Recent reports from the Federal Deposit Insurance Corp. show that bank lending declined again in the first quarter of this year. Since 2008, the volume of loans outstanding has fallen in 10 of 11 quarters, and the only reason it grew during the first quarter last year was an accounting change. By far the biggest decline has been in loans for real estate construction and development. Lending in that category has fallen by more than half, and builders and developers are having a hard time finding money to back their projects. “Basically, it’s been bad, and it’s stayed bad,” says Michelle Hamecs, assistant vice president for housing finance at NAHB. Hamecs also says builders are being told that regulations are making it difficult for some banks to make loans for acquisition, development and construction. Bank regulators require banks to not make AD&C loans totaling more than 100% of the bank’s capital. “We’re also seeing the case where lenders are bumping up against their 100% of capital requirements on construction loans and examiners are telling them not to make any more construction and development loans,” Hamecs says. “In that case, loans are being pulled; loans are just not being made.” (www.msnbc.com)
MSNBC.com (6/9/11); Wendell Cochran

Veteran San Diego architect Simi Razavian was all set to start construction on 10 energy-efficient townhomes she designed for her small plot of land. She and her husband own the property and want to tear down three cottages to put up the moderately priced three-story row homes near the University of San Diego. The problem is the couple can’t get a construction loan. Every bank they contacted told them that they’re not making construction loans. “They are treating us like a bad apple,” Razavian said. “We have a 10-year history of borrowing on projects that we paid back on time.” In a recent survey of more than 500 architects by the American Institute of Architects, 63% said financing difficulties stalled at least one project. Commercial real estate agents also are blaming tight credit for their woes. Of all the commercial sectors, multifamily housing has the best prospects due to the improving rental market, researchers say. But that’s mostly for existing properties; new construction is still a tough sell. “There’s not much construction in any arena,” said Bill Hughes, managing director of Marcus & Millichap Capital. He says a number of banks are starting to offer some construction loans to their “best clients,” though they’ll need to put down at least 30% to 40% in equity. Even then, deals are spotty, depending on local market demand. (www.investors.com)
Investor’s Business Daily (6/10/11); Marilyn Alva

While a requirement that borrowers make a 20% downpayment to qualify for the cheapest mortgages has captured the public spotlight since the government unveiled its plan for qualified residential mortgages in March, experts who track the housing industry say the proposed debt limits could be just as onerous for borrowers. “The debt limits are far and away the most binding constraint,” said Mark Zandi, chief economist at Moody’s Analytics. “It’s probably the one thing that will knock the largest number of borrowers out of the market by keeping them from getting the most favorable rates.” The proposal restricts a borrower’s total debt — including credit cards, auto loans and student loans — to 36% of gross monthly income. The measure would also limit the mortgage payment itself to no more than 28% of a borrower’s gross monthly income. Nearly three out of every five U.S. borrowers who bought homes last year would not have met the proposed restriction on total debt, according to an analysis by mortgage research firm CoreLogic. A separate federal analysis showed that more than half of buyers whose loans were sold to Fannie Mae and Freddie Mac in 2009 would have fallen short of one or both of the two debt requirements. (www.washingtonpost.com)
Washington Post (6/8/11); Dina ElBoghdady

Among the residential contractors who have switched their business model to survive the housing downturn, Fred Davis, owner of Davis & Associates in Chester, Va., runs five paint crews to keep up with demand from lenders itchy to get repossessed houses on the market so they can recoup losses. “We’re painting all the time all over central Virginia,” Davis said. “Contracting is not what it used to be, and building is not what it was in 2005,” he said, when he was doing high-end additions and building houses. “It’s very competitive.” “The repair work is pretty steady,” he said. It’s also demanding, requiring a quick turnaround, he said. “Lenders want a house repaired as fast as possible.” Most jobs are $10,000 to $15,000, Davis said, but if a house needs new carpeting, vinyl siding, countertops, cabinets and a roof, the cost can quickly add up to $75,000. (www.timesdispatch.com)
Richmond Times Dispatch (6/5/11); Carol Hazard

Local Realtors® say sales of homes on higher ground spiked after the swollen Missouri River forced the evacuation of more than 3,500 residents of the Dunes and other low-lying areas in southeast South Dakota. “We saw a surge of people wanting to buy property in Iowa, primarily in Morningside or the northside,” said Fred Holcomb, vice president for United Real Estate Solutions. “With the uncertainty of when they’re going to get back into their homes, rather than pay rent, they’re buying property.” Heavy rains in Montana and unusual amounts of snowpack melting in the Rocky Mountains pushed the U.S. Army Corps of Engineers to release as much water as possible from six upriver Missouri reservoirs, raising the river level at Sioux City to as much as 37 feet, or some seven feet above flood stage. Temporary levees have been built to protect the planned community of Dakota Dunes and the neighboring Wynstone development, as well as the northwest corner of South Sioux City, but officials warn the barriers might not hold over an extended period, with river flows not expected to return to normal until at least late August. The prospect of being out of their homes for months on end weighed on families suddenly forced to find a new place to live. “We talked about renting, but we weren’t having a lot of luck in that department,” said Mike Moody, whose family was among the more than 300 households forced to leave the Dakota Dunes’ Country Club neighborhood because of the rising river. “We decided to bite the bullet and bought a mid-sixed condo.” (www.journalstar.com)
Lincoln Journal Star (6/12/11); Dave Dreeszen

Old-fashioned storm shelters have become relics of the past as developers increasingly build homes and entire neighborhoods without them. That leaves many people with nowhere to go except an interior hallway or a bathroom when the sirens blow, and as the devastating storm in Joplin, Mo., recently proved, that’s often not enough. “If anything, we’re moving away from having a place to go during a storm, said Steve Melman, NAHB’s director of economic services. The shelters that were common in the 1930s and 1940s, if not earlier, were usually no more than a concrete-lined hole with a locking metal door. They were seldom larger than a walk-in closet and were designed to protect a handful of people for only 20 or 30 minutes — just long enough for the storm to pass. But now even basements are becoming less common, and they are no longer a guaranteed safe spot. Experts warn that basements without an integrated concrete roof or with windows could be just as dangerous as above-ground parts of the home. The reason for the decline varies from to place to place. In some areas, it’s just not practical to build a basement because of soil conditions. And some builders say penny pinching buyers are less likely to opt for something that adds to the price of a home. ”With the recession we’ve had over the last few years, people want as much for their money as they can get,” said Todd Wilcox, president of the Arkansas Home Builders Association. For now, the spate of recent storms has generated lots of new business for crews that install storm shelters or storm rooms. Contractors throughout the Midwest and South say they have been inundated with orders for the past month and a half, and that demand is bound to continue. (www.startribune.com)
Minneapolis Star Tribune (5/27/11); Andrew DeMillo, Associated Press