Micro-Booms Defy the Downturn
Although real estate sales and prices are flat or down in dozens of metropolitan areas, they may be up in micro-markets within those areas — along as there is at least moderately good local job and income growth. These strong markets are characteristically located in close-in, established neighborhoods convenient to the urban center’s employment and cultural attractions. The areas have above median incomes, with housing prices to match, and the homes are primarily purchased with prime, not subprime, mortgages. For example, in the 20815 Zip code (Bethesda-Chevy Chase, Md.), the dollar volume of sales was up 22% from June 2006 to June 2007, the average selling price was up 11.5% and the median price was up 6%, according to multiple listing service data provided by Dale Mattison, a broker with Long & Foster. Just across the Washington, D.C. line in the 20015 Zip code, the average sale price increased 6.6% and the median price 3.5% from June to June, though total dollar volume was down 2.5%. By contrast, in Washington, D.C. as a whole, dollar volume was down more than 16%, the average sales price fell 6.8% and the median price dropped 3.5%. In the Miami area, close-in communities such as Coral Gables are handling the downturn far better than more distant, lower-cost communities such as Homestead and Florida City. In San Francisco, highly regarded in-town neighborhoods such as Pacific Heights and the Marina continue to outperform the metro area and the state as a whole. (www.washingtonpost.com)
Washington Post (8/11/07); Kenneth R. Harney
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In a Spiraling Credit Crisis, Large Mortgages Grow Costly
When an investment banker set out to buy a $1.5 million home on Long Island last month, his mortgage broker quoted an interest rate of 8%. Three days later, when the buyer said he would take the loan, the mortgage banker said the new rate was 13%. The investment banker’s problem was that he was taking out a jumbo mortgage — a loan greater than the $417,000 mortgage that can be sold to Fannie Mae and Freddie Mac. The banker who wanted the jumbo mortgage had a good credit score and is not a subprime borrower. But private mortgage securities of all types are now hard to sell, leading to his problem. In the end, he was able to get a mortgage with a lower interest rate, but it will adjust in five years, possibly to a much higher level. While conventional mortgages cost less than they did a few weeks ago as Treasury bond rates have declined, jumbo mortgages, where they are available, cost more. The difference has gone from less than a quarter of a percentage point to more than two-thirds of a percentage point. Jumbo mortgages are most important in areas with high home prices, most notably on the East and West coasts. (www.nytimes.com)
New York Times (8/12/07); Floyd Norris and Eric Dash
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Anxious Builders Pile on Incentives
The latest survey taken by NAHB indicates that 56% of builders are now offering incentives to home buyers, up from about 45% a year ago. And those incentives are growing bigger. In California’s San Diego County, Chris Heller, a real estate agent with Keller Williams Realty, says that on houses in the $700,000 range, his clients are typically scoring multiple concessions totaling as much as $80,000. Generally, that includes a price reduction, an agreement to pay closing costs or upgraded flooring or appliances — or a combination of all three. Builders in the greater Dallas-Fort Worth area have also been struggling to move homes and are using incentives more freely. In suburban Dallas, incentives on single-family homes abound, including price reductions of as much as 20% and free swimming pools. Steve Wall, president of Wall Homes Inc., says his company is knocking as much as 18% off the list price for inventory homes in the city’s northeast suburbs. For other homes yet to be built, the builder is offering free blinds, a free covered patio and 50% off upgrades, up to $20,000. “It’s more competitive than this time last year,” he says. Builders generally try to avoid outright price markdowns, in part because it angers prior home buyers who don’t want prices in their subdivisions forced down. (www.wsj.com)
Wall Street Journal (7/9/07); Jeff D. Opdyke
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Maine Lumber Industry Falling on Hard Times
The housing market is down, taking the price of dimensional lumber down with it; and a shortage of logs is driving up the price of mills’ raw material. Put it all together and Steve Banahan, sales manager at Moose River Lumber in Moose River, Maine, said lumber mills’ profit margins are getting squeezed to the break-even point. Moose River Lumber, which employs more than 80 people in the small town near the Canadian border, had to shut down three times in the past two weeks because of a shortage of reasonably priced logs, and the sawmill will be going to a four-day work week until the situation eases. One reason for the shortage of logs is demographics, with loggers getting older and retiring and not being followed by young people getting into the business. Another problem appears to be that the Canadian government has cut back on the harvest of timber from land owned by the government, causing Canadian mills to bid up the prices of logs from the U.S. That means mills are paying higher prices for logs at the same time that prices for dimensional lumber are declining. (www.pressherald.mainetoday.com)
Portland Press Herald; 8/13/07; Alan Crowell
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Hispanic Growth Extends Eastward
Rapidly growing numbers of Hispanics are fanning out across the eastern half of the USA and settling in rural and suburban counties far from traditional immigrant strongholds, according to Census numbers. The number of Hispanics has soared since 2000 in counties such as Paulding near Atlanta, Kendall on the western edge of Chicago, and Stafford, Prince William and Loudoun in Virginia, outside Washington. None of the traditional immigrant gateways — including Los Angeles, Chicago and New York — remains among the fastest-growing Hispanic centers. The Hispanic population in Pennsylvania’s Luzerne County, two hours north of Philadelphia, nearly tripled since 2000, the fourth-fastest increase among large counties. The Census data show that diversity is increasing in more parts of the country. In 303 counties — nearly one of 10 — the share of whites has slipped below 50%. Eight more counties joined the list since 2005, and 205 others are nearing the mark with more than 40% minorities, nearly all in the South and West. (www.usatoday.com)
USA Today (8/9/07); Haya El Nasser and Brad Heath
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Developer Thinks Outside the Wooden Box
Developer John Petchel says his new concrete 1,400-square-foot, three-bedroom condos in Henderson, Nev. are strong enough to withstand a hurricane, sturdy enough to last through a wildfire and energy-efficient enough to cut their owners’ electricity bills by 80%. He has constructed 12 townhouses in a rundown neighborhood where homes leak cooled air through holes in windows or walls, and he is building another 36 units on vacant lots around the corner. Although his concrete townhouses cost about $3,000 more than a traditional wood-frame home ($125,000 compared with about $122,000 for the same wood-frame unit), he says the houses make up the difference with the savings in air conditioning bills within two years. Petchel uses insulating foam forms reinforced with rebar and surrounded by concrete on each side. The 8- to 15-inch walls are covered with stucco, shingles or wood on the outside and traditional drywall on the inside. Interior walls are usually also concrete, and roofs are traditional tile. The Southern Nevada Home Builders Association says that the percentage of homes in the valley built with concrete is “minuscule” and that most of its members still build with stick framing, which can be built to be just as energy-efficient as concrete homes. Donn Thompson, residential technology manager for the Portland Cement Association, said that about 18% of single-family new construction starts in the U.S. used some form of concrete frame in 2005. (www.lasvegassun.com)
Las Vegas Sun (8/5/07); Phoebe Sweet
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