News headlines throughout major U.S. cities note record-high commercial vacancies, along with a decrease in the asking price for commercial rental space. As was predicted by several major real estate statisticians earlier this year, the next real estate bubble to burst is commercial properties.

Based on statistics compiled by Cushman & Wakefield (C&W), the commercial vacancy rate hasn't been this high since mid-2005. C&W, a global commercial real estate brokerage and consulting firm, found that vacancy rates increased in 24 of the 32 major markets they surveyed.

Colliers International, a global commercial real estate service provider, noted that rental office space is becoming abundantly available. Nationally, office space vacancies in major business districts jumped from 12.5 to 13.74 percent in the second quarter of 2009. Suburban markets increased 1.95 percent to 16.28 percent. In addition, the firm found that the asking rent in major districts dropped by 3.2 percent during the quarter to an average of $38.25 per square foot. Average asking rent in U.S. cities overall, however, are now more often priced at around $25.00 per square foot.

Both firms note that the market has been pummeled by increased supply and a decline in demand due to the economic downturn. Executive Managing Director Maria Sicola asserted that elevated unemployment numbers translate into the reduced demand reflected in higher vacancy rates. More than 66% of 6.5 million square feet of newly constructed commercial space was still vacant at the end of the second quarter of 2009.

Michael Cohen, a research strategist for Property & Portfolio Research (PPR), stated that the firm's expectation was that vacancies would reach historic highs in office, apartment and warehouse space in 2009. According to ING Clarion Real Estate Managing Director David Lynn, the hospitality market has been dealt the biggest blow with major cutbacks in business and leisure travel.

Most cities across the nation are experiencing a rise in commercial vacancies. Phoenix has a 17.4 percent vacancy, Chicago's is at 15.4 percent, Washington, D.C. holds an 11.7 percent rate, Las Vegas exceeds 20 percent, Kansas City is higher than 18 percent, Providence, Rhode Island is now over 30 percent, and so on.

Along with the rise in commercial vacancies, insurance companies are becoming more concerned about liability associated with vacant real estate. Vacancies present additional risks not applicable to occupied real estate. Commercial insurance companies are encouraging owners of vacant real estate to minimize risk by implementing the following:

* Notify insurance company of vacancy, become informed and follow policy terms that apply to vacant property.
* Advise local authorities that property is vacant.
* Remove all combustibles, debris and any unnecessary materials from vacant property.
* Inform local fire department of materials left that could impair fire-fighting.
* Inspect property weekly, have someone watch the property or hire a guard service to daily drive by to observe property.

With real estate vacancy numbers not anticipated to see daylight for some time to come, this is wise advice, indeed.

Ki moved to Austin to attend college, and stayed to work in Austin real estate. He created a website encouraging buyers to search for Austin homes for sale. His site also has information on Austin Commercial real estate and general information and statistics on Austin real estate.

So it has been a week since the feds came in and took over Freddie Mac and Fannie Mae. While it will obviously take some time to know the long term repercussions I wanted to look at some of the immediate reactions to the move.

First let's look at the reaction from the media and the general public. One would expect there to be some political fallout from the largest takeover in government history. But because of the election and Hurricane Ike the reactions have largely been muted. There have been of course the expected positive reactions that this was a shrewd move to help the real estate market and negative reactions that the government should limit its involvement. But for the most part their has not been a big reaction one way or another. I have actually seen more stories about the reactions on the takeover from the presidential candidates than stories simply about the takeover.

While the media reaction has been muted the reactions in the financial markets have not been. Not surprisingly, the stocks of Fannie Mae and Freddie Mac plummeted after the announcement. The government said before hand that the common shares of Freddie Mac and Fannie Mae would lose most of their value in the event of a government takeover. So following the news of the takeover the share promptly lost 80% of their value.

The mortgage markets have reacted very favorably to the news. Considering the Fed has cut interest rates multiple times this year mortgage interest rates have remained relatively high. The reason for this was that banks were unsure about the financial stability of Freddie Mac and Fannie Mae which provides insurance for about half of the residential loans issued in the United States. This risk has now been lowered since the government takeover. Consequently mortgage rates have plummeted in the last week. 30 Year mortgages have dropped from 6.35 to 5.93. This is after rates have moved down from 6.63 to 6.35 partially on expectations that Fannie Mae and Freddie Mac were going to be taken over. I have seen some reports that this is lowest rates have been in the last 4 months. I think this understates how low rates have come down. Besides two brief drops at the beginning of 2008 this is the lowest rates have been since 2005.

The lower interest rates should have a positive effect on the real estate market. Lower rates pull down the mortgage on a house and tend to have a positive effect on real estate values and market activity. In another positive sign although their has not been too much media coverage the coverage that has come out has been mostly positive. To be honest I was a little surprised by this. I would have expected the coverage to be a little more mixed. But regardless the favorable media reaction combined with lower interest rates should help the real estate market. And based on what I have heard from different realtors their does seem to be an upswing in activity. But we won't have any hard data on this for a month or so.

So, at least in the short term, it seems the Feds have accomplished their goals of helping the real estate market with the Freddie Mac and Fannie Mae takeover. We will of course have to wait over the next few years to see if this move turns out to be wise. But for now the Fed has finally been able to push down mortgage rates.

Ki is a real estate broker working in the Austin real estate market. He maintains a website with a Austin MLS search and a frequently updated Austin real estate blog.

So on Friday it was leaked that the government is taking over Freddie Mac and Fannie Mae. On Sunday it was official. Freddie Mac and Fannie Mae have now been taken over by the federal government. But what does it mean for the real estate market, mortgage interest rates, and the US economy.

First let's look at what it means for mortgage rates. I would expect that the government takeover will result in lower mortgage rates, possibly a full point lower. Why? Basically the Fed has been struggling to lower mortgage rates for the last year in an attempt to assist the troubled real estate market. The Fed has lowered prime rates several times in an attempt to pull down mortgage interest rates, with mixed success. Now with full control of Freddie Mac and Fannie Mae (which provides insurance for most mortgages in the US) they will have much more control over the mortgage market and mortgage rates. As long as their objective stays the same, we can expect lower rates.

What does the takeover say about the current situation in the real estate market? This should have been obvious from all the events that preceded this but the takeover shows that the real estate market is in serious serious trouble. The federal government doesn't just take over large companies on a whim, especially an administration with a Republican president that believes strongly in free markets. This is not simply a government takeover. This is the largest takeover in US history. Basically the takeover happened because it was believed if nothing was done we were headed for economic catastrophe.

How is this going to effect the real estate market? Although the takeover is a bad sign about our current situation it should have a positive effect on the real estate markets moving forward. First lowering mortgage interest rates should be quite a boon for the real estate market. Lowering rates lowers the effective cost of a house. And historically lowering rates has a positive effect on real estate values.

Additionally, if the Fed is smart they will reduce some of the mortgage restrictions Freddie Mac and Fannie Mae have created in the last year. While I would not like to see the mortgage market return to the free-wheeling lending of a few years ago, some of the current rules are bizarrely restrictive. The lending environment typically works like a pendulum moving from one extreme to another. Currently lending restrictions are not just stricter than what we saw during the real estate boom a few years ago but they are more restrictive than anything we have seen in the last 15 - 20 years. Hopefully a federally controlled Fannie Mae and Freddie Mac can help return us to normal as far as lending restrictions.

Lastly the government takeover could put taxpayers in the lurch for billions in loan losses. In the short term the government is going to have to infuse money into Freddie Mac and Fannie Mae. They have been losing money for quite some time and that is not going to change overnight. If the market improves over the next year or two, which was likely before, and the takeover improves the outlook for the real estate market, the government will have to infuse maybe a total of 20 to 30 billion into Fannie Mae and Freddie Mac to get them back to financial solvency. That sounds like a lot but to put the number in context, the cost of the Iraq War has been running at about 100 billion a year for the last 7 years. So a 20 billion dollar expense is an unpleasant but manageable expense. But if real estate market gets a lot worse over the next two years, I can't think of the adjective to describe how expensive things could get.

Fannie Mae and Freddie Mac provide insurance for 5 trillion in loans or about half of the residential loans in the United States. Because of the takeover, the federal government now provides insurance for 5 trillion in loans. If we are just on the cusp of severe real estate problem that means that the federal government is on the hook for 5 trillion in loans. That's more than double the entire federal budget for 2007 and 10 times what the US has spent on the Iraq War. So as taxpayers we should hope things improve soon because if the rate of foreclosures skyrockets over the next 2 or 3 years, we are basically going to be paying for it.

Does this mean the federal government is insane? It depends on how you look at the issue. This was certainly a risky move. But on the other hand allowing Fannie Mae and Freddie Mac to fail would have devastated the US economy and likely lead to a severe depression. So doing nothing was equally risky. And while taking over Freddie Mac and Fannie Mae was a risky move for taxpayers, in a depression those that keep their jobs have to make up for all the lost tax revenues for the large number of people that lose their jobs. So in summary the federal government found itself in a tight spot and decided to bet the farm they can fix the real estate market and for our sakes, let's hope they are right.

Ki lives and works in central Texas. He provides a search of the Austin MLS on his site along with current information on the Austin real estate market. His site also provides a tool that show current trends for mortgage interest rates.

Staging a home can end up being a valuable tool in selling the house. Not only can it assist in selling a house, but it can also help the seller get top dollar.

The amount of staging needed varies wildly from a small scale de-cluttering of a home to hiring staging professionals to the tune of several thousand dollars, but the goal is the same- creating a pleasant mood by making a house appear bigger, brighter and warmer while neutralizing the area so prospective buyers can visualize how their own furniture and belongings can be incorporated into the home.

In a good or bad housing market, some studies have shown that staged homes can add between 10 and 15 percent to the sale price of many homes. Sellers who don't take the time to properly stage may end up with their house on the market for longer periods of time, and agreeing to a lower selling price to a buyer who can see the potential the home has that other viewers did not.

Though professional home stagers may be needed if a home is completely empty, the majority of staging can be accomplished by the seller. A quick visit to some newly built model homes can help a seller get an idea of how interior designers and stagers prepare a home. There's a delicate balance between keeping the home sparse enough to appear as spacious as possible, and picking the right pieces to maintain a warm and livable space.

The first impression a potential home buyer will have of a house will be of the exterior, so nice curb appeal is important. A fresh coat of paint on the front door, a nicely trimmed lawn, and fresh flowers in a garden or on the front porch are easy and effective staging techniques. A brightly colored patio set in the backyard can help the home's exterior appearance when the buyer steps out the back door.

Kitchens and bathrooms are two of the most important rooms in buyers' eyes. Kitchen counters should be clear of all small appliances and other items that tend to gather on them. When counter tops are cleared of clutter, the amount of working surface increases. A splash of color, such as a bowl of fruit is acceptable, but a refrigerator, covered in personal pictures and comic strip cutouts, is not.

Bathrooms should look as open and airy as possible, and above all clean. A new white toilet or tub, or a new set of sink faucets could be a worthy investment during the staging process. Personal toiletries, like toothbrushes, should be removed from sight, while the addition of scented soaps, lotions and clean white towels could give the room more of a spa type feeling.

For bedrooms, remove as much unnecessary furniture as possible, and keep it in the garage or in storage if need be. For smaller rooms, hang curtains high on the wall, and do not cover the actual window with them. Doing so will increase the apparent height and width of the room. Neutralize the rooms by removing all personal pictures and keeping wall colors a nice warm, clean color.

By following a few simple and effective staging guidelines, a home seller can increase his or her chance to sell the home quickly, and the time and effort will pay off by netting the highest offer as well.

Working as a realtor in Austin Texas Ki helps people search for Austin homes. He provides general information about Austin real estate online as well as tool that graphs mortgage interest rates.

In the past I used to tell people to look at different mortgage rates for different loan products and determine what was best for them. If they were planning on moving soon a 5 Year ARM might work. If they planned on staying on the house longer they might consider a 30 Year Loan. I don't say this any longer. Why? Because of recent developments the 30 Year Loan is king. If you can get a 30 Year loan in the current market 95% of the time it's the best choice.

If we look back to the beginning of 2006 both 5 Year ARMS and 1 Year ARMS where significantly lower than the rates on 30 Year Loans.

Begin 2006
30 Year Fixed - 6.22
5 Year ARM - 5.79
1 Year ARM - 5.15
At the time banks saw 5 and 1 Year ARMs as a short time commitment. But now banks are starting to see more foreclosures on ARMs than they are on 30 Year Fixed loans. This has started to make banks more nervous about ARMS. In response banks have raised rates on 5 and 1 Year ARMs even as rates on 30 Year loans have decreased. Using a tool that graphs mortgage interest rates Here is a chart comparing the loan products over the last few years.



What we will notice is that historically all 3 products moved in concert with each other. But recently that trend has changed. 5 Year ARMs and 1 Year ARMs have gone up while 30 Year Rates have come down. So if we look at the rates today we will find them much closer together than what we saw at the beginning of 2006.

Today
30 Year Fixed - 5.85
5 Year ARM - 5.67
1 Year ARM - 5.24

So how much does this affect your potential mortgage payments? Let's look at the mortgage you would get on a 200k house based on the interest rates.



First let's look at the mortgage payments you would make at the beginning of 2006.

Begin 2006
30 Year Fixed - 1227.53
5 Year ARM - 1172.23
1 Year ARM - 1092.05

So the difference between a 30 Year Fixed loan and a 5 Year ARM was 4.72 percent or $55.30. Now let's look at the mortgage payments one would make based on today's rates for the different loan products.

Today
30 Year Fixed - 1179.88
5 Year ARM - 1157
1 Year ARM - 1103.16

So today the difference between a 30 Year Fixed loan and a 5 Year ARM is only 1.98 percent or $22.88. The difference has decreased by more than half. In addition, if we also consider the fact that mortgage interest rates today are relatively low compared to the last 15 years there is a good chance when ARM's expire interest rates will be higher.

Now if someone is absolutely certain they will sell their house in 5 years it still makes sense to get an ARM. But this is rarely the case. People often move to a city only planning on staying for a few years and then end up staying. Or they end up renting out their house instead of selling. The way life changes it's hard to predict what one will be doing in 1 year much less 5 years. I talked to someone recently that said every time they got a 5 Year ARM on a property they ended up keeping the property for longer than 5 Years and every time they got a 30 year loan they ended up selling in less than 5 years. In summary it's hard to tell what will happen in the future.

In the future the difference in mortgage rates between 30 Year Fixed loans and ARMs might start to make ARMs more attractive. But if you are looking to get a loan in the current market the security of the 30 Year loan outweighs the small savings you would gain from the different ARM products.

Ki is a realtor in Austin. He runs a site about Austin real estate that provides users a free search of the Austin MLS along with a free mortgage calculator and information on current mortgage interest rates