An End to Easy Money: Subprime Mortgage Lenders Retreat

It came as a shock to two house hunters when the nontraditional loan they thought they had been prequalified for was yanked away from them just as the seller accepted their contract for a four-bedroom $300,000 house. More would-be home buyers with blemished credit histories may soon be shut out of the housing market now that lenders are curtailing the number of loans to risky, or subprime borrowers. A spike in delinquencies and defaults among subprime borrowers has forced more than two dozen lenders to close, sell themselves to larger firms or report staggering financial losses. Some have chosen to get pickier about borrowers — a course encouraged by federal regulators. General Electric’s U.S. mortgage arm has laid off a fifth of its workers because of a jump in defaults and has stopped making some risky loans. New Century Financial, one of the nation’s largest lenders to subprime borrowers, said last week that it has stopped accepting new loan applications under pressure from its creditors. One hundred percent loans and loans that do not require borrowers to document their income have been the first ones dropped by some lenders because of their risk. (www.washingtonpost.com)
Washington Post (3/10/07); Dina ElBoghady and David Hilzenrath

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Home Builders Find Contractor They Want in Themselves

Part of a growing home-building trend, a Clarksville, Tenn. mother of four whose husband is in Iraq estimates that she will save her family almost $40,000 on their $265,000 home by being her own contractor for two hours a day. Since breaking ground on the home in July after meeting with Nashville’s division of the Owner/Builder Network, no major disasters have been encountered, and the home is on track for completion in April. As a result of the savings, “I can afford better quality things,” she says. “I can get Corian countertops instead of laminate, ceramic tile instead of linoleum.” According to NAHB, the average general contractor sees about a 21% gross profit margin and 8% net margin on each new house. “If you build four houses this way, your fifth home is free,” says Carl Heldmann, author of “Be Your Own House Contractor,” published in 1982 and now in its fifth edition. Several books on the trend have been published recently, including “The Owner-Builder Book,” “Build Your Own Home on a Shoestring” and “How to Plan, Contract and Build Your Own Home." The Owner/Builder Network charges clients $2.95 per framed square foot for helping them to manage their projects from start to finish, shepherding them through everything from selecting property to picking out tile. The company provides a tried-and-true subcontractor list to its customers, as well as services such as an independent building inspection of each construction stage before the codes inspector arrives. A similar company, UBuiltIt, charges owner-builders in the range of 5% to 8% of the home’s total cost. (www.tennessean.com)
Tennessean (3/11/07); Tracy Pulley

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Entrepreneur Is Right at Home Developing Floor Plans

Able to work out of her home and keep tabs on her two boys, a Vail, Colo. entrepreneur with an associate degree in drafting has become a self-employed home designer, growing her business exclusively through referrals from former clients and acquaintances. Wendy Elena Counes said she has the self-discipline and motivation to generate floor plans steadily, as well as to do some civil drafting such as maps, bridges and roadways. Helping people create their dream house in a cost-effective way is something she enjoys, she added. Typically, those who seek her services — instead of those of an architect — aim to keep down the cost of building a house. Without a degree in architecture, Counes has some limitations in her work. She is not able to perform a structural analysis that meets safety standards when a house is built. That doesn’t usually pose a problem because most of the homes she designs are basic floor plans that adhere to existing building codes, she said. Counes noted that she has the ability to draw plans that incorporate more complex designs, such as a wall of glass instead of standard windows. But such a feature would require clients to also hire a structural engineer, she noted. (www.dailystar.com)
Arizona Daily Star (3/12/07); Lourdes Medrano

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Numbers Don’t Lie, But They Do Confuse

Conflicting reports on housing prices and the direction of the market from the National Association of Realtors® and the Office of Federal Housing Enterprise Oversight (OFHEO) can raise questions among consumers about what is really going on out there. However, some conclusions can be drawn, according to columnist Kenneth Harney. “If you own or are buying property in any of the dozens of metropolitan areas that boomed from 2002 to 2005, you can be fairly certain that property values are either giving back some of those fat gains or are flat for the time being. For example, in 21 of 26 major California markets in the latest OFHEO study, there was price deflation in the final quarter of 2006.” However, in most of the high-flying areas such as Washington, D.C., southwest Florida, Nevada, Arizona and California, the fallback is relatively small, in the 1% to 4% range from the peak. Buyers in an area where employment growth is strong and there was no hyperinflation during the boom years are probably seeing excellent growth in home values. Jobs in Seattle and Portland, Ore., for example, have been growing at twice the national average, according to Freddie Mac Chief Economist Frank Nothaft, and home values there are up by double-digit rates. “The truly sobering pictures are in the industrial Midwest and parts of New England, where the population and number of new jobs have been flat or have fallen,” writes Harney. “Prices there aren’t likely to get out of negative territory until employment turns around and people start moving in.” (www.washingtonpost.com)
Washington Post (3/10/07); Kenneth R. Harney

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Harvard Communities Makes Solar the Standard in Stapleton

Semi-custom home builder Harvard Communities in Colorado announced that all of its Architect Collection homes in the Stapleton redevelopment will now come with photovoltaic (PV) solar power as a standard feature. The panels will provide approximately 30% of the homes’ electrical power needs and will be integrated seamlessly with the homes' electrical service so that any excess power that is produced can be sold back to the utility company. Combined with energy-efficient home building measures already being incorporated, the solar system will result in the reduction of more than 7,000 pounds of excess carbon dioxide, or 3.5 tons, per home annually. The panels being installed are much leaner than their predecessors — just 1.81 inches thick. These homes will include state-of-the-art triangular panels that conform closely to the roofline, creating a sleek, elegant aesthetic. “Harvard is the first home owner in the state to announce the use of solar PV as a standard feature and, we believe, this bold decision will create the consumer demand that inspires other builders to follow our lead,” said John Keith, president of the company. (www.businesswire.com)
Business Wire (3/12/07)

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Making It Official: Some Municipalities Push Contractors to Recycle Construction Waste

North Texas planners hope to increasingly curb the left-over wood, metal, concrete and paper trash from construction and demolition sites going into landfills. The task isn’t easy. Many contractors say recycling debris is a hassle and would add cost to a job. To recycle, contractors must keep materials clean, dry and separated, and recyclers must be conveniently located. The city of Plano adopted a 40% reduction goal and began in November 2004 to work toward it and is now at a diversion rate of 20%. Frisco, which has been a leader on this issue, began in 2000 to require contractors on commercial buildings to recycle all debris possible. The bigger challenge is what to do about the waste from the roughly 3,000 new homes sprouting in the area annually. Each new home generates about six tons of debris, about 50% of which could be reasonably reused. Along with other cities, Frisco is struggling to develop a comprehensive program that would be cost-effective for builders. The difficulty is that residential job sites are smaller, with less space for multiple recycling bins. There’s less waste than a commercial building and the volume of contractors and job sites is vast. (www.bizjournals.com/dallas)
Dallas Business Journal (3/9/2007); Margaret Allen

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