Borrowers Are Feeling Some Heat But It’s Not a ‘Mortgage Meltdown’
Although the term “mortgage meltdown” has become so common on TV, in the headlines and in casual conversation that it might be assumed that this is a tough time to get a mortgage, mortgage money is plentiful; the majority of mortgage products remain relatively unaffected by troubles in the subprime market; and interest rates for 30-year, fixed-rate loans remain in the low 6% range for people with reasonably good — not necessarily perfect — credit. Even interest rates on jumbo loans for more than $417,000 have fallen after spiking this summer. The main change over the past several months is that “the products and underwriting that allowed people to buy houses they couldn’t afford have disappeared,” said Ted Grosse, president of 1st Mortgage Advisors in Los Angeles. Kit Crowne, a loan officer with Right Trac Financial Group in Manchester, Conn., said even sophisticated home owners with high incomes are under the impression that the entire mortgage market is in crisis. Recently handling a relocation financing for a professional couple moving from New Jersey to Connecticut, one spouse said that they weren’t really sure they would be able to even qualify for a mortgage because of their graduate and dental school loan debt. Crowne checked the couple’s credit and verified assets and put them into a cream-puff fixed-rate first mortgage at 6.25% for 30 years. (www.washingtonpost.com)
Washington Post (9/29/07)
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Public Not That Worried About Mortgage Crisis Affecting Own Finances
In a Gallup Panel survey conducted Aug. 23-26, about seven in 10 Americans say they are following the news about the home mortgage-lending industry closely, including 28% who are following it very closely. In the same poll, 45% of Americans say they are following the news about problems with Chinese products very closely. Americans appear to be far more apprehensive about the impact of the subprime mortgage crisis on the national economy than on their own financial situations. Seventy percent of Americans say they are worried that the problems in the home mortgage-lending industry will have a negative impact on the U.S. economy, with 21% of respondents saying they are worried and 49% who are somewhat worried. When considering their own financial situations, about one-third (35%) say they worry about the impact the subprime lending crisis will have on their day-to-day finances — half as many as worry about the effect on the national economy. That is the same level of concern expressed about the impact of the subprime crisis on their ability to borrow money and that renters express about their rent. Americans are slightly more concerned that the crisis could have a negative impact on their investments (42%), with stock investors more likely to express concern (51%). Forty percent of home owners are worried about the impact on their investments (42%), with stock investors more likely to express concern (51%). Forty percent of home owners are worried about the impact on the value of their homes. (www.knowledgeplex.org)
Knowledgeplex (9/10/07); Magali Rheault
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Housing: Diverse Game Plan Helping Builders Ride Out Slump
Diversity is the game plan for success during the housing slump in the Kansas City area. “The developers who are having big problems right now are the ones building cookie-cutter subdivisions the way they did five years ago,” said David Gale, president and owner of Gale Communities in Lee’s Summit. “Consumers are different than they were even five years ago. The key to housing is choice, and consumers have a huge array of choices compared to 20 or 30 years ago.” Gale’s company has three developments under way; each is significantly different, “and that is key to success in this marketplace,” he said. Diversity also works for Kevin Stucker, president of Stucker Construction in Blue Springs. Stucker has found a profitable niche as a leading builder of town homes. “There is excess inventory throughout the city,” he said. “All of the builders can attest to that, but we are doing our best to suck in our gut and ride it out. The main thing we are trying to do is have the right product in the right location. It may sound like empty rhetoric, but that’s what it’s all about. We have been able to do that with successful town home projects in places such as Kansas City, Harrisonville and Belton.” Kansas City Homes in Grain Valley has carved a successful niche by building affordable housing for first-time buyers. “About 70% of our projects are in the 140s, and the other 30% are in the 160-to-280 range,” said Brian Colson, a partner in the business. “Starter homes are affordable for people tired of living in apartments. They can get in for about $900 a month, which may not be much more than they pay for rent.” Business is as good as can be expected in the current economy, he said. “It’s been a different market in 2007,” Colson said. “Our sales are off about 20%, but we currently have 118 duplexes and single-family homes under construction. We look for 2008 to be a good year.” (www.kansascity.com)
Kansas City Star (9/25/07); Alan Goforth
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Facing an Unstable Housing Market, Some Developers Are Retooling Plans for New Homes
The faltering housing market is having a powerful effect on some of the most anticipated projects in California’s Inland Empire, with local housing starts down 45% for the first eight months of the year compared to the same period in 2006 and several large housing developments either going by the wayside or slowing their pace. One housing segment is thriving despite the slowing market, however. In dense, urban areas stretching from Los Angeles to Ontario, mixed-use developments centered around mass transportation are taking off, said Jeff Simonetti, vice president for government affairs and chief economist at the Baldy View Chapter of the Building Industry Association of Southern California. “As an area gets built out, I think it makes it a riper opportunity for mixed-use,” he said. Mixed-use developments often have condos or apartments above offices or retail. Three mixed-use projects in Ontario are moving ahead as planned, said Greg Devereaux, the city manager. In downtown Redlands, the city’s latest analysis shows demand for 1,200 to 1,300 housing units downtown, Community Development Director Jeff Shaw said. Chicago-based General Growth Properties is planning 230 condos above retail as part of Redlands Village, a mixed-use project that will attract people who don’t want to drive all the time and who want a more urban lifestyle, said Redlands City Councilman Mick Gallagher. (www.dailybulletin.com)
Inland Valley Daily Bulletin (10/1/07); Jason Pesick
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No End in Sight for Idaho’s Growth
With all due respect to Phoenix, Las Vegas and Orlando, Idaho is the state with the nation’s fastest-growing economy. Home building in the state hasn’t crashed as it has across much of the USA, and a two-decade run of prosperity continues. Idaho’s population grew 13.3% from 2000 to 2006 to 1.466 million. That’s twice the national growth rate, although the average of about 30,000 new residents a year is small compared with Arizona or Florida. For Idaho, however, it’s like adding a major city every year. In 1990, only Boise, Idaho Falls and Pocatello had more than 30,000 people. Today, nine cities are that big. Developer Doug Fowler believes he has a way to let Idaho grow and keep its identity. He’s turning one of the state’s most valuable pieces of real estate — the 1,297-acre Harris Ranch, within Boise’s city limits — into an upscale, eco-friendly community. His development will have 2,800 homes clustered on 358 acres. The rest will be left untouched, or even improved by the restoration of native prairie grass. The scenic foothills will not be developed. Bald eagle habitat will be preserved. The river that runs through the ranch will remain pristine. The developer even plans to keep a few head of cattle grazing on the land for symbolic reasons. Fowler believes he can make more money giving people the Idaho experience — rivers, fishing, open space — than carving land into cul-de-sacs and quarter-acre lots. The first lots, among the biggest and most expensive, will cost about $300,000. (www.usatoday.com)
USA Today (9/27/07); Dennis Cauchon
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Montgomery Home Prices a Seven-Figure Shock
In a trend officials in Montgomery County, Md. called shocking, the median price for a newly constructed single-family detached home in the county rocketed to a record high of $1.13 million in the first quarter for this year, according to government data, up from $881,600 last year. The county’s new-construction home prices are soaring, county officials said, because developers are responding to the downturn in the housing market by focusing on building large, high-end homes for affluent buyers. “What we see when we look at the data, though, is not so much that all the houses are becoming more expensive, but that in the current market, builders stopped building middle-of-the-market houses,” said Karl Moritz, research chief of the Montgomery County Planning Board. Experts said the county has several factors that insulate it from the decline in median home prices in many areas over the past two years, such as a strong job market, proximity to downtown Washington, D.C., strong schools and a generally well-run government. Meanwhile, median prices for townhouses as well as existing single-family detached homes remained stagnant this year, at $505,462 and $540,000, respectively. The median price for existing townhouses increased slightly, to $364,000. (www.washingtonpost.com) Washington Post (9/27/07); Philip Rucker and Nancy Trejos
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