Three years after the onset of the mortgage crisis, lenders continue to tighten credit standards. The initial moves were a natural reaction for a business badly burned by rising delinquencies and defaults. But conditions are now so tight that lenders are frustrating borrowers who have enviable financial situations but still can’t easily satisfy lenders’ rigid checklists. “The pendulum may have swung too far the other way,” Scott Anderson, a senior economist at Wells Fargo Securities, said in a report this month. Some analysts thought that by this point in the business cycle, lenders would have started to relax credit conditions slightly after clamping down on the risky bubble-era practices. Instead, the screws are still tightening. This is partly because lenders are taking every precaution to avoid being forced to buy back loans from Fannie Mae and Freddie Mac in the event of default. Fannie and Freddie have already tightened their standards: Borrowers with credit scores above 720 accounted for 85% of their loan purchases last year. Borrowers who have received standard paychecks and have uncomplicated finances generally aren’t getting tripped up. But others face hurdles. Self-employed borrowers, for example, document their incomes with tax returns that include business-related write-offs, which might understate their cash flow. To revive the economy, “we need the banks back in lending,” said Anthony Sanders, a finance professor at George Mason University. (www.wsj.com)
Wall Street Journal (7/10/10); James R. Hagertry and Nick Timiraos

The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like Los Altos, Calif., in the Silicon Valley. Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population. More than one in seven home owners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic. By contrast, home owners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent. Though it is hard to prove, the CoreLogic data suggest that many of the well-do-do are purposely dumping their financially draining properties, just as they would any sour investment. The delinquency rate on investment homes where the original mortgage was more than $1 million is now 23%. For cheaper investment homes, it is about 10%. (www.nytimes.com)
New York Times (7/8/10); David Streitfeld

In the first four months of this year, builders took out permits to construct nearly 1,900 residential units in the Baltimore metro area, up 70% from the same period a year earlier. Building activity is still below the 3,200 units permitted in early 2005. But the number of housing permits issued has grown more rapidly than in other parts of the state and nation. “I’m seeing much more activity, much more discussion of projects going forward that were kind of stalled,” said Jeff Kirby, owner of J. Kirby Development in Baltimore. It doesn’t mean the new-housing market is roaring again. But builders — betting that the worst is over, or at least nearly so — are trying to position themselves for a rebound. Cindy McAuliffe, president of Ellicott City, Md.-based builder Grayson Homes, said her sales “have stayed pretty steady” this year, with no falloff after the tax credit expired. All told, her company found buyers for 80% more homes between January and May than during the same stretch two years earlier, the roughest period during the slump. Maryland has one of the nation’s healthiest new-home markets, said Kenneth Wenhold, director of the Mid-Atlantic region for Metrostudy, a home building market researcher. Suburban development controls prevented the boom-time overbuilding that still presents problems in parts of the country, so few Maryland builders are now sitting on finished homes going begging for buyers. The state also has a limited supply of land ready for building, Wenhold said. “As we start to see home starts come back up, we’re going to see those lot supplies shrink to nothing,” he said. That’s why builders are buying land: They’re worried about shortages down the road. National builders in particular are tapping their cash to acquire land in the state “at an aggressive rate,” said John E. Kortecamp, executive vice president of the Home Builders Association of Maryland. “That sends a signal to everybody that we’re turning the corner,” he said. (www.baltimoresun.com)
Baltimore Sun (7/6/10); Jamie Smith Hopkins

Despite softening sales in the new-home market, national home building companies in the Denver area are continuing to buy lots, significantly driving up prices from where they were a year ago. It’s part of their push to have communities to build in when their existing inventory runs out and to position themselves for an economic turnaround. “At the end of last year, we had just one active community that we could still sell homes in in 2011,” said Matt Janke, director of land acquisition for Meritage Homes’ Denver office. Over the last six months, Meritage Homes has snapped up about 600 lots in 13 communities, and the company isn’t stopping — it closed on four land deals last week. “The price of lots has been bid up as the national home builders have come out of the bunker and realized the whole industry isn’t going to implode,” said Marcel Arsenault, chairman and chief executive of Real Capital Solutions, which has bought about 5,000 lots nationwide. “They have more cash than we do. They’ve paid prices we, frankly, can’t afford to pay. We’re finding it more difficult to buy finished lots.” While national builders are snapping up lots, small local builders are still struggling to get financing to buy lots and build homes. “The banking issue hasn’t gotten any easier,” said David Tschetter, chief executive of Colorado Custom Homes. “The big guys are sitting on a fair amount of capital, so it makes it a little easier for them to maneuver in those constraints. But for the smaller and medium-sized guys, it’s as difficult as it has been, and it will continue to be difficult.” “The recovery is showing great preference to national companies and big guys,” said Gene Meyers, president and chief executive of New Town Builders in Denver. “But really, the only business that’s too big to fail is small business because we employ 80% of the employees in this country.” (www.denverpost.com)
Denver Post (7/4/10); Margaret Jackson

Residents of Austin, Texas, are looking at smaller projects these days. Local construction workers say they’ve seen a rise in remodeling and renovation projects, and statistics from the city’s planning office show that residential construction of all kinds — including deck projects as well as things such as new garages and revamped roofs — is up versus this time last year. However, the spike in residential construction through the early parts of 2010 is coming on the heels of a three-year slump in Austin. Dave Anderson, owner of Anderson Construction, said he’s had no shortage of projects. “It’s actually been really busy this year,” he said. However, Anderson said he has noticed a shift in the type of work he’s been getting. Several years ago, more people were building new homes. Now, the contractor said, more people are looking at smaller projects, such as kitchen renovations. “People are doing lots with their existing homes,” Anderson said. Despite these types of projects, Anderson said his workload isn’t quite as strong as it was during the peak years earlier this decade. Instead, he’s noticed a slightly reduced pace that has remained steady for the past few years. (www.austindailyherald.com)
Austin Daily Harold (6/26/10); Mike Rose

Del Webb, the nation’s leading 55+ community builder, has launched its online Lifestyle Advisor as a tool to help assess the psychological motivations of active adult home buyers and give them insights on how to plan for and enjoy their next state of life. The 32-question survey, available on www.delwebb.com, was created in collaboration with psychologists and a research company after the builder interviewed hundreds of buyers and non-buyers. The scientific results are very likely to indicate whether the survey-taker would find a Del Webb Community a great place to live or not. (www.businesswire.com)
Business Wire (6/17/10)