Lifelines Dry Up for Mortgage Lending
The wind-down of federal support for mortgage rates, involving a commitment of more than $1 trillion, is set to end in two months and is seen as a momentous test of whether the Obama Administration and the Federal Reserve have succeeded in jump-starting the housing market and ensuring it can hold its own. “We did what we thought was necessary to stabilize the market, but we don’t think the government should continue special efforts forever,” said Michael S. Barr, an assistant secretary at the Treasury Department. “As you bring stability, private participants come back in. We do expect this now that the market has stabilized. I’m not going to say there will be no effect on rates, but we do think you are seeing market signs and market signals that there should be an orderly transition." Administration and Fed officials expressed confidence that rates will rise only modestly when the Fed ends its mortgage security purchase program on March 31 — perhaps a quarter of a percentage point. They attribute their optimism to the lengthy notice they have given the market. The markets already should have anticipated the government’s exit by adjusting interest rates higher. Yet mortgage rates have been falling slightly the past few weeks. Real estate and mortgage finance officials said the timing of the government’s exit seems especially ill-conceived, since the Fed’s support would end just a month before a home buyer tax credit program, which the real estate industry has credited with jump-starting home sales. Given the importance of the housing market, some industry officials doubt whether the government will follow through with its pledge to exit the mortgage market in March. (www.washingtonpost.com)
Washington Post (1/25/10); David Cho, Neil Irwin and Dina ElBoghdady
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Builders Seek Their Own Recovery
Though U.S. housing starts dropped 39% in 2009, according to the Census Bureau, the southwest Missouri home building industry seems to be turning around. The local market was bottoming out at the end of 2008 and through the first six months of 2009, said Matt Morrow, executive officer of the Home Builders Association of Greater Springfield. Now, after a long, hard winter, there are signs of life. When the bottom fell out, the market was overbuilt, with a large inventory of newly constructed homes. But during most of 2009, buyers were closing on twice as many homes as were being started, Morrow said and, as a result, inventory has decreased dramatically. That recovery will be slow, however. Terms like “shortage of homes” are relative, Morrow noted, and it won’t take thousands of homes to meet local demand in the year ahead. Anecdotally, Rusty MacLachlan, president of J. Russell MacLachlan Homes and the Springfield HBA, is among custom builders who are reporting they are seeing indicators of renewed interest from potential buyers. “The phone is starting to ring a little bit,” he said. “We had very few to none in 2009, and I’m starting to get those inquiries now. I’ve talked to developers who say lots are starting to sell, or at least people are asking about buying lots.” (www.sbj.net)
Springfield Business Journal (1/26/10); Clarissa French
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Today’s Top 10 New-Home Must Haves
“This is a traumatic time in this country and the future isn’t something we’re 100% sure about now either,” Heather McCune, director of marketing for Bassenian Lagoni Architects in Park Ridge, Ill., told an audience at the International Builders’ Show. “What’s left? The answer for most home buyers is authenticity.” Buyers today want cost-effective architecture, plans that focus on spaces and not rooms and homes that are designed green from the outset, she said. The key for home builders is “finding the balance between what buyers want and the price point.” Paul Cardis, CEO of AVID Ratings Co., which conducts an annual survey of home buyer preferences, said there are 10 “must” features in new homes: large kitchens with an island; energy-efficient appliances, high-efficiency insulation and high window efficiency; a home office/study; a master suite on the main floor; an outdoor living room; ceiling fans; soaker tubs in the master suite; stone and brick exteriors (stucco and vinyl don’t make the cut); community landscaping, with walking paths and playgrounds; and two-car garages. (www.thespec.com)
Hamilton Spectator (1/29/10); Steve Kerch
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2010 International Builders’ Show: At Home in the Future
Among noteworthy products at the IBS was Honeywell’s new wind turbine, which Popular Mechanics magazine declared to be one of the “10 most brilliant products of 2009” and may change the face of the industry and, quite possibly, the look of the suburbs. Small and compact, the Honeywell turbine resembles an extra-large, six-foot-diameter bicycle wheel with plastic blades instead of wheel spokes. More important, it is not subject to the same constraints as the horizontal and vertical wind turbines on the residential market. It can be installed on the roof of a wood-framed house rather than on a separate pole or tower, and it does not need to be positioned away from trees or other obstructions. Another critical difference with the Honeywell model is that it can start up and generate electricity with wind speeds as low as 2 mph, a rate at which air movement is barely perceptible. The other wind turbines currently available require 7 mph. Another plus with the Honeywell turbine: it does not make alarming noises or vibrate excessively, two major objections to installing wind turbines on houses in residential neighborhoods. (www.washingtonpost.com)
Washington Post (1/30/10); Katherine Salant
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Builders Reassess the Market
The number of new-housing permits issued statewide in New Jersey in 2009 did not even reach 12,000, the lowest since 1945. Even if the housing crisis is finally over and the overall economy is headed toward recovery, it will still take at least two years for housing starts to recoup, according to market analysts. “Traditionally, after past recessions, housing starts have doubled within two years,” said Jeffrey G. Otteau, whose Otteau Valuation Group provides advice on state real estate trends. “Because of the severity of this recession, though, there may be lingering wounds.” Yet even in the face of sobering numbers, several builders of multifamily projects have forged ahead — some actually building, others planning on it as soon as weather permits. Their reasons are varied, based on interviews with developers of several large projects. Some asserted that condominium developments held special appeal despite the general slowdown in sales; others said they had used the “down time” of the economic crisis to reconfigure plans and now felt they understood the changes in buyers’ requirements. One developer, David Barry, president of the Ironstate Development Company in Hoboken, said his company was focusing on ways to create “efficient” units — “not overly large, with high amenities, but lower price points.” While it won’t get back in before the end of the year, the company is proceeding with plans to create about 70 condos at its Pier Village rental-and-hotel development in Long Beach. One idea he is considering is a condo conversion of one rental building at the complex. It is still very hard to get construction financing, he noted, and conversion is less expensive than new construction. Also, the move would be in line with his notion of “efficient” apartments. The rental units are 700-square-foot one-bedrooms and 1,000-square-foot two-bedrooms. “This could allow an entry-price point of something like $349,000 and $500,000,” he said, “which is more in line with today’s market.” (www.nytimes.com)
New York Times (1/28/10); Antoinette Martin
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To Boost Sales of Foreclosures, FHA Suspends Anti-Flipping Rules
The Federal Housing Administration has revised its long-standing anti-flipping rule as of Feb. 1. For years, the FHA strictly prohibited insuring a mortgage on a house if the seller had owned it for less than 90 days. The ban was a reaction to fraudulent quick flips of houses that inflated their values far beyond market worth. Now it is suspending the policy, at least for the next year. In an advisory to lenders, FHA Commissioner David H. Stevens said the agency will provide mortgage insurance for some purchases in which the seller had closed on the property less than 90 days earlier. The objective, he said, will be to speed up sales of renovated houses to first-time and other purchasers. With foreclosures at record levels — an estimated 2.8 million filings last year — many communities are faced with excesses of bank-owned properties sitting unsold, often in poor repair. By waiving the 90-day rule, private investors will be more likely to bid on these houses, fix them up and sell them to buyers who will not be able to gain early access to FHA financing, which offers 3.5% downpayments. Investors who specialize in acquiring and renovating foreclosures and bank-owned properties say the significance of the 90-day timeline is huge. Paul Wylie, an investor active in the Los Angeles area, says his group generally can acquire and rehab a house and list it for resale within 60 days. (www.washingtonpost.com)
Washington Post (1/30/10); Kenneth R. Harney
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