Equity Losses Aren’t Felt Evenly
In the Federal Reserve’s latest report, home owners on a national basis lost an estimated $879.6 billion in net equity wealth in the first quarter of this year compared to a year earlier. The number may sound shocking, but it needs to be put into perspective. During the housing boom years, nearly $3 trillion in net equity was racked up in a few years as prices exploded in local markets with high levels of speculative investments powered in part by low interest rates and exotic mortgages. For individual property owners, depending upon where they live, these wild gyrations of equity growth, followed by equity shrinkage, may not mean a lot. “I don’t think numbers like an $880 billion equity loss are all that meaningful for most individual home owners,” said Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association. “When you look at home price data over the last five years, you find that large parts of the country never got caught up in the boom and bust cycle.” The big drops in prices are disproportionately concentrated in California, Florida, the mid-Atlantic states and New England, he said, and “most markets haven’t been hit anywhere near as hard.” (www.washingtonpost.com)
Washington Post (6/14/08); Kenneth R. Harney
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Housing Slump Helps the Draw of Fixer-Upper TV
The housing market is collapsing, but television shows about housing are booming. The audiences for HGTV and TLC, the two channels with the most so-called property programming, have grown steadily over the last three years as they have shifted their focus away from buying real estate as speculative sport to more educational and emotional shows. Last year, with the housing market slumping, programmers at HGTV doubled their orders of “House Hunters” and “Designed to Sell,” two shows offering advice on buying and selling decisions. Susan Miller of Louisville, Ky., considers herself a student of HGTV. She said the channel offers her family advice as it sells a small rental house and searches for a vacation home. The shows “have taught us that investing a few hundred dollars in repairs, painting and accessories can yield thousands of dollars from the sale,” she said. While Miller has not sold the rental house yet, she said she nevertheless takes guilty pleasure from seeing $50,000 living-room makeovers on HGTV’s “Divine Design,” and $500,000 homes on “What You Get for the Money.” (www.nytimes.com)
New York Times (6/12/08); Brian Stelter
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Rental Revival: Soft Condo Sales Prompt Strategy Shift
The Atlanta condo market has become a victim of the subprime mortgage crisis and subsequent global credit crunch, with local real estate developers saying that financial backing for condo projects has all but dried up. Those able to get financing are turning to high-end rental apartments instead. “Building condos right now is next to impossible, it really is,” said Stephen Franco, a partner at Franco DeFoor Properties, an Atlanta real estate development company. “It’s just financing. You can’t get financing for condos.” Franco said his company is planning to build 250 to 300 upscale apartments in southeast Atlanta’s Reynoldstown neighborhood, not far from a cluster of condo complexes. “The new darling child of multifamily residential is rental,” he said. While the Atlanta market never became as overheated as areas such as Miami, a glut of units has forced prices down and left some buildings half-empty. And a number of condo projects begun during the boom are under construction and poised to come online, further saturating the market. “Apartments are a fabulous sector to be in right now,” said Bill Donges, CEO of Atlanta-based Lane Co. and chairman-elect of the NAHB Multifamily Council. “People are coming back to rent because less people are able to qualify” for home mortgages, he said. (www.ajc.com/)
Atlanta Journal Constitution (6/11/08); Paul Donsky
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Housing Slump Hits Microbusinesses Hard
The housing slump is hitting doubly hard a growing number of owners who run microbusinesses — small, often home-based companies that employ nine or fewer workers. A new report from the National Association for the Self-Employed in Washington, D.C., found that 62% of microbusiness operators said they’re concerned that sliding home values will affect their ability to survive and grow. Eighteen percent of the respondents reported having adjustable-rate mortgages, and they’re faced with resetting interest payments that could mean they’re out of house and headquarters alike. But the 60% of participants who took out fixed-rate mortgages aren’t immune to the housing downturn. Falling values and rising foreclosures everywhere mean borrowers with safer, traditional mortgages can no longer rely on home equity to finance expansion. Big lenders such as Countrywide have frozen home-equity lines of credit for virtually all Nevada customers, while other banks have constricted loans for all but the most creditworthy borrowers. “Because so many home-based business owners use the equity in their home to grow or keep the business afloat, they’re in a dire situation when home values are dropping and the credit market is tightening,” said Kristie Darien, executive director of the National Association for the Self-Employed. (www.lvbusinesspress.com)
Las Vegas Business Press (6/9/08); Jennifer Robison
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Relocating to Houston Proves Difficult When a House Won’t Sell
Carole Hackett, vice president of human resources of The Methodist Hospital in Houston, has some high-level management jobs to fill, but she is having trouble because of slumping real estate markets in Michigan, Illinois and Ohio. Since about January, good candidates from the Midwest and beyond have been saying: “I’d love to come to Houston, but there is no way I can sell my house,” said Hackett. As houses linger on the market and prices continue to fall in many U.S. cities, some recruiters in Houston are wringing their hands. “My intuition is that the housing market crisis in the United States is greatly affecting labor mobility,” said Barton Smith, director of the Institute for Regional Forecasting at the University of Houston. “But we may not get a handle on that until the 2010 Census comes out.” One reason he suspects something is afoot is that word is getting out that Houston is a job creation machine, yet some openings are going begging. “In this stage of the countercyclical economy, you would expect mass migration to Houston,” said Smith. But the city hasn’t been flooded by out-of-state license plates, and one explanation is negative equity — people owe more on a house back home than it’s worth so they’re stuck unless they’re willing to eat a big loss. (www.chron.com)
Houston Chronicle (6/16/08); L.M. Sixel and Nancy Sarnoff
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Today’s Floor Plans Reflect Dimensions of Modern Life
Today, master bedrooms are in on the ground floor of home design and they are bigger than ever before, often coming with sitting areas, spacious walk-in closets or dressing rooms, and even efficiency kitchens. The most tossed-about term these days for buyers, real estate agents and designers alike is Master on Main. “I don’t know of a new house we’re selling that doesn’t’ have a master on main, or even more common, a master and another bedroom on the main floor,” says Kirby Britt, a real estate agent with Keller Williams in Greenville, S.C. “They use that second bedroom as a second bedroom, an office or a guest room.” To add utility, the spare bedroom is usually accompanied by a full bath. Heather McGowen, communications director for Greenville-based Donald A. Gardner Architects, says that the rooms, or suites, often have refrigerators, a coffee maker, sitting area, oversized bathrooms with huge shower rooms, along with a large tub, and giant walk-in closets. (www.app.com)
Asbury Park Press (6/12/08); Mike Foley, Gannett News Service
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