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Housing Chronicles

Housing Chronicles
The blog from building industry consultant Patrick Duffy at MetroIntelligence Real Estate Advisors. Commentary and news citations on regional, national and international economic and real estate trends.


KBHome pulling out of 3 markets
2008-03-10 05:17:00
Rather than continue to build in the future in Albuquerque, Chicago or the mid-Atlantic states, builder KBHome has announced it will be leaving those markets once it finishes up current projects:The Los Angeles-based company said current conditions in the housing market are too difficult and it has decided for now not to build any more homes in Albuquerque, Chicago and the mid-Atlantic. KB spokeswoman Lindsay Stephenson said the transition would be gradual since the company plans to finish its current projects and honor all warranties on homes already built.
More About: Markets
FHA to the rescue
2008-03-10 04:49:00
Created during the Great Depression to create a market for mortgages insured by the federal government, the Federal Housing Administration (FHA) became mostly forgotten during the last housing boom (I actually used an FHA loan to buy my first condo in 1990). Although the program only requires a 3% down payment, its underwriting guidelines are a bit stricter than those for conventional loans -- especially those of the subprime variety -- and so both lenders and mortgage brokers weren't pushing them. But now the FHA may be the government's best hope of addressing the credit crunch without creating a new bureaucracy:Home loans insured by the FHA have become the cheapest and, in many cases, the only alternative for borrowers who can make only a small down payment. The agency is rapidly gaining market share as government-sponsored mortgage investors Fannie Mae and Freddie Mac, stung by combined losses of about $9 billion in last year's second half, back away from credit risks by...
More About: Rescue
Housing Chronicles Hits 2 Million Headline Views on Reuters, Fox Business N
2008-03-10 04:37:00
If you're a fellow blogger and are interested in creating some great new promotional opportunities for your site, I'd highly recommend checking into the syndication service BlogBurst. About 10 days ago, I announced that Housing Chronicles had recently hit 1 million headline views on BlogBurst subscriber sites such as Reuters , Fox Business News, The Wall Street Journal and the Chicago Sun-Times after originally signing up on Feb. 5th, 2008.Although it took about a month to hit 1 million views, it took only another 2 weeks to hit 2 million headline views, which creates powerful brand awareness and also brings in new readers to the site every day. With many media sites now including blog posts from outside their own editorial walls, an entire new universe is opening up to bloggers on a variety of timely subjects. And if your hometown newspaper or favorite media website hasn't done this -- suggest it! You can only improve your understanding of the issues with as wide a variety of...
More About: Views
FBI investigates Countrywide for securities fraud
2008-03-08 23:26:00
Countrywide is one of 15 sub-prime lenders under investigation for potential securities fraud related to statements about its financial position and the quality of loans in its portfolio. From a Wall Street Journal article:The Federal Bureau of Investigation is probing subprime lender Countrywide Financial Corp. for possible securities fraud, according to law-enforcement officials and finance-industry executives. The inquiry involves whether company officials made misrepresentations about the company's financial position and the quality of its mortgage loans in securities filings, four people with knowledge of the matter said. It is at an early stage, they emphasized...Fifteen other subprime companies also are under scrutiny by federal agents and prosecutors in a broad look at the subprime industry sparked by huge losses on residential mortgages and the securities used to fund them. The investigations are examining mortgage-origination fraud, conflicts of interest and undisclosed ...
More About: Fraud , Securities , Countrywide
The New York Times takes on Dunmore Homes
2008-03-07 04:54:00
In a detailed expose set to run in Friday's paper, The New York Times tells the story of now-bankrupt Dunmore Homes , which built throughout California's Central Valley for decades. Before selling his company to an investor last year, Sidney Dunmore was also one of the state's most respected homebuilders, who built a solid home and was active in building industry associations. But as the market slowed, over-leveraged bets began to unravel, uncovering what the story says "have come to symbolize the real estate crisis not just for Dunmore Homes, but for an entire industry:"When George P. Dunmore started his business in Sacramento in the early 1950s, World War II was over and the building boom was on. Over the next several decades his company, Dunmore Construction, along with other respected builders, took the tabula rasa that was California’s Central Valley and etched it with entire neighborhoods filled with well-built ranch houses on trim lawns...But by the time Mr. Dunmore die...
More About: New York Times
Foreclosures Rise as Home Equity Declines
2008-03-07 04:17:00
Not surprisingly, the ongoing decline in home equity has helped the level of foreclosures rise to an all-time high. Without sufficient equity in homes and 100% financing now a thing of the past, borrowers facing re-sets increasingly find themselves without options other than simply walking away from properties. From an L.A. Times story:Home foreclosures hit new highs and the amount of equity in homes reached new lows as the housing crisis escalated across the country in 2007, new figures showed Thursday. Nationwide, nearly 6% of all mortgages were delinquent at the end of the fourth quarter and just over 2% were in foreclosure, the Mortgage Bankers Assn. reported. The number of foreclosures was at the highest level since the association began keeping records in the 1970s...Doug Duncan, chief economist for the Mortgage Bankers Assn., said the number of foreclosures and delinquencies in four hard-hit states -- California, Florida, Nevada and Arizona -- was high eno...
More About: Foreclosures , Rise , Equity
Builders going 'green' out of necessity
2008-03-06 23:31:00
When sustainable development first emerged a few years ago, most builders weren't willing to risk their production schedules for new building methods and options that were either untested, not in demand by buyers, or both. Even as recently as a couple of years ago, buyers claimed they wanted 'green' homes but weren't willing to pay the extra freight for its benefits. But now, with LEED energy certified projects in much greater demand (especially for commercial buildings but increasingly for residential developments), builders are finding that offering energy efficiency far beyond what's currently available in existing homes can sometimes pry skittish buyers out of hiding. From a Wall Street Journal story:More builders are adding "green" features to their new homes. It is a strategy born out of necessity. In October, the Trilogy division of Shea Homes rolled out a program dubbed Shea Superiology for its 1,500 to 2,000 new homes this year. The homes will have environmentall...
More About: Green , Builders
Lenders starting to blacklist communities
2008-03-06 23:03:00
Opponents of a government bailout of lenders will undoubtedly have another weapon in their arsenal as mortgage lenders are increasingly blacklisting entire communities or regions, which could lead to an ongoing cycle of related price declines: with fewer lending options available, prices come under even more pressure, which is great for cash buyers but bad for sellers. From a story in the Wall Street Journal:As property values decline and credit markets contract, home lenders nationwide are growing ever more unwilling to finance home purchases in sharply declining housing markets, driving prices down further. In some cases, lenders have ruled out entire geographic regions and property types altogether, most notably high-rise condominiums in South Florida and Las Vegas. Lenders including BankUnited, a unit of BankUnited Financial Corp., and Vertice, a wholesale lending unit of Wachovia Corp., have elected not to lend to some areas or properties because of declining prices. C...
More About: Communities
How the media's focus on bad news can lead to recession
2008-03-06 21:51:00
One of my biggest beefs with the blogosphere is the lack of balance among many blogs, which pick an agenda and stick to it and deliberately ignore news items which contradict their missions; whereas big newspapers have multiple layers of fact-checkers and editors, blogs are the unedited musings of individuals. While this is certainly the strength of blogs -- which can quickly break important stories often much faster than newspapers -- it's also the concept's weakness, as objectivity can be clouded by specific agendas (i.e., even The Drudge Report tends to lean to the right rather than the center). To be sure, mainstream media also has their agendas, such as the New York Times' Left-of-center reputation or Fox News ' rather obvious embrace of the Right, but when covering issues such as economics or the housing market, balanced blogs may one of the only remaining hopes left for readers in search of simple, agenda-free information.That's why the question posed by Chris Farrell i...
More About: Bad News , Focus , Recession , Lead
Construction lenders now preparing for defaults
2008-03-06 10:12:00
Although many developers and homebuilders have tried to keep current on land development and construction loans even as the overall market has deteriorated, the length and depth of this downturn is starting to result in defaults to banks. From an MSNBC story:Loans to homebuilders and other developers are the latest slice of the credit market under duress, and analysts say banks could face hundreds of millions of dollars in losses as a result.As commercial and residential real-estate prices decline, banks of all sizes face a growing number of loan defaults from builders unable to sell houses, and from developers whose malls and other properties turned out to be less desirable than anticipated...Construction and development loans are loans made to builders for properties such as strip malls, office buildings and residential developments. They have been a key source of profit for small and midsize banks.The percentage of those loans that are 90 or more days past due rose to nearly 3.2...
More About: Lenders
Emerging mortgage fraud a threat to a bailout
2008-03-06 09:20:00
I think one reason that the Bush Administration is so opposed to a wide-scale bail-out of mortgages is because of the amount of fraud that is coming to light, not only from perpetrators of 'liar loans' but also from those who stole identities or created completely fictitious buyers to purchase investment properties, collect rent from tenants but never intend to pay the mortgages. How widespread could this have been? According to one expert quoted in this story from Reuters, as high as 30%:As the U.S. housing meltdown forces hundreds of thousands of Americans from their homes, the extent to which fraud was a factor in the crisis is just coming to light.Products such as stated-income loans -- known as "liar loans" because no proof of income was needed -- led to widespread misrepresentation by borrowers about their earnings. But far more sinister forms of fraud, including identity theft and "straw buyers" -- those created using fake documents -- are also coming into the open...Many...
More About: Fraud , Mortgage Fraud , Mortgage , Threat , Bailout
Homebuilders finding discounts working
2008-03-06 04:33:00
In Stage 1 of a housing downturn, homebuilders first try out a variety of incentives such as free upgrades of optional items, allowances at the design center or paying non-recurring closing costs. But as their competitors start to match these incentives, to move inventory they must become more aggressive and sometimes cut list prices.Understandably, builders hate to do this because it erodes the value of their investment, crimps whatever profit margins they have left and angers buyers who might have paid more for the same type of home (which is why price guarantees have recently taken off).But discounts do work, as summarized in a story in the L.A. Times (and which also quotes yours truly): Stuck with excess inventory, builders throughout California are beginning to offer steep discounts on new homes, sometimes at a loss. Centex Corp. is touting the "greatest prices in years" in its ads. In San Bernardino County, builder Van Daele Homes is advertising 35% di...
More About: Discounts , Working
Housing rescue plans: a summary
2008-03-05 06:54:00
With the various housing rescue plans being floated by Congress, Fed Chair Ben Bernanke, Wall Street and community groups, it's hard to keep track of each one's respective merits. Fortunately, has posted a story that allows a much easier apples-to-apples comparison:The Government FixThe government buys at-risk mortgages from lenders at steep discounts, restructures the loans to reduce payments and resells the loans in secondary markets. Investors in mortgage-backed securities take a loss, but get most of their investment back. Borrowers get refinanced mortgages...The plan would jump-start the market for mortgages by establishing a true market value for the securities backed by these loans. Then investors would start buying the securities again, creating liquidity and making it easier for borrowers to get a mortgage..."I'm not interested in bailing out investors, lenders and speculators," Treasury Secretary Henry Paulson said last week. "I'm focused on solutions tar...
More About: Housing , Plans , Rescue , Summary
Home values now the best in four years
2008-03-05 05:41:00
Apparently the slump in home prices has happened so fast in many markets that home prices are the most affordable in four years. According to some number crunching done by lender National City and Global Insight, 88% of the 330 metro areas studied showed improvements in affordability that make them more in line with long-term averages. Still, due to enormous negative press, depressing consumer psychology and a serious credit crunch, housing affordability may dip below its long-term trend line before eventually rebounding. From a story:Home prices have dropped so quickly and so far that valuations - the difference between what a home should cost and its actual price - are the lowest they've been since 2004, according to a report. The Cleveland-based bank National City Corp. (NCC, Fortune 500), together with financial analysis firm Global Insight, revealed Tuesday that more than 88% of the 330 housing markets surveyed showed price declines and improved affordability d...
More About: Years , Values
Enough dithering: we need more action
2008-03-05 05:18:00
Writing in the Daily Telegraph, International Business Editor Ambrose Evans-Pritchard argues that moves by the Federal Reserve and the Bush Administration not only have failed, but that the contagion in credit markets could very well spread far beyond U.S. shores:The verdict is in. The Fed's emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed...Why won't it end? Because US house prices are in free fall. The Case-Shiller index for the 20 biggest cities dropped 9.1pc year-on-year in December. The annualised rate of fall was 18pc in the fourth quarter, and gathering speed.As the graph shows below, US households are only halfway through the tsunami of rate resets - 300 basis points upwards - on teaser loans. UBS says the cost of the credit debacle will reach $600bn. "Leveraged risk is a cancer in this market."Try $1trillion, says New York professor Nouriel Roub...
More About: Action
Bernanke urges banks to adjust mortgages or face 'jingle mail'
2008-03-05 05:12:00
In his strongest words to date by far on the housing and mortgage crisis, Fed Chief Bernanke gave banks two stark choices today: be willing to forgive portions of mortgage balances for borrowers underwater or face increasing "jingle mail" as homeowners walk away from properties and mail in their keys rather than continue paying mortgage payments. From the L.A. Times:Federal Reserve Chairman Ben S. Bernanke said today that the nation's banks must be ready to go beyond stretching out interest payments or trimming rates and write down the principal of some troubled mortgages in order to avoid widespread foreclosures and break the steep dive in housing prices. Speaking to a banking conference in Florida, where house prices have tumbled further than in almost any other state but California, Bernanke said that unless bankers act quickly, a large number of homeowners could reverse the historical pattern of people of hanging onto their homes at almost all cost and walk away from their f...
More About: Mail , Banks , Face , Mortgages , Adjust
Foreclosure moratorium has historical precedent
2008-03-04 22:00:00
Although many laissez-faire proponents continue to argue against any government intervention into the housing & mortgage crises in favor of Adam Smith's "invisible hand" letting free markets create their own solutions, some historians are pointing to the Great Depression, when moratoriums on foreclosures sometimes lasted many years. From a New York Times story:The Bush administration recently announced a plan to delay foreclosures for some troubled homeowners for 30 days. Senator Hillary Rodham Clinton, in the race for the Democratic presidential nomination, has called for a 90-day moratorium on foreclosures.But two state legislators have been quietly pushing for an even longer reprieve for homeowners in New York State: a one-year moratorium...The measure would allow residents to remain in their homes while granting them time to work with lenders to modify their mortgages.The bill is one of the most far-reaching state proposals to address the crisis in subprime lending and for...
More About: Foreclosure , Historical , Moratorium
Builders Push for More Ways to Revive Market
2008-03-04 20:26:00
Although the post-Super Bowl traffic at new-home communities throughout the U.S. is rising, tighter credit conditions are keeping cancellation rates at record levels and preventing potential buyers from obtaining mortgages. Consequently, politically connected builders and the NAHB continue to press for more ways to revive the long-flagging housing market in more constructive ways than threatening to withhold donations to political candidates, which was widely derided by Washington insiders as a bit childish and by others as proving a quid pro quo between industry and government. Frankly, however, what did builders have to lose at this point in the cycle? From Nation's Building News:With reports from crucial markets around the country that the traffic of prospective home buyers has been picking up even as tighter mortgage financing conditions remain a hurdle for many, the NAHB Board of Directors at its Feb. 15 meeting in Orlando announced that the association will be making a majo...
More About: Market , Builders , Push
Fannie and Freddie to raise appraisal standards
2008-03-04 06:14:00
Bowing to pressure from New York Attorney General Andrew Cuomo, GSE giants Fannie Mae and Freddie Mac have agreed to institute new standards for appraisals related to the loans they buy in order to avoid potential collusion between lenders and appraisers. While I'm sort of curious why this wasn't done years ago (and along the lines of the City of Los Angeles' self-congratulatory press release for finally getting around to synchronizing 75% of the city's traffic lights, with the remaining 25% along the routes I tend to travel), it's an important step in giving lenders the confidence to open up the credit lines for an eventual housing rebound. From an L.A. Times story:Mortgage giants Fannie Mae and Freddie Mac agreed today to revamp their home-appraisal standards to eliminate the type of alleged fraud that contributed to the nationwide housing bubble.In a legal agreement with New York Atty. Gen. Andrew Cuomo, the two companies said they would only purchase home loans from banks ...
More About: Standards
Could the housing doomsayers be wrong?
2008-03-04 02:54:00
Although the mission of Housing Chronicles is to provide a balanced portrayal of the housing market and related economics, that's not been easy to do lately, with various prognosticators calling for cataclysmic peak-to-trough pricing declines approaching 40 percent. So it's certainly nice to provide the occasional item that suggests that the doomsayers might be off the mark for a variety of reasons.At the Motley Fool -- which has no reason to either support or discourage homebuilding activity -- writer Marko Djuranovic suggests that home prices in many areas may be reaching the bottom for this cycle for reasons that have not been previously discussed: A recent BusinessWeek cover story touted the idea that housing prices could fall by another 25%. Although some areas are looking at a precipitous drop in prices, for the most part, current housing prices are nearing bottom. Forces other than loose lending standards and a corresponding spike in demand are responsible for the recent...
More About: Wrong
March 4th issue of BuilderBytes published
2008-03-04 02:51:00
Want to catch up on any housing-related stories you missed over the last two weeks? Then be sure to check out the March 4th issue of BuilderBytes.
More About: Published , Issue
Hope Now helps 1 million homeowners
2008-03-03 22:54:00
The Hope Now coalition of lenders created by the Bush Administration reports that it has helped 1 million homeowners at risk of foreclosure. Of that amount, 278,000 actually saw their loans modified, while the remainder were put on repayment plans to make up for missed payments. So will this plan have long-term benefits or it is merely a band-aid? It depends on the borrower and their circumstances. From a article:Hope Now, the foreclosure prevention coalition put together with the Bush administration's support, claims dramatic success in helping at-risk mortgage borrowers stay in their homes. The groups has reworked more than 1 million mortgage loans since July, Treasury Secretary Henry Paulson said in a speech before the National Association of Business economists on Monday.But of those borrowers, only 278,000 actually saw the terms of their mortgages modified. Their lenders either froze or reduced their interest rates, and may have reduced their balances as well ...
More About: Million , Homeowners
Vacant Home Inventory at Record High
2008-03-03 19:27:00
Due to tight credit and high cancellation rates at new-home communities nationwide, the inventory of newly built homes that remain vacant stands at about 200,000 -- the highest level noted since the Commerce Dept. started tracking this data in 1973. While most builders have dramatically scaled back their operations and ceased building out new communities, in order to get some cash flow to maintain their core operations many have no choice but to complete existing projects. Apparently that doesn't sit well with many recent homebuyers, but given the choice between appeasing critics or staying solvent, which would you choose? From a Bloomberg story: Almost 200,000 newly constructed single-family homes are sitting empty in the U.S., the most since Commerce Department statistics began in 1973. Partially completed developments reduce revenue for cities and towns and hurt businesses, said Nicolas Retsinas, the director of Harvard University's Joint Center for Housing Studies. Rising f...
More About: Home , Inventory , High , Vacant , Record
Tapped out of home equity, more Americans turning to credit cards
2008-03-03 18:59:00
In a sign that U.S. households are not bringing in sufficient income to cover living expenses and debt payments, many are increasingly relying on credit cards as home equity lines become drawn down, frozen or harder to get. But the biggest change from the past is that mortgages have lost their first-tier position in terms of payment priority in favor of paying car payments and keeping credit cards current. From a USA Today story:Credit bureau analyses of consumer payment data show that financially squeezed borrowers have begun paying their credit card and car bills before their mortgages. That's a striking reversal from the norm, one that reflects rising desperation. It suggests that some people essentially have given up trying to stay current with their mortgages and instead are focused on using credit cards to squeak by. If the trend persists, many economists say, it could accelerate mortgage losses and further drag down the economy.Rising living costs, along with cheap and ple...
More About: Credit Cards , Home , Americans , Cards
Launch of a new industry: mortgage-related lawsuits
2008-03-03 18:52:00
Like NASCAR entrants gunning their engines awaiting the green light, attorneys are gearing up for what could be one of the biggest legal paydays in history: the subprime debacle. From an L.A. Times story:First came the sub-prime mortgage boom. Next was the bust. Now, as surely as day follows night, come the lawsuits.All large-scale financial scandals spawn mountains of litigation, but the sub-prime fiasco stands out because of the complexity of the system that funneled more than $1 trillion from investors around the world through Wall Street and mortgage lenders to borrowers with dicey credit. As losses mount on those loans, the scene of the blame game is shifting to the courts.Sub-prime borrowers are suing loan brokers and lenders, accusing them of deceptive practices. Wall Street firms that bought now-delinquent sub-prime loans are trying to force lenders to buy them back.Investment-bank shareholders are going after those firms' managers, saying they took excessive risks by loa...
More About: Lawsuits , Industry , Mortgage , Launch , Related
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