No Money Down Disappearing as Mortgage Option
Faced with bad loans, lenders have abruptly clamped down on no-money-down mortgages, threatening to dash the hopes of millions of potential buyers, especially those shopping for their first homes. Four out of 10 first-time buyers used no-downpayment mortgages in 2005 and 2006, according to the National Association of Realtors®. Some lenders are now scrapping those loans completely; others are pickier about who gets them. As of March, Washington Mutual started only financing no-downpayment loans for first-time buyers up to $417,000, compared to up to $1 million previously. SunTrust Mortgage has boosted the credit-score requirements for no-downpayment loans, and has also started requiring borrowers to have six months of payments in reserve, up from two months. After Countrywide Financial, the nation’s largest mortgage lender, announced that defaults on home-equity lines contributed to a decline in its second-quarter profits, the piggyback option has largely disappeared and many-first time buyers who want 100% financing may find themselves priced out of the market because they would have to pay mortgage insurance. (www.washingtonpost.com/)
Washington Post (8/5/07); Dina ElBoghdady
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Florida Faces Worst Budget Woes Since 9/11
Florida is in the worst state budget hole since 9/11, with lawmakers now facing $1.1 billion in budget cuts, roughly matching what was slashed from state spending after the 2001 terrorist attacks in 2001. And a rebound from the current slump — caused primarily by a sour housing market — may take longer than it did after 9/11. Tax receipts from real-estate transactions are expected to be $132.6 million below what had been expected this year, state economists reported. Sales taxes — which provide the bulk of Florida’s general revenue — are off $746.1 million as purchases of housing-related items such as carpeting, appliances and building supplies have nose-dived. Housing sales are not expected to pick up until early 2009, later than had been forecast as recently as March, said Amy Baker, coordinator of the legislature’s Office of Economic and Demographic Research. In fact, some economists say Florida is teetering close to recession. They say home values could fall as much as 15% this year, sparking a general economic decline. (www.orlandosentinel.com)
Orlando Sentinel (8/5/07); John Kennedy
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In Anaheim, the Mouse Finally Roars
Located 25 miles south of Los Angeles, Anaheim, Calif. is divided over a housing developer’s plan to build 1,500 apartments and condos, 225 of them for low-income families, a few blocks from Disneyland. Disney doesn’t want the project, arguing that the land is zoned for tourism, and along with business groups and the city’s mayor says that the housing project is the beginning of the end for resort zoning that keeps cash flowing into the city — $80 million last year from hotel taxes alone. But in Anaheim, as in much of Southern California, home prices are beyond the grasp of service workers, and a coalition of unions, churches and nonprofits has turned Disney’s resistance into a rallying cry. The median home price in Orange County rocketed from $185,000 in 1997 to $645,000 in June. Rent has climbed too, to an average of $1,531 at the beginning of the year. The nationwide housing slump is only slightly modulating housing prices here, as job creation far outstrips new building, and overcrowding is a huge problem. (www.washingtonpost.com)
Washington Post (8/6/07); Sonya Geis
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Southern California Is Becoming a Tight Fit
In Southern California, construction of condos and apartments is rapidly overtaking that of single-family residences, even in suburbs known for spread-out living, as the region shifts to urbanized living and higher density. As Southern California stretches to accommodate a crush of 6.3 million new residents over the next 30 years, so many new apartments will be built that by 2035, the number of multifamily dwellings under construction will outstrip the number of single-family residences by two to one, according to projections by the Southern California Association of Governments. The shift is starkly obvious in Los Angeles County, where 60% of residences built in 1993 were single-family. Last year in the county, 38% of residential construction was single-family and 62% was apartments and condos. Driving the shift is affordability: multifamily buildings are cheaper to build largely because less land is required per unit. They are also cheaper to sell or rent, and with the median price of a single-family home in Orange County at $724,000, many potential buyers can afford only condos, said Kristine Thalman, chief executive of the Building Industry Association’s Orange County chapter. (www.latimes.com)
Los Angeles Times (8/6/07); Sharon Bernstein
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Townhouses Still a Winner
The good news in the Chicago area is that there are still plenty of new, affordable townhouses out there. The bad news is that the selection isn’t as wide as it was this time last year because many builders aren’t starting new projects until the real estate market correction stabilizes. With few exceptions, to find a townhouse for less than $250,000 requires going 30 to 40 miles out of the Loop, says Tracy Cross of Tracy Cross & Associates in Schaumburg. “But the buyers’ employers aren’t necessarily in the city,” she says. “They could be in Oak Brook or Schaumburg or another satellite employment area.” Prospective buyers may find that the more starter townhouses they visit, the more they look alike. “They’re becoming more generic,” says Cross of the designs of the current selection. “Rear-loaded, two-car garage; three stories in the back and two in the front; three bedrooms and two-and-one-half baths.” Ditto for their lists of standard amenities, so the occasional granite countertop or ceramic-tile bathroom stands out. But compared to the starter townhouses their parents bought a generation ago, today’s first-time buyers get more, says Gopal Ahluwalia, vice president of research at NAHB. “Two-car garages, basements, decks — you didn’t get these in affordable townhouses years ago,” he says. To the extent that they can afford it, says Ahluwalia, townhouse buyers want everything they can get in a single-family house, minus the exterior maintenance. (www.chicagotribune.com)
Chicago Tribune (8/3/07); Leslie Mann
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Some Seek a Home Near Family: Togetherness Can Make for Warmth and Sharing
First-time buyers often purchase a place near their parents, and both generations usually benefit from the arrangement. The parents provide emotional and sometimes even financial support to their young children who are just starting out. Meanwhile, the parents still get to see their offspring on a regular basis. Home builders have caught on to the idea. They’re creating developments that include a variety of home styles to appeal to different age groups. Some developments even have age-restricted neighborhoods for older people, adjacent to traditional sections meant for young families. No one tracks how many young adults purchase homes near their parents, but some clues can be found in the rising number of young adults who still live at home. By 1990, the number of young adults age 25 living at home had almost doubled to 25% from 13% in 1970, according to Robet Schoeni, a professor of public policy and economics at the University of Michigan, Ann Arbor. Based on current Census figures, about 30% of young adults live with their parents, he said. He also has quantified the hours of assistance and money that parents provide to their grown children. About a third of young adults receive cash from their parents, totaling an average of about $38,000. And 47% of adults age 18 to 34 get help with tasks from their parents, or a total of two years worth of full-time 40-hours-a-week work. In 2005, the average price of a home purchased by a first-time buyer was $167,000, according to NAHB, and “affordability is an issue,” according to Gopal Ahluwalia, the association’s vice president of research. (www.chicagotribune.com)
Chicago Tribune (8/1/07); Jane Adler
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