Housing Remains Steady Amid the Gloom

A recent run of bad news from home builders — including a downbeat outlook on sales and earnings from Toll Brothers, the troubles of sub-prime mortgage lenders and weak housing starts in February — led economists at MSNBC.com to take a look at major housing sector indicators to see where the ongoing housing market correction currently stands. The compilation of those indicators found a bounce in real estate activity since last year’s big downsizing from June through August, but more weakness in the pipeline, with high inventory levels likely continuing to put downward pressure on prices, starts, construction and completions through the middle of the year. “As such, housing should continue to weigh on GDP growth through midyear. With all that, we are about 20 months into the housing correction, and we have yet to see any meaningful net wealth or industry contagion effects of the real estate market adjustment. If the seasonally important spring real estate market shows stable conditions, the risks that the Federal Reserve will have to move on interest rates as a result of volatility in this sector will diminish considerably.” (www.NSNBC.com)
NSNBC.com (2/25/07); Michael Englund

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This Year Could Be the Calm Before the Housing Boom

Carey Rosenblum, a broker and owner of Rosenblum Realty who sells for several builders in the Huntsville, Ala. market, says that buyers may want to make their move soon to take advantage of current interest rates, which have been hovering around 6%. Rates are expected to rise to around 6.5% to 6.75% this year, he said, which can add another $30 to $50 to a monthly payment. While Hunter Homes President Shawn Fairburn says he doesn’t anticipate market saturation slowing sales for another 18 to 24 months, his company is already offering a “$100 gets you into a house” deal, which will continue throughout the year. Huntsville, so far, has been largely immune to the declines being experienced in major U.S. cities, Fairburn indicated. “I think the market is here right now and, unless there’s a major change in consumer confidence where we may have to pare down a few projects in the future, we’re staying the course,” he said. With a good credit rating and $100 in earnest money, a first-time or mid-market buyer can get into a new house, Fairburn says. Additional costs for title insurance, mortgage insurance and mortgage costs may apply depending on the lender. In the past years, he says they’ve offered similar deals with $500 down. “The consumers just don’t have the money to buy a brand new home, but it gets them started in the process and in procuring financing,” he says of first-time buyers. “By focusing on that market, we knew they needed access to 100% financing on homes in the affordable range. We also knew we had to educate these buyers, so we do home buyer seminars to show them they can own a home and afford to do it.” The marketing strategy has proven successful, he says, adding, “We’re enjoying a very good, robust sales season. January has been record-breaking in sales.” (www.al.com)
Huntsville Times (2/25/07); Anna Thibodeaux

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Housing Decline Hits Area Unevenly

The Baltimore metro market has weathered the soft housing market fairly unscathed, with only one out of six areas experiencing price declines and some posting hefty gains. The striking split seemed to be related less to location, location, location than to price, price, price. Areas with declines were generally expensive, with homes costing $500,000 on average, while many of the fastest-appreciating communities were more affordable. Half of the region’s 10 most costly ZIP codes in 2005 saw a drop in their average home price last year. Prices in half of the city’s neighborhoods jumped at least 20%, although some of these neighborhoods previously saw no real price appreciation for two decades. “It was the collapse in affordability that was the catalyst for the housing correction,” said Mark Zandi, chief economist at Moody’s Economy. Com. “Those areas where prices are high and affordability low were the areas that got hit the hardest.” Zandi expects to see price decreases in the region this year of about 5% to 10%, but John McClain, a senior fellow at George Mason University’s Center for Regional Analysis, says that the area has probably seen the worst of it and will show about a 5% gain in prices this year. (www.baltimoresun.com)
Baltimore Sun (2/25/07); Jamie Smith Hopkins

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A Tale of Two Housing Markets

The supply of houses in North New Jersey with an asking price of $2.5 million or more is so high that it would take about 2-1/2 years to sell them at the current sales pace, said Jeffrey Otteau, an East Brunswick real estate appraiser who analyzes the Garden State’s housing market. By contrast, the supply of houses selling for less than $600,000 ranges from about five to eight months, depending on the county. The market for high-priced houses is always going to be smaller than the market for starter homes, he says because there are more middle-class people than rich people. But that trend may accelerate in future years because the state has been slow to create high-paying jobs and recent job growth has been in low-wage, low-skill industries such as restaurants. And the glut of high-priced houses will increase over the next decade as baby boomers retire and unload their six-bedroom empty nests, Otteau said. “Essentially, there are a lot more buyers in lower price ranges,” said Adam DeFino of DeFino Realtors in Wyckoff. “The higher you go, the less of a buyer pool you have. If you put a house on the market in the right town, under $500,000, it’s going to go pretty quickly.” Luxury homes, however, are a discretionary purchase, said Eric Belsky, an economist with the Joint Center for Housing Studies at Harvard. Prospective buyers of those homes already own houses and can hold off on trading up if they think the cost is too high. (www.northjersey.com)
The Record (2/25/07); Kathleen Lyn

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Las Vegas Casinos Help Make Housing Affordable

The gaming industry in Las Vegas is looking for solutions to the area’s rising home prices at the same time as it contemplates hiring tens of thousands of housekeepers and their bosses over the next few years in a low unemployment market. This month, MGM Mirage Inc., one of the two biggest casino companies off and on the Strip, announced a program with two real estate developers to build more affordably priced housing for casino workers as part of a master-planned commercial and retail development about 25 miles away from their jobs. The company is studying new forms of high-density housing that could significantly reduce home prices, while using low-cost financing to help developers make a profit, said Jim Murren, the company’s president and chief financial officer. “People we care about want a sense of ownership,” Murren said. “We don’t have all the answers, but we hope this is something others will emulate.” Alan Schlottmann, a University of Nevada Las Vegas economics professor and executive director of the Theodore Roosevelt Institute, a national think tank that studies public policy issues, said companies that help their workers on such a primary level can better fend off pressure to increase salaries from unions while building loyalty among workers struggling with a higher cost of living. (www.jacksonholestartrib.com)
Jackson Hole Star Tribune (2/25/07); Liz Benston, Las Vegas Sun

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Social Security Number as Mortgage Prerequisite

A new legislative proposal in the U.S. House of Representatives with uncertain prospects for moving forward would curb an increasingly popular mortgage practice of allowing potential home buyers to use Individual Taxpayer Identification Numbers (ITINs) to apply for a mortgage loan instead of Social Security numbers. ITINs are issued by the Internal Revenue Service to immigrant workers who don’t quality for Social Security numbers so that they can report their income and pay federal taxes. Bank of America earlier this month announced a pilot program in Los Angeles to provide credit cards to resident immigrants with ITINs, and that prompted some critics to charge that the bank was seeking to profit by helping illegal immigrants. But Timothy Sandos, president and chief executive of the National Association of Hispanic Real Estate Professionals, said that the bill would be “extremely disruptive” and affect far more people than the illegal immigrants being targeted. Sandos estimated that as many as 8 million resident aliens in the U.S. do not have Social Security cards but are in some phase of the immigration process leading to citizenship. That process can take more than eight years and “meanwhile these individuals are working here, earning incomes, paying taxes, contributing to the economy.” A study by Sandos’ group concluded that if mortgage companies made more use of ITINs to extend home loans to qualified buyers, $44 billion in new mortgages — primarily to first-time buyers — could be originated. (www.washingtonpost.com)
Washington Post (2/24/07); Kenneth H. Harney

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