Real Estate Rates Could Hit 7% by Summer

High energy prices, growth in wages and the continuation of the economic expansion appear to be nudging the Federal Reserve from a neutral monetary policy to one that is restrictive, according to Lou Barnes, a mortgage broker and nationally syndicated columnist based in Boulder, Colo. If Barnes is right, many economists — those who had been expecting the Fed to be finished with its string of incremental increases in interest rates on March 28 when it boosts its federal funds rate to 4.75% — will be wrong. Barnes calls an increase to 5% in May a “sure-thing” and is predicting that a climb to 5.25% in June is “probable” along with “an ultimate stopping point higher than that.” Approaching each of the upcoming Fed meetings, he believes that long-term mortgage interest rates are likely to go up a quarter-percent at a time. “That would mean 6.75% mortgages in April, 7% in June and then higher, until something breaks,” he says. (www.inman.com)
Inman News (3/10/06); Lou Barnes

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Top Luxury Home Builder Entering Atlanta Market

With a contract to buy 194 acres in Woodstock for a 361-home development, Toll Brothers, the nation’s leading builder of luxury homes, has signaled its entry into the Atlanta market. The Horsham, Pa.-based company operates in 21 states, including the Carolinas and Florida, and sold $5.8 billion worth of homes in its 2005 fiscal year. Homes in the project will be priced in the $300,000s and higher, according to Richard McCloud, Woodstock’s planning director. Atlanta, generating more than 72,000 single-family building permits annually, has an advantage in attracting builders because it has remained affordable, especially in comparison to markets that have experienced huge price spikes such as South Florida, California and the Northeast. It also has a strong market for luxury housing, according to several experts. Atlanta’s average home price rose just 5.4% over the past year, compared to 13% nationally, according to Jeff Humphreys, director of economic forecasting at the University of Georgia’s Selig Center. Over the past five years, the city’s housing prices have gone up by 27.6%, less than half of the 57.7% price rise reported nationally. (www.bizjournals.com/atlanta)
Atlanta Business Chronicle (3/13/06); Lisa R. Schoolcraft

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Where Did All the Children Go?

Between 2000 and 2004, all eight metropolitan regions on the West Coast, from Seattle to San Diego, lost middle-class families because of high-priced housing, and the trend is threatening to reshape many of the nation’s major cities. On the East Coast, middle-class families have been making an exodus from the New York region and Boston to points south, leaving the Washington, D.C. area in a buffer zone that has been losing middle-class families with children to the Sunbelt but picking up some from the Northeast, according to William Frey, a demographer at the Brookings Institution. More than half of San Francisco’s firefighters, police officers, emergency medical workers, nurses and teachers live outside the city, according to local statistics. Facing a median house price of $780,000, some firefighters, who work 24-hour shifts, commute to the city from as far away as Montana. Black families have been leading the charge, but their white counterparts are not far behind. San Francisco lost 45% of its black children from 1990 to 2000, according to the Census. Those under 18 account for just 14.5% of San Francisco’s population, the lowest percentage of children of any major U.S. metropolis. Next on the list are Boston, with 19.7%; Washington, 20.1%; Miami, 21.8%; Atlanta 22.3%; and New York 24.3%. (www.washingtonpost.com)
Washington Post (3/19/06); John Pomfret

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Such a Deal: Buy a House, Get a Car Free

Free car leases are among the many perks sellers are tossing in to move homes in the Detroit metro market, where prices are falling in many areas and listings have skyrocketed. “We’re doing whatever we can to get them to buy,” said Bob Mitchell, director of development for Seville Homes. In the past, the builder offered 52-inch TVs, a stove-refrigerator-microwave package and a $2,500 gift certificate for furniture as buyer incentives. Now it is planning to allow its buyers to move into a new home without paying closing costs, providing a downpayment or making a mortgage payment for the first six months if they finance through LaSalle Bank. Home prices in Michigan dropped 10% last year compared to the previous year, according to Real-comp II, and the average time homes have stayed on the market have been climbing. An NAHB survey of 500 builders in January found that 41% of them were offering free appliances, 31% were paying closing costs and 15% were paying up-front financing. (www.detnews.com)
Detroit News (3/13/06); Tenisha Mercer

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Odds Vary on Chances of Enacting GSE Bill in '06

Jerry Howard, chief executive officer of NAHB, puts the odds of Congress enacting stronger regulations for Fannie Mae, Freddie Mac and the Federal Home Loan Banks this year at “considerably less than 50-50.” In a recent survey of a group of political experts, Kenneth Posner of Morgan Stanley found “the average views of our expert panel imply a 37% probability” of GSE reform legislation in 2006, but a cumulative probability of 76% by 2009, suggesting that something will eventually happen on this issue. Howard doesn’t see good odds on a GSE bill passing this year unless the center of gravity tilts toward the House version, which doesn’t have the Senate bill’s contentious limitations on the portfolios of Fannie Mae and Freddie Mac. The catalyst for action, according to political analysts at Lehman Brothers, would be a decision by Senate Banking Committee Chairman Shelby to engage in bipartisan discussions on portfolio language. The bill’s prospects for this year will also be compromised by a tight congressional election-year schedule. (www.djnewswires.com)
Dow Jones Newswires (3/15/06); John Connor

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Area Builders Yank Thieves’ Welcome Mat

More last-minute deliveries, rather than having fixtures and materials sit at a construction site, are among the measures home builders have been taking to limit construction site thefts in the Toledo, Ohio area, where they have been on the rise. Thefts of building materials such as lumber, copper pipes, furnaces and windows cost millions of dollars annually, driving up insurance rates and home prices, and delaying construction schedules, according to NAHB. Construction materials are a target because they can be easily used in other houses. Barb Metusalem, vice president of Brooks Insurance Agency in the city, said most of the theft claims from builders are for furnaces, water heaters, tools, kitchen cabinets, windows and drywall. But most builders decide to absorb the loss unless it is big, holding thefts to only about 5% of builder claims. Bailey Stanbery, of Stanbery Homes, says he has had materials or items stolen from five unfinished houses in the area and a sixth vandalized over the past 12 months. To prevent the theft of wood and materials, he is building walls and ceiling frames in a private warehouse, and then shipping them to the site as needed. Furnaces, water heaters and other valuables aren’t placed in a house until doors and locks have been installed. (www.toledoblade.com)
Toledo Blade (3/12/06); Jon Chavez

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