it would help to bring the market closer to balance between home buyers and sellers,” he said. “As a result, there should be a cooling in the rate of price growth – on balance, the overall market should continue to favor sellers with price appreciation remaining above the high end of historic norms. The investment fundamentals for housing remain solid.”

Looking at stats like these from Palo Alto, I think people are either getting out while the getting's good, watching the prices fall and their fortunes along with them, or hoping against hope that they somehow won't be "included" when the bubble bursts. Or maybe I'm totally wrong and Cali will continue to be the fulcrum of a housing boom that makes the gold rush look like a poker game with a two-dollar buy-in.

Caveat emptor or caveat venditor? We shall see.

There's a brewing surge of opposition to the Supreme Court Kelo vs. New London decision, which held that state and local governments could seize private property for a specific use in development, even if the property in question wasn't "blighted" or scheduled for demolition. In this case, it was basically a justification to bulldoze peoples' homes in order to build shopping malls and bring in tax revenue.

The level of opposition to this decision was staggering across the board, and in a rare moment of sanity, the House has passed a bill that denies using eminent domain powers for private property development, and prevents doing so unless relocation costs are paid to the owners whose property is seized.

I think the market frenzy of the last few years has blinded many buyers to the fact that a house is more than a wealth-building tool. You have to live there. That means taking into consideration everything from local land use, to property tax, to environmental regulation, and yes, to seizures and foreclosures. I also think many homebuyers look at decisions like Kelo or Federal wetlands regulation (Scheduled to come before the Roberts Court this term) and think this isn't relevant to them. "Nobody expects the Spanish Inquisition!"

Finally, this isn't really relevant to real estate, but I have to take a swipe at Treasury Secretary John Snow, who visited China this week and exhorted the virtues of consumer spending and using credit to a thriving, cash-centric Chinese market. Like the article says, spend more, borrow more, and save less. Here's the money quote:

Second, they hope that increased financial sophistication in China will lead to higher consumer spending, which, in turn, could reduce the huge trade imbalances that China is building up with the rest of the world.

So spending with plastic and getting yourself into debt is "more financially sophisticated." Hmmm...now, where have I heard that before?

Posted at 08:13 PM | TrackBack

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Katrina Housing

Locate Housing for those affected by Hurrican Katrina:

StormHousing.org takes housing postings from major housing posting sites — including Hurricane Housing (of MoveOn.org), and KatrinaHousing.org — and puts them together for your easy access. You can search by geographic area, and find out which web services carry the most housing offers in an area.

The web site notes that they are unable to add or remove postings from the map search. However, the feeds are updated regularly.

To search for housing in a particular city or state, use the combined map search.

Other sites aggregating Katrina housing listings:
HurricaneHousingSearch.org
HurricaneHousing.org - A project of MoveOn.org
HUD's Hurricanes Katrina and Rita Resource Page
USDA Rural Development

katrina housing

Posted at 09:46 PM

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How do you increase the value of your property?

The biggest factor that can affect property value -- market conditions -- are outside of your control. But other factors -- including the condition of the property, certain home improvements and neighborhood stability and safety -- are not.

For example, specific home improvements can increase your property value above the cost of the improvements themselves, such as remodeling a kitchen, adding a bathroom, finishing a basement or upgrading landscaping. Just be sure that quality pays with remodeling. A bad remodeling job will do little to boost your property value.

home improvement

If you live in a high-crime area, an organized community watch program not only will lower the crime rate but can enhance property values, too. It also helps to live in an area where other homeowners are upgrading their homes, which can help pull up your property value, too.

The bottom line is to measure the cost of any improvements you want to make against the overall values in your neighborhood. If you overimprove for the neighborhood, you may not necessarily recover your costs or boost your property value significantly.

Looking to do some remodeling? ServiceMagic offers a service that will match you with a prescreened contractor. Click here for more details.

Posted at 09:36 PM

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What is the difference between market value and appraised value?

The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300.

Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.

Read more tips on home buying.
home buying

Posted at 09:30 PM

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The Road from FEMAVille: Hotel Hell

$11 million a day. That's how much it's costing FEMA--and taxpayers--to host Katrina survivors in hotels. This article is so money, I don't even know where to begin. The killer quotes include:

Hotel costs are expected to grow to as much as $425 million by Oct. 24, a large expense never anticipated by the FEMA, which is footing the bill. While the agency cannot say how that number will affect overall spending for storm relief, critics point out that hotel rooms, at an average cost of $59 a night, are significantly more expensive than apartments and are not suitable for months-long stays.

But the temporary housing program has been troubled since the start, observers say. Instead of setting up as many as 30,000 trailers and mobile homes every two weeks, as of Tuesday, just 7,308 were occupied. Even counting berths on the four ships that FEMA has leased and rooms on military bases and elsewhere, the agency has provided only 10,940 occupied housing units for victims in the three Gulf states.

FEMA, reacting to criticism that it might create super-concentrated slums, has scaled back plans to build so-called FEMAvilles with up to 25,000 trailers.

Real estate officials say that although there are few available apartments in Louisiana, there are many vacancies in apartment buildings across the South, including perhaps 300,000 in Texas alone.

"What are these guys doing?" Jim Arbury, an official with the National Multi Housing Council, a group of building owners and managers, said of FEMA. "All of this housing is available now."

"FEMAVille," eh? Wonder where they got that from?

This is just ludicrous and stupid. I'd be interested to know how much the hotel/travel industry gave to the Bush campaign in 2000, because this is either monumental incompetence or the ultimate kickback.

The Katrina boom to Baton Rouge may not be the salve people advertised it as. Given that gas prices are staying high and energy prices are sure to do the same, I doubt there will be that much of a spike in consumer buying in the area. Hell, people who haven't been caught in a terrible natural disaster are terrified of spending on nonessentials or luxury items these days. Where do they think the money is going to come from?

Here's some cause for optimism. A wonderful married couple I know is making serious plans to buy their first home. Pretty mundane, right?

Well, what amazed me about this was the number of friends of ours who stepped forward with useful information and advice--very well-informed advice, at that. We discussed checking your credit reports and credit scores, the advantages of using realtor agents and brokers, and most impressively, the warnings against getting caught in "creative" mortgages. Here's a money quote from one of them:

IMO- A home equity is meant just for that. Not for cars or vacations or whatever else people are now using them for. Again this is my opinion.

Damn straight, sister.

It does me proud to see this level of knowledge and sagacity pervading the marketplace. An informed consumer is an empowered consumer, and the more knowledge we obtain and disseminate about the housing process and the market, the better off everyone will be.

femaville

Posted at 06:34 PM | TrackBack

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Cameron Sinclair named recipient of a 2006 TED Prize

Now in its second year, the TED prize, an initiative of the legendary TED Conference (Technology, Entertainment, Design), grants its recipients one world changing wish which they present to attendees of the conference, a group of more than 800 catalysts for change, ranging from Fortune 500 executives to dedicated non-profit professionals. This unique community then seeks to make the wish come true.

Cameron Sinclair is cofounder and executive director of Architecture for Humanity, a six year-old charitable organization seeking architectural solutions to humanitarian crises and providing design services to communities in need. Sinclair is working on a wide range of projects, including school building in India, issues of homelessness,tsunami reconstruction, developing mobile medical facilities to combat HIV/AIDS in Sub-Saharan Africa and rebuilding communities devastated by Hurricane Katrina.

Posted at 07:35 PM

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Wednesday Housing News: Special "Death of the Bubble" Edition

The big news today is that a Bush administration tax panel is considering lowering the tax deduction for mortgages.

So let me get this right. Our economy is almost solely propped up by spending from home equity, and yet the brainiacs' big idea is to limit the amount of deductible cash one can take from the home at tax time? We are truly in Bizarro World.

On the one hand, this will finally force the highest-level taxpayers to cough up more of the cash they have been putting in offshore shelters and "seeing-eye" trusts, a la Bill Frist. If Congress kills the AMT, this could also mean middle-class families and earners can take home more of what they earn, and possibly put more of that into the economy via spending and investment. It also means a definitive end to "flippers" and speculators who, as Consumer Affairs reminds us, continued to buy ever-larger and more expensive homes, deducted the entire mortgage cost, and sold them at a profit.

On the other hand, this will cause tremendous pain for home owners who got into the market with "creative" mortgages and deducted all they could in the hopes that they could use equity to pay off other debts. Now, with more taxes, more costs, and the possibility of price depreciation to look at, the level of foreclosure and bankruptcy may reach cosmic levels.

You can look at this on a political level and say it's an immediate slap to blue-state voters and buyers, who will be dinged a lot worse than red-state buyers. But anyone who's taken a drive through the Northern Virginia area can tell you that all those "old money" and nouveau riche McMansions will get squeezed just as hard, if that's not happening already.

This is another case of short-term pain, long-term benefit. This will further push home prices to drop, putting them back in the range of normal, middle-class buyers who don't have to rely on option ARMs and interest-only loans to get a stake in the property. I also think that despite claims to the contrary, mortgage ownership data is obtainable enough that we can have a clear idea of who will be affected by the deduction elimination and who won't.

The general thinking is that home ownership is to be encouraged, because it promotes stability and earns a region more tax revenue than renting. I don't agree with that, but that's the mindset. It's part of why the bubble swelled to such massive levels...everyone wants people to buy, even if all logic and common sense tells them they shouldn't.

Of course, the encouragement of home ownership often stops when it involves mixing economic brackets or social classes. Witness this very telling story from Stamford, Connecticut. Killer quote:

The dozen or so West Cedar Street residents who attended last night's meeting to support the resolution agreed. Many said they support the need for affordable housing, but not in their neighborhood, where they fear it would add to traffic congestion and could also exacerbate crime problems.

NIMBY is alive and well, right down to opposition to immigration.

Another point about changing the playing field in the housing market rests with the increasingly-bizarre pronouncements from the Federal Reserve. This time, they said Greenspan raised rates so as not to scare people. The man is senile.

Given that the prices of practically everything inside AND outside the consumer price index are increasing anyway, I echo the call of another blogger who said "I think hourly workers would take an increase in pay, and to hell with inflation!"

Finally, just to give you some perspective, here's a list ranking the most expensive cities in the world. Anyone who thinks they will find cheaper housing or living expenses elsewhere in the world, while still maintaining their comfy standard of living, is due to join Greenspan for a trip to meet the nice men in the white coats.

housing bubble

Posted at 04:14 PM | TrackBack

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Hurricane Housing: Mixed Messages

This morning in Covington, Louisiana, Habitat for Humanity's housing program was joined by no less a pair of hands than President Bush and First Lady Laura Bush. Bush used the opportunity to proclaim that he would ensure local workers and businesses would be the ones to rebuild the Big Easy.

"I don't think Washington ought to dictate to New Orleans how to rebuild," he said.

Boy, you got that right.

Bush said he had told New Orleans Mayor Ray Nagin that "we will support the plan that you develop."

Let's hope that "Get 'Em, Ray" Nagin's plan is a little better than what he came up with the last time.

There actually seems to be some solidity to this particular endeavor, however. HUD announced a new series of grants designed to combat predatory lending, promote first-time home ownership, and to enforce the Section 8 program that allows first-time homebuyers to use vouchers for home purchases. And FEMA is apparently scrambling to get as many local and small businesses into the mix as possible. The Post has more on the redistribution of contracts.

But as the New York Times reminds us, hurricane housing seekers may not be able to use those HUD goodies:

A similar proxy war has played out in housing policy after the Senate voted to house evacuees through the Section 8 program, which offers poor people subsidies for private housing. Critical of the program's cost, the administration instead created a parallel voucher program for hurricane evacuees.

And when you actually take a look at the HUD Katrina housing site...well, that about says it all, doesn't it?

In other news, Bankrate.com's Greg McBride posted some very sharp commentary on the new employment reports and the Federal Reserve. In particular, he drops the bomb on the current thinking that homeowners can still live off their equity like it was a water faucet:

Let's look at some evidence. Credit card delinquencies have hit a record high in the second quarter. And this is the second quarter. This does not bode well for delinquency rates in the third or fourth quarters when the impacts of Hurricane Katrina, higher interest rates, and higher minimum credit card payments take hold.

Higher interest rates seem likely to compound all of the aforementioned problems, with greater risk to consumer spending and the economy as a result. After all, consumer spending accounts for nearly 70 percent of economic output.

Damn.

Or, as Bradley Inman put it in his blog recently:

This could be scary!
1. Mortgage interest rates at 6-month high.
2. Consumer confidence at 12-year low.
3. Home Buying consumer confidence at 10-year low.
4. Listings at 5-year high. *
5. Sub-prime loans at record levels.
Are you frightened yet?

* Estimate

Damn.

Posted at 04:30 PM | TrackBack

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Using your mortgage as a checking account: The CMG Plan

From Jack Guttentag,Professor of Finance at the Wharton School:

"Recently, I heard an ad on the radio about a new type of mortgage from CMG Financial that allows you to use the mortgage as if it was a checking account. According to them, this allows you to pay off your loan in about half the time. Would you give me your opinion?"

Continue reading "Using your mortgage as a Checking Account"

Posted at 07:30 AM

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FSBO real estate buyers fall victim to 'offer shopping'

From Bob Bruss, real estate advice writer:

DEAR BOB: About two weeks ago, we made a written offer to buy a "For Sale by Owner" house. The sellers had all the forms and they filled them out with the price we wanted to offer (about $7,500 below the asking price). They said they would "think about it." When I phoned the sellers a few days ago, they said they accepted a better purchase offer, which was about $5,000 higher than our offer. Shouldn't they have given us a chance to match that second offer? - Lance R.

DEAR LANCE: You were a victim of "offer shopping." That can easily happen when a naive buyer like you makes an open-end purchase offer with no expiration date.

If you had been represented by a buyer's agent, that person would have suggested your offer be valid for not longer than 24 hours. A limited time for purchase offer acceptance puts pressure on the home seller to promptly accept, reject or counteroffer. Instead, your seller obviously showed your offer to other buyers to "shop" for a better offer.

The home seller had no obligation to ask if you wanted to match or surpass the second offer. Your situation provides a valuable lesson on how to avoid offer shopping by always specifying a short offer expiration time, such as 24 hours.

Continue reading real estate Q&A with Bob Bruss.

Posted at 07:19 AM

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Housing Bubble: Head, Meet Sand

I came across two telling articles in USA Today dealing with mortgages and housing bubbles. One rosily proclaimed that even though localized bubble markets are cooling, there's not enough data to make a firm prediction as to the market's future. The second one covers more warnings from Greenspan about the dangers of option ARMs, interest-only loans, etc.

What's interesting to me about these pieces is the tone. On the one hand, the first piece is almost desperately trying to convince potential buyers that there's no bubble and that it's safe to invest in a new home. "We're safe! It's ok! No bubbles here!" At least they acknowledge the local nature of bubble pricing.

The other piece is increasingly stentorian in its warnings that the market may not be able to sustain the flurry of new or refinanced loans with "creative" terms. Witness this killer quote:

"The easier availability of first mortgages has helped many marginal borrowers obtain loans and it has helped banks sustain loan volume and profits," said John Dugan, comptroller of the currency.

"But looser underwriting standards and the more widespread penetration of riskier mortgage products have raised questions about how these loans will fare in the event of a rise in interest rates or a softening in house prices," Dugan said.

So, it's still essential to take advantage of a booming market, but you need to be seriously careful about how you do it. On its face, this seems like smart advice, and I agree with it. Under scrutiny, however, it feels more like the dichotomy between realtors' frenzy to get people in homes, and the markets' increasing wariness about risky loans, is reaching truly multiple-personality-disordered levels.

Of course, the article fails to mention that it was Greenspan cutting interest rates in the first place that led to the increased availability of "creative" mortgages. Thus is history rewritten.

Americans are juggling an insane amount of consumer debt, driven to record levels in recent years by soaring gas costs, credit card payments, student loans, and most definitely mortgage costs. The most fundamental problem with interest-only or option ARMs is that if you don't plan for when those rates will inevitably go up, you may find your wallet stretched completely beyond its means.

Some good news, at least: CNN Money has a roundup of what many major lenders are doing to ease the burdens on Katrina and Rita victims. Consumer Affairs has a rundown of the changes in the law for hurricane survivors. Of course, these are only temporary measures, but anything that helps people get back on their feet--and out of Hotel FEMAville--can't be hated upon.

Posted at 07:13 PM | TrackBack

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Which real estate lender Web sites are worth shopping?

(This is Part 2 of a three-part series.) By Jack Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania.

Read Part 1 of 2

Borrowers who shop for a mortgage online, for any of the reasons I discussed last week, should only spend time on sites that price their loan. If a site doesn't price the type of loan you want, with the features you require, don't bother with it. You are online to shop, not to be seduced into making a phone call.

To help, I recently scored 21 sites for the depth and comprehensiveness of the information provided to shoppers. Of these, I considered 17 worth listing on my Web site because they had some price functionality and showed all settlement costs.

The Best: The highest-ranked site was www.E-LOAN, followed closely by www.mortgage.com (the site of ABN AMRO), and www.indymac.com.

E-LOAN is the only site that meets all my requirements for the designation of Upfront Mortgage Lender (UML). Among other things, UMLs provide a summary of all the market niches priced by the site, and disclose all the major features of their adjustable-rate mortgages (ARMs). The two runners-up did neither, but they did cover many loan types and market niches.

A site with a higher score is one that prices a larger number of potential transactions, and provides shoppers with the information needed to make decisions. Here are some examples of the scoring system I used:

Mortgage Types and Features: For every program they price beyond 15- and 30-year fixed-rate conventional loans, a site receives 1 point. This includes different types of ARMs, balloon loans and FHA/VA loans. They also receive a point for disclosing each important ARM feature.

Down Payment: A site that allows the user to enter the down payment receives 2 points, and an additional point if the down payment can be less than 5 percent. If the site uses one down payment in all its pricing but tells the user what that assumption is, it receives 1 point.

Settlement Costs: A site that shows all settlement costs receives 1 point, another point if lender fees are segregated, another point if lender fees are guaranteed, another point if the guarantee includes the appraisal, another point if the guarantee includes the credit report, and 2 additional points if it covers all third-party fees.

Points: A site receives 1 point if some of the mortgages are priced with multiple combinations of interest rate and points, an additional point if rates are shown for negative points (rebates), and a point if it prices no-cost loans.

Strengths in Coverage: 10 of the 17 listed sites priced loans on second homes, loans on investment properties, and cash-out refinances. Most sites also priced loans on 2-, 3- and 4-unit properties, as well as on condos. There were even five sites that priced loans on co-ops, and three that priced loans on manufactured homes.

Fourteen of 17 sites priced loans with down payments specified by the shopper (rather than assumed by the site), and in eight cases down payments could be less than 5 percent. Most of the eight allowed zero down on at least some transactions.

Sixteen of 17 sites provided different combinations of interest rate and points on at least some programs, and 12 included negative points (rebates).

All 17 sites showed total settlement costs, 10 segregated lender fees, and eight explicitly guaranteed lender fees.

Weaknesses in Coverage: While shoppers can find every type of ARM offered on multiple sites, only E-LOAN and Chase Mortgage (ranked number 5) disclose the index and its current value, the margin, and all rate caps. If you price an ARM on any other site and need this information to make an intelligent decision, you will have to contact them to fill in the blanks.

Except for E-LOAN and Indy Mac, the sites assume your credit is excellent. E-LOAN and IndyMac adjust price for a credit score entered by the user, but the adjustments are quite crude. Shoppers with scores below 620 cannot yet shop effectively online.

Online shoppers also do best if they can fully document their income and assets. Only four sites have a "stated income" option, and none offer "no docs."

Why Show Lower-Ranked Sites? I show detailed information on 17 sites because, while a lower-ranked site has less coverage, there is always the possibility that it prices your loan and a higher-ranked site does not. Countrywide.com, for example, ranked number 10 overall, but it is the only site that prices FHA and VA loans.

Here is the complete list by score: E-LOAN.com (46), Mortgage.com (42), Indymac.com (37), Greenpointmortgage.com (32), Chasehomefinance.com (30), Mortgage.etrade.com (29), Charteronedirect.com (