Gabriel Libutti

Pick the right pro at the right price To keep a lid on home-improvement costs, hire only the expertise you really need. (Money Magazine) -- For anything from a small upgrade to a major remodeling job, perhaps the most important decision you'll make is whom to hire. You'll seek out a top-notch worker with a stellar reputation, of course, but first you'll have to decide what kind of expert you're looking for. That choice can have a dramatic effect on the cost of your project. Whether you're wondering if you really need an architect to design your new den or debating whether a handyman can handle your wiring job, here's how to figure out which pro to call. Specialist or handyman? The difference: Electricians, plumbers, and other specialists have the know-how to tackle any project in their area of expertise, but they cost at least $75 to $100 an hour. A handyman doesn't have that depth of experience but has the advantage of breadth: He'll not only hang your ceiling fan but repaint the ceiling too. You'll typically pay just $25 to $50 an hour for an independent handyman. Franchises such as MrHandyman.com and HouseDoctors.com will charge you more -- $50 to $100 an hour -- but are likelier to insure and bond their crews. (Both handymen and specialists may tack on an extra fee for small jobs.) How to decide: For jobs that involve inside-the-wall changes to electricity, plumbing, or heating or cooling systems, go with a licensed specialist. General contractor or several tradesmen? The difference: A general contractor will handle a renovation, addition, or remodeling job from soup to nuts, bringing in whatever subcontractors he needs -- plumber, tiler, roofer, and so on. In exchange he'll mark up the subs' fees by 10% to 20%. Or you could hire those same contractors yourself and save thousands. How to decide: If you need only one or two subs -- perhaps a plumber and a granite guy for those new counters -- and you're a veteran home improver, go for it on your own. Otherwise, a GC will spare you the hassle of getting referrals and doing due diligence on a host of pros as well as the delays and cost overruns you'll encounter by juggling multiple tradesmen yourself. Architect or contractor? The difference: When a contractor designs a project, he looks for efficient, cost-effective ways to achieve your goals: A family room addition is likely to be a boxy appendage off the kitchen, for example. An architect is trained to design the new space around your family's lifestyle and to weave it seamlessly into the existing house. But his fees will also add at least 5% to 10% to your project cost -- and his design will probably cost quite a bit more to build than a general contractor's. How to decide: Bring in an architect for any project that involves a significant alteration to your floor plan or exterior or will entail spending more than 10% of your home's value. You'll stand a better chance of coming away with a design that adds charm and value to your house.

Push on to expand $8,000 tax credit Some want to expand the tax credit for homebuyers. Supporters say it could stem price declines. Critics say it would just be a costly, temporary fix. NEW YORK (CNNMoney.com) -- Congress is considering proposals to greatly expand a soon-to-expire $8,000 tax credit for first-time homebuyers -- potentially applying it to all but the wealthiest homebuyers. Supporters say doing so would further boost home sales, stabilize housing prices and generate jobs. Opponents say extending and expanding the credit would be a waste of money and only temporarily stave off further price declines. The credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30. Beyond extending that deadline, some lawmakers want to make the credit available to all homebuyers who meet income eligibility requirements. And some want to increase the amount of the credit from $8,000 to $15,000. Currently the first-time home buyer credit is available in full to those buying their primary residence who make $75,000 or less ($150,000 for joint filers). A partial credit is available to those making between $75,000 and $95,000 ($150,000 to $170,000 for joint filers). The case for expanding the credit Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn't specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time. By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors. Mark Zandi, chief economist of MoodysEconomy.com, favors extending the current credit until June 1, 2010, and making it available to all home buyers regardless of income or at least to everyone except those at the highest end of the income scale. He estimates the cost of doing so wouldn't exceed $30 billion over 10 years. Zandi's reasoning: Foreclosures are expected to rise next year because of rising unemployment, and that will drag home prices down further. Extending and expanding the credit will help mute that decline. And by June, there's a chance the job market will have stabilized. "The most fundamental argument for the credit is that nothing works in the economy if housing is falling -- it hurts household wealth and credit becomes tight," Zandi said. "[The credit] is a good insurance policy. It's vital to stem the housing price declines." To kick start economic activity, Zandi believes lawmakers should set aside an amount of money for an extended credit and tell potential home buyers "first come first served." The National Association of Home Builders would like the credit extended for all of 2010. 0:00 /4:47Foreclosure fix not working "We estimate that this would increase home purchases by 383,000 in the next year and help mitigate the foreclosure crisis by whittling down inventory," NAHB Chairman Joe Robson said in a statement. "This stimulus alone would create nearly 350,000 jobs over the coming year, which is exactly what the economy needs right now." A study funded by the industry-supported Fix Housing First Coalition found that the current credit helped stimulate demand for homes at the lower end of the price spectrum. "An expansion of the tax credit would spur an increase similar to what occurred in the lower end of the market, by motivating buyers in the 'trade-up market' to purchase a higher priced primary home," said Kenneth Rosen in testimony before Congress. Rosen runs the consulting group that conducted the study and is chairman of the Fisher Center for Real Estate and Urban Economics at the University of California in Berkeley. The case for letting the credit expire Opponents of extending and expanding the credit worry that such moves offer poor bang for the buck and won't stem housing declines. "Everything spent on this program will ultimately have to be paid for later through higher, economically harmful taxes," Ted Gayer, co-director of economic studies at the Brookings Institution, wrote in a Brookings blog. Assuming there are 5.5 million home sales in 2010, Gayer said, expanding the credit to all homeowners "is poorly targeted because it would give a credit to 5.5 million homebuyers who would have bought a home anyway." The current credit was estimated to cost federal coffers $6.64 billion over 10 years. But Gayer notes that the cost is likely to be much higher since more people than expected took advantage of it but only about 15% of people wouldn't have bought a house otherwise. It would cost an estimated $16.7 billion if the credit is extended until the end of June 2010 and made available to single filers making up to $150,000 and joint filers making up to $300,000. Those are the parameters that Sen. Johnny Isakson, R-Ga., and Sen. Chris Dodd, D-Conn., are proposing in an amendment they introduced to a bill the Senate is expected to take up this week. (Please see correction.) Another argument against an extension: It would only temporarily boost home prices and potentially set up those using it for a fall. That's because home prices are likely to decline once the credit expires and interest rates ultimately trek north, according to Dean Baker, codirector of the Center for Economic and Policy Research. "Temporarily propping up house prices, so that a new set of homebuyers can incur losses, is a policy of questionable merit," Baker said in a CEPR column. The sooner the market adjusts the better, Baker said. He did offer one caveat: "We may want to step in to prevent prices from overshooting on the downside in a select group of markets where this is a real possibility." Zandi said that's already happened in a number of markets, and that an extended credit might help turn around the deflationary psychology in those markets where buyers are worried about catching a falling knife.

Mortgages under 5% are back in bloom With one of the key measures below the benchmark for the second week in a row, would-be home buyers face the best rates since the spring. NEW YORK (CNNMoney.com) -- The possibility of securing a mortgage rate below 5% has greatly improved in recent weeks, in a positive sign for would-be home buyers. Home mortgage rates fell for the sixth straight week, according to two key measures, with one of them pointing to a sub-5% rate for the 30-year fixed loan for the second week in a row. Freddie Mac's (FRE, Fortune 500) weekly report said the 30-year rate slipped to 4.87% for the week ended Thursday, the lowest since May. According to the mortgage backer, last week's rates stood at 4.94%. Mortgage tracker Bankrate.com said the average 30-year fixed loan slipped to 5.22% from 5.25% the previous week. The 15-year fixed rate also fell, Bankrate said, to 4.6% from 4.64% the week before. The 30-year rate is influenced by the benchmark 10-year note's yield, which moves in the opposite direction of its price. Treasury prices have risen over the past week as $78 billion worth of auctions received above-average demand. "Another disappointing employment report had investors questioning the strength and sustainability of the economic rebound," the Bankrate report said. "The resulting uncertainty drove investors into the safety of government and mortgage-backed bonds." "Not even a substantial auction of government debt has been enough to derail the streak of declining mortgage rates," the Bankrate report said. Rates are returning to levels not seen since the spring when, in an effort to cap mortgage rates, the Federal Reserve began a campaign to buy back $300 billion in Treasurys. The Fed hoped that it would spark demand and keep yields -- and therefore, mortgage rates -- in check. Mortgage rates fell as refinancings abounded. But those benefits seemed to wear off, as rates started on a tear in the summer. By June, the benchmark 10-year bond's yield had increased steadily to hover around 4%. Now the central bank has less than $15 billion left to spend on its buyback program, which led some investors to worry that yields would soar again. So far, that's not the case. On Wednesday, reports said Democratic congressional leaders were working to extend a $8,000 tax credit for first-time home buyers past the Nov. 30 expiration date and could even make it available to current homeowners who buy a new house. Homeowners have received a boost from both the tax credit and the lower rates -- last year, the average 30-year fixed mortgage rate was 6.2%, according to Bankrate. To translate the difference in mortgage rate into dollars, consider a $200,000 loan. At last year's rate of 6.2%, the monthly payment would be $1,224.94, or $124 higher than the monthly payment at the current rate. The low rates helped mortgage applications surge by 16.4% last week, according to a separate report

Mortgage applications jump Industry group says mortgage activity surged 16.4% last week as consumers took advantage of low interest rates. NEW YORK (CNNMoney.com) -- Mortgage applications surged last week as interest rates on home loans remained low, an industry group said Wednesday. The Mortgage Bankers Association said its index of mortgage application volume rose 16.4% last week versus the previous week. The surge in activity came as rates on 30-year fixed rate mortgages, the most widely used loan, remained below 5% for the third week in a row. The average interest rate for 30-year fixed-rate mortgages fell to 4.89% last week from 4.94% the week before, according to the MBA. It was the lowest level since May 2009 when 30-year rates were 4.81%. The MBA said refinancing applications jumped 18.2%, climbing to the highest level since mid-May. Purchase applications rose 13.2% to reach the highest level since January. The report bodes well for the U.S. housing market, which has been stabilizing following a major slump. In addition to low interest rates, home sales have been supported by affordable prices and government tax credits. But analysts say the market remains hampered by rising unemployment and warn that the budding recovery could falter if a popular $8,000 tax credit is allowed to expire at the end of the year. Meanwhile, the average rate for 15-year fixed-rate mortgages eased to 4.32%, the lowest rate ever recorded in the survey. Rates for one-year adjustable rate mortgages, or ARMs, rose to 6.56%.

Home sales contracts in 7-month rally Realtors' index rises 6.4% in August for 7th straight gain as tax credit deadline boosts activity. Homebuyers signed more sales contracts in August than in any month this year, boosted by the looming expiration of a homebuyers' tax credit, according to an industry report released Thursday. The August Pending Home Sales Index from the National Association of Realtors (NAR) surged 6.4%, the seventh straight month-over-month improvement in the indicator. The increase far exceeded economists' expectations -- a panel of analysts surveyed by Briefing.com had forecast a 1% rise. Pending home sales rose 3.2% in July. Pending sales are considered a forward indicator of housing market health since contract signings precede actual closings, which typically occur two to three months later. August contract signings show up in October and November NAR statistics as existing home sales. Housing markets have gained some ground recently as a tax credit for first-time homebuyers -- which is scheduled to expire Nov. 30 -- stimulated sales of starter, and other, homes. "No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month," said Lawrence Yun, NAR's chief economist. One problem in extrapolating future closings from contract signings, however, is that there are continuing problems obtaining mortgages that may scuttle many deals, according to Yun. "The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules," he said. Those issues also could also lead to some double counting of previous pending sales as buyers whose earlier deals fell through may return to the market and sign new contracts. Still, the oversized gain in pending sales will surely translate into some increase in closings, and the report added to several other positive recent indicators that housing markets are at least stabilizing, if not in full-blown recovery. Not all economic and housing indicators have been pointing up. Initial jobless claims climbed this week, according to a Labor Department report, after three weeks of declines. Foreclosure filings are still well above normal and they threaten to go far higher as the terms of many toxic mortgages, such as interest-only loans and option ARMS, reset over the next six to 12 months and send the monthly mortgage payments of homeowners soaring. Another housing market question mark is the status of the tax credit for first-time homebuyers, with the industry fearing that home sales could drop sharply if it's allowed to expire. There are, however, several efforts in Congress to extend the credit and even to expand it to all homebuyers, not just first-timers. That could turbo-charge home sales if it goes through.