Lowball Appraisals Spark Uproar
In San Diego, Steve Doyle, division president for Brookfield Homes, is trying to close out the final 20 houses of a 120-unit single-family subdivision at prices ranging from $340,000 to $350,000. But recently there’s been a major hitch as appraisers assigned by banks are coming in with valuations of $60,000 or more under Doyle’s selling prices. The appraisers, who Doyle says are inexperienced, unfamiliar with local market trends or both, are using distressed sales — foreclosures and short sales — as their “comparables.” Some of the distressed properties are in poor condition, and all of them offer fewer amenities, Doyle says. In the suburbs near Cleveland, Enzo Perfetto, manager of Enzoco Homes, builds custom houses on clients’ lots. Recently, he said, banks have begun assigning appraisers from far outside the area to value lots as part of mortgage packages on new homes. Some of the comparables they use are in foreclosure situations, and that depresses land valuations. A young couple who paid $75,000 for their lot recently had it valued at just $30,000 by an out-of-area appraiser who looked only at online data, according to Perfetto — discouraging the couple from proceeding. “I think the pendulum is swinging way too far in the wrong direction on appraisals,” Perfetto said. Bank-assigned appraisers often “don’t know the local market and they’re going for low numbers to be ‘safe.’” (www.washingtonpost.com)
Washington Post (7/4/09); Kenneth R. Harney
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Toughest Times for Utah Housing May Be Nearing End
The collapse of Utah’s housing bubble in 2008 wiped out at least $20 billion in residential real estate wealth, eliminated thousands of construction jobs and forced hundreds of home builders out of business, according to James Wood, director of the University of Utah’s Bureau of Economic and Business Research. Yet Wood, in a new research report titled “Utah’s Home Building Industry: Present Perspective, Future Prospects,” suggests the rate of the home building industry’s decline has been slowing of late. “The diminished weakness in recent months allows for some hope that the bottom of the housing cycle in Utah is near,” said Wood, noting the industry nevertheless still faces enormous headwinds. Curt Dowdle, chief executive of the Salt Lake Home Builders Association, said the industry may have hit bottom in Utah already or is near it. “We had two strong incentive programs, one federal and the other the Utah Home Run Grant that gave new home buyers $6,000 in downpayment assistance to help them purchase never before lived in homes,” he said. Those programs — that resulted in 1,600 Utahns receiving state grants — helped reduce inventories of unsold homes in Utah, Dowdle said. “What is happening, though, is that builders who want to construct new homes are being stonewalled by lenders and can’t get the financing they need,” he said. “We may be near the bottom but the question is whether the recovery will be V-shaped or U-shaped and how long it is going to take,” Dowdle said. (www.sltrib.com)
Salt Lake Tribune (7/10/09); Steven Oberbeck
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Housing Company Lowers Costs by Taking Out the Middle Man
Residents of Middletown, Ohio, will soon be able to buy brand-new homes for rock-bottom prices thanks to a company’s new patent-pending process. Cincinnati-based Holiday Homes has developed a new software and building process that takes out the middle man, dropping the price of a newly constructed home nearly 16%, said Dan Rolfes, president of the company. The end result is a home that is guaranteed to be built in 90 days or less, and a new, 1,251-square-foot home that would normally sell for $107,000 is available for $89,000 — which includes lot, landscaping, home and all major appliances except the refrigerator, Rolfes said. The software, which is used by the home builder as well as its suppliers and subcontractors, tightly schedules each step of the home building process, from the time a customer requests a home to the mortgage approval, construction and final release of the home, Rolfes said. This software automatically orders and tracks items such as the furnace, straight from the manufacturer, telling the supplier when and where the item needs to be shipped and installed. “The housing industry has been hit hard by the struggling economy and by leveraging my many years of experience with manufactured housing, I found a way to provide consumers with the highest quality home for the lowest possible price,” he said. (www.middletownjournal.com)
Middletown Journal (7/11/09); Jessica Heffner
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Allegan Home Builders, Buyers Cut Cost by Cutting Out Basements
Chad Kruithoff, a builder based in Allegan, Mich., said he has built and sold three homes without basements in the last two years. “Initially it was the cost factor because concrete is a major expense in the cost of a home,” said Kruithoff, owner of C.L. Kruithoff Building Co. “I can do a 1,500-square-foot, two-story on a concrete slab for $135,000 versus one with a basement for $150,000. You can save anywhere from $6,000 to $10,000 by not putting in a basement.” Two of the homes built by his company were for retirees who didn’t want to be bothered with stairs or water problems. He said basements aren’t necessary in homes, but people like them for the additional storage space and as a safe haven in the event of bad weather. In addition to going without a basement, Kruithoff said he’s building bi-levels with two bedrooms and one bathroom on the upper level for buyers who plan to finish the lower level when they need more room. (www.mlive.com/kalamazoo)
Kalamazoo Gazette (6/27/09); Jane C. Parikh
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White House Eyes Bailout Fund to Aid Small Firms
The Obama Administration is developing an initiative to take money from the $700 billion rescue program for the banking system and make it available to millions of small businesses, which officials say are essential to any economic recovery because they employ so many people, according to sources familiar with the plan. The effort would represent a striking shift from the rescue program’s original mandate, since it would direct billions of bailout dollars toward a plan that aims more at saving jobs than at righting the financial system. Some economists estimate that small businesses, defined as firms with fewer than 500 workers, employ most of the country’s workforce. A proposal being floated by senior Treasury Department officials calls for using the bailout funds to bulk up the Small Business Administration’s most popular lending program, called 7(a). Lines of credit for small companies could greatly increase in size. If a firm failed despite receiving this help, the government would cover most of the losses on the federal loan, perhaps as much as 90%. (www.washingtonpost.com)
Washington Post (7/11/09); David Cho
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From ‘Frontier’ to the Forefront; Gallagher and Henry Homes Reflect Buyers’ ‘Bungalow Roots’
Since it was founded in 1954, builder Gallagher and Henry in the Chicago suburb of Countryside, Ill., has seen its product evolve from apartment buildings to tri-levels in the 1970s and two-story houses since the 1980s. In 1971, the company started building condominiums in addition to semi-custom, single-family houses. In 1995, it added townhouses. The best-seller today is the two-story, four-bedroom Fieldstone model (at a base price of $445,900 to $482,100, depending on location), which reflects his buyers’ south suburban values, says partner John Gallagher. “These are people with bungalow roots,” he says. “They want brick — partial, at least — exteriors and informal and formal living spaces. They want some ‘wow factor’ but an otherwise very traditional plan.” The difference between the Fieldstone and the company’s earlier models is fewer walls. As buyers have demanded open floor plans, the walls between the kitchen and family room and between the living and dining rooms have come down. And, because so many of today’s buyers work from home, they appreciate the Fieldstone’s first-floor home office, says Gallagher. While more contemporary finishes appeal to buyers elsewhere, Gallagher and Henry’s buyers prefer the tried-and-true, such as ceramic-tile bathrooms and oak wooden floors, says Gallagher. Most opt for painted trim but cabinetry that’s stained dark. Gallagher says “‘green’ is not a word we hear a lot from our buyers,” but nevertheless, four members of his management team are NAHB-certified green builders. “We’ve learned ‘tight construction,’ which makes a more energy-efficient house,” he says. Part of the company’s success, says Gallagher, is foresight. “We bought property that used to be ‘frontier’ but now is close to town,” he says. “So now we are able to sell it at lower prices than our competitors can.” The “close to shopping centers, fast highways and recreational centers” tagline on the company’s 1960s Orchard Hill subdivision in Chicago still appeals to buyers today. (www.chicagotribune.com)
Chicago Tribune (6/19/09); Leslie Mann
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