Low Rates Produce Housing Interest
Lenders and mortgage brokers across the Louisville, Ky. metro area say they have seen a sharp increase in home buying activity since the Federal Reserve announced last month that it will buy up to $600 billion in mortgage-related assets. Loan applications have nearly doubled at Louisville-based Republic Bank since the government’s announcement, said bank CEO Steve Trager. Kathy McGann, managing broker of Re/Max Properties East, said there has been an increase in traffic at open houses, and more written purchase offers, since interest rates dropped below the 6% level. “It’s definitely warmed things up,” said McGann, whose office has 110 agents. Demand for housing will increase if rates stay low, giving consumers a better chance of selling their existing home perhaps at a higher price, said Dan Bauer, dean of the Rubel School of Business at Ballarmine University. (www.courier-journal.com)
Louisville Courier-Journal (12/8/08); Alex Davis
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Long-Term Numbers Tell a Different Story
The latest federal statistics on housing prices in hundreds of local markets reveal patterns that haven’t been making the news. While on a national basis home owners have lost more than $1 trillion in equity since the end of the boom, the overwhelming majority of markets continue to show net cumulative value growth over the past 60 months. According to the third-quarter survey released Nov. 25 by the Federal Housing Finance Agency, out of 292 metro markets, 273 showed positive net home values over the course of the previous five years, while 19 were negative. Nationally, the survey found prices down 4% over the year, but still up almost 29% over five years. Unlike stocks, where your asset values can go from peak to zero in a matter of weeks, house values tend to be far slower moving, and can be more durable over extended periods. Buy a house and hold onto it for five to 10 years in all but the most severely depressed local economies, and you’re likely to see positive growth in its value, even if a rough patch of price deflation intervenes. For example, In Washington, D.C. and much of its suburbs, an area that saw a 12.5% price decline in the past year, the cumulative gain for home owners over the past 60 months has been 43.7%. If you bought a $300,000 house in mid-2003, in other words, it’s likely to be worth about $431,100, despite this year’s drop. (www.washingtonpost.com)
Washington Post (12/6/2008); Kenneth R. Harney
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Oklahoma City Mayor Pumps Up Local Home Market
Oklahoma City Mayor Mick Cornett pumped up Oklahoma City as a top-tier market for home purchase and mortgage accessibility today. On the Miliken Institute’s recently released list of best performing cities, Oklahoma City climbed 50 spots from the previous year and was one of the biggest gainers. “Confidence is what leads people to buy a house, and the more you look at this data you realize that people in Oklahoma City and in the metro area have every reason to be confident and to still be pursuing homes and to continue to invest in real estate,” Cornett said. “All the factors are there. The Oklahoma City economy has slowed somewhat, but it’s still doing much better than everyone else. Our housing prices are still going up and the rest of the country looks at Oklahoma City with some level of envy.” Greater Oklahoma City Chamber’s Roy Williams said the federal government announced that Oklahoma was the number one state for home-value gains and that Oklahoma City was one of the top 35 metro areas relative to home values. (www.okcbusiness.com)
OKC Business (11/25/08); Pamela Grady
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A Spending Plan Is Crucial, Boston Fed Chief Says
The U.S. financial system won’t return to normal until credit flows more freely, the housing market stabilizes and the federal government enacts a massive spending package to stimulate the economy, Boston Federal Reserve Bank President Eric Rosengren told a risk management conference in Geneva on Dec. 8. “Given that interest rates cannot be negative, further monetary policy actions are limited,” Rosengarten said. “Many observers and commentators are suggesting that fiscal stimulus will be an important element of the economic recovery.” Conditions have improved over the past several months because of the Feds’ actions, but credit markets remain under stress, he said. Short-term loans that finance business operations are still harder and more expensive to get, he added. Meanwhile, efforts to stem the rise in foreclosures and stabilize housing markets have made “relatively modest progress” because of rising unemployment and continued declines in home prices, Rosengren said. “We need to see some improvement in the housing market. Stabilization in house prices and a drop in foreclosures would help the overall economy, as well as the banking sector,” he said. (www.boston.com)
Boston Globe (12/8/08); Robert Gavin
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Builders Reinventing Roles Out of Necessity
In today’s challenging times, residential builders continue to tap their other skills to diversify and make ends meet while they wait out the worst housing market since the Depression. Most of them, at least right now, say they plan to keep a foot in the sideline businesses to ease the pain of any future downturns. Curtis Perlman of Empeco Custom Builders has tapped into the knowledge of property tax assessments he’s gained as a home builder and as an owner of several rental properties in Lake County, Ill. Now working with an appraiser and a real estate attorney, Perlman has hung out his shingle to do property tax appeals. Primarily through word of mouth, he’s generated a fair share of consumers as clients, but he’s also won business from some of his home-building competitors sitting on empty lots. Perlman, like a lot of other builders, also has made the natural progression into remodeling. “There’s always going to be people who will remodel because they like where they live and don’t want to move,” said Bryan Nooner, chairman and chief executive of Distinctive Cos., an Orland Park-based home builder. Remodeling companies also benefit, he noted, from home owners who would like a new house but can’t qualify for a mortgage. So, instead, they obtain a line of credit and tinker with their existing homes. Nooner, who has launched remodeling and landscape divisions this year, had to school employees on how to work in a house with people living in it, rather than build in an empty subdivision. He also had to investigate the legal issues involved with remodeling. He hopes to make the sideline business a larger part of the company’s revenues in the long term because remodeling doesn’t involve carrying land costs and his profit margins are similar to those in home building.(www.chicagotribune.com)
Chicago Tribune (12/5/08); Mary Ellen Podmolik
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Builder Giving Away House at Eagles Game
Pulte Homes Inc.’s Delaware Valley Division will give away a $300,000 home — or that amount toward the purchase of one of its more-expensive houses in one of its 17 communities — during the Browns vs. Birds game at Philadelphia’s Lincoln Financial Field on Dec. 15. More than 4,000 Eagles fans registered on the Eagles’ Web site to be one of three picked at random to toss a regulation NFL football through a hole in a miniature Pulte Hampton model home from 20 yards away. Gopal Ahluwalia, vice president of research at NAHB, said he had never heard of another builder actually giving away a house in such a way in his three decades with the association. “Yikes,” said Marshall Granor, a principal in Granor Price Homes in Horsham, Pa. “I have seen free cars — in the old days, it was a Yugo; now I’ve seen ads for a free Porsche or Mercedes,” but never a whole house. “I guess Pulte believes the positive vibes will generate enough traffic for their salespeople to catch a few undecided buyers,” Granor said. “I think it is a big gamble, but it’s innovative.” Still, he said, the publicity Pulte will reap from national television exposure and among Eagles’ fans is probably worth several times the builder’s outlay.” (www.philly.com)
Philadelphia Inquirer (12/4/08); Alan J. Heavens
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