Housing Skid Leads to Exodus of Builders
Paul Tryon, chief executive officer of the Building Industry Association of San Diego County, expects fewer than 4,000 home-building permits to be issued in the county this year, which would be a low not seen here in decades. Experts say the problem goes deeper than the slowing sales trend. There simply is less for builders to do as the county runs out of land designated for residential development. In the future, residential construction will consist mainly of urban infill projects and attached housing. That’s why many of the builders departing from the area during the current downturn probably won’t be back, even when the slump ends. “The industry is experiencing a paradigm shift,” Tryon said. “It really means we are seeing a shift to a smaller market with less greenfield (open land) development, an environment where large-scale development is difficult to achieve. That means a different kind of product in many cases.” Some builders are having trouble raising money for new projects. Michael Pattinson, president of Carlsbad-based Barratt American, was in England last week looking for new capital for his privately owned company. “Banks have taken flight and left our industry,” Pattinson said. “The economics of housing in San Diego and California no longer work. The houses now that are selling are the foreclosures that have been taken back. We are selling assets to survive and doing what we can to keep our businesses going.” (www.signonsandiego.com)
San Diego Union-Tribune (5/27/08); Emmet Pierce
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Lennar Plans Are Tough Sell in San Francisco
Miami-based Lennar Corp. began negotiations in 1999 with San Francisco to develop the largest undeveloped site in the city — 770 acres that includes the former Hunters Point Navy shipyard and Candlestick Park. One of its biggest tests will come next when city voters decide whether to approve what Mayor Gavin Newsom called “one of the most significant development projects in our history.” The company has agreed to pay the city a nominal amount for the site. In exchange, the city requires Lennar to allocate 400 acres for park and open space, a site for the San Francisco 49ers’ new football stadium, if the team stays in town, and thousands of homes for low- and moderate-income residents. Lennar estimates that these stipulations will cost about $1.2 billion over the 10-year project. But Lennar and its mixed-use plan for 10,000 homes has still become a magnet for criticism. In next week’s vote, a deal-breaker could be the amount of affordable housing that will be set aside. Lennar has agreed that 32% of the rental and for-sale housing will be affordable and that it will donate $27.3 million for lower-income buyers to purchase homes. The affordable for-sale homes will be available for residents making between 80% and 160% of the area’s median income, which is about $82,000 for a family of four. But a competing measure on the June 3 ballot demands that 50% of the units be designated affordable. Lennar calls that demand a “poison pill” and says it is prepared to walk from much of the proposed development if the measure is approved.(http://online.wsj.com/public/us)
Wall Street Journal Online (5/27/08); Michael Corkery
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U.S. Housing Crisis Takes a Toll on the Auto Industry
The American auto industry is getting side-swiped by the country’s housing crisis. Auto lenders and banks have tightened their wallets, preventing hundreds of thousands of consumers from getting the financing they need for a car. Home equity loans, used in at least one of every nine deals, are no longer a source of easy money for many prospective buyers. Within the auto sector, problems stemming from the ongoing tightening of credit have already started to spread. Auto lenders like Chase, Capital One and GMAC are finding it harder and more expensive to obtain money for loans. Profits also look dimmer as the lenders absorb losses from defaults and pull back from making new loans. “The housing crisis, defined with the credit crisis, has really knocked consumers back on their heels,” said Michael Jackson, the chairman of AutoNation, the largest automobile retailer. But the auto industry may not suffer the same dramatic burst as the housing sector. One reason is that auto lenders have long issued loans expecting that vehicles, as collateral for loans, start to lose value as soon as they are driven off the lot. (www.iht.com)
International Herald Tribune (5/26/08); Eric Dash
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Not Even for a Car? Home Sellers Will Try Anything, But It’s Hard to Get a Look
Frustrated home sellers in the Washington, D.C. metropolitan area are adopting extreme tactics, with mixed results, as they try to stand out in a crowded market. They’re giving away prizes, sweetening commissions for agents and trying to auction or raffle off their homes when all else fails. These measures are the symptom of the fallout from the subprime mortgage crisis. In many cases, sellers are struggling to compete with the record supply of foreclosed homes listed at rock-bottom prices. In Prince William County, for instance, the number of single-family homes listed for sale for less than $200,000 shot up 15,000% last month compared with a year earlier — from five to 768. There was a 66% increase in listings under $500,000. That’s what the Hendricks family was up against when they tried to give away their Mustang. At the time, at least 30 homes were for sale within a mile of their house, they said. One similar to theirs was listed for $199,000, and they were asking $375,000. The car failed to stir buyer interest, so they slashed their price a second time to $339,000, with no offers so far. Many real estate agents say flashy giveaways are usually ineffective, and in fact, may complicate the appraisal process or give the impression that a home’s base price is inflated to make up for whatever perk is offered. The most powerful draw in a down market is setting the right price, they say, keeping in mind that the value of a home is determined by what else people can buy for the same price when they’re ready to spend. (www.washingtonpost.com)
Washington Post (5/23/08); Dina ElBoghdady
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High Housing Costs Pushing Young Adults Away
Young people are leaving and not returning to comfortable communities like Simsbury, which define a good portion of Connecticut. Active adults 55 and over are driving the local real estate growth industry. Developers complain that towns have no idea about their economic future — and where the tax revenue comes from. And in some towns even modest town budget increases are being rejected by voters. Meanwhile, big companies say they can’t recruit workers because not even the renowned local schools can overcome the sticker shock of a housing market where you need $350,000 just to open the bidding. In a meeting with The Hartford, after her election as first selectwoman for Simsbury last fall, Mary Glassman said she was told that the big insurance company is “finding it very difficult to attract young people.” Even with decent insurance salaries they “can’t live in this town,” and the company’s top job candidates “are going elsewhere.” By 2030, according to the office of Gov. M. Jodi Rell, the population of people 65 and over in Connecticut will exceed 900,000 — a jump of more than 70%, and the working-age population won’t increase at all. (www.courant.com)
Hartford Courant (5/27/08); Rick Green
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Three Landlords in Discrimination Cases Agree to Training
Three of 29 property management companies accused of discriminating against African-American testers during a Cedar Rapids, Iowa, Civil Rights Commission audit have settled, closing the investigation without admitting any guilt. The commission filed 30 complaints alleging race-based discrimination by 29 companies in April, after an audit from December to April 2 found black people acting as testers were treated differently three out of four times. “There is a livability issue here in Cedar Rapids,” Kenneth White, Civil Rights Commission director, said. “I think it’s been allowed to fester because of a failure to educate and enforce fair housing.” Since the audit, the number of fair housing complaints brought to the commission has increased. White said the office receives an average of one complaint and 10 calls alleging discrimination each week. The settlement option the commission offered would require companies to send at least two people and as many as four to three training sessions in three years. It costs $500 a person. Companies sending two people to all three sessions would pay $1,000, equal to about two months rent, according to the commission staffer who commissioned the audit. Ten more companies are in settlement discussions with the commission. (www.gazetteonline.com)
Cedar Rapids Gazette (5/27/08)
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