Is carpet dead?

More Americans are turning to hardwoods, decorative concrete and other hard surfaces to spiff up their floors and send their home values through the roof.

By Christopher Solomon

Have you overimproved your home?
Warm up a creaky old house -- for free
Order out of closet chaos
Need a reason beside aesthetics to tear out that ratty carpet? A good-looking floor can more than pay for itself. Hardwoods can boost sale prices by as much as 6%, and bamboo, decorative concrete and other hard surfaces are also gaining popularity.

Why?

1. Floors make a crucial first impression on prospective buyers, says John Spitzer, a principal broker for John L. Scott in Portland, Ore., “Go to an open house,” says Spitzer. “Most people are looking down. The first think they see is the carpet … They’re going to notice the floor way before they notice the windows.”

2. Today, people often aren’t shopping for fixer-uppers. “Buyers, for the most part, don’t want to do a lot when they move in. They want to re-create their lifestyle; people are busy,” says Andrea Lawrence, current president of the St. Louis Association of Realtors and co-owner of Prudential Alliance Realtors in the St. Louis metro area. A nice floor helps a home sell fast, and for more.

But how important, exactly, is it? While it’s true that the top return on investment is in renovating a tired kitchen and the master bathroom, “Floors are definitely in the top three,” says Jim Messenger, a Realtor in the Phoenix market with Realty Executives, and co-owner with his wife of Realty Executives of Jackson Hole, Wyoming.

In a 2003 survey of 29,000 home sales in the Philadelphia area by Prof. G. Stacy Sirmans of Florida State University, having wood flooring in a home boosted its sale price by about 6% -- and having a combination of wood and tile added nearly 11% to a home’s sale price, over comparable homes with just carpeting.

Sleek is in
“The big thing that’s happening in flooring is the movement toward hard surfaces, whether it’s wood, ceramic tile or laminate,” says Santiago Montero, editor in chief and publisher of Floor Covering Weekly. Sale of hardwood floors, for example, grew more than 11% between 2003 and 2004, to more than 10% of the flooring market, says Montero. Tile flooring grew even more.

Wood is good. “When it comes to your money, I always would advocate wood because it’s a good return on your investment and it’s a product that everyone responds to,” advises Robert Wright, national president of the American Society of Interior Designers and co-owner of Bast/Wright Interiors in San Diego. “A nice hardwood floor -- that’s pretty much always been a sign of quality,” Wright says. “It invokes a good feeling in people.”

Homeowners have definitely heard the call of the natural material. “Downstairs, you’re definitely seeing people turn more to hardwood” -- often throughout the entire downstairs, says Lou Annatone, a real-estate broker focusing mostly on residential properties with RE/MAX Unlimited in eastern Massachusetts. Cheaper, lighter-colored woods can often be used and then stained a darker color like mahogany.

Historically, installing hardwood floors has been a long, rather messy affair: the sanding, the staining and sealing of the boards could keep a family out of the room for weeks. That’s often no longer necessary. “More recently, the trend has been towards pre-finished solid hardwoods that carry a 25- to 35-year finish warranty,” says Ari Ben Harav, a real-estate agent, owner of Boston-area hardwood floor company Tiger Floors and a writer for Boston Realty News.

Bamboo for you? Other woods are increasingly popular flooring options -- and “some perform just as well if not better than hardwood floors,” says designer Wright. Bamboo is increasingly popular because it has a handsome grain, comes in different looks, colors and styles, is usually a better environmental choice because bamboo grows much faster -- and costs $3 to $5 per square foot on iFloor.com, uninstalled. (Wood varies, but often starts at $4 per square foot, uninstalled, and goes up from there.)

Cork is poppin’. “We have used cork a couple of times this last year -- in places where people stand. And it’s a wonderful, sustainable product,” says Wright. Cork, which is very visually interesting, was fashionable in the 1940s. Today’s version is sealed multiple times and holds up much better than its predecessor. Yet it is still gentle on items dropped on it, and on bodies that stand on it for long periods. (Cork varies from about $3.50 to $5.50 per square foot.)

Laminate & vinyl: role players. Faux-wood laminate (like the brand Pergo) “probably was oversold in the beginning,” says Floor Covering Weekly’s Montero. Though its use continues to grow, “It has its limitations,” he says. It is fiberboard that’s made to look like wood flooring, but it doesn’t have that solid-wood sound underfoot. Nor does it last as long as wood, and liquid left on it can do bad things, Montero and others say. However, in small areas and in small doses, say some designers, laminate can work well in a home.

Ditto with vinyl flooring, says designer Wright; it’s cheap and comfortable underfoot, and can match the Craftsman-style homes, for example. So it, too, can play small roles in your home -- just don’t go paving the living room with it.

Carpets still a comfortable, affordable choice
For all the buzz about the sleekness of hardwood floors and the like, carpeting isn’t, ahem, laying down. For both cost and comfort, it’s still hard to beat a warm carpet in a child’s bedroom -- and of course it’s much cheaper than a wood floor. “Of all flooring sold, carpeting is still over 62% of what’s sold,” says Montero.

Luckily, wall-to-wall has gotten an injection of style and innovation, too. “We’ve seen them go to much better fabrics -- wool, etc.,” Montero says. Look, too, for recycled fibers, and carpets without backings of formaldehyde that will “off-gas” throughout their lifetimes, as well as coverings made of sustainable materials such as sisal.

Another trend that’s been happening for a few years but that many people still aren’t aware of is the increasing residential appeal of once-commercial carpet companies like Karastan, says designer Wright. “Now people are really liking the clean, tailored look of these companies,” he says.

For something very different, several designers also said they liked Interface Flor -- carpet tiles that don’t look very modular and are not very expensive (about $3.75 per square foot and are self-installed). “It’s a great solution for large area rugs, or covering large surfaces, or for a mobile person who might be renting a place,” suggests Wright.

And if you can’t decide on what covering to run with -- why not have a tasteful mix? “I think in many houses you’re going to see different floorings in different rooms” that flow into each other, he says. “I think it’s kind of a fun thing to play around with in a house.”

9 tips about flooring -- from buying it, to helping use it to sell your home:

When trying to decide what kind of flooring to install, think about the area’s use. Is it high traffic? High visibility? What’s your goal for this piece of your home?
Also ask yourself, “What kind of feel do I want underfoot: firm, glossy and sophisticated, or casual and barefoot-friendly?”
When possible, use environmentally responsible products. With wood flooring, for example, look for the FSC -- Forest Stewardship Council -- label that marks sustainably harvested wood, according to Seattle’s Environmental Home Center.
Think low-maintenance, easy-care flooring, like hardwood floors with a polyurethane coating that protects them. And think twice about light-colored or grooved vinyl that can be hard to keep clean, suggests agent Lawrence.
Don’t forget about the eventual sale of the house. “One of the biggest mistakes we see is people putting too much in; don’t over-upgrade for the area” you live in, says Realtor Messenger. If homes in the rest of the neighborhood have vinyl floors, you probably won’t get your money back from installing heated slate floors.
Similarly, if you go with carpeting, “Don’t put in $50-a-yard carpet,” advises agent Spitzer. “It becomes so expensive that you may not recover the cost. You can get pretty good berbers or plush carpets for a fraction of that cost.”
About to sell? Seriously clean that carpet -- and replace it if an agent says to. “Three thousand dollars worth of carpet can cost you $10,000 in an offering price,” says Messenger. Often, a carpeting company will be willing to submit a bill to escrow and be paid when the house is sold, says agent Spitzer. “They know that the money is there, that it’s in the house, and when that home closes, they will get paid -- so everybody wins.”
Say “no” to orange. “We tell people to neutralize the walls and floors of their homes when they’re selling their house -- and so then the buyers can envision their own things in the house,” says Lawrence. “Don’t go with dark blue,” seconds Spitzer. “Pick carpeting that will go with almost anyone’s furniture.”
Finally, says Wright, “Just really do your research. You don’t want to be changing your flooring out. Let it be a long-lived decision.”
Dollar values of different flooring options

Flooring material
Avg. dollar value per sq. ft.*

Area rugs and carpet
$0.78

Hardwood
$2.45

Ceramic and wall tile
$0.91

Vinyl sheet
$0.48

Laminate flooring (Pergo)
$1.58

Natural stone
Varies widely depending on the type of stone



Source: Floor Covering Weekly, 2004
*Not including installation
Installation costs across the U.S.

Flooring material
San Francisco
Little Rock, Ark.
Boston

Carpet
$7/sq. yard
$5.50/sq. yd.
$5.65/sq. yd.

Hardwood
$5/sq. ft.
$2.25/sq. ft.
$3/sq. ft.

Ceramic and wall tile
$8/sq. ft.
$3/sq. ft.
$5/sq. ft.

Vinyl sheet
$24/yd.
$9/yard
$10.50/yard

Laminate flooring (Pergo)
$5/sq. ft.
$2.25/sq. ft.
$2/sq. ft.

Natural stone
$10/sq. ft.
$3-$3.50/sq. ft.
$10-$12/sq. ft.



Source: Several installers in the cities

What to do if your home isn't selling

From rethinking your color scheme to holding open houses on weeknights, here are 10 tips for sparking interest in your home.

By Sally Anderson

How long is too long? It's not an exact science, but there are some helpful indicators. In a dry market, a sales period of six months to one year isn't unusual. Look at recent sales reports of similar homes nearby to determine a reasonable selling interval. In a hot seller's market, a house that hasn't sold within one month indicates a problem. In either case, there are several steps you can take before putting up the white flag.

10 tips to improve your selling karma

Videotape your house, inside and out, and watch the tape as if you were a prospective buyer. Is the lawn weedy or the garden bare? Is your home uncluttered and spotlessly scrubbed? Sparkling-clean houses sell faster than those that look too lived-in or show an abundance of the owner's personality.

Take a second look at your listing price. Visit open houses in your neighborhood. Are similar homes priced lower? Selling prices may have dropped since your first comparative market analysis. (See recent home sales in your area here.) In a hot market, if you haven't sold your home within one month, chances are good that you've overpriced it. If you do lower your asking price, consider a figure slightly below those of other comparable homes if you are interested in a speedy sale.

Do whatever it takes to be away from your home during showings and open houses. The presence of sellers makes it difficult for prospective buyers to take their time or talk openly with their partner and agent. Leave some treats out to make potential buyers more comfortable: beverages, nuts, cookies -- anything that won't lose freshness or be too messy.

Ask your listing agent to talk to buyer agents in his or her firm who have shown your home. The feedback from their clients can guide you in making home repairs, toning down your décor, making landscaping improvements and the like.
Hold an open house on a weeknight. Competition is lower, and you'll attract the interest of buyers who can't make weekend appointments because of other commitments.

(Read more on whether an open house makes sense for your home here.)

Take out some extra online ads or print ads, even if your agent is doing a good job with promotions. Look for out-of-the-ordinary places to advertise, such as trade magazines, company newsletters and other alternative resources. You can even offer perks to buyers, such as a cash bonus or a season ski pass.

Neutralize your color scheme. Most buyers prefer pale, neutral colors that make it easier to imagine a new home as their own. Houses with white exteriors are the highest sellers; for interiors, try whites, off-whites or pale grays. (Read more tips on preparing for an open house here.)

If you've had offers but you considered them too "lowball," try readjusting your sights. Determine the lowest price you find acceptable, and consider anything more as icing on the cake. In a longstanding dry market you may even have to sell at a loss, so it's important to take every offer seriously. You don't want to alienate a potential buyer who has solid financing because you've set your sights unrealistically high.

Is your listing agent giving your house adequate attention? If not, start by having a candid talk. If there's no change, discuss the problem with the firm's broker. As a last resort, wait until your listing agreement expires and find an agent with a proven track record in your area. On the other hand, if you have a fabulous agent but the market is underwater, consider offering an increased commission or a bonus for your listing agent as extra incentive. If you do sweeten the pot for your agent, amend your listing contract to reflect the change, and be sure it's added to the Multiple Listing Service (MLS) book -- buyer agents will also be inspired to give your house extra attention.

Relist your house to give it a kick-start. When it was listed on the MLS, it was assigned a number reflecting the date and year of the listing. By now it may appear outdated to buyer agents; relisting will provide you with a new number. Check into the policies of your local MLS: You may need to make a change to qualify for relisting, such as temporarily taking your home off the market, adjusting its price or changing listing agents or firms.

Taking your house off the market

If you've tried the tips above, you're confident that your asking price is competitive, you have an ace agent and you're still not getting any action, it's probably time to take your house off the market. Here are some ways to make the most of it:

Choose your selling season. If you can afford to do so, relist during a more dependable selling season. After warming up in late winter, the market typically starts to peak from the ides of April (yep, tax season makes a difference) until June, when longer days and splashes of garden color make homes look their best. In summer, the market slows to a crawl, followed by a second peak from September to Thanksgiving. From then until January, the market tends to be as cold as a Midwestern winter, but it can also be advantageous to list while the competition is sleeping. Research the trends in your area: If you live near a winter resort, for example, winter may be the savviest time to sell.

If you're a senior, consider a reverse mortgage. Designed to help seniors who have more home equity than they do cash, a reverse mortgage is a loan against your home. The money is disbursed as either a single payment or a monthly sum, and the loan comes due (with interest, of course) only when the house is sold or upon the death of the owner. (Read more about the special issues facing seniors selling their homes here.)

Rent out your home until the market bounces back. If you must leave your home because of a job transfer or other extenuating circumstance, renting is an excellent option as you wait for the market to regain some heat. If you don't have the time or the talent it takes to be a good landlord, contact a reputable company that specializes in screening applicants and managing properties.

10 cities where housing prices will slump the most

Economists and analysts are trying to predict which areas will be hardest hit by a real estate decline … and how far prices will tumble. Here are some of the sobering predictions.


By Pallavi Gogoi, BusinessWeek.com.


On BusinessWeek: 10 housing markets headed for decline

Almost no one is arguing about whether the U.S. housing market is in decline these days. Prices are skidding across the country. Home building stocks like Lennar, D.R. Horton and Pulte Homes have gotten crunched.

Yet many people are wringing their hands over which markets will be the worst hit and how steep the price declines will be. Where will the housing market in Chicago or New York or Miami be next year? Bohr's take on predictions is as true as ever.

Contrasting approaches
Into the breach have stepped economists, analysts and academics. They're trying to predict where housing markets are headed using everything from econometric analysis to gut instinct. Two of these efforts offer a particularly intriguing contrast in approach. On one side is Mark Zandi, chief economist at Moody's Economy.com, who released a mammoth report on housing prices last week. On the other side are traders and speculators at the Chicago Mercantile Exchange (CME). Just a few months ago, they began trading futures and options contracts on housing prices in 10 markets across the U.S.

The contrast couldn't be more extreme. Zandi is one very smart economist, who mined reams of data to come up with his predictions. He sorted through everything, from employment levels in certain regions to historical housing price increases. At the Chicago Mercantile Exchange, the predictions are determined not by one person, but by a crowd of anyone who wants to participate. They may be real estate investors, economists or simply speculators with a hunch about where prices are headed.

Neither forecasting approach offers much reassurance for homeowners. Zandi says that housing prices will decline in 2007, which would be the "first decline in national house prices since the Great Depression." He adds that the catalyst for the unwinding of the housing boom is higher interest rates and that the unraveling of some of the markets is due to high speculation and short-term investors, or flippers, with the objective of purchasing and then quickly selling those homes.

Reasons for pessimism
Zandi's predictions for specific markets are sobering. The worst-hit metro areas, he asserts, will be Cape Coral, Fla., with an 18.6% decline in housing prices; Reno, Nev., with a 17.2% drop; and Stockton, Calif., with a 15.7% fall. To conduct his analysis, Zandi looked at the supply and demand of housing, changes in mortgage rates, demographic trends, the job market and new housing (see "Can Wall Street Withstand Weak Housing?").

The CME covers just 10 housing markets, rather than the 379 examined by Zandi. The exchange launched the trading in housing prices in May, and volumes are still modest, which may affect accuracy. Investors are predicting declines in all 10 cities over the next 12 months. In fact, by August 2007, when the one-year contract expires, futures traders expect the San Diego real estate prices will have declined 8.2%, Las Vegas 7.9% and Los Angeles 6.9%. The composite index is expected to fall 6.8%. "The markets are clearly concerned that home prices are going to fall," says Robert Shiller, an economics professor at Yale University. Shiller helped develop the contracts with professor Karl Case and Standard & Poor's (which, like BusinessWeek, is a unit of McGraw-Hill).

In the cases where they cover the same ground, Zandi and the CME traders have some uncanny similarities. For instance, Zandi expects San Diego to drop 8.4% through the second quarter of 2008, while the futures market is expecting a drop of 8.2% by August 2007. In Washington, D.C., Zandi expects prices to drop 12% through the second quarter of 2008, and the futures market expects a 7.7% decline by August 2007 (see "Hopeful Glimmers in the Housing Slump").

Anybody's guess
But in Boston, there's a sharp contrast. Zandi thinks that the worst is over. He estimates that prices declined 2.2% in the second and third quarter of 2006, and that should be the end of the meaningful declines. "Boston's jobs market is coming back, and the city didn't see much froth anyway," says Zandi. But the CME futures markets expect Boston to continue to drop, at least 7% by August 2007. Similarly, Zandi expects New York to drop 3.5% through the fourth quarter of 2008, while the futures traders are betting that New York's real estate will drop a sharper 6% by next year.

Who would you put your money on? Zandi is certainly a smart, resourceful economist. But "predictive markets" like those used at the CME have proved surprisingly accurate in forecasting everything from the weather to political races. They're particularly accurate when money is on the line, as it is in Chicago.

As Rick Redding, CME managing director for products and services says: "These products create a liquid and transparent market that can be used … to help reduce risks associated with holding real estate assets." This is no academic experiment. The results of these predictions will be made all too public in the months and years ahead.

10 markets headed for trouble

City
Expected decline by August '07*

Miami
8.5%

San Diego
8.2%

Las Vegas
7.9%

Washington, D.C.
7.7%

Boston
7%

Los Angeles
6.9%

San Francisco
6.5%

Denver
6.4%

New York
6%

Chicago
5.9%



*Based on Chicago Mercantile Exchange trading

Rate of Home-Price Increases Falls

By Rex Nutting
From MarketWatch

U.S. home prices grew at an annual rate of 3.5% in the third quarter, the slowest rate of price appreciation seen in eight years, the Office of Federal Housing Enterprise Oversight reported Thursday.

Including the third quarter, home prices are up 7.7% in the past year, the slowest in three years. A year ago, prices were rising at a 13.4% pace.

Related Links

Fewer New-Home Sales, But Median Price Rises
By comparison, home prices rose at an annual rate of 5.1% during the second quarter, with the year-over-year increase through June pegged at 10.3%.

Prices had risen by 57% in the previous five years.

"The slowdown is not unexpected," said James Lockhart, director of OFHEO, in a release. "There are still some areas where appreciation rates remain very high, but now they are the exception rather than the norm." Read the full government report.

Still, home prices were still growing much faster than inflation, which fell at an annual rate of 0.2% during the third quarter.

"It is nice to see ... that there are plenty of pockets of strength out there to offset the places where prices are cooling/falling, since it's only the negative areas that get the media attention," wrote Stephen Stanley, chief economist for RBS Greenwich Capital, in an email.

The OFHEO index is considered the best gauge of home values, because it doesn't depend on the mix of houses sold as do reports on the median prices for new and existing homes. It compares apples with apples by tracking mortgages written for the same houses over time.

A separate index based only on home sales rather than also including mortgages for refinancing showed home prices rose 6% in the past year.

Prices fell 0.6% in Michigan over the past year, the first annual decline in any state in more than six years.

And prices fell from the second quarter to the third quarter in five states: New York, Rhode Island, Michigan, New Hampshire and Massachusetts.

Idaho showed the fastest year-over-year growth at 17.5%. Prices were also growing at rates of more than 15% in Utah, Oregon, Arizona, Washington and Florida.

The Rocky Mountain region was the hottest regional market in the third quarter, with prices rising at a 6.8% annual rate. Prices rose just 0.3% annualized in New England.

Prices fell on a quarter-to-quarter basis in 15 cities in California, including San Francisco, San Diego, Oakland and Sacramento. For the state as a whole, price gains slowed from 10.2% in the past year to annualized growth of about 2.5% in the third quarter.

Ten cities recorded price gains of more than 20% in the past year. Up more than 30%, Bend, Ore., showed the largest price gains, with Boise, Idaho; Gulfport, Miss.; Miami, Fla.; and Wenatchee, Wash., rounding out the top five.

The biggest year-over-year declines were seen in Anderson, Ind.; Ann Arbor, Mich.; Springfield, Ohio; Holland, Mich.; and Greeley, Colo. In all, 18 cities recorded price declines over the past year.

In just the third quarter, 67 of 275 cities suffered falling prices.

Among the top 15 cities in population, three saw prices falling in the third quarter: Detroit, Boston and San Francisco. Among large cities, the largest price gains in the quarter were seen in Miami and Seattle, each up about 15.5% annualized.


Email your comments to rjeditor@dowjones.com.

-- December 04, 2006