Market Driving Risky Mortgages Adjustable-rate and interest-only loans together accounted for 63% of all loan originations in the second half of last year, according to the Mortgage Bankers Association, and the group’s chief economist, Doug Duncan, says that’s probably the highest it has ever been. And about one-fourth of buyers across the country are taking out interest-only loans, most of which are adjustable, reports San Francisco-based LoanPerformance. Lenders say that with home prices rising so quickly, many buyers couldn’t afford homes without using the loans. Also, lenders are pushing the loans to maintain a high sales volume at a time when loan refinancings have plunged. Many economists are alarmed that so many buyers are choosing these loans at a time when the interest rates on fixed-rate mortgages remain at near-record lows. “I don’t know anyone who thinks rates will come down,” said economist Dean Baker, co-director of the Washington, D.C.-based Center for Economic and Policy Research. “Almost everybody expects rates in three or four years to be much higher than they are today. People who are professionals are systematically misadvising people. They want to make the deal.” (www.washingtonpost.com) Washington Post (6/3/05); Kirstin Downey [Return to top]
Mudd Vows to Change Fannie Mae Culture At a town meeting with more than 1,000 of Fannie Mae’s approximately 5,000 employees and a conference call with investment analysts, Daniel H. Mudd, the new chief executive officer of the housing finance giant, pledged to change the culture of the company in the wake of last year’s accounting scandal and set the hiring of a corporate ethics officer as one of his top priorities. He said he will also be filling several other key positions, including chief financial officer and chief risk officer. Mudd pledged that the company would be more transparent and that it would disclose another accounting violation if one is uncovered. In response to an analyst’s question, he said that the company will continue to decrease its portfolio of mortgages, mortgage-backed securities and other assets until it meets the capital reserve requirements set by its main regulator, the Office of Federal Housing Enterprise Oversight. “What came across in the call to me was, ‘We’ve got to turn the culture around; we are turning the culture more in the direction of service and the client,’” said Bruce W. Harting, a Lehman Brothers analyst. (www.washingtonpost.com)
Washington Post (6/3/05); Annys Shin [Return to top]
Court OKs School Fees on Homes A state appeals court in Florida has cleared the way for the doubling of school fees on new homes in Lee County as early as this fall. The school fees currently stand at $2,232 for every new single-family home built in the county and $691 for every multifamily unit. Builders are paying almost $10,000 per home in impact fees for schools, parks, roads, fire protection and other services, and those costs are passed on to new home buyers in the county. Michael Reitman, executive vice president of the Lee Building Industry Association, said that the higher impact fees are not likely to curtail local growth, but they will make it tougher for working people to live in the county. “We’re the hottest housing market in the country; it won’t affect us,” Reitman said about home builders. But “new school teachers, firefighters, people working in Lee County and county employees will not be able to buy a new home.” Reitman’s association, along with First Home Builders and home owner Tina Brown, filed the original lawsuit against the school fees in December 2001 challenging their fairness and the method used for computing them. (www.news-press.com)
News-Press, Southwest Florida (6/2/05); David Breitenstein [Return to top]
Impact Fees Will Nearly Double The Hernando Builders Association may challenge a unanimous decision by the Hernando County Commission in Florida to nearly double the fees for new homes from $4,779 to $9,211 starting next month. Assuming that builders construct 3,000 new houses in the coming year, as expected, the fees will generated $28 million. They generated $15.5 million in 2004. State law requires the fees to be based on the cost of providing new residents with roads, schools and other facilities and services, and builders say that the fees have now climbed higher than those costs. “We sure feel as though we pay our fair share,” said Stuart Glover, owner of Palmwood Builders. The new fees, he said, “would put too much weight on the new folks moving in.” (www.sptimes.com)
St. Petersburg Times (6/3/05); Dan DeWitt [Return to top]
Laguna Beach Landslide Sends Homes Crashing Down Hill Eighteen hillside homes were destroyed, dozens of others remained in danger and as many as 1,000 people were evacuated in a landslide last Wednesday in Laguna Beach, Calif., about 50 miles southeast of Los Angeles. The slide occurred about a mile from the beach on steep sandstone hills that have been densely covered by two- and three-story homes that generally sell for $2 million or more. The slide was “almost certainly” related to winter storms, said Ed Harp, a geologist with the U.S. Geological Survey based in Golden, Colo. The area has received 27.85 inches of rainfall since July 1, 2004, compared to its annual average of 12.60 inches. Half-an-inch of rain fell in the area on May 5-6. The area historically has experienced flooding, mudslides and wildfires, and several of its homes were red-tagged as uninhabitable in February. In February 1998, a rainstorm triggered slides that damaged 300 homes, 18 of them seriously. An October 1993 fire swept down into the city and destroyed some 400 homes. Most were rebuilt within a half-dozen years. (www.signonsandiego.com)
San Diego Union-Tribune (6/1/05); Ben Fox, Associated Press [Return to top]
Supervisors Greenlight Summerhaven Plans Replacing the six-unit Alpine Inn that burned in the Aspen Fire in 2003, Pima County, Ariz. Supervisors have approved a combined lodge-restaurant-condominium development that will try to promote ecotourism in harmony with the Mount Lemmon area. The new lodge’s 54 overnight units and condominiums will be designed to meet environmental standards of the U.S. Green Building Council, supported by the Environmental Protection Agency and NAHB. The lodge will be built of salvaged trees from the fire, will use efficient toilets and dishwashers to reduce consumption and will harvest rainwater for landscaping. The six-acre project, including shops, may take seven to 10 years to build.
(www.azstarnet.com)
Arizona Daily Star (5/18/05); Tony Davis [Return to top]
Tucson Home Buyers Priced Out Soaring home costs that have been rising much faster than local incomes have priced at least 1,000 households out of the housing market in Tucson, Ariz. in the past year, according to NAHB economists. House hunters Chris Johnson, a registered nurse, and Tammy Johnson, a nursing assistant, both 23 and the parents of two children, had a hard time finding the three-bedroom home they needed with a price tag of no more than $150,000. After twice finding homes they liked but being outbid by people willing to pay more than the asking price, they finally were able to find a home for $162,000, with the husband’s parents cosigning for the loan. Median incomes in Pima County fell 1.5% from 2002 to 2003, while the median home price jumped 7.9%, and the situation has gotten worse since then. The median price of new and existing homes in the county in March was $184,609, up 18% in a year. If the price were $5,000 higher, another 4,400 households would not have qualified for a mortgage, according to NAHB’s “priced out” calculators. Competition for homes has become so fierce that attached to some bids are “accelerating clauses” for pre-approved, incremental increases in the bidding price in an effort to outdo other buyers. (www.azstarnet.com)
Arizona Daily Star (5/15/05); Joseph Barrios [Return to top]
Regulation and Fees Add Heat to a Bubbling Housing Market A growing number of localities are imposing exorbitant impact fees to meet expenses unrelated to the development they are charging, according to NAHB, including one city in California that has routinely charged for the cost of building new parks even though it hasn’t opened a park in 27 years. “Home builders are often an easy target for local tax authorities,” says Clayton Traylor, senior vice president at NAHB. “These taxes are invisible and the people they fall upon — ultimately those who buy new homes — don’t have a voice.” Brian Catalade, NAHB’s vice president/treasurer, complains that he was recently forced to spend $1.1 million on road building almost three miles away from his construction site. The Department of Housing and Urban Development says that in some towns “gold-plated” regulations still require cul-de-sacs to be built to allow a 1950s fire engine to turn around, even though modern fire vehicles require less space. Bryan Applegate, director of America’s Affordable Communities Initiative at HUD, says a duplicative and time-consuming planning process has also been adding to upward pressure on house prices. “Cutting back on fees and regulation could cut development costs by about a third in some places,” he says. (www.ft.com)
London Financial Times (5/27/05); Christopher Swan [Return to top]
Business Leaders See Many Priced Out of Living Locally in South Florida Business leaders attending a recent economic summit in Palm Beach on the outlook for South Florida heard that soaring home prices are making it difficult for the region’s employers to recruit workers from other parts of the country. James Tarlton, head of the Broward Alliance, said he wondered how police, firefighters, nurses and teachers will be able to afford to live there. Home prices have risen 32% in Palm Beach County and 27% in Broward and Miami-Dade counties over the past year, according to the Florida Association of Realtors®. Andrew Rosen, president of Kaplan University in Fort Lauderdale, said he recently offered an Atlanta man a $150,000 salary to take a top post at his company, but the job candidate refused to accept anything less than $200,000 after he took a look at housing prices. Rosen said this will make it difficult to lure employees from anywhere but a few high-cost areas in California and the Northeast. Kelly Smallridge, head of the Business Development Board of Palm Beach County, said her group is working with an aerospace firm that hopes to add jobs paying $40,000-$50,000, which was once considered a generous salary. “If you’re creating jobs that pay $40,000 or $50,000, where are those people going to find homes in Palm Beach County?” she asked. (www.palmbeachpost.com)
Palm Beach Post (5/27/05); Jeff Ostrowski [Return to top]
Downtown Atlanta Hopes for a Change of Pace Despite development activity slowing in all property types in the Atlanta area, buyers and renters are lining up for new condominium and apartment units in established urban neighborhoods, driven at least partly by an effort to escape some of the nation’s highest commuting costs. On the 138-acre site of an old steel mill in the city’s Midtown section, Atlanta’s Jacoby Development Inc. and New York-based Global Real Estate Investment Corp. are developing the $2 billion Atlantic Station, which will add 7.5 million square feet of retail, office and entertainment space, with hotels and as many as 5,000 residential units. Developer Sembler Co., based in St. Petersburg, Fla., will wrap up four urban mixed-use developments by 2006 with a total of 1.6 million square feet of storefront space and 1,200 residential units. Real estate markets in the nation’s ninth-largest metro area have been slow to recover, with job growth of only 0.8% for the year ending in March. But a relatively low cost of living is attracting corporations to the city. At 11.5% at the end of last year, Atlanta’s apartment vacancies were the third highest in the U.S. at the end of 2004, behind Houston and Denver, but they were lower in more developed parts of the city. Atlanta’s median housing price is just $155,562. (www.realestatejournal.com)
RealEstateJournal, Wall Street Journal (5/31/05) Nancy D. Holt [Return to top] |
