Survey Shows Home Owners Unfazed by Mortgage Troubles

A recent survey by online broker Share Builder found that 67% of the respondents were “just as confident” in their ability to make mortgage payments — even in the current declining housing and mortgage market. With credit getting tighter and many major lenders having to deal with loans that might not have been made in a less robust market, the same survey showed that 28% of those home owners surveyed planned to increase their spending on home improvements. Those concerned about the housing market are instead cutting back on entertainment and discretionary spending. Nineteen percent of home owners plan to decrease their spending on travel and vacations and another 19% say they are decreasing spending on dining out. The market environment for home improvement projects, both for additions and alterations as well as kitchen and bath remodels, is reported to be very healthy even though growth is not as strong as it was a year ago, according to a recent American Institute of Architects survey of its members. Still, residential market conditions continue to deteriorate nationally, according to AIA Chief Economist Kermit Baker. The steepest market declines have come from more affordable homes targeted for first-time buyers, Baker said. There has been some firming in market conditions in the custom/luxury market, while home remodeling activity remains relatively strong in spite of the broader weakness in home building. (www.realtytimes.com)
Realty Times (9/20/07); Al Heavens

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High Appraisals Signal Change

In some parts of the country, mortgage lenders — and appraisers themselves — say they are increasingly coming in with valuations higher than the contract prices agreed to by sellers and buyers. “We’re seeing it a lot now,” said Patrice Yamato, president of Plaza Mortgage Group in Jacksonville, Fla. “Appraisals are coming in higher than the contract” — a reversal of the pattern during the housing boom, when appraisals often came in at or occasionally below the contract price. “I think buyers are pushing very, very hard,” Yamato said — and they’re walking away with steals. Appraisers insist that their value opinions are based on hard numbers: recently closed comparable sales, current comparable listings, pending sales, statistical trend analyses and adjustments for special features of the property and its location. “We’ve got to use the most recent market data that is available to us,” said Patrick Turner, an appraiser in the Richmond, Va. area. “We can’t just make it up” to hit a contract price, he said. “If [the appraisal] comes in above the contract, that tells you something unusual is happening out there” — perhaps too much property has been sitting unsold for too long, and some sellers are suddenly feeling time pressure. (www.washingtonpost.com)
Washington Post (9/22/07); Kenneth R. Harney

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Trapped by the Mortgage Meltdown

Tighter lending standards have put many home sellers, owners and buyers in a bind, but it’s worth remembering that all real estate is local, and some markets are doing fine. More than half of the major housing markets in the country have yet to see prices drop. Even in those markets that aren’t fine, there are steps that can be taken to minimize the damage. Home buyers who can clear the hurdle of getting approved for a mortgage and have enough money set aside for a downpayment have more listings to choose from, at better prices and with a lot less competition than during the housing boom. “These days you’re in the driver’s seat,” says Lawrence Yun, senior economist for the National Association of Realtors®. Sellers who face the biggest hurdles are those in a rush to seal a deal. “If you need to sell your home in three months or less, you may have to discount the price 20%,” says Jonas Lee, founder of Redbrick Partners, a private equity firm that invests in real estate. If they can, sellers should wait at least a few months to put their homes on the market, after the panic phase of the mortgage credit crunch passes. Otherwise, they should take steps to ensure the swiftest possible sale at the best possible price, including a new paint job in neutral shades, replacing worn carpet and fixing up visible damage to the gutters and roof. Also, instead of using the list price of comparable homes for sale in the neighborhood as a guide, sellers should check out what homes have actually sold in the past month or two and then price theirs slightly below that level. (www.money.cnn.com)
Money (10/1/07); Les Christie

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Recession Fears Linger Depsite Market Rally

Although the immediate reaction in the financial markets to the Fed’s dramatic half-point cut in interest rates was encouraging, some analysts fear that problems rooted in shaky housing finance still could squeeze consumer spending and drag down the economy. “There is a significant risk of a recession within the next year,” Robert Shiller, one of the nation’s most prominent finance experts, told the Joint Economic Committee of Congress. “The Federal Reserve will undoubtedly take aggressive actions, which will mitigate its severity,” he said, “but if home price deflation persists or intensifies, they may discover that the Achilles’ heel of this resilient economy is the evaporation of confidence that can accompany the end of boom psychology.” Some analysts reject the notion that danger is afoot. “Jobs are huge now. That’s what will end this thing,” said James Paulsen, chief investment strategist for Wells Capital Management, an arm of San Francisco-based Wells Fargo & Co. Paulsen expects that an upward revision to August job numbers, which showed a loss of 4,000 jobs, or a new month showing strong job growth soon will end recession fears, boost consumer confidence and overshadow news of housing-sector problems. He thinks that the deep cut in the benchmark federal funds rate showed that the Fed recognized “that most of this is a confidence crisis, not a ‘fundamental’ crisis.” (www.sltrib.com)
Salt Lake Tribune (9/22/07); Kevin G. Hall, McClatchy News Service

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Luxury Project Becomes Affordable

Thanks to San Diego’s nearly flat-lined downtown real estate market, what was supposed to be a luxury condominium tower is morphing into a landmark low-income apartment project. KB Homes cancelled plans for a ritzy 184-unit condo it got approved in April 2006, and it’s being followed by Affirmed Housing. The local developer got the land at the bargain-basement price of $4.4 million, or $202 a square foot. The current per-square-foot average is $250; the average during the market boom two years ago was $350, said one real estate economist. KB Homes’ blueprint is being tweaked into 226 apartments for families who earn less than $42,000 a year. The tower, which will be the tallest affordable housing project in the country, is called Ten Fifty B and is expected to be built by early 2010. The downtown redevelopment agency loves the $89 million project enough to lend the developer $34 million. It will be the agency’s largest-ever investment in an affordable housing complex. (www.signonsandiego.com)
San Diego Union-Tribune (9/24/07); Jeanette Steele

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It’s a Cellars Market Out There

The wine cellar has become a must-have amenity for high-end homes, much like the home theater and the gym had been. A growing number of new-home developers in the Washington, D.C. area are offering wine cellars as an option, which makes particular sense with Virginia becoming a force in wine production. “In the next few years, you will be seeing wine cellars as a standard feature in upscale homes,” defined as those being 4,000 square feet or larger, said Gopal Ahluwalia, staff vice president of research at NAHB. Ahluwalia said that much of the demand comes from baby boomers who have collected wine over the years. But younger people who can afford expensive homes want all the upscale features they can get, he said. “I don’t know if they drink wine or not, but they do want everything.” Not even the shaky economy and the uncertainty of the housing market have kept owners of upscale homes from building wine cellars. In fact, some believe it will increase the value of their home. “I think it’s becoming a selling feature for new homes and existing homes,” said Josh Farrell, a product specialist and wine director of Wine Enthusiast magazine. “If you’re reselling your home and it has the swimming pool and it has the wine cellar, obviously that is going to add to the price.” An average cellar holds about 1,000 bottles, but some can hold thousands more. Prices, too, vary wildly, from the $10,000s to $100,000 and higher, according to several cellar designers. (www.washingtonpost.com)
Washington Post (9/20/07); Nancy Trejos

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