“Tight” expresses the feelings of home builders as they try to find funding to put up new residences around Las Cruses, N.M.  That’s the view for John Hadley, from his perch as president of the Building Industry Association of Southern New Mexico. “There’s no funding; absolutely, positively none,” said Hadley, who owns Desert Star Realty and Desert Sky Builders. He said he believes that local banks are wary of the economy and the federal government. “They cannot and will not do anything unless the feds approve,” he said. Hadley said that the federal government has implemented programs for community banks to issue building loans, but he has been told that the hoops for banks to jump through are prohibitive. In addition, the national scene continues to affect Las Cruces. “We’re being hurt by five markets, otherwise we’d be healthy,” he said. “Michigan, Florida, Nevada, California and Arizona, those five markets are killing us.” That does not mean, though, that no work is taking place. But builders and customers often have to be creative with financing. “I’ve got clients and I’m probably going to end up with my best year in two years,” Hadley said. “The majority of them are doing it with their own cash, nobody really has a bank loan.” (www.lcsun-news.com)
Las Cruces Sun-News (7/17/10); Brook Stockberger

If you take a step back from the current doom and gloom of foreclosures and declining sales and focus on the low construction levels over the past few years, some economists say a housing shortage might be in the offing. A 2009 report by Massachusetts Institute of Technology economics professor William Wheaton says that despite the glut of existing homes, with current depressed levels of construction, there might be “excess demand” for newly constructed homes. We’re only adding about 600,000 new housing units a year now, and the long-term growth in new households is 1.3 million to 1.4 million per year, says Ross DeVol, executive director of economic research at the Milken Institute. The household formation rate has fallen off somewhat because of the recession. But that decline is misleading because college graduates have chosen to live at home with their parents while they find their financial footing, and people defer getting married for a year or two. But long term, that household growth says that “if we build substantially less than that amount, which we’re doing now, in four, five or six years, if we don’t ramp up housing starts, we could see a shortage,” DeVol says. One risk is that so many home builders leave the field during the current downturn that there could be “capacity constraints” in the long term as the U.S. population continues to grow, says John Vogel, professor of real estate at the Tuck School of Business at Dartmouth. There won’t be constraints in overbuilt places like Las Vegas, Phoenix, Riverside, Calif., or Miami and Ft. Lauderdale. But if the pace of home construction doesn’t pick up, “we are going to begin to see some tightness in some areas of the country that didn’t have the boom and bust occur,” DeVol says. The regions most likely to be undersupplied by mid-2012 are those where supply and demand are now in balance, says Celia Chen, senior director of housing economics at Moody’s. Chen includes states like Washington, Oregon, New Mexico and Utah in this group. (www.smartmoney.com)
SmartMoney (7/26/10); Lisa Scherzer

Some intrepid home owners are intentionally taking a loss on their current house — and writing a big check to retire their old mortgage — in order to buy twice the home for not much more money. Scott Ayler, 35 years old, and his wife, Jaclyn, 33, recently decided to trade up to a larger home in their native Denver, despite taking a loss on their current house. In 2004, they paid $234,000 for a three-bedroom 2 1/2-bath house built that same year in Green Valley Ranch, a subdivision that has among the highest foreclosure rates in the city and lacks upscale amenities. They are in contract to sell the home for about $204,000. Their new home, built this year, cost about $323,000, comes with four bedrooms and three baths, and sits on a corner lot overlooking a reservoir. The house, which was initially listed at $379,000, is in Denver’s desirable Cherry Creek area, known for excellent schools, plentiful amenities and few foreclosures. With $195,000 remaining on their original 6.625%, 30-year fixed-rate loan, the Aylers estimate their total paper loss will be around $45,000. They are putting down only $11,500 on the new house. But because the new FHA loan carries a 4.5% rate, their monthly payment will rise by only about $290 a month. They say they expect price appreciation in their new home. And with a young daughter and plans for another child, they need more space anyway. “We don’t want to wait for the market to come back,” said Mr. Ayler, general counsel for an energy company. “We wanted a better quality of life now.” “Loss aversion is a very, very strong force,” says Christopher J. Mayer, a Columbia Business School economist. “People don’t like to sell their homes for less than they paid for it.” But, he adds: “Why should it matter? If you sell a home for less than you pay for it, you would buy for less, too.” (www.wsj.com)
Wall Street Journal (7/24/10); M.P. McQueen

Nearly one in four American couples sleep in separate bedrooms or beds, the National Sleep Foundation reported in a 2005 survey. Recent studies in England and Japan have found similar results. And NAHB says it expects 60% of custom homes to have dual master bedrooms by 2015. The marital bed, once the symbol of American matrimony on a par with the diamond ring, the tiered wedding cake and his-and-hers martinis, is threatened with extinction. “Till Death Do Us Part” is fast becoming “Till Sleep Do Us Part.” Separate sleepers cite a bevy of reasons for their habit, including apnea, restless leg syndrome, his insistence on watching “Sports Center,” her need to get up early for yoga. As Barbara Tober, the former chairwoman of the Museum of Arts and Design, told The New York Times recently, “Not that we don’t love each other, but at a certain point you just want your own room.” (www.nytimes.com)
New York Times (7/23/10); Bruce Feiler

Building luxury homes on spec has always been a risky proposition that most home builders ardently avoid. A look at Villanova Heights explains why. Villanova Heights is a community being built on 16 acres in the estate section at Riverdale, an affluent enclave in the northwest corner of the Bronx, N.Y. When completed, the development will hold 15 large homes designed by architect Robert A.M. Stern, dean of the Yale School of Architecture. The homes cover 11,000 square feet of space, and have libraries, swimming pools and elevators. But after nearly two years on the market, not one home has found a buyer, even after asking prices were slashed. The price of the most expensive model was cut to $7 million from $12 million. Local brokers say potential buyers find the Villanova homes attractive, but are nervous about paying prices that are substantially higher than existing homes nearby. Older homes in the estate section of Riverdale are smaller than those at Villanova Heights, but older properties are on the market for between $2 million and $4 million. The Villanova homes also are on relatively small lots of less than one acre. Spec homes in the current market work best when they are the least expensive homes, according to Bernard Markstein, senior economist for NAHB. Selling spec homes becomes more difficult in the middle and luxury markets. If the homes are priced right and have the proper amenities, a developer can have reasonable success, but it isn’t a guarantee. (www.wsj.com)
Wall Street Journal (7/14/10); Brittany Hutson

More scared of the possibilities than sure he was doing the right thing, Guy Tridgell bought a house with a whopping 850 square feet, not including the finished basement, which is about a third of the size of the average American house these days, according to NAHB. “When we started moving in furniture, the house became dollhouse small,” he said. “Once a kid was added to the mix a year ago, it became phone booth small. Today, the fit has never been tighter. But I’ll happily take it.” Tridgell said there was no sticker shock, and “by not paying as much for our house, the loss in value when the economy went south hasn’t been that great.” Also, “one nugget of wisdom my folks passed to me was to buy something that a person could maintain on one income. The suggestion seemed quaint at the time, like something from the 1950s. With job loss happening all over, it’s turned out to be great advice. I’ve witnessed other people lose their jobs and immediately start figuring out ways they can dump their house as a means to buy groceries. I won’t face that scenario unless things get really, really ugly.” Other advantages include: home improvements are more manageable in a small house; it’s cheaper to heat and cool; looking at the same four walls encourages the family to get out of the house and walk the neighborhood, eat on the patio and exercise; you don’t accumulate as much junk; the tax bills are smaller; and the home is easier to clean. (www.southtownstar.com)
Southtown Star (7/14/10); Guy Tridgell