Affluent Are Also Losing Homes
The number of home owners defaulting on their loans in the Baltimore metro area last year rose the fastest among highest-income counties with the most expensive housing — Howard, Anne Arundel and Carroll. Foreclosures were even higher in the wealthy Washington, D.C. suburbs, according to a Baltimore Sun analysis of court records statewide. All but two of Maryland’s 10 most affluent counties — those with median household incomes topping $70,000 — saw foreclosure rates rise by more than 50% in 2007. Montgomery County, where the typical household income is more than $87,000, saw its foreclosure cases rise nearly 130% — the biggest jump in the state. Housing experts blame the frenzy of easy mortgage money available during the housing boom and the beginning of the slump. The share of buyers opting for “piggyback loans” to cover the full cost of a home with no donwpayment tripled in Montgomery County between 2004 and 2006 to three out of every 10, according to a recent study by the Reinvestment Fund for the Baltimore Homeownership Preservation Coalition. “I realize I’m not the only one, but I didn’t realize how many people are being confronted…with this kind of situation,” said LuJuanda Dixon, who is working with counseling group HomeFree-USA to try to save the house in Bowie that she bought with her husband last year for $650,000. Before Danny Dixon lost his job in November, they were making $100,000 a year. (www.baltimoresun.com)
Baltimore Sun (3/16/08); Jamie Smith Hopkins
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Swooping in From Overseas
With the U.S. dollar at its weakest level in decades, international buyers are chasing housing bargains here, eager to take advantage of their purchasing power and the declining prices in some of the best-known U.S. cities. Stephane Torriglia flew in from Spain about a month ago to check out a rowhouse for sale on Capitol Hill that belongs to a friend and former Marine who now lives in Spain. He estimates that it could be worth as much as $1 million and has offered $800,000. He plans to put 50% down if the offer is accepted. “The idea is we’ll convert our euros into dollars,” Torriglia said. “We can rent the place out. Maybe in five years or six, the dollar will be strong again and the real estate will gain value. It’s an opportunity.” A study by the National Association of Realtors® found that about 25% of the real estate agents surveyed last summer said they had more business from international clients than they did five years ago. The weak dollar was cited as one of the reasons for the uptick. More than a quarter of the foreign buyers bought their homes with cash, and when they took out loans, they put down more money than domestic buyers, the study found. About 26% of foreign buyers ended up in Florida and another 16% in California, with Texas in third place. (www.washingtonpost.com)
Washington Post (3/15/08); Dina ElBoghdady
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Utah Seeing Less of Housing Slump
While its housing price appreciation dropped in the fourth quarter of 2007, Utah’s numbers for the entire year show a 9% increase, according to the Office of Federal Housing Enterprise Oversight’s fourth quarter national report of price appreciation rates. This was the highest of the 50 states, according to the report, which showed a national average increase of 0.8% last year. “Utah didn’t experience the type of price appreciation of other states in the bulk of the boom,” said Andrew Leventis, senior economist for OFHEO. “Utah did not have the affordability constraints that have really affected other places.” “You have to keep these things in perspective,” said Carol Sapp, executive officer for the Southern Utah Home Builders Association. She said that five-year appreciation rates give residents a better idea of their home’s value. Utah’s western neighbors didn’t fare so well. In all, Nevada had a 5.9% decrease in price appreciation. Arizona saw a 2.4% decrease and California a 6.7% decrease, according to the report. Other high appreciating states included Wyoming, 8.3%; North Dakota, 7.9%; Montana, 6.9%; and Alaska, 6%. (www.thespectrum.com)
Thespectrum.com (3/14/08); Alyson Van Deusen
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Builders Stand Pat Here, Put Up Sticks Elsewhere
In response to a severe local housing recession, developers like Mick Pattinson, president of Carlsbad, Calif. home builder Barratt American, are sitting on land plots they have poured millions of dollars into and looking outside of the state to build. Because readying land for homes can take three years or longer, builders acquired and invested in land long before the start of the housing downturn. Now that the land is ready, Pattinson will wait until the market shows signs of recovery to build. In the meantime, he has started looking at projects in Idaho, Utah and Canada. “We’re all dressed up with nowhere to go,” said Pattinson, whose company sold 397 homes in Southern California in 2006 and 116 in 2007. Michael Crews, founder and president of Michael Crews Development in Escondido, said his company probably invests more money outside the state than within it. While waiting to develop 13 land plots in Fallbrook, Calif., his company is selling homes or developed land in Arizona, Idaho, Texas and Utah. His company sold 63 homes last year, down from 111 in 2006. Pattinson expects to be building in California again in about one year, with a seven-month housing inventory, down from 12 months currently. But some economists and academics have predicted it will take longer, maybe three or four years, because the median home price needs to be affordable for the median-income households. But some builders say it is impossible to build affordable housing in San Diego and turn a profit because of permitting fees, which have been ramped up in recent years. “You can’t have some of the regulations and priorities that we encumber housing with in California and then lament the lack of affordable housing in any genuine sense,” said Paul Tryon, chairman of San Diego’s Building Industry Association. “If you go back to 1977, housing in California was exactly as it was nationwide in average price….It was desirable in 1977. It didn’t get sunnier. The surf didn’t get bigger.” (www.nctimes.com)
North County Times (3/17/08); Zach Fox
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Regulations Are at the Root of U.S. Housing Mess
A recent study by Cato Institute scholar Randal O’Toole draws on broad economic literature to conclude that recent price swings in housing are the result of out-of-control government regulation. For most of U.S. history, real estate prices have tended to rise with inflation. In periods when they increase faster than that, home building activity rises, driving prices back. Since the U.S. is flush with land, it has generally been easy for supply to respond to higher prices, and push them back down. But in the 1960s and 1970s, California and Hawaii began a movement that sought to limit this with growth management planning that effectively confined growth to within a line around the city. Over time, this regulation has spread dramatically. “In 2006,” O’Toole reports in his study, “the price of a median home in the 10 states that have passed laws requiring local governments to do growth-management planning was five times the median family income in those states. In contrast, a median home in the 22 states that have no growth-management laws or institutions cost only 2.7 times the median family income.” (www.bloomberg.com)
Bloomberg (3/17/08); Kevin Hassett
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The House in a Box
Promoted by design magazines such as Dwell, kit homes sold as parts have attracted a near cult-like following among style-minded home shoppers and do-it-yourselfers. The factory-fabricated houses, often in modernist designs, can bring efficiencies to a process notorious for cost overruns and delays. And fans say they are greener because they create less waste than on-site construction. The kit house from designer Rocio Romero starts at $42,000, but Matthew and Allison Meeks spent nearly eight times that to have it assembled in Gallatin, N.Y. At 1,500 square feet, the house had three bedrooms and two baths. But buying the roofing, doors, windows and interiors, plus other charges, quickly blew their $260,000 budget. Mrs. Romero charged $8,400 in design fees to allow the owners to eliminate the basement, take out a wall to open up the kitchen and flip the floor plan. They swapped out the galvanized steel exterior for cedar, costing $4,500. The cost of floor-to-ceiling windows and doors containing argon gas between the double panes for energy efficiency was $32,500. The land was a bargain $42,000 for three acres, but it was sloped, requiring a $22,000 above-ground septic system, versus about $3,000 for a standard in-ground one. The Meeks paid their contractor a fixed price of $64,000 for what they thought would be four months of work. But site conditions such as hitting rock and delays from ordering custom materials not included in the kit stretched the project to a full year. All told, the house cost $250 a square foot, or $375,000. While local architects say custom building starts at about that price, it was 44% over the couple’s budget. Still, “it was worth it,” Mr. Meeks says. “I wound up with a home that was way cooler than I thought it would be.” (www.marketwatch.com)
MarketWatch (3/13/08); Sara Lin, Wall Street Journal
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