On Aug. 17, the Treasury Department is hosting a conference of financial companies, housing advocates, academics and other interested parties to begin discussing how to design a new housing finance system that doesn’t rely as much on taxpayers. The Obama Administration is required to make a proposal by January under the bill recently passed by Congress to reshape financial regulation. A consensus is emerging among housing companies and consumer advocates over what to do with Fannie Mae and Freddie Mac. That common ground is evident in letters filed last month with the Treasury Department in response to a request for public comment about the future of U.S. housing policy. Many of the groups that responded want to maintain Fannie and Freddie — or set up several similar entities — as heavily regulated companies that offer a guarantee to investors in high-quality mortgage loans. The federal government would stand behind the guarantee. Under this scenario, the companies would charge mortgage originators a fee for the guarantee and use some of the money to cover mortgage investments that go bad. Part of the fee would be contributed to a separate insurance fund that would be tapped if one of the companies fails and can no longer stand behind the mortgage investments it guaranteed. Investors, the thinking goes, could remain confident in the mortgage securities and continue to buy them. The consensus approach would try to fix several flaws in the original design of Fannie and Freddie that contributed to their collapse — notably, their implicit government guarantee. (www.washingtonpost.com)
Washington Post (8/7/10); Zachary A. Goldfarb

There are several factors that could buoy housing during the second half of 2010, according to Michael Darda, chief economist for MKM Partners. First, with home sales and mortgage-purchase applications falling to record lows in the wake of the expiring first-time home buyer tax credit, there is a very low base against which to measure future gains. Second, we are now moving into a period (May to August) that tends to be seasonally strong for housing, as evidenced by the strong Case-Shiller numbers for May. Third, the affordability backdrop remains highly favorable, as home prices are at a record low relative to per capita disposable incomes, while mortgage rates are also at record lows. Fourth, although the recovery of the labor market to date has not been as robust as many had hoped for, private-sector jobs and income are growing and are likely to continue expanding. The highest-frequency indicators to watch for housing are weekly mortgage purchasing applications (which fell sharply over the last few months but appear to be stabilizing), the NAHB HMI Future Sales Index (which has weakened recently, but we believe should firm in the months ahead), weekly jobless claims (which our credit market indicators suggest should fall from current levels) and spot lumber prices (which took a 41.5% tumble over the last three months, but have begun to firm recently.) (www.barrons.com)
Barron’s (7/28/10) Michael T. Darda

Prospective home buyers who thought new-construction homes were out of reach should think again. For now, they are holding their own against their resale counterparts. Here’s why. First, “Prices are rock bottom,” said Andy Konovodoff, president of Lombard, Ill.-based Town & Country Homes. “Prices of the new market equate to the prices we were selling homes for in the 1990s. I recommend not to wait to catch the bottom. We’re at the bottom, but just bouncing along. The demand is building. When it comes back, prices are going to appreciate very quickly.” Second, low mortgage rates. “If you have a comfortable income that you believe will remain at that level, now is an excellent time to strike,” said NAHB Chief Economist David Crowe. “You can no longer take advantage of the federal buyer credits, but these interest rates are a huge incentive to strike now. I think they will remain relatively low for another year, but I don’t think they will be as low as they are right now for an extended period. As the economy heats up, rates will go up.” Third, tax advantages. “You can deduct the mortgage interest and property taxes from income taxes,” said Crowe. “And when you sell the house, you do not have to pay capital gains tax on the first $500,000 in gain.” Fourth, energy efficiency. Crowe pointed out that improved building codes mean more energy-efficient homes, which cost less to operate. Fifth, amenities. Sixth, a place to call your own. For many people, homeownership offers peace of mind and a feeling of stability. “There’s the psychological benefit of it being your place,” said Crowe. “You can decorate it, renovate it, change it and customize it to your taste. You don’t have to ask the landlord for permission.” (www.chicagotribune.com)
Chicago Tribune (8/6/10); Brenda Richardson

Researchers at Nielsen believe consumers over the next decade will have fewer children, leading to smaller households and fewer young consumers to lure. A rough economy will lead to those smaller young families spending less, and smaller salaries for younger generations known today as “Generation Y” and “Millennials.” As the baby-boom generation retires and grows old, America is likely to have a larger older population and a much slower-growing young one, suggested Doug Anderson, Nielsen’s senior vice president for research and thought leadership. “There will be a huge number of people over the age of 65, 75 and 85 over the coming decade. We’ve never had a population this big this old before,” he said. “This is not something that demographers and anthropologists have tons of models sitting around that they can talk about. We as a species have never had this many older people before. It’s new ground.” Most times senior citizens are still seen in ads selling life insurance or denture cream, yet the older person in the U.S. in the next decade is likely to be anything but helpless and in the market for more than just financial help and medications. According to Nielsen, baby boomers in 2010 account for approximately 38.5% of all dollars spent on consumer package-goods such as diapers, toothpaste and laundry detergent. They account for 40% of customers paying for wireless services and 41% of customers paying for Apple personal computers. And while brand alliances are often thought to be established when a consumer is in his or her 20s, changing technology has unleashed a steady spate of new devices and gadgets that are new to all consumers. With older folks having salted money away and younger consumers expected to find income shrinking over the next decade, “targeting older consumers makes sense because you might be reaching more of your consumers” with the pitch, said Pat McDonough, Nielsen’s senior vice president for planning and policy analysis. (www.adage.com)
Advertising Age (7/19/10); Brian Steinberg

According to the 2009 Characteristics of New Housing survey by the U.S. Census Bureau, there was a 12% increase in porches between 1999 and 2009. NAHB also released a report saying that between 1995 and 2005, the number of new homes with porches increased about 10% while decks decreased 7%. Gina Muzzy, who co-owns Muzzy Builders Inc. with her husband, Doug Muzzy, said front porches are making a comeback because people want to increase the curb appeal of their homes. “For the types of homes we build, we always have some sort of a front porch,” Gina Muzzy said. “You want people to like your house enough to stop and look at it.” Some of the homes by Muzzy Builders are in the Village of Cherry Hill, a neighborhood based on the New Urbanism movement, another reason for an increase in front porches. According to the website for New Urban News, a publication that promotes the movement, the idea is “based on principles of planning and architecture that work together to create human-scale, walkable communities.” It is a response to the increase of suburbs after World War II, which separated the residential areas from businesses, thus increasing the reliance on cars. (www.columbiatribune.com)
Columbia Daily Tribune (8/1/10) Haley Adams

Today’s home buyers aren’t just looking for good schools and low crime rates when they evaluate a neighborhood, many brokers say. They’re paying much more attention to what they can walk to. “Everyone wants to know now how close they are to stores,” says Linda Duggan, an owner of The Duggan Group real-estate agency. She recently had clients who, given a choice between a house in Danville, Calif., and another that was bigger, newer, $300,000 cheaper — and 20 minutes farther from town — chose the first one. Earlier this year Scott Newman, of Newman Realty in Chicago, started highlighting how close his listings are to amenities. The number of amenities in walking distance can vary sharply from block to block, he adds. Websites have sprung up to rank which homes have the most amenities within walking distance. The most commonly used one is Walk Score, started in 2007 by Seattle software company Front Seat. The site saw visits in May more than double from year-earlier levels, to 938,000, according to comScore Inc., which measures online audiences. Ads on real-estate websites now include Walk Scores, and some 4,000 websites now link to the site’s map, where users can input an address and get a score. Real-estate prices are reflecting the new interest in walking distances. A study published in August of 90,000 homes across the country by nonprofit CEOs for Cities, a group of urban-redevelopment advocates, found that having more amenities in walking distance can boost home values. As measured by Walk Score, walking-distance amenities raised values by as much as $3,000 for a one-point increase in rankings. (www.wsj.com)
Wall Street Journal (7/2/10); Nancy Keates