Real Estate Information

According to the AAA, 29.9 million people call for emergency roadside service each year, many of which are requesting assistance with a flat tire. Pennzoil has created a TRUNK ITEM CHECKLIST for roadtrip roadside emergencies:

• Bottled water - Helpful if the radiator runs low on fluid or simply to avoid dehydration while stranded on the side of the road.
• Flares - Essential if you experience car problems after dusk.
• Jumper cables - Batteries can die for many reasons, including leaving lights on accidentally.
• Tire inflator such as Fix-A-Flat® - A quick, convenient solution for a flat tire...no tire jack or spare tire required. (Pennzoil, which makes this product, is offering a free 2003 Rand McNally Road Atlas with each purchase.)
• Flashlight (and batteries) - Always be prepared.
• Duct tape - The ultimate solution for quickly repairing a ruptured hose until you reach the nearest service station.
• First-aid kit - For all the little emergencies.
• Blanket - Helpful if you need to slide under the vehicle to further examine a problem or simply to provide warmth on a cool summer evening.
• Reflective triangle - To be used during day or night to warn oncoming vehicles. Reflective triangles are required in some states.
• Cell phone - If all else fails, simply call for roadside assistance. However, be prepared to be in an area without signal.
• Maps - It's safe to know where you are and it will be easier to tell potential rescuers a more precise destination.

Source: "Where to Go Next" newsletter, June 10, 2003.

By Bankrate.com

One of the most important things about the real estate market is that it can look entirely different, depending on where you're standing. National trends are meaningful, but what's happening in your state affects you more directly. What's going on in your county is even more important. And in your town far more important than the county. And so on, right down to your street and the houses adjacent to you.

The more locally you regard it, the more you will know about real estate and its impact on your life. That's what "location, location, location" is all about.

We all hear the real estate market is down, depressed, lethargic, bursting, deflating ... whatever. Last fall, homeowners in New York, Rhode Island, New Hampshire and Massachusetts saw prices fall from the previous quarter. But from September 2005 to September 2006, homes in Idaho, Utah, Oregon and Arizona enjoyed double-digit appreciation of close to or above 17 percent.

Sales figures also lagged in some parts of the country. Sellers held out for the prices they wanted and buyers waited for better deals promised by the buyer's market. Sellers expect appreciation and buyers want discount prices.

It's been a buyer's market and continues to be a good time for buyers. Affordability is up, incomes are rising and home prices have stalled or are, in some cases, declining. But many experts believe an acceptance of somewhat lower prices by sellers, a smaller volume of homes on the market, increasing income levels and rising interest rates could be contributing factors to cause the buyer's market to disappear by the end of 2007 and be replaced by a neutral market that favors neither buyer nor seller.

Which all leads up to a very interesting spring real estate season that's about to get under way.

Are you a buyer? A seller? An interested observer? Did your bubble burst? Just hiss a little? Or did you see double-digit appreciation? What will this season mean for you? Bankrate's Guide to Real Estate 2007 (www.bankrate.com) aims at providing insight and perspective, as well as facts and figures to help you achieve your real estate goals.

by Cherie Winner

Check out the new building at Washington State University's Extension campus in Puyallup. The foundation is cracked. The front stoop tilts toward the house. Window flashing was installed wrong or not at all, the attic insulation runs right up against ventilation holes, and there's a persistent leak around the toilet.

Contrary to what you might think, the designers and builders of the 1,152-square-foot house made it that way on purpose.

"We were told the other morning that we were good at doing things wrong," says construction maintenance mechanic Ron Froemke, who helped build the house. "It felt like a low blow to me, but I guess if everyone's happy . . ."

"Everyone" in this case includes pesticide educator Carrie Foss and the advisory committee for WSU's structural pest integrated pest management (IPM) program. A few years ago the committee suggested building the house as a teaching aid for structural pest managers and inspectors. The "Structural Pest IPM Facility," as it is formally called, will give students a chance to see for themselves a variety of poor building techniques and the pest problems they help create.

"Conducive conditions" is a key concept, says Foss. Poor construction doesn't always lead to pest problems, but it does create conditions, such as excess moisture, that encourage pests and give them a foothold within the home. Subterranean termites, carpenter ants, and the fungus that causes wood rot are just a few of the pestiferous guests Foss expects to see in the house eventually.

Foss says many of the problems that plague homeowners aren't easy to find. They sprout behind walls, under floors, in cracks and corners. In their early stages they can be hard even for experienced inspectors and pest pros to detect. How-to books, diagrams, and checklists can help, but there's no substitute for the real thing.

"What's of value here is being able to see where the problems—that might not be obvious—are going to be," says Foss. "To know where to look, and what clues to see."

Foss and her crew will monitor the house over the next few years, and when they find damage in out-of-sight places, they'll make it easier to view by replacing portions of walls or flooring with Plexiglas panels.

The house will be officially dedicated this spring, but it made its instructional debut last October. In a weekend workshop for 25 pest managers from six western states, the house was a hit. Until now, students in this region haven't had the chance to see many of these problems before they get out into "the real world." Similar facilities have been built in the eastern half of the country, but Puyallup's "mildew manor" is the only such structure in the western U.S. That distinction might not last long. After the first class, two California attendees, a student and an instructor, went home convinced that their state should have such a facility, too.

In addition to being built wrong, the house incorporates a variety of different materials—several kinds of siding, roofing materials, flooring, attic and subfloor structures—that aren't necessarily bad, but may not be appropriate for conditions in the Pacific Northwest.

It might reassure prospective homebuyers to know that Foss had a tough time getting building permits for the house. When county authorities saw the plans—which obviously included several major no-nos—they balked.

"This is out of the context of what they normally do," says Foss. "This is a training facility. It's not like a house that they would normally permit."

The logic of using poor construction techniques as a teaching tool finally won out, and the project went forward. It was a challenge for mechanic Froemke and carpenter Curt Bod to do so much of it so wrong. In fact, other than the parts that were deliberately done wrong, the building is solid.

 "For a house that's built to fail," says Bod, "it's pretty well built."        

This article first appeared in the Feb. 2007 edition of Washington State Magazine, a publication of Washington State University, and is reprinted with permission.

Employer Assisted Housing (EAH) is viewed as one strategy for employers to increase home-ownership for their workers. Its roots can be traced to the industrial revolution and the emergence of "company towns." Now employers are reinventing the concept as they compete to recruit and retain works in an era of tight labor markets and escalating housing costs.

Homeownership trends underscore the situation: Since 1978, the national homeownership rate climbed from 65.2 percent to 68 percent. During the same period, the rate among working families declined, dropping from 62.5 percent to 56.6 percent.

EAH can encompass any number of ways an employer invests in workforce housing solutions, such as providing homebuyer education, assistance with down payments and closing costs, and loan guarantee programs. Fannie Mae started its EAH program in 1991, offering a forgivable loan to eligible employees.

Many variations of EAH exist, and while its proponents cite numerous benefits, the concept also has its doubters and detractors, including some who oppose tax credits and subsidies, design innovations, zoning/building code changes or other strategies for accommodating affordable housing options.

One long-time supporter of Employer Assisted Housing is Robin Snyderman, who visited Seattle in mid-April as the third of four speakers in the "Housing Our Future" speaker series program of the City of Seattle and ULI Seattle.

Snyderman, the housing director at the Metropolitan Planning Council in Chicago, outlined how that nonprofit, nonpartisan group has worked with a variety of regional stakeholders to increase the range of housing options near jobs and transit.

Chicago is "woefully under-producing" multifamily housing, according to Snyderman. Only 3 percent of all metro Chicago housing permits in the '90s were for multifamily housing, far below the nationwide figure of 22 percent. She cites three "non-economic" barriers as contributing to the shortage:

• Negative public perceptions of "affordable housing."
• 1300 different municipalities statewide (including 274 in the Chicago metro area), each responsible for housing policy "in their own backyard."
• Lack of community support and state leadership.

Like Seattle, Chicago is experiencing a "jobs-housing mismatch" where jobs and population are growing at a faster rate than the supply of workforce housing. EAH can benefit a range of stakeholders, Snyderman believes. Among some of the key benefits she listed are:

• The employer enjoys the advantages of a more stable workforce when employees live near work. Improved morale, less turnover and reduced recruitment result in bottom line savings.
• The employee, beyond receiving financial support from an employer to buy a home closer to work, also gains extra time – formerly spent in traffic – for family or community life.
• The surrounding community gratefully trades in a portion of its traffic congestion for the new investment and property taxes, as former commuters buy homes near the jobsite.

In Chicago, four entities play key roles in Employer Assisted Housing programs, the employer, the Metropolitan Planning Council, the Regional Employer Assisted Collaboration for Housing (REACH, which comprises community-based nonprofit housing partners), and financial partners/developers.

REACH administers the EAH program, provides credit counseling and housing education to employees, connects buyers and renters with financing products, financial institutions and Realtors and applies for and administers state tax credits.

Snyderman said the housing organizations engaged in REACH are all established nonprofit entities with a track record in homebuyer education and homeownership counseling. "They have access to various social service alliances and a sophisticated understanding of the very different market demands and opportunities in the jurisdictions they serve," she explained. Some of the partners even develop, own and manage affordable homes, she noted.

Currently, some 40 employers are offering EAH in Illinois. Through REACH Illinois, more than 1,000 employees have bought homes since 2000, and only five have left their jobs.

Snyderman believes EAH has proven effective as a tool to promote affordability in more expensive, high job growth areas, as well as a strategy to encourage reinvestment in urban communities. "It has further proven itself among large and small employers alike, as well as for both nonprofit and for-profit organizations," she adds.

The Joint Center for Housing Studies at Harvard University concurs with other research that found housing assistance is beneficial for the employer, the employee and the surrounding community. In its report, Employer Assisted Housing: Competitiveness through Partnership, published in 2000, JCHS researchers note several benefits associated with reducing the expense, both in time and money, of commuting.

For example, the report notes, reducing commuting time increases employee morale and productivity with less absenteeism, tardiness and stress. Additionally, employees spend less of their income on commuting related expenses. "In turn," the authors state, "this positively affects employee retention. All of these factors reduce turnover, which cost businesses an average of 25 percent of an employee’s annual salary."

Another report on EAH, authored by Erika Green, a graduate student in planning at Drachman Institute, describes how "anchor institutions," such as universities and hospitals, have utilized EAH not only to offer convenient and affordable housing opportunities to faculty and staff, but also as a means to revitalize surrounding communities.

The University of California system started a program in 1979 that now includes forgivable loans, reduced interest mortgages with partner institutions and affordable ownership housing. Its program, offered at six of its nine campuses, is credited with providing 12,150 loans to employees, recruitment of 5,090 employees and retention of 1,327 employees.

Maryland and Milwaukee are using EAH programs to support smart growth. In 1997, the State of Maryland launched "Live Near Your Work," a statewide EAH program that is part of a series of smart growth initiatives. In Baltimore, 20 employers have joined the program and more than 200 households have purchased homes.

One of the first major collaborations for workforce housing was initiated more than 20 years ago by the Silicon Valley Leadership Group (SVLG). The group represents more than 190 companies employing over 250,000 workers.

Concerned about the threat that high home prices pose to business competitiveness in the Silicon Valley, the group spearheaded the establishment of a $25 million housing trust fund to help more than 1,250 first-time buyers. Additionally, SVLG has partnered with local governments, community leaders and labor representatives to advocate for policy changes and to draft recommendations for local land-use policies to increase the supply of affordable housing.

Several new EAH models are emerging, Snyderman told her Seattle audience. They include EAH in support of the Chicago Housing Authority’s Plan for Transformation (which promotes mixed income communities), rent subsidies and IDAs (Individual Development Accounts, which enable low-income families to build the financial assets to achieve their homeownership dream), EAH small business consortia, inter-jurisdictional EAH programs and EAH as preservation or development investments.

Snyderman also shared highlights of Illinois’ first-ever policy that evolved into a Comprehensive Housing Plan, now mandated by law. (see box)

The final speaker in the "Housing Our Future" series will be Ron Terwilliger, chairman and CEO of Trammell Crow Residential. On Sept. 18 he will speak on "Housing Our Workforce: Why Business Leaders Should Care." During his remarks, he will discuss the growing crisis of fully-employed people who are not able to live close to where they work, then offer a roadmap to change this pattern. Watch for registration information at http://www.seattle.gov/housing/HousingSpeakers/.

By Jolene Anderson, Journal Newspapers

Spring, the season of new beginnings, is here. For many local residents now is the time to begin shopping for a new home. While, the first step is envisioning the new space, whether it be an urban condo or a wonderful Northwest craftsman, taking the time upfront to become educated about the actual process is a worthwhile investment of time and energy. Since investing in a new home is the single largest purchase most will ever make, it is prudent to seek the best advice before buying. In this case, knowledge is not only power but it can save time and money.

An important part of the process is the financing of your purchase. Jeff McGinnis of CTX Mortgage in Seattle says the most important thing for today's homebuyers is preparation. While the stress of buying a home cannot be removed entirely, being a pre-approved buyer is a wiser and less stressful place to be. 

Pre-approval vs. pre-qualification
There are two phrases thrown around in the lending industry: a pre-approval and a pre-qualification.  They are distinctly different and one is safer than another. A definition of a pre-qualification is this: A buyer has spoken with a lender about their credit, employment, and how much cash they have on their balance sheet.  The lender has given the client an idea for what amount of loan the client can afford.  

A definition of a true pre-approval is this: A complete loan application (this includes a credit report) has been taken by a qualified lender, the support documentation (W2's, tax returns, pay stubs, and bank statement) has been submitted to an underwriter, and the underwriter has given an approval of credit based on a property with an acceptable appraisal and clear title.  Without all three of these items, a buyer is somewhere between pre-qualified and pre-approved.

McGinnis also warned that many lenders have been experiencing situations where they had a loan program for their customer two weeks ago, but this week the company changed their qualification guidelines or have shut their doors altogether.  The lender no longer has a loan to offer and the client no longer can buy their home.  It pays for buyers to do their homework upfront.

McGinnis recommends spending at least one hour with the interview process before beginning to shop for a home. Mortgage brokers are often willing to meet you at your place of business if this is a desirable option. 

The same applies to the process of interviewing a realtor. Buying a home is number three on life stressors behind a divorce and death in the family.  While the stress of buying a home cannot be removed entirely, working with an experience Realtor can make the difference in not only obtaining the right price for the home but getting the home altogether. Well priced properties in desirable neighborhoods, are still seeing competing offers from multiple buyers. Knowing your interests is represented by a skilled professional, will certainly secure the best negotiating position and eliminate chaos.

Inspection
Once you've found a home and the offer is accepted by the seller, the next step is the inspection. To define this process, Byron Vadset, of B.J. Vadset and Associates, says these items are included: an inspection of the outside of the home, including the roof, siding, decks, windows, driveways, retaining walls, fencing, chimney, porches, foundation and power. The inside of the house is inspected including the crawl space and the basement (for foundation condition, electrical panel check, heating system, etc.). Bedrooms are checked for window openings, electrical plugs, cracks in ceilings or walls and the bathroom is inspected for water leaks, plumbing and venting, etc. Finally, the kitchen appliances are tested, cabinets and drawers and plumbing. The inspector will prepare a written evaluation for the homeowner. The selling agent, (buyer's agent) and the buyer will want to be present at the inspection to observe the inspection process.

If there are negative items noted on the report this can be a matter of negotiation between the seller and the buyer. This process is thoroughly addressed in a Purchase and Sale Agreement. The inspection process and the duties of the parties should be explained thoroughly by the buyer's agent, at the time of writing the purchase offer.

Escrow
The final part of the buying process is escrow. Heather Burke of Escrow Professionals of Washington, a Licensed Professional Officer and Escrow Closer says, simply put, an escrow officer is a neutral third party to a real estate transaction whose duty is to see all terms and conditions of the Purchase and Sale Agreement are met prior to the time the transaction closes. The Seller's Title is protected, held in safekeeping until all terms are complete. The buyers may deposit funds with the security of knowing they will be held in trust until the transfer of the property.

Escrow is the central place where all funds and documents may be deposited. Escrow is an independent third party which performs these services impartially. The escrow officer is responsible for the final settlement between the buyer and the seller, recording the final documents, paying off the existing liens and mortgages, the pro-ration of property taxes, leases, maintenance fees and any other property expenses in order to assure an accurate and complete closing.

Printed with permission from The Journal Newspapers.

As kitchens have evolved into the most popular room in the home, consumers are increasingly looking for high-end appliances, additional pantry space, island work stations, wine storage areas and recycling centers. The number of bathrooms in homes is also increasing with radiant floors, multi-head showers, dual sink vanities and towel warming products emerging as the most popular features. These findings are from The American Institute of Architects (AIA) Home Design Trends Survey focused specifically on kitchen and bath trends in the fourth quarter of 2006.

“There is a strong desire to integrate the kitchen with living space that allows for a more open home environment with the ability to converse and access entertainment options while in the kitchen,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “There has also been a sharp rise in demand for renewable materials for countertops and flooring, as well as dedicated areas for recycling.”

"Accessibility and universal design to accommodate an aging population are on the rise in bathrooms,” Baker noted, adding, “From an amenities standpoint heated floors lead the way, followed by multiple showers and towel warming racks, with the popularity of whirlpools dropping for the second consecutive year.”

Despite the national slowdown in the housing market, Baker said architects report continued strong demand for remodeling and renovation projects, with virtually every other residential category in decline.

Popular kitchen products and features*

• Upper-end appliances: 65.2
• Increased pantry space: 64.2
• Renewable flooring material: 53.3
• Wine refrigerators / wine storage: 53.0
• Integration with living space: 52.5
• Recycling center: 48.3
• Island work areas: 43.0
• Natural stone countertops: 42.2
• Drinking water filtration systems: 37.0
• Duplicate appliances: 34.0

Popular bathroom products and features

• Radiant heated floors: 62.4
• Multi-head showers: 61.9
• Accessibility / universal design: 47.5
• Doorless showers: 47.3
• Linen closet / storage: 36.4
• Hand showers: 35.5
• Multiple vanities: 26.5
• Dressing / cosmetic areas: 22.9
• Towel warming drawers / racks: 22.1
• Whirlpool baths: -24.3

Specific construction segments (index score computed as % of respondents reporting improving minus those reporting weakening conditions)

• Additions / alterations: 42.0
• Kitchen and bath remodeling: 38.5
• Custom / luxury home market: 5.2
• Townhouse / condo market: -2.2
• Second / vacation home market: -7.1
• Move-up home market: -12.3
• First-time buyer / affordable home market: -40.8

To the full report: http://www.aia.org/aiarchitect/thisweek07/0223/0223b_res.cfm

About the AIA Home Design Trends Survey
The AIA Home Design Trend Survey is conducted quarterly with a panel of 500 architecture firms that concentrate their practice in the residential sector. Residential architects are design leaders in shaping how homes function, look, and integrate into communities and this survey helps to identify emerging trends in the housing marketplace. Business conditions are also monitored on a quarterly basis.

By Elizabeth Rhodes

Seattle Times business reporter

Bucking the national trend, the price of King County houses has risen for the fourth month in a row, reaching a median $465,000 in April, according to statistics released Monday by the Northwest Multiple Listing Service.

At the same time, single-family home sales are slowing throughout much of the four-county Central Puget Sound region.

The majority of single-family homes sold within Seattle last month went for more than the asking price, an analysis by Windermere Real Estate shows.

That trend in Seattle was strongest for two-bedroom houses. Less expensive because of their small size, they're in high demand as "starter homes." They brought an average 100.43 percent of their asking price, Windermere found.

Three-bedroom houses — the largest percentage of sales — on average sold for 100.25 percent of asking.

Only five-bedroom houses in Seattle, which as a group are larger and more expensive, sold for less: 97.6 percent of the original asking price.

Buoyed by a strong local economy that's been growing at twice the national rate, some 64 percent of all Seattle houses sold within 30 days, Windermere reported.

In other parts of the country, where the economy is more sluggish and foreclosures have started to push down prices, average selling times are 90 days or more.

"If it's a good, clean property and priced right," it will sell quickly, said Jerry Martin, broker and owner of RE/MAX Northwest Realtors-Kirkland. He noted that homes priced below $500,000 sold the fastest, sometimes receiving multiple offers.

Martin estimates that on the Eastside, one in 10 single-family-house transactions is generating multiple bids. Last spring about 80 percent did, he said. Multiple offers on condos in his area are less frequent.

"Overall, people have been getting worn out paying what in their opinion is an inflated price," Martin said.

Plus there are significantly more properties to choose from compared with a year ago.

In King County, the number of houses available increased 38 percent in April. The number of condos for sale rose 74 percent as more new buildings and conversions came on the market.

That strong uptick helps explain why pending sales for houses and condos combined fell 5.4 percent last month compared with a year earlier. Pending sales reflect the relationship between the number of available properties and the number of accepted transactions.

Foreclosures may have added to the inventory total but remain a small factor locally.

In March, the last month for which statistics are available, one in every 1,846 King County homeowners was in some stage of foreclosure, compared with one in every 775 nationally, according to RealtyTrak, a California foreclosure-information provider.

However, many foreclosures are not finalized as owners and lenders, who have started introducing new mortgage products with more variable terms, find ways to escape this fate.

April's local sales activity is an improvement from earlier in the year, said Dick Fulton, managing broker of Coldwell Banker Bain's Lake Union and Magnolia offices.

"Because of the awful weather we had, there were a substantial number of days where commerce couldn't happen," he noted. "The 2007 market kind of found its stride for the first time in April. The activity feels like we're at a faster pace than last year in the Seattle and Bellevue market."

That's likely not repeated nationally, according to a preliminary report on April home sales released last week by the National Association of Realtors.

The trade association anticipated that final April numbers will show sales nationwide to be the lowest since March 2003. Tighter mortgage-lending standards along with a decline in subprime lending are among the causes, according to David Lereah, the group's chief economist.

At present, loan rates aren't seen as a factor. In Seattle last week, the average for a 30-year, fixed-rate mortgage stood at 6.27 percent. That's up slightly from prior weeks but down about a half of a percentage point compared with a year ago.

Within the four-county, Central Puget Sound region, houses in Snohomish County have appreciated the most, year over year, the MLS found. The county's proximity to King County job centers, plus its relative affordability compared with King, are two reasons for its strong appreciation.

However, its price rise has not been as steady as King County's.

Over the past four months, median single-family house prices have fluctuated in Snohomish County, settling at $375,000 in April. That figure reflects a 13.7 percent year-over-year increase. Median means half sell for more, half for less.

House prices in the same time period are up 10.9 percent in King County, 6.9 percent in Kitsap County and 4.4 percent in Pierce County.

King County's median condominium price last month was $295,000, up 19 percent compared with the previous April. Snohomish County's median condo price was $242,500, up 21.3 percent.

Spring traditionally is the strongest season. Whether April will be the strongest month remains to be seen.

Already, asking prices are cooling, according to the MLS.

King County's median listing price of $525,000 is just 5 percent higher than a year ago. That's likely a result of more properties for sale, thus more competition for buyers.

Sellers "have to be very aware of pricing their homes properly relative to their competition in their price range," Fulton said, adding that "the ones selling are the ones priced competitively."

Elizabeth Rhodes

U.S. business productivity -- a measure of how much any given worker can produce in an hour -- grew a greater-than-expected 1.7% in the first quarter of 2007. Economists expected a rise of only 1%. Meanwhile, unit labor costs grew 0.6% in the first quarter of 2007, well below the 4% rise analysts predicted.

The Institute of Supply Management (ISM) reported May 3 that its April index of manufacturing activity moved to 54.7, from 50.9 in March. Readings above 50 point to expansion in the economy. Forecasters expected the April index to hit 51.

The ISM also said its non-manufacturing index rose to 56 in April from 52.4 in March, beating Wall Street expectations for a reading of 53. The service sector represents about 80% of U.S. economic activity.

The National Association of Realtors' Pending Home Sales Index fell 4.9% in March, following a 1.1% increase in February, the trade group reported May 1. Economists had predicted a 0.4% rise in the index.

Mortgage rates for the week ended May 4 remained unchanged on signs of weakening consumer spending and cooling inflation, Freddie Mac said.

This week look for updates on the Producer Price Index and retail sales on May 11.

Bad news has been emerging from the subprime market every week: One lender after another is in trouble.

As of April 16, National Mortgage News, a trade publication, counted 32 subprime lenders that had become "defunct" since early 2006. The good news is that many subprime lenders remain: In 2005, there were 250 firms that were members of what is now called the Mortgage Bankers Association, a trade group. The 32 failed firms accounted for less than 15 percent of the total of subprime loans.

However, we don't know whether the firms remaining are still making loans, and if they are, at what terms.

On April 10, the Upfront Mortgage Brokers Association surveyed its membership on these questions. (I am chairman of the board.) Of the 55 brokers who responded, five specialized in subprime lending, nine did no subprime lending, and the other 41 did them along with prime loans.

We asked the brokers to describe the changes that have occurred in their wholesale lenders over the last six months. We found that a few brokers with potential subprime clients had lost access to subprime lenders. However, the great majority of brokers have been able to replace defunct lenders with other lenders who were still operating.

These were typical responses:

"We lost Fremont, New Century and MLN. We have added BNC, IndyMac and MortgageIT."

One broker said that FHA has been a help filling the void, while another observed that the lenders folding up were being replaced by better lenders.

"The ones that would take any old garbage loan seem to be gone, while the ones where the loan has to make sense are still there."

The brokers were unanimous in reporting a tightening of underwriting requirements:

• 100 percent loans are much more difficult to find, with the remaining subprime lenders now requiring 5 percent or 10 percent down.

• Stated-income loans, where income is not verified by the lender, are no longer available for subprime borrowers with income derived from salaries or wages.

• Minimum credit (FICO) scores are up by 30-50 points, depending on other characteristics of the transaction.

• Borrowers are being qualified for adjustable-rate mortgages using the fully indexed rate (the most likely rate at the first adjustment) rather than at the discounted initial rate. Regulators have been pressing for this, but the market is doing it voluntarily.

The tightening of underwriting requirements has not been limited to the subprime sector. The requirements in the so-called Alt-A sector, which is an intermediate classification between prime and subprime, are also being tightened. And so are the requirements for "prime."

Some loans that would have been prime last year will go Alt-A this year. Some loans that would have been Alt-A last year will be subprime this year. And some loans that would have been subprime last year will be rejected this year.

Some brokers who have been in the market for many years remarked that the underwriting rules now emerging are much like those of a decade earlier, before they were swept away by the euphoria created by steadily rising real-estate prices.

Unfortunately, the transition to more restrictive underwriting rules poses a danger to borrowers (and a costly nuisance to brokers).

A borrower can begin the process under one set of rules and then have the rules change before the deal is done. Here is a recent example from my mailbox:

"In January, my husband and I decided to build a home.... The mortgage company prequalified us for a subprime loan. ... A week ago the mortgage company called and said the conditions had changed and now we have to have a 620 middle score or better to close, or else come up with 5-10 percent down. Can they do this to us?"

Borrowers can avoid costly disappointments by applying the following underwriting rule to themselves:

Under the rules now emerging, if you can't put 5 percent down, have a FICO score below 620 and can't document the income needed to make the payment on a fixed-rate mortgage, you will probably be rejected. Homeownership is not for everyone.