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2008-01-28T15:30:00.000-06:00

Sales of New Homes Plunge
by Martin Crutsinger, AP Economics Writer January 28, 2008
WASHINGTON - Sales of new homes plunged by a record amount in 2007 while prices posted the weakest showing in 16 years, demonstrating the troubles builders are facing with a huge backlog of unsold homes.

Developer Deals with Home Construction Slowdown
by Jim Zarroli Thursday, September 7, 2007
The construction industry was one of the hardest-hit sectors in a Labor Department report released Friday.

National Spotlight! News Flash Regarding Home Building and Mortgage Loan Woes!!!
by Matthew Wood Thursday, September 7, 2007
Chances are if you have been watching the Evening News lately or reading the Newspapers, you have seen the recent headlines Blasted throughout the United States on the Mess the National Home Builders are in and the Mortgage Companies that have been funding their loans.

Anxious Builders Pile on Incentives
by Jeff D. Opdyke Thursday, August 16, 2007
provided by: The Wall Street Journal
Perks, Price Cuts Become More Lavish As Developers GrowIncreasingly Desperate; Would You Like a Pool With That?

Sales of New Homes Plunge

2008-01-28T15:24:00.000-06:00

By MARTIN CRUTSINGER,
AP Economics Writer Mon Jan 28, 10:42 AM ET

WASHINGTON - Sales of new homes plunged by a record amount in 2007 while prices posted the weakest showing in 16 years, demonstrating the troubles builders are facing with a huge backlog of unsold homes. The Commerce Department reported Monday that sales of new homes dropped by 26.4 percent last year to 774,000. That marked the worst sales year on record, surpassing the old mark of a 23.1 percent plunge in 1980.

The government reported that the median price of a new home barely budged last year, edging up a slight 0.2 percent to $246,900, the poorest showing since prices fell by 2.4 percent during the 1991 housing downturn.

The new report reinforced the view that housing is currently undergoing its worst downturn in more than two decades, with the slump threatening to surpass in some ways the severe housing recession of the early 1980s.

The housing weakness has dragged down overall growth and sent shockwaves through the rest of the economy including the financial sector, which is dealing with billions of dollars in losses in subprime mortgages. Some analysts are worried that the fallout could become so severe it will drag the entire country into a recession.

The Federal Reserve unexpectedly cut a key interest rate by the largest amount in more than two decades last week following an emergency meeting, and it is expected the Fed will cut rates further at a regular rate-setting meeting this week.

The 26.4 percent drop in sales for 2007 represented weakness in every part of the country except the Northeast, where sales posted a small 1.6 percent advance. Sales recorded declines of 32.2 percent in the West, 26.7 percent in the Midwest and 26.3 percent in the South.

The year ended on a weak note with new home sales in December falling by 4.7 percent after an even sharper 12.6 percent decline in November.

While the median home price for the entire year was up slightly, the median price of homes sold in December was $219,200. That was down 10.4 percent from a year ago, the biggest 12-month price drop in 37 years.

Analysts said that prices will likely keep falling in early 2008 as builders continue to struggle to work down the glut of homes.

It would take 9.6 months to eliminate the backlog of unsold new homes at the December sales pace, the longest stretch of time since the month's supply stood at 10.3 months in October 1981.

The severe credit crunch that hit in August has made the troubles in housing worse because it has prompted banks and other lenders to tighten their standards, making it harder for prospective buyers to qualify for loans. Also adding to the problems facing prospective sellers is the rising tide of mortgage defaults, which are dumping more homes on an already glutted market.

The big fall in new home sales followed earlier reports that sales of existing homes fell by 13 percent in 2007, the biggest drop since 1982, while construction of new homes dropped by 24.8 percent last year, the biggest fall since a record decline in 1980.

Developer Deals with Home Construction Slowdown

2008-01-28T15:20:00.000-06:00

by Jim Zarroli
Thursday, September 7, 2007

The construction industry was one of the hardest-hit sectors in a Labor Department report released Friday.

The construction industry was one of the hardest-hit sectors in a Labor Department report released Friday. It lost 22,000 jobs last month. Homebuilders have been affected by the real estate slowdown, especially the small- and medium-sized developers who build most of the homes in the United States.

One developer in New York's Hudson River Valley says he has seen housing recessions before — but never one like this.

Steve Rieger stands in the two-story family room of a model home in a suburban development called The Legends. Houses here have all the features many buyers like these days — plenty of bathrooms, granite countertops, front and back stairs. Rieger and his brother helped develop The Legends next to a golf course in New York's Dutchess County. Their family has been building homes in the area since 1960.

"It's exciting to see the house come out of the ground. And to start with raw land and end with ... people's homes. We love going to closings and have people tell us how much they love their home," he said. "We really look at ourselves as providing the American dream to people who have worked hard their whole lives to afford it."

But these days, providing that dream has become a lot harder.

Rieger gets into his SUV and drives around the development's winding roads, which are still dotted with empty lots. Rieger, in his 50s, used to be a partner in a law firm before he quit to join the family business.

He has done well for himself. A few years ago, he said, people lined up to build homes here. Land prices went through the roof. But the Riegers are building half as many homes as they were two years ago. Revenue has slowed considerably.

"We've done OK up until now. We're going to have tough times now for the next six months, year, two years, however long it lasts," he said. "We're not going to make money going forward until the market improves."

Rieger stops to point out a house his company built on speculation. It went on the market six months ago at $899,000. Now, the price has been reduced by $40,000, but it hasn't sold.
Prices in Dutchess County have fallen 3 percent in a year, but many people expect them to drop more. If things don't turn around, Rieger knows he will have to consider layoffs. The company employs just 15 people, but it provides work to hundreds of subcontractors.

Assistant foreman Ron Mullaly, who was cleaning up construction debris at a newly built home across the road, said he has seen the job market change almost overnight.

"You talk to a lot of the subcontractors ... They're out there feeling the crunch too," he said. "And everybody's just hoping it's going to pick up again soon."

What caused this downturn is something Rieger thinks about a lot. He said housing prices have fallen before in the Hudson Valley, but only when there was an economic downturn. This time there's no recession. But Rieger said the negative news about the mortgage market has changed buyer psychology. People used to buy because they believed houses were a good investment. Now, they're not so sure.

"How can we expect that our customers will understand what's going on in the mortgage market? It's almost irrational, and it's frightening, and so, I am sure that it has frightened customers away," he said.

Rieger said the real estate industry shares some blame for what has happened. Prices went up so fast that a lot of people couldn't afford to buy.

"As prices became too high, the number of people who could buy the homes that we are all producing became smaller and smaller, and we ran ourselves off a cliff," he said.

Back at the model home, sales manager Betty Maddick showed floor plans to a young couple. Lisa Toohey said she and her husband, Kevin, have just started looking for a larger house.

"The timing is probably the best timing for us because you can get more for your money. I mean, the houses aren't selling like they used to sell," she said.

To Rieger, comments like that are actually a hopeful sign. He said at some point customer psychology will reverse itself. Prices will come down so much that people will start to think there are a lot of bargains to be had and begin buying again.

Rieger likes to think that point is coming soon, but then nothing about this downturn has been predictable so far.

--Jim Zarroli contributed this article.

Copyrighted, NPR All rights reserved.

Anxious Builders Pile on Incentives

2008-01-28T15:16:00.000-06:00

by Jeff D. Opdyke Thursday, August 16, 2007 provided by: The Wall Street Journal

Perks, Price Cuts Become More Lavish As Developers GrowIncreasingly Desperate; Would You Like a Pool With That?

With the housing market looking increasingly frail, home builders and real-estate agents are going to new extremes to attract buyers, dangling lavish incentives and slashing prices.

In Boca Raton, Fla., Gordon Homes is offering to pay two years of property taxes and insurance -- worth as much as $150,000 on houses priced as high as $2.5 million -- for buyers of completed homes at its upscale Azura development. In Richmond, Va., Orleans Homebuilders Inc. is offering "Sizzling Summer Sale Savings" that include as much as $100,000 off the cost of upgrades ranging from granite countertops to a conservatory. And in Medford, Ore., Diane Adams, a real-estate agent, is offering to pay four months of mortgage payments on the $975,000 house she and her home-builder husband constructed on 20 acres near Crater Lake. "I'd also negotiate a lower price, too," says Ms. Adams, an agent with Re/Max International Inc. "I just want this house off our books." Across the country, the theme is the same: Home builders and home sellers are juicing their efforts to unload single-family homes. Among other things, they are offering buyers cash discounts of as much as 20%, throwing in a pool and agreeing to finish basements, garages and other spaces at a cost of several thousand dollars -- incentives much richer than builders were offering as recently as six months ago, when the downturn didn't look as bleak.

Since then, home builders have been hit hard as rising mortgage delinquency rates have made lenders much more reluctant to issue new loans, causing home prices to fall and inventories of unsold homes to rise. In June, new-home sales had fallen more than 40% from their peak two years ago, and more than half a million new houses -- nearly eight months of supply -- sit in inventory, according to the most recent report from the National Association of Home Builders. Contract cancellations, meanwhile, have hit nearly 30% for some builders.

Things may not get better for a while. The National Association of Realtors said yesterday that new home sales this year were likely to fall 19% from last year, worse than its previous forecast of a 17.7% drop.

Many builders never expected the housing market to fall this far. Now they're struggling with empty land, too few buyers and an inventory of finished homes that have been sitting empty for months -- and some are growing desperate to free the cash locked up in their real estate by enticing the dwindling number of buyers. The latest survey taken by the National Association of Home Builders indicates that 56% of builders are now offering incentives, up from about 45% a year ago.

And those incentives are growing bigger. In California's San Diego County, Chris Heller, a real-estate agent with Keller Williams Realty, says that until about 18 months ago, builders had little reason to offer incentives. Today, he says, "buyers are asking for the moon, and they're often getting it." Mr. Heller says that on houses in the $700,000 range, his clients are typically scoring multiple concessions totaling as much as $80,000. Generally, that includes a price reduction, an agreement to pay closing costs or upgraded flooring or appliances -- or a combination of all three.Builders in the greater Dallas-Fort Worth area have also been struggling to move homes and are using incentives more freely. "They are giving stuff away here," says Kenneth Cox, a real-estate agent with DFW Urban Realty in Dallas.

In suburban Dallas, incentives on single-family homes abound, including price reductions of as much as 20% and free swimming pools. Steve Wall, president of builder Wall Homes Inc., says his company is knocking as much as 18% off the list price for inventory homes in the city's northeast suburbs. For other homes yet to be built, the builder is offering free blinds, a free covered patio and 50% off upgrades, up to $20,000. "It's more competitive than this time last year," Mr. Wall says.

This trend toward more-generous incentives is "likely to intensify," says Mark Zandi, chief economist at Moody's Economy.com, citing a growing inventory of new homes, an oversupply of pre-owned homes on the market and "a glut of homes that are a year or two old that investors bought as rental property that have never been lived in, and those investors are now trying to sell, too."

Incentives alone often aren't enough to close a sale, however. National builder KB Home says that in May, it was offering to pay $5,000 toward closing costs on already completed, or "inventory," homes, up from $1,000 about a year ago, "but we find that these kinds of incentives don't generally work that well," says a spokeswoman. Rowena Emmett, an independent Realtor in La Canada, Calif., says that during Southern California's last downturn, a client offered home buyers a new Porsche, "but that didn't work."

Builders generally try to avoid outright price markdowns, in part because it angers prior home buyers who don't want prices in their subdivisions forced down. These days, though, builders increasingly resort to price cuts "because it's all about avoiding bankruptcy for some," says Gene Rivers, a Keller Williams agent in Tallahassee, Fla., where builders are offering incentives and price markdowns of as much as 15% of the purchase price on $300,000 and $400,000 houses, double the level of a year ago.

Certainly, not every market is struggling. Dianna Kokoszka, a vice president at Austin, Texas-based Keller Williams Realty, says homes in hot markets such as Austin still receive multiple offers, making incentives unnecessary. In other markets, pockets of strength may still exist, particularly in popular neighborhoods. Jim Napier, president of Napier Realtors ERA, in Richmond, Va., says an agent last week listed a house for $600,000 in a desirable subdivision, "and it sold in two days at the list price, all cash."

Still, in much of the country, it's a buyer's market. And the savviest buyers are using that to their advantage.

Lummie Jones, a vice president at Napier Realtors, says the best deals go to those who buy inventory homes, can close within 30 days and who have no contingencies in their contracts, such as the need to sell another house or find financing. Those buyers, Ms. Jones says, "are getting concessions of between 5% and 10%" of the house price.Also, have a preapproval letter in hand, which indicates that a lender is ready to fund your mortgage immediately up to a certain amount, "and tell them to show you the two or three best deals they have," says Mr. Rivers, the Tallahassee agent. Certain houses -- even identical ones -- can have different carrying costs because one needed a special foundation or took longer to build. "That's the house the builder wants off his books first," Mr. Rivers says.

Orleans Homebuilders, based in Bensalem, Pa., for instance, has knocked nearly $200,000 off the price of some already built million-dollar homes in Richmond, Va., and is offering an additional $20,000 reduction for buyers who buy inventory homes before Labor Day.
For buyers short on cash, builders are offering as much as $10,000 to help cover costs, which can help buyers qualify financially for the home.

In markets such as Denver and Seattle, builders are increasingly willing to pay agents substantially larger commissions -- as much as 4% of the home's sales price, up from 1.5% or less -- to help unload inventory homes. In turn, some agents are returning some of that money to builders to lower the home price to help buyers qualify for the house.

"Don't be afraid to negotiate for as much as you can these days," says Judy King, a Seattle-area Re/Max agent. "There's a lot of flexibility in a market like this."

--Joseph De Avila contributed to this article.

Write to Jeff D. Opdyke at jeff.opdyke@wsj.com

Copyrighted, Dow Jones & Company, Inc. All rights reserved.

National Spotlight! News Flash Regarding Home Building and Mortgage Loan Woes!!!

2008-01-28T15:04:00.000-06:00

by Matthew Wood Thursday, September 7, 2007

Chances are if you have been watching the Evening News lately or reading the Newspapers, you have seen the recent headlines Blasted throughout the United States on the Mess the National Home Builders are in and the Mortgage Companies that have been funding their loans. Many of the home loans these Builders and Lenders have been writing have been with 100% financing, including allowable Closing Costs to be rolled in on behalf of the buyer. What is happening on a large scale is many of these loans are being foreclosed upon due to non-payment by borrower. On a local level, we at Macy Paige Realty have seen many cases where these foreclosed properties are accumulating in suburban communities throughout the Dallas Fort/ Worth Metroplex here in Texas. As a result of these issues, many of these builders and lenders have been forced out of business. What is also happening is that these types of loans are no longer available, which in time will force these builders and lenders to write more qualified loans with higher credit scores. Realistically, very few people have that perfect type of credit scores and many are over extended already, which keeps them from being able to pay the credit issues off.

Short Term Solution

We, at Macy Paige Realty, have positioned ourselves on the front line working directly with some of the larger National Home Building Companies on a local and State level in Texas to try to move and close this inventory with Qualified Investors, who have the ability to put down large down payments and carry the property on a conventional loan allowing our tenants to move into the home and pay a manageable lease amount on these homes that will produce positive cash flow for our investors, allowing these tenants, many of whom were originally qualified for these new homes to move in and pay rent until they have worked out the credit issues keeping them from getting their own financing. Many of the lenders that are out there have specialists that deal directly with debt issues that are keeping these prospective buyers from getting a home loan. By having qualified investors that are purchasing these homes and allow the tenant the time needed to get qualified, it is virtually a win for all parties involved.

The Catch

In order for our Investors to step forward on these properties, the builders are being forced to give Huge Incentives and Significant Discounts to entice them to the table. The discounts and incentives are sometimes as high as 30-40k in the market we are targeting. This process allows the investors to purchase the home at a great price and when the property is ready for resale to the tenant or open market, the homes can be sold at the appraised value at the time the new buyer is qualified. We do believe this is a short-term problem that the largest of these Home Building Companies and Lenders will survive through to a see a better day. We want to focus on not only buying these available homes with our investors, but also the purchase of the remaining vacant lots that can eventually be built upon. This will give a significant position of control to the investors buying these homes and sitting on these lots, insuring that the homes being built on those lots are of a higher end product, drawing the appraisal values of the other remaining homes throughout the various developments. Between right now and the next couple of months, it will be a feeding frenzy for qualified investors looking to get a piece of the action. We at Macy Paige Realty are involved directly with several Large National Home Building Companies that are allowing us to liquidate their inventory. We also have several Lenders that have Fantastic Financing Options for Investors with Great Credit and some Down Payment Money! In some cases, as little as 5% out of pocket!

--Matt Woods contributed this article.