The House Financial Services Committee this week favorably reported two bills dealing with the current housing crisis. The Committee supported H.R. 5579, the "Emergency Mortgage Loan Modification Act of 2008." This bill, sponsored by Reps. Castle (D-PA) and Kanjorski (D-PA), would provide a safe harbor for servicers who undertake mortgage restructuring. NAR supports this bill, and believes it will alleviate reluctance on the part of some loan servicers to write-down or otherwise modify home mortgages. The Committee also supported H.R. 5818, the "Neighborhood Stabilization Act of 2008," sponsored by Rep. Waters (D-CA). This legislation would provide $15 billion in grants and loans to states to purchase foreclosed homes, in an effort to prevent blight.
In addition, the Committee also began consideration of Chairman Frank's (D-MA) bill, HR 5830, the "FHA Housing Stabilization and Homeownership Retention Act of 2008." This bill would create a voluntary program whereby loan servicers could dramatically write-down the value of the mortgage, in return for FHA refinancing. Qualified loans would be written down to a level that homeowners could afford to repay, and FHA would insure the loan. Final Committee action on this bill is expected this week.
It is believed that some of these bills may be included in a Housing Stimulus package being crafted by the House in response to the bill passed by the Senate several weeks ago.
Wednesday, April 30, 2008
House Committee Supports Housing Recovery Bills
Thursday, April 24, 2008
Housing permits signal market trend?
The Arizona Republic
Home-building permits in metro Phoenix were flat again in March as the housing market continued to search for a bottom.
Last month, 1,278 new-home permits were issued Valley-wide, RL Brown's Phoenix Housing Market Letter reports. That compares with 1,297 building permits in February and 1,370 in January.
"We think that the evidence is building that we are seeing the bottom of the new-home market in the metro Phoenix area," Brown said.
If the pace of permits stays in this range, metro Phoenix could have an annual tally of 12,000 for 2008 - the Valley's lowest level for home-building since the real-estate recession of 1990.
Interesting Distress Statistics
Survey: Owning home within reach
The Buisness Journal; April 22, 2008
By Tierney Plumb
More than half of Americans believe that owning a home is still possible for most people.
In AOL Real Estate and Zogby International's latest survey, more than 6,500 Americans were asked about an array of real estate issues -- from home ownership to housing costs, financial woes and house-hunting tactics.
Respondents stated that realizing the dream of owning a house comes at a hefty price. Forty-three percent said they spend more than 30 percent of their household budget on housing, which according to the U.S. Department of Housing and Urban Development indicates they are "cost burdened."
The financial concerns of spending such a large percentage of their budgets on housing include:
§ 22 percent of participants would lose their house or apartment with an unexpected short-term job loss.
§ 30 percent are working paycheck to paycheck to cover housing costs.
§ 30 percent of people know someone who has gone through or is being forced to sell their home due to a foreclosure.
If respondents were forced to sell their house today, the survey reveals that half would buy another home rather than rent; and roughly half would seriously consider purchasing a home through a foreclosure listing.
But the outlook on their home's current and future value is optimistic:
§ 31 percent of participants feel their home is worth more than it was a year ago.
§ •56 percent do not think their home will be worth less in five years.
§ 69 percent see real estate as a viable investment.
For those neither buying nor selling a home this year, 16 percent plan on doing a major home remodeling project, saying that any improvement can increase the value of their home in today's market.
'Jewel' community to rise at proving ground site
April 21, 2008 - 12:44AM
Sonu Munshi, EV Tribune
Developers of a prized east Mesa property say they're on track to turn 3,200 acres of dirt into a "jewel of a destination" for the East Valley.
GRAPHIC: See the proposed land-use plan
"Nothing's been done before that's quite like this in the Sonoran Desert," said John Bradley, vice president of DMB Associates, the Scottsdale developer planning to turn the General Motors Proving Ground into a shining example of 21st Century urban development.
Part-owner of the 5,000-acre proving ground, set to be vacated next year, DMB is still submitting key planning documents to Mesa.
A general plan amendment request has been filed and a rezoning application is scheduled to be filed in May. DMB also plans to request annexation of the property into Mesa.
The developer also aims to acquire the city's special "planned community zoning district" designation, allowing greater leeway for projects that include a mixture of land uses.
"That affords a certain amount of flexibility needed for something this large," Bradley said.
But with that kind of a change, encompassing residential, office and retail space, officials at the neighboring Phoenix-Mesa Gateway Airport, west of the property, want to make sure there will be no disruption to the airport.
Airport director Lynn Kusy said he's in constant touch with Mesa and DMB officials to make sure any project revisions work for the airport, too.
The existing general plan does a good job of limiting development to uses compatible with Gateway, Kusy said. Still, he said DMB's plan calls for the entire property to be given the somewhat vague "mixed-use development" designation, so it's difficult for airport officials to voice specific concerns.
"We're cautiously waiting and watching," Kusy said.
Kusy has been doing even more than that. Earlier this month, he joined DMB officials to take a look at their Verrado project, a residential community in Buckeye, and its relationship with nearby Luke Air Force Base, to get a sense of how the company is handling development there.
Bradley said DMB realizes that accommodating the airport is important, and that the city wants Gateway to succeed. He said the proving ground project would complement the area.
"So it's not just a typical industrial landscape but a vibrant zone that can accelerate growth at the airport, too," Bradley said.
Scot Rigby, project manager for Gateway-area economic development, said the city has "liked what we've seen (from DMB)."
It also shares DMB's vision of high-density residential development.
Rigby said any airport has concerns about residential areas developing nearby, but he added the construction materials used to build high-rises help reduce noise problems in the surrounding area. The city will keep flight paths and other noise issues in mind, he said.
"Some people like to live in areas with amenities, traffic and buzz," Rigby said.
District 6 Councilman Scott Somers said the city will consult with Arizona State University's Decision Theater next month as part of an ongoing study for the Gateway area, to understand the impact of flight patterns using three-dimensional models.
"That will help us understand where to place residential," Somers said.
Meanwhile, Mesa is willing to consider designating the area a "community facilities district," which would impose a special tax on individual property owners to fund shared infrastructure.
Somers said cash-strapped Mesa needs to think creatively to tap into available financial resources. It would be the first time Mesa has used the facilities district designation to pay for roads, fire stations, water and other basic facilities through bonding. Only landowners within the district would contribute to repayment of the bonds.
But Somers said there would be a need to make payments affordable for area residents, or else they may not vote for other bonds that would benefit the whole city.
Two years ago, DMB bought the land from General Motors for $265 million. Real estate firm Pacific Proving LLC owns the other 1,800 acres.
Once the automaker moves to its new facility in Yuma, DMB will start pulling out the test tracks, grade the land and begin construction for some of the commercial and residential blocks in the planned urban core.
While design plans are still pending, DMB has said it would only place a high-density urban core in the northwest part of the property, a considerable distance from the airport. Golf courses are planned on the east side.
Plans also include a business park to be placed closer to a new Gateway terminal that will be developed further east near the DMB property.
Projections for Gateway area include up to 100,000 quality jobs. The expectation is that DMB's development would help jump-start that push to bring a more urban lifestyle to east Mesa.
Bradley said residential areas would be much more dense than the city has seen. While commercial development would be intense, it's still further away in the planning process.
The ability to plan an entire 3,200 acres at once presents a rare opportunity, Bradley said.
"We can treat this as a planned community and do it over a long period of time," he said. "We can't force the market, but looking 20 years out or further, you can rest assured there will be significant commercial employment."
The idea is to drive jobs into east Mesa to reverse the current ratio of jobs to housing, which is about half what it is in the Valley as a whole, Bradley said.
"When we get on the freeways going west and north in the morning, they're full. That can't last, there's just so many freeways you can build," he said.
That will begin with developing some residential and at least two resorts, if possible, to create an attractive place to distinguish the area and drive further commercial development.
Bradley said the challenge is to see the plans come to fruition in what will be decades of development.
"The challenge is to make sure what we see in our mind's eye can be executed and accepted by the market," Bradley said.
SunTrust income drops by 44%
Business Journal
Tuesday, April 22, 2008 - 10:57 AM EDT
SunTrust Banks said net income fell about 44 percent in the first quarter, as the company continued to take a beating from the housing crisis and credit crunch and had to increase its provision for loan losses.
The Atlanta-based company reported net income of $290.6 million and earnings of 81 cents a share. That's down from net income of $521.2 million and earnings of $1.44 a share in the first quarter of 2007.
As the deterioration of residential real estate markets continued in the first quarter, the company increased its provision for loan losses to $560 million, increasing the ratio of allowance to total loans outstanding to 1.25 percent as of March 31. The increase in the allowance for loan and lease losses was also attributable to an increase in expected losses in the existing residential mortgage, home equity lines of credit and residential construction portfolios.
SunTrust also had $163.7 million in net valuation losses during the first quarter, mostly from mark-to-market valuation adjustments on trading assets and loan warehouses, and certain asset-backed securities classified as available for sale. The after-tax earnings impact of the net valuation losses was $101.5 million.
SunTrust is the fifth-largest financial institution in South Florida, with nearly $8.43 billion in deposits, 100 offices and a market share of 5.63 percent as of June 30, according to the latest report from the Federal Deposit Insurance Corp.
Statewide, SunTrust is the third-largest financial institution -- behind Bank of America and Wachovia -- with 554 offices, $33.89 billion in deposits and a market share of 9.07 percent, as of June 30, according to the FDIC.
Through sales, maturities and pay-downs, SunTrust said it has cut its exposure to these distressed assets by more than $1 billion since the end of 2007, leaving the quarter-end exposure at $1.6 billion.
Average loans for the first quarter were $123.3 billion, up 1.4 percent from the first quarter of 2007. The increase was primarily in commercial loans, as average residential real estate and consumer loans dropped due to balance sheet management strategies, while construction declined due to slowing residential building activity and company efforts to reduce exposure.
"Growth in credit costs associated with the residential real estate correction continued to take a toll in the first quarter; further, the backdrop of emerging recession fears clouds the near-term outlook," SunTrust President and Chief Executive Officer James M. Wells III said. "However, SunTrust is financially strong, with ample liquidity, adequate capital, and a solid balance sheet, and we are effectively managing through this difficult economic environment. Perhaps most importantly, we are encouraged by underlying progress in key business lines, good deposit and some modest loan growth, and the positive impact of improved expense discipline."
As of March 31, SunTrust had $179 billion in total assets.
SunTrust ended 2007 with a 99 percent drop in net income.
Monday, April 7, 2008
Rent Keeps Getting More Expensive
Average rents for U.S. apartments rose 1 percent in the first three months of 2008.
This was the 24th consecutive quarter that rental property rates have risen, according to New York-based real estate research firm Reis Inc. The last time rents fell was the first quarter of 2002, when they declined by 0.2 percent, according to Reis.
A soft housing market beset by stricter loan terms and falling home prices is the "dominant driver" pushing people to rent apartments, said Sam Chandan, chief economist at Reis.
New York had the highest average rent at $2,790 a month, followed by San Francisco at $1,801, Fairfield County, Conn., at $1,759 and Boston at $1,620, Reis said.
Source: Bloomberg News (04/05/2008)
Thursday, April 3, 2008
Free Money to Buy Foreclosures
On the other hand, we are concerned that this will not immediately impact sellers of existing homes as their sellers will be competing with builders who are offering incentives to clear their inventories and foreclosure rebates (or credits). Nevertheless, this still should help by getting hesitant home buyers to get back into the market. This will change momentum into one more favorable for real estate professionals.