Following the greatest housing crash since the Great Depression, home lending standards have tightened to their strictest levels in decades, economists say. Tight home loan credit is affecting everything from home sales to household finances. Many borrowers are struggling to qualify for loans to buy homes. Others can’t take advantage of some of the lowest interest rates in 50 years because they don’t have enough equity in their homes to refinance. Those who can get loans need higher credit scores and bigger downpayments than they would have in recent years. They face more demands to prove their incomes, verify assets, show steady employment and explain things such as new credit cards and small bank account deposits. Even then, they may not qualify for the lowest interest rates. The National Association of Realtors® says lending standards are too tight and are hurting the housing industry’s recovery and are a drag on the economy. The Realtors® estimate that home sales would jump 15% to 20% if lending standards simply returned to where they were a decade ago, before they got so loose they helped create the real estate bubble that later popped. However, lending standards are unlikely to loosen until home prices stabilize, says mortgage loan expert Jason Kopcak of investment bank Cantor Fitzgerald. Nationwide, home prices are down 30% from the 2006 peak and are expected to fall more this year. “The industry is basically status quo,” agrees Michael Copley, head of retail lending for TD Bank. (www.usatoday.com)
USA Today (9/15/11); Julie Schmit

Legions of home owners remain underwater on their mortgages or unable to move because they can’t sell their house. Plenty who want homes can’t buy them because credit remains tight. Looking deeper, though, the trends suggest a larger shift in how people feel about homeownership. Droves of potential buyers, particularly young adults, are renting longer even when they can afford to buy, stockpiling their savings or seeking investments they see as safer, real estate brokers and economists say. People who do buy are increasingly opting for more modest houses. Recent data show new homes are smaller — and sport fewer pricey extras, such as fireplaces and patios — than in years past. Home owners are staying in their houses longer. Just 11% of sellers surveyed by the National Association of Realtors® last year had owned their home for three years or less, down from 30% in 2006. Increasingly, consumers seem to be viewing their houses simply as places to live, instead of as lucrative investments. It’s not yet clear whether the shift is permanent. Memories of past recessions can fade quickly, economists say, and government policies encouraging home buying aren’t likely to disappear, because the housing market remains a critical part of the U.S. economy. For now, though, some experts say the American Dream has taken a back seat to economic realities. “We’ve gone through 50 years of homeownership being the American dream, and in those 50 years, homes didn’t do anything but appreciate, said Bill Miley of real estate research firm Metrostudy. “The American dream today is job security and being able to afford gasoline to get to work. It’s certainly not buying a home.” (www.charlotteobserver.com)
Charlotte Observer (9/3/11); Kirsten Valle Pittman

Nationwide, the U.S. housing market remains deep in the doldrums and economists expect prices to fall another 5% to 10% in many places. In a few of the hardest-hit areas, such as Detroit, homes have become so cheap that it no longer makes sense to rent. In other places, like Los Angeles, price drops haven’t stopped, but they’ve slowed, and homes are selling faster. When the rebound arrives, desirable zip codes will see prices jump first, says David Stiff, chief economist for housing research firm Fiserv Case-Shiller. “Real estate is always local, but these days it’s hyper-local,” says Chicago broker Scott Berg. While it’s a good sign when price drops slow down, inventory levels are actually a better gauge of where a local market is headed, says NAHB Chief Economist David Crowe. That’s because monthly home-value numbers are skewed by seasonal fluctuations, and prices are usually the last thing to budge when a market turns the corner. (www.money.cnn.com/magazines/moneymag)
Money Magazine (9/15/11); Sarah Max

A study released last year by the Center for Retirement Research at Boston College found that when kids jump ship, parents increase their per capita consumption of nondurable goods by a rather startling proportion: an average of 51%. Empty-nesting is also a natural time to begin the dream-retirement-home project, whether by remodeling existing digs or working with an architect or builder from scratch. Research by Harvard’s Joint Center for Housing Studies shows that boomers as a group drop more than double when Gen Xers do on remodeling and more than four times what every other age group spends. As for the so-called active-adult new-home market, average values have rebounded past 2005 levels, with some builders reporting solid post-crash growth. At Robson Resort Communities, which has upscale active-adult developments in Texas and Arizona, sales rose 16% from 2008 to 2010. But the downturn did make a big difference in how 55-plus households finance their dream digs, according to a recent study by MetLife Mature Market Institute and NAHB. With the overall housing market still depressed, buyers can’t count on parlaying an existing family home into cash to pay for a new one. As a result, they’re pulling downpayments more frequently from savings and cash on hand — and in the process, often depleting retirement reserves. Indeed, only 55% of the active-adult home buyers who made a downpayment in 2009 reported that the money came from the sale of a previous home, down from 92% in 2007.(www.smartmoney.com)
SmartMoney (9/15/11); Missy Sullivan

The early retiree population in Horry County, S.C. — those between 55 and 64 — grew about 73.5% during the past 10 years, according to the U.S. Census Bureau. The number of residents above the age of 65 grew 56% between 2000 and 2010, compared to roughly 35% of 18 to 64 year old residents, according to the Census. The growing demand has meant rapid growth for communities catering to seniors, including Seasons at Prince Creek West, a 55-plus active adult neighborhood, and Brightwater, which is a continuing care living community that provides independent living, assisted living and skilled nursing. “The market is huge,” said Rainbow Russell, the marketing director for Seasons. “How many millions of people are in this age group right now, and they’re looking for this sort of lifestyle and this sort of home.” In the past, seniors would move to Myrtle Beach to retire but when they got older they would move back north or to wherever their families were, said Harry Dill, the president of the Horry Georgetown Home Builders Association. “Now more are staying here, which creates a demand for aging in place,” he said. The association’s training classes to become a Certified Aging in Place Specialist, a designation offered by NAHB, have been full as more builders look to hone their understanding and skills of what the aging population will need. In his company, Sterling Homes, Dill has redesigned plans to make wider doorways standard and often does a standalone shower that wouldn’t require the resident to step into a bathtub, which can be difficult for older residents. He also builds homes so that it’s easier to add safety and accessibility features, such as grab bars in the shower or a lower sink that can accommodate a wheelchair. “I would say that anybody that doesn’t go study this aging in place is missing the boat,” Dill said. “We’re going to see it in almost all new construction in an area like us where we’re a destination area and there’s a lot of retirees.” (www.thesunnews.com)
Myrtle Beach Sun-News (9/3/11); Adva Saldinger

A stimulus program in Puerto Rico, long ripe with vacant houses and condos, has sent sales of new homes surging 80% and sales of existing homes up 24% in the past 10 months from a year earlier, even as the market in much of the U.S. mainland is dead. The incentive plan, juiciest for new homes, has played a part in $2.6 billion worth of sales from its launch in September through July, according to the Puerto Rico Housing Finance Authority. The program, which includes a variety of tax breaks for both buyers and sellers of residential and commercial properties, was rolled out by Gov. Luis Fortuno as part of his effort to revive the commonwealth’s economy. “This program could provide a road map for the rest of the country if the U.S. wants to get out of this recession,” said Fortuno, who took office in 2009 and is seeking re-election next year. But Puerto Rico’s efforts aren’t likely to be matched on a broad scale by the states, whose governments are slashing budgets. Puerto Rico, for its part, has already done a lot of budget cutting and is currently running a deficit of about $605 million, compared to $3.3 billion when Fortuno took office. One of the incentive program’s popular provisions offers qualified buyers downpayment assistance for homes purchased with a mortgage as well as a second mortgage of as much as $25,000 that can be used to make downpayments and pay closing costs. Buyers of new homes also pay no transfer taxes when a property changes hands, escape paying property taxes for five years and future capital-gains taxes and pay no taxes on rental income for 10 years. Sellers don’t have to pay capital-gains taxes on profits. One major goal of the program is to boost demand for the nearly 10,000 vacant homes scattered across the island. Some are foreclosures; others are new condominiums left over from the nation’s construction boom. (www.wsj.com)
Wall Street Journal (8/13/11); Wesley Lowery