For buyers with good credit and healthy bank accounts, a million dollars buys a lot more home than it did a few years ago

The Karsentis are jumping into South Florida real estate at a risky time: Home prices are down, foreclosures are up, and for-sale signs are as common as palm trees.

But entrepreneur Arnaud Karsenti and his wife, Rebecca, a doctor now pregnant with their first child, are confident that the $1.15 million home they have a contract to buy in the wealthy Miami suburb of Pinecrest, Fla., will prove to be a good investment.

"I see the real estate market declining, so it's very difficult to stick a fork in the ground and take a position on something that could be overvalued six months down the road," said Karsenti, a recent graduate of Harvard Business School. "Our decision is long term."

Bargains in the Luxury Market

Buyers like the Karsentis who can afford million-dollar homes are getting more for their money than they might have during the peak of the housing boom a couple of years ago. These are families with enough income and other assets, as well as good credit. They aren't worried about making mortgage and car payments, and are able to take advantage of historically low interest rates and falling home prices.

BusinessWeek.com's survey of million-dollar homes in 20 markets across the country shows that buyers have plenty to choose from, and that their money will get them plenty of space and high-end amenities such as gourmet kitchens, patios, game rooms, and pools. Of course, in some areas a million dollars goes a lot further than in others. Living close to America's priciest cities comes at a premium. A remodeled 1,757-sq.-ft. house in Belmont, Calif., about a half-hour outside San Francisco, for example, looks pretty modest compared with a stately 5,059-sq.-ft. mansion with a screened-in pool on an acre outside Charleston, S.C. (Both homes are listed for under $1 million.) But it's not all bad news. In the pretty town of Brewster, N.Y., about 80 minutes from midtown Manhattan, a four-bedroom, clapboard home with an in-ground pool is on the market for $989,000.

Families like the Karsentis, with a net worth of more than $1 millionwhich includes the value of their homes minus outstanding mortgage liabilitieswant to live well but many of them still don't feel rich. But they know they have made enough money to afford, truly afford, to pay for what they've bought. And to many home buyers, being able to afford something with a $1 million price tag is a confirmation of their success, even if there are plenty of nice houses available for less.

A House That Says You've Arrived

In less expensive markets, such as Texas, buyers expect more for their $1 million, said Jan Poscovsky of Re/Max Heritage in Sugarland. Doctors, lawyers, and oil executives expect country-club amenities in the communities they move into, she said.

"There's so much affordable housing here, and it is possible to get a really nice home with a large square footage for $400,000 to $600,000," Poscovsky said. "They're spending $1 million because they want something more than space. They're buying a lifestyle and the prestige that goes with it."

Homes that cost $1 million or more represent just about 2% of all transactions, according to the National Association of Realtors. And the credit crunch is not hurting only subprime borrowers. It's been harder for borrowers to get so-called jumbo mortgages, which exceed $417,000. That means the majority of buyers in this category are those who have just a sold a house and are looking to buy again, or have liquid assets of more than half a million dollars.

It's not just the amenities that home buyers are getting for their money. Often, these homes are located in the best school districts. Of course, potential buyers also need to keep in mind that good schools often translate to higher school taxes so they will need to factor in those, in addition to their mortgage and down payment, when calculating the affordability of a home.

The Sweet Spot for Bargains

Still Celia Chen, director of housing economics at Moody's Economy.com, said the top 10% of the real estate market in terms of home price is doing better than the lower end of the market, which is impacted more by the credit crisis. Prices can be more sticky on the top end because "owners of very high-end homes can wait longerthey don't have to accept a lowball price," Chen said.

JoAnn Roberts of Coldwell Banker Residential Real Estate in Pinecrest, said million-dollar homes in her area are doing much better than both the lower-priced homes and mansions at the top of the market. She said builders created an oversupply of $3 million to $4 million homes. Contracts are falling through on the lower end of the market because buyers are having trouble qualifying for loans, she said.

The Karsentis say they're buying now because their family is growing, they love the home, and they know it's impossible to time the real estate market.

"You can't help but look over your shoulder and think there might be other opportunities down the road," he said. "But though it's difficult to sell at the peak, it's also difficult to buy at the trough."

Million-Dollar Home Deals 2008

For those with good credit and a solid income, the housing market hasn't been this good in years for buyers. Here's a look at what $1 million (or less) can buy you in 20 of the nicest suburbs of the nation's largest cities.



Arizona

Suburb: Scottsdale
Address: 13839 E. Casey Lane
Price: $950,000
Closest major city: Phoenix
Commute: about 50 minutes
Bed/Baths: 4/3

The 3,970-square-foot home sits on 1.25 acres in the north Scottsdale foothills area. It has a separate guest house with a kitchenette and full bathroom and a 1,500-square-foot brick entry courtyard. The great room has a built-in audio/video center with wood insets, and the kitchen has a solid granite breakfast bar.



California

Suburb: Belmont
Address: 1914 Lyon Ave.
Price: $989,000
Closest major city: San Francisco
Commute: about 30 minutes
Bed/Baths: 3/2

The remodeled 1,757-square-foot house built in 1956 has views of the Santa Cruz mountain range. It has a marble master bathroom, a granite kitchen, crown moldings, central air conditioning, double-pane windows, and a finished basement media room.



Colorado

Suburb:Aurora
Address: 6091 S. Kalispell
Price: $999,000
Closest major city: Denver
Commute: 30 minutes
Bed/Baths: 4/4

The 4,990-square-foot house has a two-story foyer with grand columns framing the entrance to the formal dining room. The curved staircase has a wrought-iron railing.



Connecticut

Suburb: Stamford
Address: 85 Harpsichord Turnpike
Price: $1,049,000
Closest major city: New York City
Commute: about 60 minutes
Bed/Baths: 4/2

The 3,000-square-foot colonial has a two-story entry, a country kitchen, family room, a living room with fireplace, and a library with doors to the patio and formal dining room.



Florida

Suburb: Pinecrest
Address: 7820 SW 126 Terrace
Price: $999,000
Closest major city: Miami
Commute: about 20 minutes
Bed/Baths: 4/3

The 3,047-square-foot house has a three-car garage, a guest

Median price down nearly 5 percent from a year ago, Realtors report

WASHINGTON - Sales of existing homes fell for the sixth straight month in January, dropping to the slowest sales pace on record. Median home prices were also down and many analysts predicted further price declines in the months ahead given high levels of unsold homes.

The National Association of Realtors said Monday that sales of single-family homes and condominiums dropped by 0.4 percent last month to a seasonally adjusted annual rate of 4.89 million units. That was the slowest sales pace, going back to 1999, and was seen as evidence that the steepest slump in housing in a quarter-century has yet to hit bottom.

The median price of a home sold in January slid to $201,100, a drop of 4.6 percent from a year ago. Particularly alarming, analysts said, was the fact that the inventory of unsold homes jumped to a 10.3 months supply, meaning it would take that long to sell the 4.19 million homes on the market at the January sales pace.

That was up from 9.7 months in December and just below a two-decade high of 10.5 months hit in October. During the peak of the housing boom in 2005, the supply of homes relative to sales stood at 4.5 months.

With sales weak and inventories at extraordinarily high levels, prices are likely to fall a lot more, said Joel Naroff, chief economist at Naroff Economic Advisors. Eventually, sellers will end their denial and realize that if they want to unload their homes, they will have to cut prices even more.

Analysts said one of the problems was a rising tide of mortgage foreclosures, which is pushing even more unsold homes back on the already glutted market.

Sales of existing homes fell by 12.7 percent in 2007, the biggest decline in 25 years, and are down 20 percent from their all-time high set in 2005, the final year of a five-year housing boom which saw sales and prices soar to record levels. Over the past two years, housing has been in a steep downturn that has been made worse by a severe credit crunch as financial institutions have tightened their lending standards in reaction to their multibillion-dollar losses on mortgages that have gone into default.

With prices expected to continue dropping and banks leery to make loans, few prospective homeowners feel now is the time to buy, said Michael Gregory, an economist at BMO Capital Markets.

Some analysts saw it as an encouraging sign that sales of single-family homes actually posted a modest increase but the overall number was dragged down by a continued sharp decline in sales of condominiums.

Patrick Newport, an economist at Global Insight, said that condo prices rose more sharply than single-family home prices from 2000 to 2006 but have fallen less in the current downturn. He said until condo prices drop more, buyers are likely to remain leery.

Sen. Charles Schumer, D-N.Y., said the further bad news on existing home sales should be a wake-up call to Congress and the administration that more needs to be done to help the distressed housing market.

The housing crisis has mushroomed in part due to Washingtons inaction, he said. Declining home values cut to the very heart of families sense of financial security and our economys overall health.

Sales were weak in all parts of the country in January except the Midwest, where sales posted an increase of 3.4 percent. Sales dropped by 3.6 percent in the Northeast, 2.1 percent in the West and 0.5 percent in the South.

Lawrence Yun, chief economist for the Realtors, said he believed the housing market may be on the verge of bottoming out with a rebound expected to start toward the end of this year. He said he expected demand to be bolstered in coming months by the housing sections of the $168 billion economic stimulus bill passed earlier this month. Those provisions raise the caps on the size of loans that can be backed by Fannie Mae and Freddie Mac and the Federal Housing Administration, an increase that is expected to provide help in high-cost areas of the country such as California.

But other economists said they still did not see a significant turnaround in housing until late this year or possibly early 2009.

Expect sales and prices to keep falling, said Ian Shepherdson, chief U.S. economist for High Frequency Economics. There is no end in sight for the housing disaster.

The severe slide in housing has depressed overall economic growth and raised concerns the economy could slip into a full-blown recession. The National Association for Busines Economics said Monday that 45 percent of the members of its forecasting panel believe the economy will experience a recession before the end of this year and even those not looking for a downturn believe growth will slow down significantly.

Source: www.msnbc.msn.com/id/23335173/

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The housing meltdowns silver lining: For the first time in years, contractors need your business. Heres how to get top-quality work without undermining your financial security.

When Jack Mahoney, a 43-year-old senior manager in a financial technology firm, embarked on a major remodel of his familys two-bedroom 1880s Connecticut vacation house last year, doubling its size, he was prepared for the worst. The word renovation, it seems, is always preceded by the word nightmare. Web sites such as contractorsfromhell.com warn that embarking on a home-remodeling project will end life as we know it. Mahoney, in fact, had a friend in Manhattan who had fired a contractor a year into a massive apartment renovation after learning that the guy was taking his payments and using the money to fund another project. Id heard just terrible stories, says Mahoney.

There was no such bad luck for the Mahoneys. The project breezed by, with the construction progressing like clockwork and the quality of the work top-notch. The contractor was not only on site every day to supervise his crew, but actually got out there to swing a hammer himself now and again to make sure the work was done properly. Though the job was tricky, involving a substantial addition to an historic house, Mahoney says the transition from old to new was seamless. Now the family spends cold winter nights around their new colonial-style Rumford fireplacea brick-faced, wood-paneled beauty that fits right in with the older part of the home.

A hassle-free renovation? Whats going on here? Next thing you know Rudy and Hillary will be sharing a ticket. Gisele Bndchen will start dating 40-year-old guys from accounting. No, this is not a sign that the end of the world is nigh. It just means that the bursting of the real-estate bubble has an upside. Back in the go-go days, getting your contractor to call backnever mind finish the job on timewas considered a major victory. But now, suddenly, contractors need work, and homeowners like the Mahoneys can get through renovations without Zoloft. Plus, you have leverage when it comes to negotiating price. One architectural designer in Portland, Maine, recalls exactly what tipped him off that the pendulum had swung back toward the homeowner: His phone started ringing. Within the last year, says Martin Moore, Ive had contractorsgood onescalling me and saying, Marty, what do you have on the drawing board? That was a turning point.

Overall remodeling spending in 2007 was expected to fall 2.3 percent from 2006, the first drop since 2003, according to preliminary numbers from Harvards Joint Center for Housing Studies. The slide is expected to continue into this year, with remodeling spending falling 4.5 percent in the first half of 2008 compared with the first half of 2007. After years of double-digit growth, its a dramatic reversal. Some contractors are actually relieved by the slower pace. When the housing market was going so strongly, we were in a frenzied mood, trying to keep up with everything, says Larry Murr, president of Lawrence Murr Remodeling, in Jacksonville, Florida. Its nice not to have to wait a week for electricians because their crews are all tied up.

The only drawback to the current environment is that tighter lending standards can make it tougher to get financing. But if you have good credit, you can still find the money (see How to Pay for It). One thing to keep in mind: Its a mistake to think of a renovation as an investment that will pay off in full when you sell your house. You may boost the value somewhat, but its very difficult to make money remodeling, says Lou Barnes, a partner with mortgage banking and brokerage firm Boulder West, in Colorado. The reward for doing the work is the enjoyment of the space.

And just because contractors will return your phone calls doesnt mean you can go into the process without knowing the rules of the game. To capitalize on the buyers market, youll need to know how to negotiate and what steps you can take to protect yourself from unscrupulous operators. Heres our five-step plan for surviving a home renovation.


Hire Locally
As tempting as it is to look far and wide to find the cheapest contractor, youre usually better off with a firm based in your town, says John Allee, an architect based in Salisbury, Connecticut. The local shop has a big incentive to do the job right. Word-of-mouth is everything, and one bad job can really hurt someones reputation, says Allee.

Julie Carpenter and Matt Zehe, parents of two in Fort Collins, Colorado, paid slightly more to hire a local contractor whose work they had seen in the neighborhood and admired. Sure enough, they found he was incredibly attentive during a major remodeling of the family home. Not only did he stay on top of the subcontractors, but he touched up their work when it didnt meet his standards, says Carpenter. If he felt it was too dusty, hed sweep up and make sure everything was put away, she says. When youre living in it, having someone take that kind of care is huge.


Negotiate Globally
Just because you plan to hire a guy in your zip code doesnt mean you shouldnt get a bid from Lowball Partners in the next county over. Richard Hurley, an architect based in Long Island, New York, says the lowball estimate is your leverage to talk the other guys down. Its absolutely essential to play one against the other, he says. They do negotiate.

Homeowners are wary of playing hardball, he says, because they dont want to appear nasty or tough, and seasoned contractors take advantage of that reluctance. In his case, I didnt think twice about driving these guys right down to the nails, says Hurley. He got what started as a $2,000 job done for $800.


Order la Carte
When seeking estimates, says Moore, tell contractors you want the cost of everything broken out separately. Sometimes one bid comes in higher than another simply because a subcontractors pricing is out of line. An la carte estimate shines a light on such discrepancies and gives the contractor an opportunity to correct the problem. It can also expose the lowballs: If one guys oak flooring is half the price of everyone elses, thats a red flag. Ask for an explanation. Either his brother owns a lumber company or hes going to hit you with a surprise halfway through the project.

Once you select a contractor, make sure the written agreement is as detailed as the bid, with a clear description of every element of the job and what it will cost, says Murr.


Pay as You Go
Structure the payment schedule so that everyone working on your renovation has a financial incentive to show up for work. That means you make partial payments as different elements of the job are completed. You have to make sure the remodeling crew keeps coming back, says attorney Neil Garfinkel, a partner with Abrams Garfinkel Margolis Bergson, LLP, in New York.

Also, he says, tell the contractor at the outset that you will be asking for lien releases from the subcontractors after each payment you make to the contractor. The releases are standard forms stating that the subcontractors have been paid and they agree not to put a lien on your property.

Trust, but Verify
Always ask to see a contractors license and proof of insurance, and then take it two steps further: First, check with your local buildings department to make sure the license is current, says Bob Peterson, president of ABD Design/Build, in Fort Collins, Colorado. Second, write down the name of the contractors insurance company, which will be listed on his insurance certificate. Then, says Peterson, call the company to make sure the insurance is current. Some less-than-scrupulous operators will sign up for insurance for just a couple of months to get a certificate. Then, to cut costs, theyll let it expire, keeping copies of the certificate to s

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