MHN Blog

Green Building Grows In California—And The Multifamily Market

Last week, California became the first U.S. state to issue a mandatory green building code that will require energy efficiency and less water consumption. Regulations for single-family, multifamily and commercial structures are also part of the new code.

It was a big move for the golden state, and a popular one--the California Building Standards Commission voted unanimously for the green building code, which was designed to reduce greenhouse gas emissions.

As MHN reported Monday, the new code will improve water usage in both commercial and residential plumbing fixtures and aim for a 50 percent landscape water conservation reduction.

• Builders will also be encouraged to reduce energy use by 15 percent more than today’s current standards.

• The code also emphasizes using recycled content in building materials and carpets and suggests site improvements like hybrid vehicle parking and stronger storm water plans.

• Until 2010, the code regulations are optional; after 2010, they’re mandatory.

(Other areas are embracing green building, too. In Seattle, the mayor recently suggested changes to the multifamily building code that included adding green roofs and less--or no--parking in developments that are close to mass-transit, according to the Seattle Times.)   

California Building Standards Commission Chair Rosario Marin praised the commission for uniting construction and building industry representatives, environmental groups and labor organizations. 

It’s certainly something to be proud of—by taking a decidedly sustainable stand, California is working to reduce the environmental impact of new construction.

And it’s a decision that the multifamily market can feel good about.

• It’s a strong marketing technique. It’s true, green building can produce some higher upfront costs--but it also offers long-term savings for owner/investors, and provides leasing agents with an added-value for renters.   

And--according to news on the single-home front--in a recent article about builders attempting to move unsold homes, the San Jose Mercury News pointed out that one major technique builders were using included "trying to woo customers with green building techniques and energy-saving features."

• Green urban areas—designed to negate car usage—are more popular. Energy costs are also persuading buyers to look in urban rather than suburban areas.

As gas stubbornly remains above the $4 mark—with little sign of dropping--they’re eager to avoid long commutes and trips to stores, restaurants and other locations.

"People are now saying affirmatively they want to live closer to town centers and have a shorter commute," Lawrence Yun, National Realtors Association economist, told U.S. News & World Report. "And smaller homes mean less energy consumption."

That’s more good news for the multifamily market.

It’s good news, too, for urban planners who have been trying for decades to get Americans to embrace a more compact geographical pattern, according to U.S. News & World Report.

"To be honest, I feel that rising gas prices...are going to do more for good, sustainable urban planning than the entire urban planning profession," says Thomas Campanella, an associate professor of city and regional planning at the University of North Carolina—Chapel Hill.

Space constraints in urban areas have typically meant multifamily buildings were the best, or only choice for development.

If more buyers are looking in downtown areas because high gas prices are making them reconsider long commutes and car-intensive lifestyles, it could be a huge boon for multifamily building.

(Sort of makes the hefty cost of filling your car up seem a little less painful, doesn’t it?)

Cost remains a concern, but the evidence is overwhelming: Green fever is spreading, and going green is becoming increasingly popular in the multifamily market.

And one day, apartment renters and buyers will simply expect it.

Will A Soft Dollar And Strong Foreign Interest Save The Housing Market?

The dollar is weak--it fell against the euro by the biggest amount since March last week due in part to increased credit market issues and oil costs--which means foreigners can get big deals on U.S. products, vacations and property.

In April, the National Association of Realtors said a U.S. home could be bought by a foreigner for an average discount of 30 percent, according to USA Today.

The foreign-buyer trend isn't exactly a new one:

• The euro been stronger than the dollar lately; but the foreign buyer wave dates back to the housing boom. According to the NAR 2007 Profile of International Home Buying Activity, non-U.S. buyers were heavily interested in the market during the 2000 to 2005 real estate boom.

• Between April 2006 and April 2007, 30 percent of non-U.S. buyers were European, a NAR survey found.

• The results were especially prevalent in vacation areas. In spring 2007, 7.3 percent of all Florida home sales were to foreign buyers, the NAR said.

Yet now, in some areas-- such as beach and ski towns, which had previously shown significant second-home buyer appeal--foreign investment isn't as enthusiastic, according to the New York Times.

They're looking--according to agents, more overseas buyers have been physically seeing beach and ski properties this year.

But because of the shaky U.S. economy and widely publicized housing slump, they're not eager to actually buy in pricey places like East Hampton and Beverly Hills.

However, even though there's no official record of how many people from outside the U.S. bought second homes here, economists feel foreign buyers are helping to give the overall market a boost.

It may not be as big as sellers had hoped for, but it's a boost nonetheless.

"The circumstantial evidence strongly argues that global investors are indeed supporting these second-home markets," chief Moody’s Economy.com economist Mark Zandi told the Times.

• According to the National Association of Realtors, one-third of the country's agents worked with one or more international buyers last year.

• Mexico, Britain, Canada, India and China's residents were the most interested, MSNBC.com reported in early June.

The trend is becoming so prevalent, according to MSNBC, that some agents are setting up satellite offices in places like South Korea and Dubai.

For foreign investors, condos--which are a fairly low-maintenance second home--in American cities seem to have a huge draw.

Perhaps that's why one Maui-based Keller Williams agent told MSNBC that 90 percent of the crowds at his recent open houses have been Canadian; or why developers of Dallas' 120-unit Museum Tower luxury condo project plan to "actively market ... in Monterrey and Mexico City."

Just look at New York City. For months, some areas escaped the national housing decline--eight-figure apartments are still selling well in Manhattan, according to the Washington Post.

And, not surprisingly, foreign investment is still strong in the city. It has helped keep Manhattan apartment prices at astronomically high levels, according to the Times.

Housing isn't the only market that is benefiting from overseas intervention in New York.

A sales clerk at the NBA store at 52nd and Fifth in Manhattan recently told the Washington Post that two-thirds to three-quarters of the store's customers were foreigners. "We'd be dead without them," another store manager confessed.

Like a pair of new, high-tech sneakers, New York real estate is, for some, a pleasure purchase.

A resident from London or France may not need a summer condo in New York--but if they've ever wanted it, now is certainly the time to buy. Home prices are down; and the exchange rate is in their favor.

The question is: Aside from setting up an office overseas--which realistically isn't in every developer or real estate agent's budget--how do we market to this thriving group of buyers? In this case, word of mouth probably just won't cut it.

What would you suggest?

As Gas Costs Rise, Buyers Look At Downtown Living

Urban multifamily developers, start your engines: Demand is about to increase, and we have the astronomically high gas prices to thank.

Americans are looking at homebuying in a new light, according to an Associated Press article reprinted in the San Jose Mercury News today. They don't want to commute--partially because of the time it takes, but more often, because it's just getting too expensive to drive far.

Gas has risen by more than a dollar this year; this week, it hit a new high of $4.08 per gallon on Monday.

As a result, Americans are driving less. Compared to April 2007, we drove 1.4 billion fewer highway miles this April, and 400 million fewer miles than we drove a year ago in March, according to the Transportation Department.

Prospective buyers are well aware of how expensive gas is. A recent survey of 900 Coldwell Banker agents found that 96 percent cited rising gas prices as a big client concern.  

And that's giving urban living a big boost.

Eighty-one percent of the agents in the Coldwell Banker survey said clients mentioned minimizing their work commute as a reason for being interested in urban living.

That's giving a boost to homes near "urban centers and subway, train and bus stops," AP says, which "are often selling faster and at better prices than those in the distant suburbs."

That's not necessarily true for all downtown areas. Smaller cities and burbs that are too far to offer a decent commute are suffering. An article in today's Boston Globe touches on the struggle cities like Franklin, Mass.--which is located more than 40 miles from Boston--are having to revitalize their downtown areas.

Mixed-use developments may offer Franklin residents the same quality of life and convenience a mixed-use development would offer a resident in a larger city like Boston--but it's also going to offer them a hefty drive of an hour or more to commute if they're working there.

This week, the Commerce Department said that multifamily starts fell 8 percent in May. However, multifamily permits increased 3.9 percent. Could urban demand be responsible for the rise?

It's possible. In large U.S. cities, the urban housing market has traditonaly been dominated by multifamily structures because of space constraints and design. It just makes sense: With a higher population, you need a bigger amount of smaller homes.

We know overall housing demand has been rocky for some time. But if we know that demand for one sector--urban multifamily properties--is beginning to vastly increase, how should the industry prepare?

Should we be planning more rental properties? Increasing the offerings in mixed-use condo projects--adding restaurants, coffee shops, gyms and other neighborhood-enhancing items that will let residents walk where they need to--to increase their draw?

Should the design of new downtown multifamily structures reflect some of the convenience suburbanites are used to--such as ample parking and open space?

Or will the location alone--and shorter or nonexistent commute--be enough to lure residents from the suburbs?

Could California Escape a Recession--And Spark a Housing Market Recovery?

California has given us many wonderful things--Hollywood. Disneyland. A gold rush.

And now, it may be about to give the housing market a huge gift: Hope.

That comes courtesy of a quarterly report from the University of California, Los Angeles--released today--which says that while California home prices are still low, the number of condos and single-family homes being sold is rising in some areas.

Why should we care about home sales in one state? Because it's California, which is:

• The most populous U.S. state;

• One of the regions that saw the biggest price increases during the housing boom and, during the following housing bust, saw prices plummet--early on-more than many states;

• An area where subprime mortgage issues were especially prevalent, increasing foreclosures and causing home price declines. Mortgage defaults grew 143 percent to the highest level in 15 years in the first quarter of 2008, according to DataQuick Information Systems;

• A state that has helped highlight the ripple effect of the housing slump. When Home Depot sales dropped, they dropped most in California and Florida; when the big spring moving season started off slow, the Los Angeles Times was one of the first to report in May that movers were struggling;

• And because California could be the first state to indicate the housing slump is beginning to turn around.

According to the Times, the lower home prices have increased first-time buyer activity, opening up homes to a group that couldn't previously afford to buy in the pricey California market.

That's not to say the housing market in California is going to radically improve soon. The UCLA Anderson Forecast said that the effect housing will have on the economy could be the worst since the Great Depression.

But although the report said the state's economy won't fully recover until 2010, it said California will avoid a recession.

"The witch's brew of the popping of the housing bubble, a wounded financial system and increasing inflationary pressures coming from rising commodity prices will keep the economy on a sub-prime growth path for the next several quarters," David Shulman, a senior UCLA economist, told the Los Angeles Times.

According to the Anderson Forecast UCLA report, foreclosures will still be an issue in California--and the housing market isn't out of the woods yet.

But the sales gain in parts of the state is a good sign, Bloomberg said. It indicates that--unlike the 1990s recession--California's pain will be severe, but quick (Well, quicker.)

When aerospace and defense and other workers lost their jobs in the 1990s, foreclosures rose. But they didn't hit their high point until the decade was close to over--in 1997--after employment had already risen.

In the current housing slump, the falls were fast and furious--but hopefully won't outlast the next two years.

In which case, California could be a sign that the entire market is on the mend.

What do you think?

Keeping an Eye on Builder Confidence

How is the housing market doing? If you're hoping to hear that things are improving, don't ask builders.

At least, that's the picture painted by the National Association of Home Builders/Wells Fargo builder confidence index, released this week, which didn't offer much more industry hope.

And with good reason. Last year, the index averaged around 27; in June, it hit 18--the second time the index has reached that low point (the first was in December).

In May, the index measured builder confidence at 19.

Forecasts had placed the June index at about 19, according to Bloomberg--the surprise drop may not have been much, but it was more than had been expected.

But the confidence reading wasn't the only low. Builders' take on single-family home sales remained at 17, another all-time low; builder sentiment also declined in two of four U.S. regions:

• In the Northeast, the index fell to 12 from 18.

• In the West, it dropped to 16 from 20.

• The index rose from 12 to 17 in the Midwest.

• And in the South, the index remained the same, holding steady at 22.

That's all alarmingly low: Anything under 50 implies respondents don't feel great about the market.

But aside from not being very confident about the market, builders also said that buyer traffic--a key indication of future sales--also dropped in June, falling from 18 in May to 17 this month.

And it doesn't look like builders are being overly pessimistic. The government report released today found single-family home starts had hit a 17-year low in May--falling 1.3 percent from April.

Housing starts aren't--at least for now--likely to improve much in the coming months. Building permit applications fell last month to a seasonally adjusted annual rate of 969,000  from a revised 982,000 April rate--less permits; less plans to build.

Unlike consumer confidence, which can really influence and affect the market, builder confidence is more of a reflection: Knowing that developers and builders are down about the status of housing isn't likely to increase or decrease sales, but it provides a good snapshot of how the market is doing.

If people aren't looking for new homes--and, as Nancy Keates pointed out in yesterday's Wall Street Journal, there are reasons it makes sense to build one--builders are the first to know about it.

If we'd paid more attention to builder sentiment as demand began to drop off at the start of the housing slump, we might have been able to correct the amount of homes being built, reducing the housing supply and, in effect, shortening--or altogether preventing--the decline.

But we didn't. And now, as Bloomberg said, as foreclosures add more homes to the market and financing to buy housing becomes increasingly harder to get, demand is likely to shrink even more--making builders all the more wary.

Knowing that isn't going to do much for us now. But paying attention to builder confidence readings once the market does improve--and it will--is an absolute imperative.

But do you think the industry will? Tell us what you think by posting your take.

The Biggest Sign That Property Is Rebounding (And It's Not Sales)...

Forget real estate sales. There's a bigger indication that the market may be turning around: Real estate investment.

Home prices may be down, but the average real estate fund is 2 percent higher this year compared to 2007, according to the Chicago Tribune.

That's a decent amount, given New York-based financial analyst Lipper Inc. also says that the average U.S. diversified stock fund is down 8 percent this year.

The rise in real estate-related stocks is good news--and offers hope as the housing slump rages on.

• Shares of self-storage and apartment management companies have risen as investors are again beginning to see real estate as a great investment.

• Although real estate funds decreased 14 percent in the past 12 months because of concern about value declines and the credit crisis, the Trib says, their annualized returns aren't terrible: The funds' three-year annualized return is 6 percent. The five-year annualized return is 14 percent.

And another bit of good news: Real estate investment fever isn't just happening in the U.S. According to the Financial Times, nearly $20 billion in real estate funds are scheduled to be launched this week for development in Asia and Europe.

Property fund management firm MGPA raised enough for a $3.9 billion fund to invest in Asia and a $1.3 billion fund to invest in property in Europe, which will be spent on renovating buildings and buying devalued assets. The European fund currently has a site planned for development in Greece and previously bought residential assets in Poland, according to Reuters.

London-headquartered property fund manager Europa Capital also raised money for two funds to invest in European property.

Getting equity isn't hard to do overseas (at least, not yet), which--when you also consider that the funds are focusing on buying distressed or devalued residential and commercial properties, many in developing markets--could be a sign that investors feel real estate's long-term opportunities are very positive, the Times said.

And that's a good sign--in the U.S., Europe and everywhere else the funds are investing in.

We all know the housing market's turnaround won't be instantaneous--and it won't be easy. The general point when that correction will begin has been under debate for a year--late fall? Early 2009? Or beyond? No one is sure.

And as more downbeat housing news floods in--such as RealtyTrac announcing foreclosure filings were up in May late last week--we're more unsure by the minute.

Forget declaring each slightly positive nugget in the latest housing reports as a sign: The best indication that faith in the housing market is getting stronger is the market's reaction to the industry.

If investors are banking on property regaining strength in the next year--and, based on the recent investments we just discussed, it seems they are--things may not be as bad as they seem.

Or--at least--they may not be bad for long.

FBI Announces New Focus on Mortgage Fraud

The Chicago Tribune reported today that the Federal Bureau of Investigation has instructed more that two dozen field offices to cease financial crime investigations so agents can work on mortgage fraud probes.

That's a marked change from recent years, when agents have been instructed to focus on homeland security issues, according to the Trib.

Twenty-six offices in areas where mortgage crime is prevalent were told to focus on mortgage issues last week by Kenneth Kaiser, chief of the criminal investigative division.

The reason could be the number of suspicious activity reports filed in the 12 months ending Sept. 30--47,000, a 31 percent rise from 2007.

Because mortgage fraud can include everything from appraisal-inflating schemes to scams to "rescue" homeowners facing foreclosure, it can affect real estate agents, builders, appraisers, attorneys and mortgage bankers, the Trib said.

As the foreclosure rate rises--RealtyTrac said today that foreclosure filings are 50 percent higher than in May 2007, the New York Times reports--rescue scams are likely to become more of a concern.

Still, the FBI switching its focus from homeland security to mortgage fraud investigations is big news.

It shows that the FBI has a reason to be concerned about fraud increasing as the market works to repair itself.

It shows that another area of government--in addition to lawmakers proposing housing bills and Comptroller of the Currency John C. Dugan, who this week questioned the accuracy of the subprime borrower assistance and foreclosure information that banks and mortgage firms are offering--are concerned about housing market regulation.

And it shows that, although the housing slump is hopefully winding down, it's not over yet. But--with a new focus on mortgage fraud investigation--at least some of the corruption could be...

Home Sales Are Up--But For How Long?

On Monday, the National Association of Realtors released its Pending Home Sales Index results for April--which, somewhat surprisingly, showed the amount of signed contracts rose 6.3 percent from March.

The index increased from a reading of 83.0 in March to 88.2 in April, according to the NAR.

The results were varied across the U.S.

• In the West, the index increased 8.3 percent in April and is actually 4 percent higher than a year ago.

• The index shot up 13 percent in the Midwest, although it is still 13.1 percent below the April 2007 level.

• In the South, the index rose 4.6 percent to 88.8--22.5 percent below last year's level.

• And the index declined 1.9 percent to 79.3  in the Northeast in April, which is 12.2 percent below a year ago.

Yet, despite the index rising, the group predicted that housing starts--multifamily units included--will decline 27.2 percent this year to 987,000, followed by a 0.6 percent drop in 2009.

Median home prices are expected to decline, too.

• The NAR estimates the median new home price will be 3.1 percent less this year, around $239,500. "Rising construction costs will provide less room for price cuts on new homes," said chief NAR economist Lawrence Yun.
  

• However, the group says prices should increase 5.4 percent in 2009 to $252,400.

The NAR blamed buyers' difficulty obtaining mortgages for the recent housing market woes but said the lending situation was improving.

However, that doesn't mean sales necessarily will rise as a result--because, according to Yun, low consumer confidence could hurt the market.

Yet he said the overall economy could improve and predicted U.S. gross domestic product growth would be 1.7 percent this year and 2 percent next year.

Growth? Why, then, would consumer confidence weigh so heavily on housing?

The answer can be found in Yun's unemployment predictions--which suggest the unemployment rate could average 5.3 percent in 2008 and 5.6 percent in 2009.

Those numbers are in line with Friday's depressing jobs report from the Labor Department, which said:

• The unemployment rate skyrocketed to 5.5 percent in May from 5 percent--its fifth consecutive month of decline.

• The May unemployment increase was, according to the New York Times, the most severe monthly rise in 22 years--and it cost the economy 49,000 jobs.

With less jobs and rising food and gas costs, Americans are stretched thin, wary of their financial future--and unlikely to go house shopping.

That's especially true in rural areas, which benefited from rising home prices several years ago as consumers looked to outward-lying suburbs and towns that let them commute to urban jobs without paying urban home prices.

It was, according to a recent Bloomberg article, a "drive until you qualify" way of thinking--and it helped emerging suburbs and exburb commuter towns grow 15 percent in popularity from 2000 to 2006, almost three times as fast as the U.S. population.

But gas prices have risen consistently this year--last week, they hit a new national high of $4 a gallon. And it's killing commuter towns.

Home prices in areas lacking public transportation where most citizens have long commutes are falling faster than in neighborhoods that are closer to cities, a recent study showed.

Cities don't necessarily have it easy. Many, like Miami--where home sales are still in a "free fall," according to USA Today--are struggling too.

But if consumer confidence is our biggest hurdle to overcoming the housing slump, we're in luck. Because that means we don't have to wait for lenders, prices, inventory reduction or any other out-of-our-hands factor to turn things around.

We can.

We just need to all start feeling better about the economy. Then buying real estate. Then investing in real estate development. Then selling real estate.

See how easy that sounds? Unfortunately, getting the general public to do it will probably prove more difficult.

But if consumer confidence is in fact our biggest burden, how should we go about turning it around?

Any suggestions? Post your thoughts below...

Unemployment Numbers Mean Trouble for Housing

Yesterday, we talked about how the housing decline was costing Hispanics construction jobs--but, according to today's unemployment report, the whole industry is suffering.

That's not to say that Hispanic workers are any better off than they were earlier this week, as evident by the number of articles that have popped up in the past few days about the issue, including:

• One in the Washington Post, which features Javier Amurrio, a 38-year-old immigrant from Argentina who was unemployed for 7 months in 2007 and became one of the Hispanic homeowners discussed in our earlier blog who lost his home as a result;

• And an article in the Chicago Tribune, that mentioned that African-Americans also have struggled with a 9 percent unemployment rate in the first quarter;

But it is today's government report, showing that the unemployment rate rose 5.5 percent in May--which is the biggest increase in two decades--that is particularly worrisome. We knew various sectors were sagging; now, it looks like unemployment is become a harsh reality and risk for almost everybody.

According to the Bureau of Labor Statistics, employers cut 49,000 jobs last month: 49,000 jobs.

We've been on a job losing streak all year. And, not surprisingly, construction is one of the hardest hit sectors because of a declined demand. Construction employment sunk by 34,000--its 11th consecutive drop--The Wall Street Journal said.

The financial industry dropped 1,000 jobs; retail lost 27,100, its sixth-straight decline.

One small good point of news: Average hourly wages increased by $0.05--0.3 percent--to $17.94, a 3.5 percent increase from 2007, which the Journal said suggests that wage costs are remaining manageable.

But that's only good news, of course, if you still have a job. And judging by today's numbers, many don't.

The continued unemployment rate growth--if it does in fact increase again in June--is likely to have a huge effect on the already struggling U.S. economy. How are Americans going to cope with less (or no) income when necessities like food and gas prices keep rising?

Well, consumer spending is going to take a hit. We've already seen a drop-off this year in big-ticket item sales. And we've seen a decline in demand for new homes.

The bottom line: If unemployment keeps rising, Americans are going to hold on to what money--and property--they have, and we can kiss any hope of the housing slump turning around by early next year good bye.

Even if people want to move into a new home during these trying times--which we hope they will, since the bloated housing inventory needs to decline before home prices and construction demand significantly pick up--it's going to be tough.

Financing is hard enough to get if you have good credit these days--but apply for a home loan without a job? Forget it.

The housing market should be concerned that unemployment is rising--and not just because it's hit the construction sector hard.

The question is: How do we begin to turn this messy, troubled economy around?

Will it take more jobs? Less expenses? Incentives for Americans to buy homes, like the National Association of Home Builders and Toll Brothers CEO have suggested?

What do you think?

 

The Hispanic Community Is Important To The Housing Industry--In More Than One Way

Today's daily news contained an item about how the sinking construction market is hurting the Hispanic community--and while that effect is just now becoming apparent, it's likely to alter the industry for months to come.

What's happening:

A new study by the Pew Hispanic Center found that the seasonally adjusted Hispanic unemployment rate reached 6.5 percent in the first quarter.

By comparison, for non-Hispanics, the unemployment rate was just 4.7 percent, according to The Wall Street Journal.

In addition, Hispanics are making less: Weekly earnings have fallen from $512 a week in 2006 to $480 a week this year.

According to May New York Times article, they're also sending less money home: The amount of the almost 19 million U.S. Latino immigrants sending money to family members in Latin America dropped from three-fourths two years ago to about half, an Inter-American Development Bank survey found.

A few interesting caveats:

As the housing slump chipped away at the rest of the construction industry, Hispanic workers actually fared decently in its early stages: They were able to get 300,000 more new construction industry jobs in the first quarter of 2007.

But that's not the situation anymore--particularly for undocumented immigrant workers, who have been the target of recent government crackdowns.

The housing slump officially has reached Hispanic construction workers, the Journal says. The nonseasonally adjusted unemployment rate for foreign-born Hispanics--many of which lack citizenship--grew to 7.5 percent in the first quarter of the year, according to the Pew report.

In the first quarter of 2007, the unemployment rate for the same group increased 5.5 percent.

The difference for native-born Hispanics--Hispanic-Americans--was significant: Their unemployment rate was 6.9 percent in the first quarter.

In 2007, the unemployment rate for Hispanic-Americans was only a little bit lower--6.7 percent--indicating they saw less of an effect from the construction sector decline.

How it's going to affect the future:

The housing slump will end--it may feel far off, but at some point (many say early next year), the housing market will be in a clear state of recovery.

And when it is, we're going to need more workers again.

Which is going to be a problem, since Hispanics made up a huge portion of the construction industry--26 percent of the seven million U.S. construction workers are Hispanic, according to Labor Department statistics that many feel are actually far too low because of the probable amount of undocumented workers.

But many, according to the Journal, have sought jobs in other industries in the U.S. as the decline continued. Will we able to woo those workers back?

Yet filling open construction positions isn't the only concern.

Remember that New York Times article that said less money was being sent home to Latin America? It also said that the weak U.S. economy has hurt Hispanic homeownership in the U.S.--so much so that a long era of increased Latino homeownership may be reversed.

The rate of Hispanic homeownership grew from 41 percent to 50 percent from 1994 to 2006, census data showed; the pace was more than twice the increase among non-Hispanics.

But if Hispanic homeownership is declining, that means less homebuyers--for the same large amount of unsold homes--and more problems for the sluggish U.S. housing market. We need more buyers; not less buyers.

But if the economy keeps declining, we could lose more than just Hispanic homeowners--we could lose a good chunk of the Hispanic population. For now, displaced workers are finding jobs in other sectors: But rising unemployment could force many to leave the U.S. altogether.

Questions remain: What can we do now to ensure that when we need construction workers later, they'll be ready, willing and able?

How can we help Hispanic families save their homes so that the Hispanic homeownership trend doesn't end?

And--most importantly--what will we do if we find ourselves, in a year or so, with a solid demand for residential building ... but less workers and less people to buy the homes?

 

A Tough Week for New York's Rental, Construction Market

Two news stories this week showcased the New York apartment market's current troubles--both with building, and with renting.

Last week, we covered the sad news of yet another fatal crane collapse at a residential building site in New York--the city's second in recent weeks.

Not surprisingly, the city has reacted strongly: They've stopped use of the Kodiak cranes, and developers at five sites are losing thousands per day as a result, according to Crain's New York Business.

Temporary buildings commissioner Robert LiMandri issued stop-work orders for all seven of the Kodiak cranes operating in New York so that the city could inspect them.

The cranes were being used at five sites--most of them with a  multifamily component: the accident site, First Avenue at East 91st Street; a mixed-use development at 808 Columbus Ave.; a new W Hotel in the financial district; a luxury residential building located at 245 10th Ave.; The Laurel Condominiums at 400 E. 67th St.

Obviously, safety is a priority--but since city officials haven't given the developers a timeline for the inspections, they're forced to wait, and that's an expensive pause.

The delays could take weeks, Crain's said; although the crews have been mostly reconfigured to do work that doesn't involve the crane, that could make it very difficult for those projects to stay on budget.

And it's becoming a growing problem in the city: The amount of construction projects that the New York City Department of Buildings has stopped due to safety violations has increased 79 percent since January.

The most recent crane accident may also result in a new training requirement for entire crane crews--a 30-hour initial training and additional eight-hour course every three years, according to Crain's.

Construction delays can be costly for developers and cause big problems for the renters waiting to move into the new or rehabbed buildings--although, according to one recent news story, New York may have less renters to worry about.

Fox quoted the New York Post as saying rents are starting to decline in the Big Apple. A studio in York Avenue and the East 70s is running about $1,500 a month; a two bedroom in the West 170s is renting for the same amount, according to Manhattan Apartments, Inc.

The Financial District and Upper East Side are also offering deals, the Post said.

Move further away from the subway, and things get even cheaper.

The decline is an interesting turn of events for New York, which has largely avoided the giant real estate price declines that the national housing slump has caused in other cities.

However, last month, numbers indicated that the slump may finally have reached New York--as we recently reported, residential building permits have sunk 50 percent in the past year in New York City, which clearly indicates there's less of a demand for housing.

And now, according to Fox, desperate landlords are willing to pay a month's rent for new renters or foot the broker's fee.

You could argue that less demand for rental properties means more New Yorkers are buying apartments--but those lower building permit numbers indicate that may not be the case for long.

Could New York--which long withstood the housing slump--finally be feeling the effects? And is this an indication the national housing decline is nowhere near over--and in fact, spreading to claim new victims? What do you think?

The Group That May Push the Foreclosure Rate Sky High

The rising U.S. foreclosure rate has prompted an outbreak of proposed bills and programs from Congress and local lawmakers to help families save their homes--but according to Bloomberg, the average American family isn't in nearly as much as trouble as the country's military families.

Foreclosures in towns with high populations of U.S. soldiers are growing rapidly--at a pace almost four times the national average, according to Irvine, Calif.-based RealtyTrac Inc.

Why?

For many of the same reasons the rest of the country is struggling with foreclosure issues: Lured by the promise of low rates and simple terms, military families signed up for subprime mortgages several years ago, sidestepping safer alternatives like Veterans Administration loans, which dropped the lowest amount in 12 years.

And according to some officials, it's caused the worst military housing crisis in history.

"We've never faced a situation like this, not in the Vietnam War, World War II or the Korean War, where so many military are in danger of losing their homes,'' said Paul Sullivan, who serves as executive director for Washington-based advocacy group Veterans Common Sense.

In towns and cities within 10 miles of military facilities, foreclosure filings rose by a roughly 217 percent on average from January through April, compared to 2007.

By comparison, the national foreclosure rate was 59 percent during the same time period.

Take a moment to let those numbers sink in: We're talking about a 217 percent foreclosure filing increase for one specific group of people--that is huge.

Affected areas include:

• Norfolk, Va.--which contains the Navy's largest base, and Woodbridge, Va., which is next to Quantico, the Marine base. Woodbridge foreclosures grew by 414 percent.

• Columbia, S.C., which saw the biggest increase. Columbia houses Fort Jackson, which is a large Afghanistan and Iraq combat training facility.

• Cities around Norfolk's base and the Oceanside, Calif. Camp Pendleton Marine Corps Base, where foreclosures have tripled, according to RealtyTrac.

• Foreclosures also more than doubled in Havelock, N.C., home to Marine Corps Air Station Cherry Point.

Much has been written about the too-loose underwriting practices and questionable conduct that pushed so many homeowners into subprime loans.

But research suggests military families in particular may have been targeted for subprime loans, according to Bloomberg, because they move around often and are sometimes sent overseas--which, combined with their low pay, often meant they had poor credit ratings. Which means it's probably not going to be easy for them to refinance.

The foreclosure numbers for military families are absolutely appalling--no matter what your feelings are about the U.S. military (they run strong these days on both sides of the coin), it's just not a good housing market move to have all these homes flooding the market in concentrated areas.

We're trying to shrink the foreclosure rate; this group is in serious danger of seeing additional defaults and foreclosures--and that could hurt more than just the communities surrounding the country's biggest military bases.

But what's the next step?

Rep. Bob Filner, D.-Calif., just introduced two bills to reduce restrictions on home-loan guarantee programs that are administered by the Department of Veterans Affairs. The move could help veterans--many of which live in Filner's district, according to the San Diego Union Tribune.

HR 4884, one of the bills, would end refinancing equity requirements--veterans currently have to have 10 percent equity in their home to refinance through the VA (good luck getting that in California these days). The bill also would cut standard funding fees to 1 percent. 

Filner's other proposed bill, HR 4883, would prohibit anyone foreclosing on a property that a service member owner for a full year after the service member completed military service.

Clearly something needs to be done; is this the best solution? What do you think we should be doing to curb military foreclosures, to help both at-risk families and the housing market?

Online Real Estate Brokers vs. Traditional Agents: Is This War?

As part of the settlement announced Tuesday in an antitrust case between the Justice Department and the National Association of Realtors,  non-Internet-based brokers will now be allowed greater use of multiple listing services, according to the New York Times.

Online brokers felt "that the industry’s practices have denied them the chance to make full use of the multiple listing services," the Times said.

It seems that wasn't the only complaint online brokers had about the industry.

Today--while perusing the Internet for my daily housing news fix--I stumbled across this press release from ForSaleByOwner.com, in which the site offers data "to provide a pricing comparison between homes being sold by its customers and those being sold by real estate agents."

That URL shouldn't be unfamiliar to anyone in the real estate industry--the site is becoming a growing threat to agents as home prices decline and sellers look for a way to make more money off the sale of their home.

Cutting out an agent commission is becoming a more popular choice, and sites like ForSaleByOwner.com give sellers a way to do it.

Buyers and sellers, of course, lose some things in the process--agents' regional knowledge, a personal touch--but there's no disputing it: Do-it-yourself home buying and selling sites are picking up steam.

According to ForSaleByOwner.com, the median price of homes it sold during the first quarter of 2008 was $267,900. The National Association of Realtors--as the release says--estimated traditional agents' median home selling price to be $196,300 and ForSaleByOwner.com's to be $180,000.

"For too long, interest groups representing real estate agents have flooded the marketplace with questionable data on 'for sale by owner' homes to discredit this method of selling a home and protect agent commissions," Greg Healy, the site's vice president of operations, said in the release. "The truth is that homes in a wide range of prices are sold 'for sale by owner' because all consumers want opportunities to save on paying commissions."    

Ouch.

It's understandable that the NAR wouldn't want sites like ForSaleByOwner.com to cut into its agents' client base; and sure, ForSaleByOwner.com is going to stress that the economy is weak, and that the site feels it can save consumers money.

But could the site's median selling price for the first quarter--in which no housing data we read was really uplifting--be more than $70,000 higher than NAR's agent-based selling price?

If NAR is wrong and the site actually did sell homes for a median price that was $71,600 higher than real estate agents did, well--that is a big difference.

The ForSaleByOwner.com selling price also significantly higher than the $202,300 median price that NAR said homes were selling for in April.

Who's right?

Who knows? But one thing was clear from the press release--there's a big divide growing between traditional real estate agents, who are in the midst of a troubled market, and ForSaleByOwner.com, which is going after that market.

Who do you think will win?

Is Affordable Housing in Danger?

Foreclosures have been hurting the single-family home market for months--and making headlines as families lost their homes due to loan resets and sinking equity.

The historically high foreclosure rate has caused growth in the rental market as former homeowners look for a new place to live; but the effect on the apartment market hasn't all been positive.

Because apartment buildings have owners, too--and those owners sometimes default and enter into foreclosure--renters can get kicked out with little notice.

And as some recent reports indicate, the small multifamily building market--which offers affordable housing options for families in many cities--may be in serious danger as a result.

According to an article in today's Chicago Sun-Times, 35 percent of the almost 14,000 foreclosures filed in Chicago in 2007 involved two- to six-unit apartment buildings. Buildings of that size in the city are, the Sun-Times says, frequently owner-occupied--and widely considered to be affordable housing.

In some neighborhoods, most of the foreclosures were of small apartment buildings, the Woodstock Institute (which measures foreclosures) said.

Two- to six-unit buildings comprised nearly 87 percent of the foreclosures in West Garfield Park last year; the same kind of buildings made up 70 percent of the foreclosures in neighborhoods like North Lawndale, the Lower West Side, East Garfield Park and New City.

Which poses a big problem for the city's housing market: If economically challenged areas are losing a large number of affordable apartments, where are the residents going to live?

Are developers working overtime to add to the city's affordable housing market in anticipation of the growing need? Is public housing ready to accept a significant amount of new applicants who are likely not going to be able to find alternate affordable housing options?

The Woodstock Institute says that the continued loss of affordable housing--which is probable, due to the continuing loan fallout--could "destabilize communities," the Sun-Times reports.

Chicago isn't alone in its struggle. In Boston, foreclosures--even in low-income have traditionally been just a small portion of the market. But times are changing: And in Lawrence, Mass., almost as many homes were foreclosed upon as were sold in the first four months of this year, according to real estate tracker the Warren Group.

Today, more than 45 percent of all area real estate transactions are bank foreclosures, the Boston Herald reports; given Boston was one of the areas hardest hit by the housing slump, that's not shocking--but it is bothersome because it's a big change--and almost twice the statewide foreclosure average.

“It is certainly disturbing,” Thomas Callahan, head of the Massachusetts Affordable Housing Alliance, told the Herald. “It has the effect of depressing the market.”

We're not hearing as much about multifamily foreclosures as we are about single-family ones. But they're out there--and the foreclosures in many ways are even more tragic than single-family home repossessions because they affect more residents.

Numerous programs exist to help troubled single-family owners; does our industry need more help, too? Could this growing concern spread to a housing market crisis--one that could threaten the very existence of small multifamily buildings?

What do you think?

Homebuilder Woes Have More Than One Cause--And More Than One Effect

Homeowners, of course, aren't the only ones who have suffered during the U.S. housing decline; and reports of builders struggling to make ends meet as residential construction dwindle are growing more frequent.

But lower community home prices and reduced sales of local homes aren't the only factors to blame.

Take, for example, Texas. The state withstood much of the housing decline and actually added construction jobs: 23,000 since the end of 2006.

But in the first three months of the year, builders broke ground on 5,218 homes in the Dallas-Fort Worth area. That's less than half of the construction starts in the second quarter of 2006, during the housing boom, according to Metrostudy.

As a result, several homebuilders in North Texas--including Goff Homes and Colonnade Homes--have gone out of business: No more marketing efforts, and the phones are disconnected, according to the Dallas Morning News.

Other builders are reducing jobs.

"Most of the builders I've talked to have reduced their overhead by 30 percent to 50 percent," Ted Wilson, an analyst with Dallas-based research and consulting firm Residential Strategies Inc. told the Morning News.

The bottom line: The housing slump's effect is widespread--and as it zooms through its second year, even states that fared decently have been affected.

And the local market isn't causing all of the problems Texas builders--and building-related industries--are facing. Silver Line Building Products LLC, a window-making unit of Andersen Co., announced recently that it would eliminate 250 jobs at its Garland, Texas plant. The job cuts aren't a result of the drop in local building; they're due to a reduced national demand for windows.

Lower building material demand isn't the only ripple effect coming out of the building sector's problems. A New York Times article published today on the auto industry's woes--which directly tie in to the housing market's decline--further illustrates that it's tough times for builders.

Vehicle repossessions, the Times said, are increasing in markets where the housing slump has been most severe, like Florida.

The most recent repossessions, according to Fort Meyers, Fla. repo man Bill Glover? Cars owned by builders.

“Lately what we’re picking up is crew-cab pickup trucks,” Glover told the Times, “and anything having to do with construction.”

And as repossessions increase, new auto loans are decreasing because of the risk--more of the same vicious cycle.

California and Florida have lost more than 80,000 construction jobs each since 2006, according to Department of Labor statistics; some were due to the housing decline. But others may be directly tied to the housing market's growth years, according to the San Diego Union-Tribune.

Paul Tryon, chief executive officer of San Diego County's Building Industry Association, expects fewer than 4,000 home-building permits to be issued this year.

Yes, home starts are down in the area. And yes, many of the area residential builders are scaling back.

“Centex, KB Home, K. Hovnanian, William Lyon, Richmond American, Pulte--all have closed local offices, and pretty much every other builder has reduced staff,” real estate analyst Peter Dennehy told the Union-Tribune.

But an additional reason for the decline may surprise you. According to the Union-Tribune, lower home sales are only partly to blame.

The other issue: The county used up much of its residential development-designated land during the boom years.

And the outcome? An industry shift from single-family, suburban tract homes to vertical, mixed-use projects, says real estate economist Gary London.

The recent Commerce Department results that showed multifamily units helped push new home construction up 8.2 percent in April would seem to support that--but is it feasible that buyers who once favored single-family homes, will embrace multifamily options?

Maybe. After two years (and possibly more, if the slump keeps going) of watching home equity decline, it's entirely possible that buyers may be a bit gun shy about spending. Multifamily units are likely--depending on the market, of course--to be priced lower than single-family homes, and they require less upkeep.

But what do you think about the proposed shift London predicted? Do you think builders--and buyers--in markets like San Diego are going to decrease single-family starts and gear up to build more multifamily properties? Tell us what you think by posting below.

 

Why Aren't Lower Prices Translating into Higher Sales?

The hotly-anticipated National Association of Realtors report on home sales was released this morning--and, as expected, it showed that home sales fell last month.

• Sales of pre-existing homes declined to an annual  pace of 4.89 million.

• The good news: That's only a 1 percent fall from March's revised 4.94 million reading.

• The bad news: The existing home sales rate is still almost 18 percent less than April 2007.

That includes single-family homes, townhomes, co-ops and condos; and it suggests the housing slump is dragging on, even as we approach the year's halfway point.

That news wasn't encouraging--but it wasn't the worst NAR had to offer. The real zinger? The housing inventory's sudden growth from March's 10-month supply to an 11.2 month supply--an 11.2 month supply!

We're moving in the wrong direction, folks. For the housing market to see a significant correction, we need sales to increase--and homes to get pulled off of, and not added to, that inventory.

Because there are so many homes for sale, the median home price fell 8 percent compared to 2007--it now stands at $202,300.

In March, NAR predicted that the median home price would drop to $232,200 this year before rising 5.1 percent next year; now, just two months later, the median price has fallen almost $30,000 lower than its forecast.

Consumers may not love lower home prices, but in theory, lower prices should increase home sales. Yet we're not seeing it. Why?

Well, it may just be too soon to see the results; and according to NAR, the next few months could show a drastic improvement in the housing market.

NAR President Richard F. Gaylord praised the recent easing of Freddie Mac and Fannie Mae restrictions, saying that once the new policies kick in on June 1, consumers will be able to put down lower downpayments and get more financing, which should help spur home sales this summer.

Changes for high-cost areas could also help increase home sales, NAR said.

Lawrence Yun, NAR's chief economist, said the "recent notable drop in interest rates on conforming jumbo loans will help consumers in high-cost markets like California and New York.”

That's true--those changes are likely to have an effect--but will it be enough to increase sales? What do you think?

The One Thing That Can Turn the Housing Slump Around in Seriously Troubled Markets Is ...

The Office of Federal Housing Enterprise Oversight released data today that showed home prices had yet again dropped in the biggest quarterly decline since the OFHEO started keeping records 17 years ago.

A few highlights:

• Home prices dropped 3.1 percent in the first quarter compared to 2007.

• Prices declined in 43 states.

• California (-10.6 percent), Nevada (-10.3 percent), Florida (-8.1 percent) and Arizona (-5.5 percent) showed the most severe depreciations, according to USA Today.

The culprit? That pesky housing supply of unsold homes.

"The large overhang of real estate inventory awaiting sale continues to force price declines in many areas, but particularly in places that had seen very sharp appreciation," Patrick Lawler, the agency's chief economist, said in a prepared statement, according to the New York Times.

By now, we're used to bad housing reports: And we're used to speculation that the decline isn't over.

And we're also used to groups like the National Association of Realtors putting a positive spin on things to make the even most negative news.

But OFHEO is a government agency--and unlike NAR has no reason to want consumers to believe that the market is improving. Yet OFHEO Director James Lockhart was quick to point out that lower prices do benefit one group--buyers.

"For homeowners and financial market observers, these declines spell further erosion in home equity levels and potentially more trouble for mortgage markets," Lockhart said. "To prospective home buyers who have been shut out of homeownership because of affordability constraints, these declines may be welcome news, as are continued low mortgage rates."

But, given that the markets that showed the greatest depreciations--California, Nevada and Arizona--in the past quarter are the ones that have seen some of the biggest, most consistent drops during the slump, it's not necessarily true that declining prices mean buyers are jumping up and down in joy.

Consider also that PMI--the country's second-largest mortgage insurer--recently released its Spring 2008 Risk Index, which said Vegas home prices have a 91 percent chance of declining in the next two years.

That's an increase from the 89 percent the company predicted in its Winter 2008 Risk Index, according to the Las Vegas Review-Journal--and something that's likely to make borrowing much, much more difficult in the Vegas market.

Cheaper homes are great; but if buyers can't get financing, the market is unlikely to see a lot of action.

And Vegas isn't alone in its risk-related financing troubles. The PMI index ranked other locations--like Riverside-San Bernardino-Ontario, Calif., which received a 93 percent rating--as being extremely prone to further price declines in the next two years.

If prices keep falling in the hardest-hit areas, financing will keep tightening up: And how are we ever going to get out of this seemingly eternal housing slump?

It's a never-ending cycle, but it's one that needs to stop. The question remains, however, who needs to step up and make the first move.

It's highly unlikely that buyers and sellers will unite to start offering and accepting higher home prices. Which leaves lenders--and it might be time for them to take a role in turning the market around.

Lenders are understandably hesitant. And they've done a good deal of work to ensure mortgage loans given out now are more realistic: More proof of income and assets is required, and many of the no-equity/no money down programs of years past are no longer available. Lenders have learned that squeezing borrowers into homes--and loans--that they can't really afford in the near future doesn't help anybody.

But for the market to rise from its ashes, it really seems that lenders need to now loosen up a bit. We're not saying loans should be given out indiscriminately--but working closely on an individual basis with borrowers to get a loan--the right loan--should be a priority for lenders in high-risk markets.

If it isn't, this cycle of higher risk leading to lower prices leading to a stagnant or declining market is sure to continue--fueling the nationwide housing slump along with it. And that's something no one--including lenders, the OFHEO, buyers and sellers--want to see happen.

Will Deals on Homes Help Fix the Housing Market?

Homes are more affordable than ever, and buyers have more reasonable financing options for high-priced properties, according to recent reports. But what does that mean for the overall market?

Falling prices are making homes more affordable than ever in some cities, according to he latest Housing Opportunity Index released Tuesday by Wells Fargo and the National Association of Home Builders.

Families earning the median household income--$61,500--could afford 53 percent of all homes sold in the first three months of 2008 in the U.S. In the same period in 2007, just 44 percent of families could, according to CNNMoney.com.

Homes prices, in fact, are at the most affordable level they've been at since 2004, CNNMoney.com says.

Even luxury homes are less expensive. Although they're holding their own in some markets, high-priced home prices have fallen as much as 20 percent in the past year in some parts of the U.S., according to the Orange County Register.

And jumbo loan rates to buy those homes are finally dropping: Interest rates for large mortgages in areas like Northern California and Washington, D.C. are finally becoming more reasonable, the San Jose Mercury News says.

When Congress approved lower rates for mortgages of up to $729,750 in high-cost housing markets--via the stimulus bill--homebuyers thought they were in for a big break.

But rates didn't fall quite as they'd expected--until Friday, when a borrower could nab a 6 percent rate for a 30-year, $500,000 mortgage--compared to a 7 percent rate for the same loan last week.

And, the Washington Post says, the era of 3 to 5 percent downpayments  is returning for buyers with good credit.

So can we expect a huge sales boom soon?

Maybe. "Boom" may not be the right word--but the recent efforts to increase activity in in the jumbo loan market and the increased home affordability could have a profound effect on the huge housing inventory.

Once that starts shrinking considerably, we may finally begin to feel like a true recovery has begun.

Of course, even though homes are more affordable, it doesn't mean people can afford to get into them--financing is still hard to come by, and that's unlikely to change anytime soon.

But could these recent changes--opening the possibility of homeownership up to a number of new buyers--help sell a significant number of homes? Or are the changes more likely to spur refinance activity?  And which would have the biggest effect on the market?

What do you think?

NAR Home Price Survey Raises Big Questions About the Jumbo Market

The National Association of Realtors released its quarterly home price survey today--and the trade group says median home prices dropped in two-thirds of the cities it surveyed.

• Median prices for pre-existing single-family homes fell in 100 of 149 metropolitan areas in the first quarter, NAR said; 48 urban areas posted price gains.

• One lone metropolitan area had no change.

• The national median home price also fell, dropping 7.7. percent from the January to March 2007 period to $196,300. The former median sales price was $212,600.

NAR has been characteristically optimistic as of late about the housing market improving--let's face it, the group is always pretty upbeat (it doesn't really benefit real estate agents to have the media and general public convinced housing is in an unending downturn and it isn't a good time to either sell or buy a house).

But the first quarter results are anything but cheery. What gives?

According to NAR Chief Economist Lawrence Yun, who always offers a tender word to accompany dour housing news, jumbo loan issues are to blame for the numbers.

As mortgage defaults rose, banks panicked and credit became harder to get; for high-end, expensive properties in costly markets, it became really harder to get.

"These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose," Yun said.

Well. OK. We'll agree, that could be an issue. Congress tried to reinvigorate that very market by raising FHA, Fannie Mae and Freddie Mac loan limits in March. Freddie Mac and Fannie Mae's shot up from a $417,000 maximum to $729,750.

That meant more people qualified--but it didn't mean the loans were cheaper.

Jumbo loans rates used to be about no more than 0.25 percentage point higher than conforming-loan rates. However, the difference swelled to more than a percentage point as the credit fallout continued because investors were worried about buying nonguaranteed loans.

The government-backed agencies' new, increased involvement in the jumbo market should have helped--but the San Francisco Chronicle reported today that the rates just now are beginning to come down.

Last week, many lenders cut their jumbo-conforming loans rates by a half a percentage point, which makes the loans as affordable as standard confirming loans below $417,000, according to the Chronicle.

So it's possible Yun and NAR are right: The jumbo market just didn't get the shot in the arm it had expected--at least not in the first quarter.

Yun also said that more than half of all mortgage foreclosures involved subprime mortgages, and severe price drops are happening mostly in areas where subprime loans had been frequently issued.

And it's true, that does describe many jumbo loan markets in the U.S.--California, Las Vegas and more. It's also true that we know we need to start moving homes in stagnant markets such as those to reduce the national housing supply, reignite demand and kick-start residential building again.

But therein lies our problem: Because although those Fannie- and Freddie-backed jumbo loans with the higher limits can potentially help more people, they're not necessarily easier to qualify for.

As the Chronicle points out, Fannie Mae and Freddie Mac generally require better credit scores, more strict income documentation, larger down payments and lower debt-to-income ratios on loans from $417,000 to $729,750. Those borrowers who had subprime loans before just may not make the cut.

And if a borrower with good credit owns a few investment properties--which some do because of jumbo market gains during the real estate boom--the person may not get funding at all.

Freddie Mac issued a bulletin on April 22 to lenders that said it planned to restrict financing to second-home and investment real estate buyers who have "individual or joint ownership" interests in more than one property after August 8, the Washington Post said.

Second-home buyers won't qualify for new Freddie Mac mortgages if they have ownership interest in more than four properties (unless they're paid off). Freddie Mac used to allow investors to own up to 10 rental properties carrying mortgages.

So we wonder: Will the lower jumbo loan rates really help the second quarter results?

Or will the jumbo market remain sluggish--and as Yun said, affect home prices--because it's still hard to qualify for a government-backed loan? Having more money available isn't much help if most people can't get it.

What do you think?

 

Which Gender Is Recession-Proof--And Which is More Likely to Buy One of Your New Condos?

The slowing economy has affected a number of industries in a number of ways--and it's affected women and men differently, too.

According to new data, women are faring better than men:

• From November through April, women in the U.S. age 20 and up added nearly 300,000 jobs, according to the Bureau of Labor Statistics. Two female-concentrated fields, education and health care, are growing, which has helped; some analysts have suggested that women also are a better fit for the knowledge economy because of their sensitivity, intuition and ability to act as a team, BusinessWeek says.

• Men, during the same period, lost almost 700,000 jobs. That's due in part to the fact the two sectors that are doing extremely poorly--construction (which is about 88 percent male) and manufacturing--are male-dominated fields, Seeking Alpha says.

• Women are also winning at the higher education game: They're graduating from college at higher rates than men are, according to BusinessWeek.

However, the extra jobs don't mean women are making more because the pay levels remain inactive.

Thus, because women and men are often sharing household expenses, the lady-driven economy can't sustain its strength for long if the men's side continues to weaken, BusinessWeek says.

That may be true--but it doesn't mean women will lose their buying power.

And when trying to sell housing (or housing repairs), don't underestimate the feminine influence. The National Association of Home Builders says a recent Harvard University study found that women handle 91 percent of home buying and remodeling decisions.

The NAHB's publishing division in January released "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions" to help builders and other housing industry members understand female buyers' motivations and objectives.

“Builders recognize that women have more buying power than ever—single women, in fact, are the second largest and fastest-growing demographic of home buyers,” said Sandy Dunn, first vice president of NAHB and a builder from Point Present, W.Va.

A few interesting finds from the 2006 "Buying For Themselves: An Analysis of Unmarried Female Home Buyers©" survey by Rachel Bogardus Drew, published by Harvard's Joint Center for Housing Studies:

• Don't focus on marketing new buildings to single women. Single women are less likely to choose newer construction than married couples.

• The multifamily market is a popular choice. Because they loved the convenience and security, 15 percent of the single female buyers that the survey studied bought a condo--slightly higher than the 12 percent of unmarried men and a whopping three times more than the 5 percent of married couples who bought condos.

• Women also rely on their agent. Roughly 96.9 percent of single females rated agent communication skills as very important, more than single males or married couples.

The economy's varying effect on men and women is interesting--but the housing decisions men and women make--and why--should be of interest to every industry member.

Knowing what makes women, for example, buy, revamp, remodel and sell homes can help drive design decisions and marketing programs--for agents, builders, developers and more.

Do you know what your potential buyers are looking for?

Want to Restart the Housing Market? Don't Forget About Foreclosures...

Yesterday, the House passed a bill to help prevent foreclosures by urging the mortgage industry to write down the loan's remaining principle in exchange for the Federal Housing Administration offering up a new loan with lower payments.

The plan's future effect--and really, future--is still really questionable (the program still needs to get through the Senate and the president, who has said he will veto it; plus it would be voluntary--and according to today's Wall Street Journal, the mortgage industry isn't exactly doing cartwheels about signing on).

But the current state of the foreclosure market in this country is not--that's actually quite certain. Just last week, new information from RealtyTrac said that the number of U.S. foreclosure filings had gone up for the seventh quarter in a row--rising to 649,917 at the end of March.

Foreclosures, RealtyTrac said, were up an astounding 112 percent from the first quarter of 2007.

The foreclosure market has become its own entity as its has grown. In areas particularly damaged by the housing slump, some real estate agents have begun to specialize in foreclosures, the way one might focus on a certain neighborhood, according to BusinessWeek; some are even offering bus tours of foreclosed homes for prospective buyers.

Take, for example, the Florida real estate agent who bought a church bus and painted "Foreclosure Tours R Us" on the side after noticing about 40 foreclosed properties a day hit the market.

"I'm taking the product off the market that's driving our economy down," Marc Joseph told NPR, "and I'm taking the product that is on the market and putting it in the hands of people who deserve it — [the buyers] who couldn't afford it two and a half years ago."

You can't really fault the guy--it's true, he is selling properties that the market needs to be sold in order to recover.

And although you may have read a number of things about what a great value foreclosed properties are, recent research shows they might not be as attractive to buyers as you think.

According to a study recently released by Trulia.com, nearly 7 in 10 American adults associate "negative aspects" foreclosed homes, U.S. News and World Report blogger Luke Mullins says.

But it's not because they feel bad about buying someone else's abandoned (or repossessed) home. Sixty-nine percent said they feared hidden costs; 35 percent said they felt it was a risky investment.

And 33 percent fretted the foreclosed home might lose value in the future.

Well. If that's the general feeling, we've got some work to do. As we've said before, reducing the U.S. housing inventory is crucial to reigniting residential building and turning the housing market around--less supply means more demand, which means higher home prices. Everybody wins!

But if buyers see foreclosed homes as being taboo--and a whopping amount of them are making their way to the market each month--we could be a long way from that happening.

How do you think we can encourage buyers to purchase foreclosed homes? And what about getting credit to fund the purchase--should foreclosed homes come with a financial incentive, or are the price reductions enough?

Would you buy one? Have you?

Will the Strong Survive the Slump?

During the housing decline, some markets seemed to be holding steady--avoiding large drops in home value and residential building.

But now, according to some sources, even those resilient markets are feeling the housing slump's effect.

Seattle, Portland, Ore., Charlotte, N.C. and Salt Lake City all had home price increases last year--while more than half of the 150 markets the National Association of Realtors tracks posted declines, CNNMoney.com said.

But those housing markets aren't looking as strong these days.

• Prices in Charlotte declined about 3.4 percent from August 2007 to February, according to the S&P Case/Shiller Home Price Index. And the area's future didn't look too promising: Builders began work on 48 percent fewer new homes in the first quarter of the year, and building permits dropped 45 percent, the Charlotte Observer said.

• Seattle saw a 6.5 percent loss compared to its July high point. In April, the median house price was $440,000, a 2.4 percent drop from March and an 8.3 percent decline from April 2007, according to the Seattle Post-Intelligencer. Condos were especially hard hit: They comprised a smaller percentage of total sales in April.

• Portland prices fell about 5 percent during the same period.

• Although Forbes recently called Salt Lake City one of the most recession-proof cities in America, its local home prices dropped about 7 percent in the fourth quarter of 2007.

The housing market in areas like Miami had gotten so pricey during the boom that a large drop was almost inevitable.

But in areas like Seattle--where homes remained relatively affordable before and during the slump--it seemed like the national housing decline would have an only minor effect.

For one, the cities are highly desirable to live in. Home to several large companies (Bank of America in Charlotte; Microsoft in Seattle, etc.), the areas offer a strong job market, which encourages new residents to move in.

Most of the cities also offer a positive living experience for the non working, CNN.com says. They're similar to other retirement hotspots like Florida, but lack the higher taxes and insurance costs related to the several hurricanes that passed through Florida in recent years.

So many retirees have flooded areas like Charlotte that there's even a term for it--the halfback phenomenon, which refers to the fact retirees are moving partway back to their original home.

Then why are prices falling?

Well, credit it tough to get, no matter where you live. And it's getting harder to obtain--according to the Federal Reserve's recent bank survey, residential mortgages became more difficult to get in the past three months than at any time in the survey's 17-year history.

And--even if your market is doing OK--there is no way to avoid the widespread bad press about the housing market, which is likely inciting fear across the country. People are afraid to buy; they're even more hesitant to sell--all of which can slow down a housing market.

The fact that some previously solid housing markets are hitting hard times is sad news--but chances are, if those markets stayed strong this long, they'll bounce back early on in the recovery period.

But when that will be ... is anybody's guess.               

Fannie Mae and Freddie Mac's Uncertain Future

Fannie Mae and Freddie Mac have been in the news often lately--and an interesting article in today's New York Times touches on some of the challenges the agencies face that could make headlines in the future.

The article illustrates why the mortgage market needs both companies, and discusses why it's in danger of potentially losing them. (Given today's announcement that Fannie Mae posted a more than $2 billion first quarter loss, that concern is more timely than ever.)

And although the government has relied on both companies to help bail out the mortgage market, its close ties to Fannie and Freddie certainly aren't making anyone feel very comfortable about the prospect of either collapsing.

As the article says, Fannie Mae and Freddie Mac have benefited from their government backing--both were allowed to borrow money at lower interest rates because of it, and their profits soared as a result. From 1990 to 2000, their stock increased more than 500 percent.

But since then, things haven't been as rosy:

• Top executives were replaced; Fannie and Freddie had to pay hundreds of millions in penalties, the Times said.

• Congress-determined affordable housing goals were met by purchasing large amounts of subprime and Alt-A mortgages; but when the housing market went bust, Freddie and Fannie had a $6 billion loss in the fourth quarter of last year.

• Executives were granted the right to increase their investment portfolios last year in exchange for their help stabilizing the market by buying subprime mortgages; in March, they both said they would raise more capital this year, and got an extra $200 billion in purchasing power.

• And in April, because they promised to further assist the housing market, Fannie Mae and Freddie Mac's mortgage cap was increased to $729,000. 

But Fannie Mae and Freddie Mac are dealing with serious issues. They've posted huge losses this year, and may still have as much as $19 billion in additional losses they haven't dealt with, according to analysts.

And, the Times says, they're banking on the housing market turning around in the next year and a half. If it doesn't, and home prices fall further, their losses could increase.

It doesn't sound like a hugely stable situation--yet we need Fannie Mae and Freddie Mac more than ever.

They are the biggest collective source propping up the ailing mortgage market: The agencies handled more than 80 percent of the mortgages investors purchased in the first quarter of this year, according to the Times.

Lose Fannie Mae and Freddie Mac, and the already rocky lending situation--just today, a Federal Reserve report said that the number of banks that had tightened lending requirements for corporate, commercial real estate, home mortgage, credit card and other consumer loans had risen close to historical highs--could go from bad to worse. Home prices could fall further; lending could become even harder to come by.

Which is why some lawmakers are concerned--but not willing to give up on the companies.

"I want these companies to help with affordable housing, to help low-income families get loans and to help clean up this subprime mess," Representative Barney Frank, a Massachusetts Democrat and the chairman of the House Financial Services Committee. "Otherwise, why should they exist?"

Good point ... but the more pressing question is, can they continue to exist?

Switching Gears From a Residential For-Sale Property to a Rental: Part Two

On Friday, we touched