MHN Blog

Online Mortgage Company and Finance Ads Send a Message to Search Engine Sites

The recent Fed cuts increased business at mortgage companies like LendingTree.com--and decreased their need for advertising.

The day after the last rate cut, LendingTree.com had a record amount of traffic. As a result, its marketing team immediately reduced its search engine ad campaigns, according to The New York Times.

That may be good news for LendingTree.com, but it's certainly not good news for the search engine ad sector, which has reaped considerable profits from financial services clients over the years.

The Decline Goes Online

Although the housing slump began in 2007, its effects on online advertising are just beginning to surface.

• Financial ad spending usually rises by 30 to 50 percent each year; this year it is equal or down for some companies, according to Efficient Frontier, one of the largest buyers of paid search listings for marketers.

• From January 2006 to January 2007, credit and mortgage ad spending increased by 24 percent; this year, spending is up just 3 percent from last year.

The financial services sector spends up to $2.7 billion each year on online ads in the U.S.--one-third of that is mortgage-related, according to Oppenheimer.

No one is sure how the reduced spending will affect Google, Yahoo or other search engines (both of which did not comment in the Times story)--but it is likely the effect will be felt. Losing a financial services client means more to a search engine site than losing, say, a retail client because the financial client pays higher rates for its listings (an average cost-per-click price of $2.70, versus around $.36 for retailers, according to Efficient Frontier).

And Google's stock price dropped by about 8 percent this week because of concern that people weren't focusing as much on its search engine ads, according to the Times.

A Solution for Search Engines?

It's entirely possible another sector will suddenly increase advertising, softening the blow. After a moratorium against drug ads was lifted in 1985, pharmaceutical consumer magazine ad spending increased 77.4 percent to $123.5 million in 1993, according to Folio--providing an unexpected boost to magazine ad revenue that year.

Or search engines may just need to refocus their attention to actively find that new ad source. Print newspapers have been damaged by the housing decline--particularly in their classified sections. The McClatchy Co. newspaper chain just reported a 14.4 percent decline in January revenue this week.

But a recent Editor & Publisher article about how many small community newspapers last year thrived--some even had their best year ever--suggested cultivating smaller advertisers in the community and focusing on highly-targeted local news coverage can help offset hurdles like the housing decline. It's helped smaller papers survive.

It would seem, then, that part of staying on top of the ad game--for companies and for publications--involves really watching and reacting to the local market. For newspapers, that market is a community. For companies like LendingTree.com, it's an industry.

And for search engines, that means the economy. What client (or potential client) could be Google's financial ad revenue replacement? We'll be watching to see if the company figures it out before its profit takes a hit ...

 

Wells Fargo Targets At-Risk Areas with New Lending Limits

Wondering what the worst housing markets in the country are? Wells Fargo has made a list.

Wells Fargo--the second-largest U.S. provider of home loans--denoted "soft," "distressed" or "severely distressed" markets in 24 states and Washington, D.C. in a document sent to mortgage brokers this week, according to Reuters. The list identified more than 200 troubled markets.

Wells Fargo will restrict lending in those areas starting tomorrow, by limiting loan size to a percentage of home values--no matter how safe the borrower seems.

The markets include:

• At least 33 risky markets in California, with a minimum of 20 counties, including Los Angeles and San Diego, labeled as being in severe distress.

• Thirty-three high-risk markets in Florida and 15 in Michigan and Virginia. Maryland and Ohio have 13 at-risk housing markets apiece.

• Worrisome markets in Arizona, Colorado, Connecticut, the District of Columbia, Illinois, Louisiana, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Washington, Wisconsin and West Virginia.

Wells Fargo is a large lender, so further restrictions could mean tough times for troubled homeowners in at-risk markets trying to refinance. It's not likely to help buyers dig into that bloated housing supply--which the Commerce Department revealed Wednesday had swelled to a 9.9 month supply, the largest in more than 26 years--in those areas, either.

The new Freddie Mac, Fannie Mae and FHA regional loan limits will be announced by March 14, the deadline the economic stimulus bill gave HUD to determine area home prices; that should help some spots--especially areas with high-cost homes like California. Previous FHA limits in many areas of California were so low that many homebuyers purchasing moderate homes--which often were above the loan limits because the high average area home price was so high--couldn't qualify.

Wells Fargo's need (and all lenders' need) to cover its back is understandable--protecting against future risk is important, and our financial system needs it to recover. But the outcome of Wells' stricter lending standards really could potentially make the refi and buy situation worse.

Will other banks follow suit?

New Government Data Highlight a Bleak Big--and Small--Picture

Common items are getting more expensive, and consumers are losing faith in the economy, according to data released on Tuesday.

Which is not good news for those hoping to prevent a recession (I'm guessing that would include pretty much everyone).

The Conference Board said its index of consumer confidence for February dropped to 75--below expectations, and the lowest reading in 15 years (except for during the 2003 Iraq War). Consumers are down about the current and upcoming economy, according to The Wall Street Journal.

To be honest, the Conference Board didn't sound so confident, either. "With so few consumers expecting conditions to turn around in the months ahead, the outlook for the economy continues to worsen and the risk of a recession continues to increase," said Lynn Franco, director of the Conference Board's Consumer Research Center.

Fan-tastic!  Good thing our cost of living isn't going up--yet wait, it is. The Labor Department announced Tuesday that the core index--excluding food and energy costs--was up a seasonally adjusted 0.4 percent in January after an 0.2 percent December rise.

Energy prices rose 1.5 percent last month; gas was up a whopping 2.9 percent. A New York Times article today said gas prices may hit $4 a gallon by spring, further dragging on household budgets.

Natural gas rose 0.7 percent, and food costs increased by 1.7 percent. (You know it's bad when I sit down to dinner with a friend I hadn't seen in awhile and one of the first thing she says is, "Seriously, have you SEEN what prices corn has been going for lately?")

Surely the rising prices aren't helping with consumer confidence--but we're in a vicious cycle. Rising cost of living prices weaken consumers' faith in the economy, which, in turn, scares consumers into investing and spending less. Overall consumer spending--especially on nonessential items--drops, and the entire economy suffers. Which makes people more concerned about their personal investments and often prompts them to reduce spending--and the cycle begins again.

The bigger the strain on personal finances, the bigger the strain on the overall economy: But how do we stop the cycle?

• Spend wisely. Invest conservatively. Save. Make home improvements now, while you know you'll be in your home for several years due to the market. The home is most consumers' biggest investment, so invest in it to invest in your future.

• Encourage first-time homebuyers. They might be our strongest chance of getting out of the current housing slump because they're the most logical group of buyers to attack the country's ridicuously high housing inventory. Not only will young first-time buyers hopefully have strong enough credit histories (or at least, ones new enough to be fairly unblemished) to easily obtain loans in today's market, their purchase won't add another home to the market.

• Be positive. We can't cut the amount of negative housing industry and economic woe articles the media produces, but we can meter our reaction to them. Housing goes up, and housing goes down. The market will improve. So keep the faith--consumer confidence is never going to rise if all we do is focus on the negative now instead of the future forecast.

Making the Repair Process a Breeze, Not a Bust

Condo and apartment property managers deal with many resident repairs--some of which are the building's responsibility, some of which aren't.

As I type this, a contractor is replacing my front door--in part because my circa-1985 door began splitting like a wishbone a week ago (the hallway got the larger half--so make a wish, elevators!), and in part (of course) because I believe in supporting the remodeling and repair industry.

Yet the experience has illustrated a few methods that can make the repair/remodel process smoother for property managers, contractors and residents--who are often all working independently for the same goal: A safe, reasonable repair that won't disturb the building's character or quality of living.

That said, because everyone is working independently, there can be a lot of back and forth, confusion and sometimes costly mistakes. So I've compiled the following suggestions for property managers, contractors and residents. Feel free to read them, develop them into a client handout, forward them, comment on them, add to them--I'd love to hear your input.

Ways Property Managers Can Make Their Lives (and Their Residents' Repairs) Easier

You're the source of knowledge for renters and for owners (maybe owners should know what repairs you cover and what ones you don't, but more often than not, they'll shoot you an e-mail or call to ask.)

As such, even if you're not responsible for a repair (like, say, a condo unit's front door), you can provide helpful guidance to residents to get the job done the way the building wants it done--and hopefully reduce future problems or eating up your time handling the issue. Some things to consider:

• Have standard (but customizable) responses to common questions. When my door first began having issues, my building manager told me it was common in our building, and that I could swap it out with any solid wood core door. I assumed I'd also need to find a doorknob that looked like my old one--but the building didn't have information on where to find it (or let me know most residents who replace doors swap it out from the current door, along with the peephole). As it turns out, the knob, peephole and deadbolt had to match the previous versions--which the contractor I hired told me. Had I done the repair myself, I wouldn't have done that--resulting in more work for my property manager to let me know it had to be replaced and possible fines for my unit.

• Provide a general timeline. The residents request may not be first priority on your list due to other pressing concerns--but you can bet it's first on theirs. For repairs the building is responsible for, even if there will be a wait for the unit repair to be made, giving owners or renters an accurate estimate of when the problem will be fixed goes a long way toward building trust and resident satisfaction.

• Keep a database of renter repairs. Have you had a lot of window frame issues in recent years? Are plumbing issues on the 4th floor becoming an increasing issue? Tracking unit issues can help you gauge overall building needs.
  

• Consider doing an annual resident repair survey. In addition to finding out how residents feel about your level of service, an annual survey can help property managers find out what problems unit owners or renters are having and also can allow managers to develop a list of frequently used (and liked) contractors.

• Go the extra mile on the first request. If a resident e-mails to ask about a repair that isn't the building's responsibility, providing a complimentary list of building-approved contractors and information on where to order any replacement parts the building requires isn't just being proactive--it's doing the job to the fullest and best extent possible.

Ways Contractors Can Make The Repair Process Easier

Always remember that residents have different levels of repair know-how--don't assume they have too little or too much. They're often desperate for a fix to be made or totally confused; other times, they're debating doing it themselves, and you're going to get hired based on your expertise. A few thoughts:

• Be in touch--as promptly as possible. It's hard to call potential clients back when you're out working on jobs, but being in contact is important. One contractor I talked to Friday promised to call back with a quote either Saturday or Monday; I never heard from him. I moved on to another contractor, but even if I hadn't, I took that as a sign of irresponsibility.

• Be realistic about deadlines. If you're not going to be able to get to the area for three days to do the repair, don't say you'll try to stop by that day.

• Consider giving a quick quote. Obviously, you'll need to come look at the unit for some repairs before giving a price estimate; but if it's a fairly fast, standard job you've done many times in the building, give the unit owner an approximation or range. I called several contractors about the door; only one wanted to make an appointment to come see it, even after I told them it needed to be replaced very soon and they told me they'd done dozens in my building. When I pushed for a price estimate, it was so much higher than the other contractors I'd talked to, that--coupled with the fact they wanted to come out later in the week before starting work and my door was barely functional now--I took them off my list.

• Make sure you include any extras. If your price includes a post-job cleaning service, special features or other services, tell the client on that first call. Always highlight your high level of service--almost all the contractors I spoke to made sure I knew they would also paint the door once it was installed.

• Develop relationships with large buildings. Rental buildings may outsource a number of their repairs; condo buildings often recommend contractors regularly who are known for doing good work--which can significantly cut the amount of time you spend on marketing yourself to new clients.

And Finally, Ways Residents Can Make Life in General Easier for Everyone

You may want the repair done yesterday--but you want it done right.

• Confirm all repairs with the building. It's better to check beforehand about approved materials and installation methods--before you do the work and risk a fine.

• Don't panic, and be polite. When you contact your property manager, realize the situation will be fixed, if it is by the building or you. Hysteria isn't going to help.

• Consider using a building-approved contractor. It's less paperwork and you may get them sooner if they're already there working on other projects. (Mine came the next day because they were working on someone's unit on the 6th floor.)

• Do your homework. Figure out what's wrong, look up any related terms and be able to describe the problem to any contractors or the property manager--it makes everyone's life easier.

• Confirm the services are what you want. Are you responsible for clean-up? Do you need to sand or paint anything, or will the contractor do that before leaving?

Have any other tips or suggestions for property managers, renters or contractors? Share your industry knowledge by posting below!

Does a Famous Name Really Give Property a Push?

On Friday, we discussed how some celebrities seem to have unusual luck in the real estate market--and why some buildings are using celebrities as a marketing tools.

However, some people could care less about whether or not a famous person is attached to the home they want to buy.

And--especially in today's market--celeb power alone may not sell a unit.

The Star Sell: Not for Everybody

A star owner or neighbor, in some cases, may up the value or quicken the sale of a condo or apartment.

But celebrity tie-ins aren't popular with all developers--or with all celebrities, for a variety of reasons:

• Not all celebs are interested in being known for their real estate buys. Jon Stewart bought his 6,000-square-foot, $5.8 million Tribeca loft in 2004 under a corporation named for his dog and cat--presumably to conceal the transaction.

• Not all buildings are interested in a celeb connection. Developer Izak Senbahar said that Leonardo DiCaprio's broker suggested he receive a 20 percent discount for buying in the 165 Charles Street building. "I said, 'I don't think so.' We don't need gimmicks," Senbahar told The Wall Street Journal. (DiCaprio's spokesman declined to comment.)

And truthfully, the effectiveness of promoting a building or unit with a celeb name is unclear. New York real estate Web site Curbed.com says celebs don't always sell apartments faster.

"In the case of Madonna and the East 62nd Street townhouse, yes. Lenny Kravitz and the Duke Semans mansion, not so much," the site says. (Luxist.com also reports Courtney Love had a hard time selling her unit at 30 Crosby Street, where Kravitz' also lived--he's had a hard time with property it seems.)

Also, not all celebs cash out on real estate deals: "Law and Order" actress Mariska Hartigay sold her downtown penthouse apartment, originally listed for $6.5 million, for $5.1 million in fall, according to The New York Post.

According to Forbes, while celebrities will sometimes attach their name to a condo or single-family home to get more attention, it doesn't always bring a higher price. Paddington Zwigard, a broker for Brown Harris Stevens in New York, says she'll subtly reference the celeb connection in listings--calling properties something like a "celebrated loft" rather than one "owned by a star."

In recent years, Zwigard has quietly put Harvey Keitel's Tribeca loft (and numerous other celeb listings) on the market. But even Zwigard says celeb pull only does so much--because in the end, closing the sale is all about price, location (of course) and generally fitting a property with a buyer's needs.

“I really try to spend a lot of time talking to somebody at the beginning and finding out what they want,” she told Forbes. “It feels great when you get a person and it clicks."

After all--whether or not it involves a celebrity--isn't that true of any real estate deal?

Are Celeb Apartments and Condos An Easier Sell?

Selling a home is no easy task these days--unless you're famous.

Forget how easy it must be to finance a home if you make millions. The real perks of being a star involve living at a luxury address that was owned previously by another celeb and/or features famous neighbors. (P. Diddy paid $5 million for his three-bedroom Park Imperial Manhattan apartment--which came with great views and neighbors Tommy Mottola and Deepak Chopra.)

And--of course--those perks also involve being able to said the home easily when you decide it's time for another.

While celeb mansions may be the norm in L.A., in New York, fancy apartments are just as prevalent as celeb-owned townhomes--and so are successful celeb real estate deals.

• Model Jessica Stam bought an $800,000 New York condo--her second--in 2004 and sold it for $935,000, according to the New York Observer.

• Julia Roberts is practically a Manhattan land baron, according to Forbes. She sold her Greenwich Village apartment in 2004 but still owned a bunch of apartments on Gramercy Park, including a penthouse and unit for guest or staff quarters, at the time.

Celeb Market (and Marketing) Success

The New York Times reported in December that the general housing market seemed to be gearing toward multifamily housing as mortgages became more and more difficult to obtain. Not surprisingly, celebs, too, are snapping up apartments--and a few who sell are experiencing unbelievable success, despite the otherwise troubled housing market.

For example, New England Patriot Tom Brady reportedly sold his three-bedroom condo in Boston's swanky Burrage Mansion--which features five parking spots--for $5.39 million recently, according to the Times Colonist. Brady bought the unit in 2004 for $4.1 million.

A quick sale? A profit? Celebrity has its privileges, indeed. Which is why, when it comes to real estate, star power is no new marketing tool.

Some developers--like James Helman, who created the 42-story Las Olas River House condominium development in Fort Lauderdale, Fla.--have harnessed celeb PR power to promote new complexes.

Helman gave former football star Dan Marino a discount on a 3,382-square-foot, three-bedroom unit in the property in exchange for some promotion because, as Helman says, "In Florida, Dan is the man."

Dan is also the display in Florida, thanks to Helman, who put him up on billboards around Fort Lauderdale promoting Las Olas, according to a 2005 Wall Street Journal article. (He's also all over the "events" section of Las Olas' Web site.)

Free Trips, Treats--and Three-Bedroom Units

Celebrity perks--like a condo discount--are nothing new. Fashion designers have been outfitting stars with clothes for years because it's free PR. "The same way every designer wants to dress Nicole or Gwyneth for the Oscars, every developer wants to say someone fabulous bought in the building or even looked at it," New York broker Michele Kleier of Gumley Haft Kleier Inc. told the Journal.

The luxury Cipriani Club Residences at 55 Wall Street also enlisted a little star shine to promote the condos before they hit the market. Margherita Missoni--a member of the Missoni designer family--and actor Mickey Rourke "allowed their names to be attached to the project," according to the Journal.

Supermodel Naomi Campbell posed with co-developer Giuseppe Cipriani for a photo that was used in promotional materials and ads in Vanity Fair. For allowing photo use, the celebs received a discount, Cipriani said; Campbell's publicist told the Journal that her modeling fee was deducted from the condo price.

Not a bad deal for the celebrity--but is it a bargain for the developer? Join us Monday for part two of our look at celeb condos and apartments to find out ...

Is Small Business Next On The Economic Guillotine?

The next sector to be hurt by the housing slump? Small businesses, according to USA Today.

A ripple effect could threaten small companies when larger companies--such as homebuilders and developers--see losses and cut jobs, says James Barrood, executive director of Fairleigh Dickenson University's Rothman Institute of Entrepreneurial Studies.

The effect a reduced housing demand has on builders and developers spreads directly to building material suppliers and vendors; which then decreases business activity in industries like travel and business equipment.

Just look at California. The state's weakening housing industry is expected to slow payroll employment growth in the state for the next two years and drag down overall growth, according to BusinessWeek.

If the country falls into a recession, retail, business-service and housing-related smaller businesses are in trouble; but they're already not faring well. The newer victims would be businesses of all kinds with 20 to 30 employees, which depend on second mortgages and equity loans for finance money, according to Todd McCracken, president of the National Small Business Association trade group.

The country's 26 million small businesses can actually pull the economy out of a recession, McCracken says--but only if they have the money to invest in themselves. Yet small business owners don't seem to be feeling in control: A recent National Federation of Independent Business survey showed industry optimism hit its lowest level last month since 1991.

And, unfortunately, 30 percent of banks have been restricting their commercial and industrial small company loans this year--making it harder than ever to lean on small business as our economic savior.

It would seem that it's time for small businesses to start investigating other financing sources--with as small a connection as possible to the mortgage market--and to start reaching out to new clients in different markets. Many lenders now wish they'd insulated themselves better before the subprime collapse; but there's a reason people say hindsight is 20/20.

And really, the housing decline can't be blamed for putting all small businesses in danger. In the end, tenacity, resourcefulness and smart planning will make or break a business--regardless of a strong economy or a soft one.

On Forbes' recent list of the best--and worst--small businesses to start, real estate services (which included appraisers and property managers) landed at No. 4.

But small lending institutions--community banks, credit unions and other deposit-based organizations--were No. 10 on the best businesses list. True, they deal with mortgages and mortgage-related finance--but they also run a tight ship. Only 48 cents of every dollar goes toward overheard, according to Forbes.

Why, despite a national housing slump, would small banks who provide community members with funding for homes, cars and other expenses do well, and the real estate industry--which helps people spend that money on their biggest investment--suffer?

"In some industries, knowing an area, its people and its geography matters more than scale," James Nolen, professor of finance at the University of Texas at Austin, told Forbes. "Smaller companies can also respond to changing industry dynamics [better] than their larger counterparts."

Which would mean small businesses probably could do more to protect themselves from the housing decline's effect than some of the larger lending institutions and real estate companies ever could have. That's great news. Because if small businesses do manage to successfully safeguard, they could save themselves--and the U.S. economy.

A Stimulus Shot in the Dark?

When the economic stimulus checks start making their way to our mailboxes later this year, the government is hoping we'll all cash them and promptly go shopping.

In the last round of rebates, in 2001, many did: according to Citigroup, 25 percent of the rebates issued in 2001 were spent at Wal-Mart alone.

But it's unclear how Americans will spend the rebates this time. The economy is unquestionably worse; housing starts are at their lowest level since 1991, according to Commerce Department data released Wednesday.

And everyday living is getting more expensive. The CPI rose by 0.4 percent again in January. Food costs shot up 0.7 percent, their most abrupt increase in a year.

Which may be why one recent poll found that only 16 percent of Americans plan to spend all their rebate; nearly one in three respondents said they planned to pay down debt with the rebates of $600 per individual and $1,200 per couple.

If you consider that Wal-Mart customers last month were cashing in their Christmas gift cards on basics like food instead of discretionary income buys like stereos, according to the Financial Times, it stands to reason the rebates will go toward life's little--and big--necessities.

Still, another survey--this one by the National Retail Federation-- found Americans will spend 40 percent of their rebate cash when it gets here in May, putting $30 billion will go toward paying debt and $19.8 billion will go into savings. But maybe that's just wishful thinking on the part of the retail association.

The whole point of the stimulus plan was to increase consumer spending and beef up the economy--but if one in three people use it to pay debt or bank it, it's going to have a lesser effect. Therein lies the problem with the stimulus plan--we have no way of knowing what the majority of Americans will do with a check for $600 to $1,200.

It's unlikely, unfortunately, that they'll spend it on housing. Remodeling is struggling (the National Association of Home Builders expects little remodeling growth in 2008, according to MarketWatch) and, although bonuses--another form of extra gifted money--helped propel the New York real estate market in recent years (and, when Wall Street bonuses declined, helped threaten it last year), $1,200 won't go far toward a downpayment.

But if consumers spend the rebate on retail goods, increasing consumer spending, the ripple effect could eventually reach housing--once manufacturing picks up, banks feel secure enough to relax their lending standards and more houses disappear off the bloated U.S. housing inventory.

But $600--heck, even $1,200--is a long way away from that. Will the stimulus plan work? What do you think?

The Place We Never Suspected the Credit Crisis to Spread (Part Two)

Yesterday, we discussed the prime mortgage market's difficulties--which include homeowners with good credit falling behind on their payments.

The causes are similar to the factors that pushed the subprime sector into rocky waters. And--even though considerably less troubled prime borrowers exist--the prime defaults are cause for concern.

What's next?

Well, according to the Mortgage Bankers Association, the highest rate of prime mortgages since the MBA began tracking prime and subprime mortgages in 1998 were delinquent or in foreclosure at the end of September.

As the country tries to spur residential building and the housing market by unloading some of its housing supply, it's not helping that we're adding foreclosed properties to the number of homes on the market. Nearly half the home sales in some parts of California recently involved foreclosed houses, according to USA Today.

However, some help--along with measures to prevent the situation from happening again--is on the way, in the form of:

• Reduced Rates. The Fed has cut short term interest rates, which should help ease reset rates.

• More realistic home equity credit. Banks are also starting to cap home equity lines of credit--in Florida, one of the prime- and subprime-damaged states, some lenders have moved to making home equity loans based on 90 percent (or less) of a home's value instead of 100 percent, the Florida Times-Union reported recently.

• Increased consumer credit monitoring. In addition, credit card companies are reducing limits--and increasing penalties--for high-risk customers, which may help curb growing debt in the future (although it will undoubtedly cause problems at first).

USA Today reported in early February that Bank of America plans to periodically review consumers and raise rates on some they perceive to be a risk--not necessarily because of the current mortgage issues, but some analysts say is related to overall lender losses. Consumers are, after all, falling behind on all sorts of payments.

• A plan to prevent foreclosure. And then there is Project Lifeline, the new plan announced by Bank of America, Citigroup, Countrywide, J.P. Morgan, Washington Mutual and Wells Fargo last Tuesday, which pledges to help foreclosure-facing borrowers work out a way to keep their home.

However, the plan is barely a week old and has already come under criticism from the Center for Responsible lending, which called it a "rope that is too short" due to its limitations, which exclude anyone who has missed more than three months of payments and has a foreclosure date less than 30 days away.

If more prime borrowers become entrenched in the subprime cycle, the blow to the economy could be unimaginable.

Have we seen the worst of the damage? It's hard to say. After all, did we really predict the full extent of the subprime fallout when it started?

The Place We Never Suspected the Credit Crisis to Spread

When homeowner-related credit issues began, they involved subprime borrowers--people with less than perfect credit--prompting criticism when the government stepped in with its Hope Now program to help those homeowners avoid foreclosure.

Some asked, why should we help homebuyers who over extended themselves? Isn't that their problem?

Well, according to a recent New York Times article, it's now everybody's problem.

Decreased home prices and stricter lending standards have pushed some homeowners with good credit backgrounds behind on their payments--less than the 24 percent of subprime borrowers which are delinquent or in foreclosure, the Times says, but in some areas, still a staggering amount.

For example, Arizona: The Mortgage Bankers Association found that between the third quarters of 2006 and 2007, ARM-related prime homeowner foreclosures rose 902 percent in Arizona, according to BusinessWeek.

And, all the while, subprime loans continue to do their damage. The MBA says that while subprime ARMs represent just 6.8 percent of the current loans, they comprised 43 percent of the foreclosures initiated during the third quarter of 2007.

(Interestingly enough, a ripple effect is occurring in the U.K.; more than half of the foreclosure orders are subprime borrower-owned homes, despite the fact that--as in the U.S.--they're just 6 percent of all U.K. mortgages, according to a BBC News report.)

Mortgage payments aren't the only trouble prime borrowers have stumbled into lately. If they aren't defaulting on their home loans, the Times says, the prime borrowers are falling behind on their auto loans and credit card payments--at an increasing pace.

And that's about the last thing that the housing market needs.

“This collapse in housing value is sucking in all borrowers,” Mark Zandi, chief economist at Moody’s Economy.com, told the Times.

• Why is it happening? Many subprime and prime borrowers took out the same kind of loans--adjustable rate mortgages (ARMs) that reset to a higher rate after several years of lower payments--so prime borrowers are just as susceptible to sudden higher post-reset payments as subprime borrowers.

When home prices were rising, both groups had more leeway to refinance or sell; now they are both facing high resets. The bottom line? Too many loan programs allowed too many homeowners to buy homes out of their comfort level with little to no money down on the hopes the market would keep rising--and it didn't.

• Why is it a problem? Because prime borrowers carried the weight of the subprime borrowers--for awhile, they were thought to be balancing out some of the subprime defaults, according to the Times.

• Where is it happening? The states with the highest increase in prime ARM foreclosure starts in the third quarter of 2007--Florida, Nevada, California and Arizona (which would help explain that horrific rise in prime homeowner foreclosure starts)--have a large amount of investment properties that were purchased to flip and make a profit, according to BusinessWeek.

Arizona had the eighth highest foreclosure rate in 2007; Nevada and Florida ranked No. 1 and 2, according to RealtyTrac.

And--unfortunately--those aren't the only places experiencing prime problems. For the second half of our look at the prime borrower slip, including a look at what factors will heavily influence the prime market's future, check out MHN's blog tomorrow! 

A Valentine from NAHB to Green Building

The long-awaited National Association of Home Builders' National Green Building Program debuted Thursday at the International Builders' Show--and although its details are still unfolding, the reaction was positive.

NAHB stressed that--in these often-negative residential building times--the marketability of green building can help builders get work. It's also a great way to boost client confidence in a project by stressing the over-time savings and general feel-good, giving-back nature of green building.

"This is a historic day for our association," said Bob Jones, an NAHB vice president and a builder in Bloomfield Hills, Mich. "This program allows all home builders to build green in a cost-effective way. Builders and consumers can select the green features that make the most sense for them."

It's not the only green system on the market--and the NAHB has said it expects its green building guidelines to be adjusted locally. We don't know what those changes are, of course--but today, we did learn more about the program, which has been in the works for three years.

• What is it? In the new system, NAHB will certify and train a national network of independent verifiers. The network members will test and score homes using a scale that gives points for different green features, rewarding each home with a bronze, silver or gold certification. The scale begins at 37 for a bronze; gold qualifications start at 100, according to the Sarasota Herald-Tribune.

• How is it different from LEED for Homes? To put it bluntly: The U.S. Green Building Council's LEED for Homes guidelines were designed by an environmental/government organization; its goals, unlike the NAHB National Green Building Program, were not centered around builders making money. The NAHB guidelines were made to encourage cost-effective green building,  according to Bob Jones, an NAHB vice president.

In the NAHB program, builders have the choice of more green methods and materials than with the LEED guidelines, Jones said; however, he was quick to point out that it wasn't a contest, and LEED and NAHB supported each other.

• Where can I find out more? The NAHB Green Building Program Web site.

IBS Gets Green with Help From New Program, Exhibitors

This year, more than 1,900 exhibitors--product manufacturers, distributors and more--from 300 industry categories came to meet and greet builders at the International Builder's Show in Orlando, Fla.

To make that process a little more manageable, the National Association of Home Builders has both a standard and searchable exhibitor list on its Web site.

However, in honor of today's Green Day status (coined as such by NAHB, who plans to release its green building professional program--which will give builders a Certified Green Professional designation--we thought we'd highlight a few of the unique green-centric exhibitors at the show.

• Optiflame electric fireplaces--All of the cozy comfort, and none of the bad emissions: Canadian company Dimplex's Optiflame fireplace cuts installation cost and safety concerns by foregoing gas or wood and creating a fire effect with a patented flame technology. Since it doesn't use combustion, the electric fireplace produces no carbon monoxide or greenhouse gases.

• Icynene insulation/air barrier system--Used in the IBS showcase homes, the Icynene dual-performing insulation and air barrier system creates a strong air seal, reducing air leakage and offering advanced moisture control, improved air quality and energy savings of up to 50 percent.

• Forbo Flooring--Hazleton, Penn.-headquartered Farbo now offers Marmoleum, a natural floor covering made with primarily natural raw materials, in a click-together panel and square for easier installation.

• Paige Electric Company--The retail division of Paige Electric Company, based in Ponte Vedra Beach, Fla., provides environmentally safe, energy saving LED tube lights for fluorescent tube replacement, rechargeable work lights and more.

Today will feature a number of green events--including the certification program launch, a press conference and tutorial about the National Green Building Program and William McDonough of William McDonough + Partners speaking about cradle-to-cradle design.

Excitement is brewing about the certification details announcement--for more on getting NAHB green certified, tune in tomorrow!

International Builders' Show Offers the Industry Excitement and New Opportunities

Forget Disney World: The biggest event in Orlando today is the International Builders' Show, sponsored by the National Association of Homebuilders, which kicks off this morning.

The past year hasn't been an easy one for residential builders or remodeling experts. But the annual IBS show--the housing industry's largest annual light construction trade show and exhibition, held at the Orange County Convention Center in Orlando--is a chance for builders to meet, network, exchange ideas and grow their business.

"Builders view the International Builders' Show as an indispensable business tool," said Ken Klein, chairman of the NAHB Convention & Meetings Committee and a builder and remodeler from Tulsa, Okla. "They come to the show to gain valuable knowledge on the industry; order the latest building products that will keep them competitive in their market; and educate themselves on timely sales and marketing practices."

In short: It's an event business-minded builders don't want to miss.

The show gave the industry some good news before it even started: NAHB announced in October that registration was up 15 percent from last year. (Registration is still open for those who want to attend.)

The number of dealer distributors--a huge source of prospective business--coming to the show had also risen by 37 percent. Considering more than 100,000 people from 100 countries attended last year's show, that is an overwhelming vote of confidence from the industry. (According to the Orlando Sentinel, pre-registration as of Monday was down just 12 percent, a number which the NAHB was comfortable with; final numbers aren't in because people are still registering.)

"Does this mean the downturn is over? No," Klein says. "But builders and suppliers are aggressively positioning themselves to ride out the downturn and come back strong when the market improves."

This year, the International Builders' Show will feature more than 1,900 exhibitors representing more than 300 industry categories. Visitors will have the chance to see the latest in home and building products and services and meet other industry members and potential clients.

Trade shows that large can be overwhelming--so it's good to have a game plan before you attend. The IBS Web site has a nifty online planner that allows you to personalize what personal and show events you want on your schedule; Entrepreneur.com also has some great tips on how to tackle a trade show, which include:

• Schedule some time each day for networking. Even if you're tired--it's important to walk around and make new contacts. Chat up people in lines and speak to as many people as you can.

• If you're there to meet with someone specific--a potential client, distributor or industry leader--ask that person to step outside with you into the hallway where it's quieter so no one is distracted.

• Bring three times as many business cards as you think you will need and consider leaving the heavy marketing materials at home. Collecting business cards and offering to mail prospects a kit can be a great way to prevent having to lug around a ton of items--and a way to build and follow up with new contacts.

Trade shows are the perfect place to market a product; they put the product in contact with hundreds of distributors, consumers and the media.

And you are a product: Whether you have 50 employees or just one (you), never forget that you are not only offering a highly skilled, valuable service, but also running a business, which requires thinking about the big picture.

Marketing yourself may not be your first inclination, but it can make or break a builder--so pound that convention center pavement, and let everyone you meet know how much you can do.

Stay tuned to multi-housingnews.com and the MHN blog this week for more IBS coverage! 

The Next Subprime Target

Last weekend, finance leaders from the Group of Seven nations met in Tokyo. The overwhelming verdict: The subprime fallout is not over--and no one is sure which country it will impact next.

The U.S. seems to be the most optimistic about the global economic situation--Treasury Secretary Hank Paulson said this week he believes the U.S. will see growth next year--but, then again, we have already seen a good deal of the subprime fallout's force.

The Federal Reserve had already more than doubled its original $50 billion estimate for subprime damage; German finance minister Peer Steinbrück said this week that the amount could actually be a whopping $400 billion.

Although the G7 talks indicated everyone felt the subprime crisis was sure to trouble some economies and industries in the future, which ones will be affected? A few possibilities:

• Taiwan and Korea. Regulators and investors have been examining financial institutions in Asia recently, and both Taiwan and Korea have been fans of buying structured products in the past few years, the Financial Times reported today.


• Insurance companies. Because insurance companies have been highly involved with structured credit in the past 10 years, they're attracting close scrutiny, the Times says. Asset insurer AIG's stock fell yesterday by the biggest amount in two decades after the company announced that writedowns from credit-default swaps sold to safeguard fixed-income investors were four times larger than previously thought.

• European banks. Although some are emerging seemingly unscathed--such as Credit Suisse, which today announced subprime-related losses of just $1.8 billion because, as investment banking head Paul Calello said, the bank reduced its exposure to subprime earlier than most banks, in late 2006--concern is mounting that other banks may show big losses.

• Chinese banks. Hong Kong shares were down Monday because of subprime impact fears, spurred by the G7 meeting news. That's a tough situation for Chinese banks, which gain a considerable amount of their total income from stock investments. In addition, to prepare for a potential subprime hit, last week, China's largest bank--the Industrial & Commercial Bank of China Ltd.--announced that,  to cover any losses, it was holding reserves equivalent to 30 percent of its $1.2 billion subprime holdings.

So who's next? Mario Draghi, governor of the Bank of Italy and chair of the Financial Stability Forum, thinks we'll have a better idea soon.

“The next 10 days to two weeks will be crucial because we are going to have the first audited accounts [from financial institutions] since the crisis started,” Draghi said.

The coming weeks will surely reveal some clues--and we'll be watching. 

Subprime-Related Accusations Fly As Housing Slump Deepens

An article in today's Wall Street Journal discussed a wave of complaints against companies shareholders feel didn't properly handle risk assessment during the subprime crisis.

They want reform; many of the companies want the shareholders to lay off. Some are trying to ward off a shareholder vote on any proposed resolutions to prevent risk issues in the future, according to the Journal.

The Laborers' International Union of North America's pension funds have sponsored many of the resolutions; they've asked companies including Merrill Lynch, Bank of America, Meritage Homes and builder Toll Brothers to provide more disclosure about CEO succession planning.

Whether or not the companies did adequately prepare, one thing is clear: The trust level between investor and company has been damaged--prompting the shareholders to feel they need to take action. And that's not exclusive to one company or industry.

As the subprime fallout and housing decline continues, frustration is mounting--among homeowners, investors, employees: just about everybody. As a result, a number of lawsuits have cropped up relating to the mortgage industry, which further indicates the country's collective anger level is rising.

Recent lawsuits have been filed by:

• Residents. Two Los Angeles couples filed a lawsuit last week claiming that Los Angeles builder KB Home and a unit of lender Countrywide Financial rigged appraisals in their Sacramento, Calif. development to raise home prices.

• An industry employee. An appraiser in California filed a lawsuit against Washington Mutual in January, saying she was blacklisted after refusing to mark a box on a report that would have indicated area home prices were stable, the Wall Street Journal reported.

• A large metropolitan housing agency. The Philadelphia Housing Authority filed a lawsuit in December claiming the federal housing secretary ordered the city to give a $2 million property to a politically connected developer.

• And even cities are getting in on the action. Baltimore filed suit in January in U.S. District Court alleging Wells Fargo Bank practiced predatory lending practices in black neighborhoods of the city, The Baltimore Sun reported Tuesday.

Are the majority of the housing-related lawsuits a sign that the questionable mortgage industry practices of recent years are finally coming to light--and therefore, to court?

Or are people just getting so frustrated with the market that they are turning to the last American hope: litigation?  What do you think?

Economic Stimulus Plan Still Leaves Some Questions Unanswered

This stimulus plan that President Bush is expected to sign shortly contains a few housing provisions--but is that enough?

A few points to consider:

• One Federal Regulator Isn't So Sure. The head of the Office of Federal Housing Enterprise Oversight (who likely doesn't have a small business card--that's a mouthful) yesterday criticized the plan's measures to give Freddie Mac and Fannie Mae larger loan limits, saying it would just get the agencies--which lawmakers have argued already need more regulation--wrapped up in some of the messiest housing markets in the U.S.

(MHN's blog expressed a similar concern in January about encouraging the agencies to offer jumbo loan help--jumbo loans that pushed homeowners into properties they couldn't afford is what got us into trouble in the first place.)

• Limits Will Be Local. Also, the new Freddie and Fannie loan limits will be altered for different regional markets. Who is going to determine the limits for each area? And what data will they use? As we have all seen in recent months, housing data varies.

According to Deutsche Bank just eight markets--which include metro areas of New York, Boston, Los Angeles-Orange County and Washington--have high enough home prices for the new loan limits to really help.

The bank's study said the new, higher limits would have only a small impact in Miami, Sacramenta and California's Inland Empire region; in Phoenix, Las Vegas, Chicago and most large Southern markets, the loan limits won't have any effect at all.       

• Will the refunds spur spending? And then there are the rebates. Taxpayers making under $75,000 taxpayers will receive rebates of up to $600 for individuals and $1,200 for couples. Families will get $300 per child.

The rebates were designed to reinvigorate the slumping U.S. economy--the plan's supporters estimate it will add $152 billion to the economy this year. But is a real figure, or wishful thinking? A debate about whether or not consumers would go shopping with the cash--or bank it or apply it toward growing debt, which wouldn't have much of an affect on spending--has been going on for weeks. According to the International Council of Shopping Centers and UBS Securities--which jointly commissioned the study of 1,005 households between January 31 and Sunday--about half plan to use the rebate to pay off debt; a quarter plan to save it,  CNNMoney.com reported today.

The rebates are expected to be en route to citizens in late spring. We won't know until then if the plan  will pay off: But what's your first reaction? Will the higher loan limits offer enough help in those costly markets to have a ripple effect on more moderately priced housing? Or are we just buying time to help high-end homeowners avoid foreclosure with a year of higher loan limits?

Tell us your take by posting your thoughts...
 

Rose-Colored Glasses Now Optional for NAR Monthly Forecast

The National Association of Realtors released its monthly report of home sales today, and the housing outlook for 2008 is pretty negative--even for the typically sunny real estate agent organization.

This is the group, of course, that has been criticized for its ever-present optimism. Remember in July, when NAR said it felt home prices would increase throughout all of 2008, even as it decreased its estimate for those increases from 2.6 to 2.2 percent?

Or that time in October when NAR said mortgage conditions were improving and that we'd see a market correction in early 2008? (That statement was made as it reported that total existing home sales had fallen by 1.2 percent to a seasonally adjusted annual rate of 4.97 million units: the lowest sales pace on record, according to BusinessWeek.)

This is the group who--as the summer wave of declined home sales and housing slump fears loomed--said that buyers had an "overwhelming advantage" because there was such a large amount of homes on the market. (Those homes have since partially been blamed for prolonging the slump by killing demand for residential building.)

And yet, NAR Chief Economist Lawrence Yun said in a statement Thursday that "existing home sales have moved narrowly since last September."   

NAR Now Sees a More Harsh Housing Reality

NAR's reputation for being slightly overzealous may be fading by the month--or it will, if the group's reports continue to forecast as dour a housing situation as the past few have.

The NAR forecasts have, in fact, begun to show that the group finally is starting to acknowledge the severity and duration of the housing crisis.

Last month, as NAR released its forecast report, bad housing news abounded:

• Builder Lennar Homes had just posted a $1.2 billion quarterly loss.
• Commerce Department figures released the day before showed single-family houses had dropped 4.7 percent in December and that 2007's sales were down a whopping 26.4 percent from 2006.
• And, according to the Washington Post, demand had fallen so low in the past two years that 12 of the nation's larger builders gave up 1.1 million lots--about 45 percent of their land inventory.

And yet, NAR said prices for pre-existing homes would be flat in 2008, with a market improvement occurring in the middle of the year. In the past 30 days, reality has sunk in: Now the group says prices are slated to drop 1.2 percent in 2008.

NAR before forecast existing home prices would fall 5.3 percent in the first quarter; this month, it's thinking 6.1 percent.

Despite the deals, consumers will buy less pre-existing homes in 2008, according to NAR, who feels home sales--including single-family, townhomes, condo and co-ops-- will drop by 4.8 percent in the year.

Last month, NAR announced expectations that existing home sales would increase in 2008 by 0.9 percent, according to CNNMoney.com.

The group did predict Thursday that home sales will rise in the second half of the year from 4.9 million to 5.8 million. But, then again, NAR had previously forecast that 2008 existing home sales would be 6.64 million.

This week, new homes got an even darker verdict: The group predicts median prices will drop 4.3 percent and sales will fall a drastic 17.7 percent. Yikes.

In short: According to NAR, we're in for a long year.

But Don't Worry, NAR Isn't Turning Into That Friend Who Calls and Complains All The Time

There was, however, one spot of NAR's characteristically rosy thinking in today's report: After unloading all the housing doom decrees, the group said that it does not expect the U.S. economy to fall into a recession. The group projects U.S. GDP growth at 2.2 percent in 2008 and 2.7 percent in 2009.

Well, maybe--our growth hopes remain to be seen. Watching NAR come to terms with the housing crisis has been a slow process, but a significant reminder that this beast is bigger than any we've seen before.

No one thought the slump would last this long--certainly no one hoped it would--and you almost have to admire NAR for its steadfast commitment to putting forth a happy face as the rest of the industry panicked.

Consumer confidence has been a key concern during the recent financial and housing market upheavals; maybe a little positive thinking was just what we needed.

Or was NAR being unrealistic and tainting market comprehension? It's a closely watched housing indicator--in a wildly volatile market. And thus, questions remain: Should the NAR forecasts have been as harsh as this month's since last summer? Did the group have a larger responsibility to be less sunny and more severe?

The Hidden Dangers in Selling Homes

Last week, a 24-year-old real estate agent in Canada died after meeting a potential client in a brand new luxury home. Police are investigating it as a homicide; the agent reportedly had concerns about the client, who said she needed to purchase a high-end home that day.

According to the Globe and Mail, that crime is sadly not the first involving a real estate industry member. A Winnipeg-area real estate agent was sexually assaulted by a man who said he was looking for a home in December; in 2002, an agent in Calgary was tied up and robbed while showing a home; and an agent was stabbed to death in 1985 during an open house in British Colombia.

Real estate-related crime certainly isn't limited to Canada. In November, The New York Times reported an increase in robberies that occurred during open houses. A team of thieves stole a Tiffany clock, jewelry, a fur coat and a bottle of champagne.

Luckily no one was hurt in those robberies. However, they illustrate the importance of being careful--even with clients who were referred or with people you've spoken to but don't know well.

What can agents, property managers, brokers--all industry members who will spend one-on-one time outside of the office with clients--do to protect themselves? A few industry tips:

• Arrange a first meeting in an office or coffee shop. Toronto Real Estate Board president Maureen O'Neill doesn't meet clients in empty homes for the first time, according to the Globe and Mail--if a client refuses, it may be an indication something is up.

• Check their records. About.com suggests asking customers for work, home and cell numbers and an address--then verifying one or more.

• Assess danger upon arriving. The National Association of Realtors (NAR) suggests you take a couple of seconds when you get to the home for a showing to make sure everything appears to be safe. Ask yourself: Is there any strange activity in the area you can see? Are you parked in a well-lit location? Can another vehicle block you in the driveway?

• Have an exit route. Suzanne Senst, a real estate agent based in west Toronto, told the Globe and Mail she always has a clear path to the door and doesn't accompany clients into basements.

• Make open houses a little less open. The NAR suggests making all visitors sign a registration book at open houses--no exceptions. Checking IDs against names will help discourage criminals from entering.

• Have coworkers check in with you. Make sure your team knows where you are by giving them property addresses and appointment times. The NAR suggests calling a friend or colleague before your client is scheduled to arrive and asking them to call you in 15 minutes. About.com suggests establishing a code word or phrase to alert the caller to contact the police if necessary.

• Be careful not to share personal information. Don't talk about where you live, where you spend your free time, where your children go to school or where other family members work. Being friendly doesn't have to involve getting personal, NAR says.

Being informed is important--that can mean carefully observing your surroundings and your potential client; it can also mean knowing common criminal schemes. Realty Times has a list of agent-related crimes on its site that can show you how some past attacks occurred--and hopefully prevent you from getting into a similar situation.

Educate yourself and inform your office about the potential dangers--and safety mechanisms--that exist when showing a home. NAR released a number of helpful handouts during its September safety week that can be downloaded, customized and distributed to real estate teams, including a list of 53 tips that are perfect for e-mails or newsletters.

And, as in any new situation in which you are alone, stay alert. Do your research. Trust your instincts. In this tough market, agents are willing to go above and beyond to make a sale--but no commission is worth risking your life.

Bush Administration Budget Highlights Housing Slump

The Bush administration's fiscal 2009 budget, released Monday, has a common theme: Housing woes.

The budget frequently mentions the current slump and makes it clear that housing will continue to affect economic growth next year. That's no shock to any members of the residential building, development, sales or financing industries--or anyone who reads the newspaper on a regular basis--but as we search for signs that the housing gloom and doom is coming to an end, it's worth noting yet another governmental body doesn't think that's going to happen anytime soon.

Last month, we saw the Fed finally acknowledge the housing decline's severe impact on the economy with two "aw, shucks" rate cuts. After a summer of waiting the situation out, the Fed's long road to recession fear started in fall--and looks like it will continue through at least part of 2008.

Although the Bush administration budget said that housing "should cease to be a negative influence on growth" beyond this year, it offered up several suggestions to help curb the effect housing will have on the economy, including:

• Restructuring the Federal Housing Administration--which would allow it to help 280,000 first-time buyers in 2009--and increasing regulation of Fannie Mae and Freddie Mac.

• Providing homeowners and residents with housing counseling, which would cost $65 million.

• Increasing the Federal Housing Administration's loan limit even more than the stimulus plan suggests, raising it from $362,790 to $417,000.

According to the Bush administration, the Department of Housing and Urban Development also will finalize regulations that will provide clearer credit card and mortgage disclosure practices--which have been cited as key factors in the mortgage industry collapse.

Certainly something needs to be done to buffer the housing decline's impact: But are the budget's proposed housing fixes what the U.S. economy--and homeowners--need?

Which is the most likely to succeed--and which most likely won't? Do any sound too similar to the ideas put forth in the economic stimulus plan? (We're still waiting to see if the reaction to the budget's suggestions will be anywhere near as negative as the initial reaction to the stimulus plan.)

MHN wants to hear your take. Post your opinion--and start the discussion.

Bush Administration Budget Highlights Housing Slump

The Bush administration's 2009 budget, released Monday, has a common theme: Housing woes.

The budget frequently mentions the current slump and makes it clear that housing will continue to affect economic growth next year. That's no shock to any members of the residential building, development, sales or financing industries--or anyone who reads the newspaper on a regular basis--but as we search for signs that the housing gloom and doom is coming to an end, it's worth noting yet another governmental body doesn't think that's going to happen anytime soon.

Last month, we saw the Fed finally acknowledge the housing decline's severe impact on the economy with two "aw, shucks" rate cuts. After a summer of waiting the situation out, the Fed's long road to recession fear started in fall--and looks like it will continue through at least part of 2008.

Although the Bush administration budget said that housing "should cease to be a negative influence on growth" beyond this year, it offered up several suggestions to help curb the effect housing will have on the economy, including:

• Restructuring the Federal Housing Administration--which would allow it to help 280,000 first-time buyers in 2009--and increasing regulation of Fannie Mae and Freddie Mac.

• Providing homeowners and residents with housing counseling, which would cost $65 million.

• Increasing the Federal Housing Administration's loan limit even more than the stimulus plan suggests, raising it from $362,790 to $417,000.

According to the Bush administration, the Department of Housing and Urban Development also will finalize regulations that will provide clearer credit card and mortgage disclosure practices--which have been cited as key factors in the mortgage industry collapse.

Certainly something needs to be done to buffer the housing decline's impact: But are the budget's proposed housing fixes what the U.S. economy--and homeowners--need?

Which is the most likely to succeed--and which most likely won't? Do any sound too similar to the ideas put forth in the economic stimulus plan? (We're still waiting to see if the reaction to the budget's suggestions will be anywhere near as negative as the initial reaction to the stimulus plan.)

MHN wants to hear your take. Post your opinion--and start the discussion.

Chicago Green Issues Showcase Need for Direction

The design industry and many city governments have made serious efforts in the past few years to encourage sustainable building--but the average homeowner may still find going green is anything but easy.

Even homeowners with the most carefully constructed plans are hitting sustainability snags, according to a recent Chicago Tribune article that ran last week. The article began by outlining the troubles Plainfield, Ill. homeowners Nora and Richard Parkman encountered when trying to add a solar energy system to their home. The Caton Ridge Homeowners Association shot down the Parkman's proposal because they didn't like the way the solar panels it required looked.

Legislation preventing associations from ruling out solar panels for aesthetic reasons passed the Illinois State Senate in 2007, but is still awaiting approval from the House, according to the Tribune, which criticized the Chicago area (the suburbs, especially) for its slow acceptance of green design.

That's a big blow for a city whose mayor once famously declared he wanted it to be the most green in America. And, to be fair, Chicago has done quite a bit to encourage green building. A Cook County ordinance, passed in 2002, requires all new county buildings to be LEED certified. The city has a Green Homes Program, which encourages green residential building and offers builders incentives, including a  system that cuts the time it takes to receive a permit in half for registered sustainable projects.

Yet still, as the Trib points out, green building faces some challenges in Chicago, such as:

• Financial Incentives Aren't Widely Publicized. Illinois offers $10,000 in incentives and the federal government will give $2,000 in tax credits--but many homeowners don't know about either option.

• Inspectors Aren't Equipped to Approve Green Design. "A lot of inspectors are old school and don't understand the new technologies," David Broderick, a permit expediter and principal at Chicago's Phase 1 Consulting told the Trib. It's an inspector's job to use building codes--but, in many cases, those codes haven't been updated to include green building principles.

• The System is New. Expediting permits is great--but, since the green home programs are still new, anything sustainable often involves significant delays. Remember our earlier blog (way earlier--back in August) about Frank and Lisa Mauceri's green home renovation? They had planned to  include a roof-mounted wind turbine to generate energy--but the city's zoning code didn't have a provision for that kind of a device on top of a building. The Mauceris met with the city for three months and ended up changing the code: admirable, but more effort than many would likely put into a remodeling job.

Not all Chicago green design news is bleak: The city has a number of green-friendly private residential buildings that are in the works or were recently completed--such as 340 On the Park, which is expected to achieve a silver Leadership in Energy and Environmental Design (LEED) rating, and Michigan Avenue Tower, which says it will be the first residential condo in the city to use 100 percent renewable energy to power the entire building.

Chicago is not alone in its effort to publicize green design; and it's not alone in its stumbling blocks, either.

Even cities focused more on building, rather than renovation, are finding green building can be a tough sell because of a lack of information or resources. San Diego--seriously damaged by wildfires last fall--is encouraging homeowners who lost property in the fires to rebuild green; initial homeowner hesitation involved concerns about builder green design competency and--you guessed it--delays.

The Southern California Sustainable Rebuilding Task Force recently held a forum at a local museum to address homeowners' green building fears, according to the San Diego Union-Tribune.

Maybe that's what we need a little more of--some homeowner hand-holding and a few helpful how-tos. If new condos are using green design as a marketing tool to sell units, there is undoubtedly a desire to go green--unfortunately, in many cases, homeowners are still waiting for the guidance they need to do it.

 

Pets Can't Help Pay the Mortgage--But Can Find Themselves Homeless

Homeowners aren't the only victims of the high U.S. foreclosure rate--their pets are also finding themselves homeless at an alarming rate.

After Hurricane Katrina, news of animals left behind--or rendered homeless by the storm--were everywhere; but stories about cats, dogs and other pets stranded when their owners flee suddenly from their about-to-be foreclosed homes are just now making their way to the media (via newswires and blogs like this one.)

Dogs are starving; cats find themselves unable to blend with feral felines who recognize the domesticated animals as being different.

Unfortunately, although a recent Associated Press article said no concrete numbers exist that track the number of abandoned animals, shelters--such as the MaxFund Animal Shelter in Denver, which recently took in nine dogs who were abandoned for over a month on a local ranch--are feeling overwhelmed as owners drop off unwanted pets. (Read or see the Denver 9News story on MaxFund's foreclosure situation here.)

Fewer homeowners are coming in for adoptions as the economy slows--another result of the housing decline, AP says. Pet ownership costs money; and cash is tight these days.

The decision is a tough one for homeowners facing foreclosure: Either leave your pets to fend for themselves in an empty house or risk putting them in a shelter in which there is a high chance they will be put to sleep if they aren't adopted.

However, pets' chances of being found and saved once homeowners vacate is rocky. People are rushing out of their homes quickly to avoid the bank swooping in, leaving almost everything beind, and those who take over the home often don't--or can't--help the pets. According to the ASPCA, bank employees and other lenders who enter foreclosed homes are often required by law to leave all property untouched--including pets--until foreclosure proceedings are finished.

A shelter is undoubtedly the more responsible choice of the two to ensure a pet's safety. If the pet is euthanized, while heartbreaking, it's better than the pet starving or freezing, alone and and afraid, waiting for its owners to return. That's just plain cruel.

“It’s not unusual for animals to be left behind, even abandoned, during difficult times,” says ASPCA President and CEO Ed Sayres. “The loss of a home is devastating and can only be made worse by having to also leave behind a beloved family pet.”

Which is why the ASPCA recommends at-risk homeowners take the following steps to protect their pets if foreclosure is imminent:

• Check with friends, family and neighbors to try to arrange temporary foster care for the pet.

• Confirm pets are allowed in the rental property you are moving to--and get it in writing.

• If a shelter agrees to take in a pet--and it's important to check ahead of time, because space at shelters is usually limited--provide medical records, behavior information and anything else that might help the pet be placed quickly in a new home.

In a perfect world, lenders would supply at-risk homeowners a document or handout with that information along with all warnings and notices about the impending foreclosure. That one piece of paper could help save countless pets; but it's true, it's not necessarily a bank or broker's responsibility, and they have plenty of things to worry about wrapping up with a defaulting homeowner. But maybe someday distributing pet placement tips and information will be the industry norm--it would be a big step, but an admirable one.

The best we can do now is try to house the abandoned pets who are already out there. If you've been thinking of adopting a pet, now is a great time--like the number of homes on the market, there are more available than you might imagine. The Web site Petfinder.com can help you locate and shelter and/or specific animal up for adoption in your area.

And lawmakers, it's time to consider altering that legal stipulation that whoever takes possession of the house can't remove or care for any pets inside. We wouldn't say the same thing if a homeowner had left a child behind.

Thankfully, there haven't been any reports of that yet--and hopefully, there won't be--but letting animals suffer because paperwork is taking awhile to process isn't the smartest system we could be promoting, is it?