Bo McCarver’s weekly news compilation, 8-16-2011

Stale sales in the housing industry continue to spook builders as potential buyers are increasingly squeezed-out by the general economic turndown. Meanwhile, unsold houses are converted to rental units and solvent mortgage holders are refinancing at record-low rates.

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On mortgage rates, Obama wants proposal for how government can keep big role

By Zachary A. Goldfarb       Washington Post         August 15, 2011

President Obama has directed a small team of advisers to develop a proposal that would keep the government playing a major role in the nation’s mortgage market, extending a federal loan subsidy for most home buyers, according to people familiar with the matter.

The decision follows the advice of his senior economic and housing advisers, who favor maintaining the government’s role as an insurer of mortgages for most borrowers. The approach could even preserve Fannie Mae and Freddie Mac, the mortgage finance giants owned by the government, although under different names and with significant new constraints, said people knowledgeable about the discussions.

A decision to preserve a major government role would mark a big milestone in the effort to craft a new housing policy from the wreckage of the mortgage meltdown and could mean a larger part for Fannie and Freddie than administration officials had signaled.

In a statement, the White House said it is premature to say that senior officials have agreed on any of the three main options outlined earlier this year in an administration white paper on reforming the housing finance system.

“It is simply false that there has been a decision to move forward with any particular option,” said Matt Vogel, a White House spokesman. “All three options remain under active consideration and we are deepening our analysis around how each would potentially be implemented.  No recommendation has been made to the president by his economic advisers.”

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Plan would turn foreclosures into rentals

By Jeff Horwich        Marketplace         April 10. 2011

The Federal Housing Administration today will ask the public for ideas to help clear out the nation’s stock of foreclosed homes. One idea gaining steam is to get foreclosed properties off the market by renting them out.

JEREMY HOBSON: Today the Obama administration will formally ask the public for ideas to help clear out the nation’s stock of foreclosed homes and fix the housing market. The most prominent idea in the mix: turning foreclosed homes into rental properties.

Marketplace’s Jeff Horwich reports.

JEFF HORWICH: A foreclosed home is a problem for the neighbors, the bank that owns it, certainly the family that lost it — but it’s a problem for the rest of us, too. Banks price them at rock-bottom to get rid of them, and that depresses prices for the whole market. The government, through Fannie Mae, Freddie Mac, the Federal Housing Administration — own hundreds of thousands of foreclosed homes.

Nicolas Retsinas heads the Joint Center for Housing Studies at Harvard. He says these government entities are looking for ways to entice investors who will to turn the foreclosures into rentals.

NICOLAS RETSINAS: The problem with that is the price investors would require to make the numbers work, to make the economics work, would require the government to take very significant up front losses.

While the plan may help reduce the foreclosed homes on the governments books — and juice the market accordingly — about half of unsold foreclosed homes are held by private banks.

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Time to refinance? How low can mortgage rates go?

Reuters         August 13, 2011

Mark Sass and his wife Jan decided to refinance the mortgage on their Cincinnati, Ohio, home on Friday, just days before the Federal Reserve pledged to keep rates near historic lows through the first half of 2013.

“I knew the Fed statement was coming out and rates had dropped to historically low levels, and it just seemed like an opportune time. I hadn’t even thought about it until then,” says Sass, who owns his own marketing research company.

Their original mortgage had a 20-year amortization period — at a 4.875 percent rate — with 12 years remaining. They are rolling it over into a 10-year mortgage with a 3.5 percent rate. “I was able to knock a couple of years off the term with a very modest increase in the monthly payment,” Sass says. “It seemed like a no-brainer to me.”

Sass and his wife are both 55, so retirement is on the horizon. “The opportunity to look 10 years out and know that – unless things change – we won’t have a mortgage when we retire looked like a smart decision,” Sass says, adding the overall savings on interest by reducing his term will be in the neighborhood of $20,000.

Sass is one of many jumping on the refinance bandwagon in the wake of the current financial crisis. Mortgage applications shot up 21.7 percent for the week ending Aug.5, according to the Mortgage Bankers Association Market Composite Index. The spike was largely driven by a 30.4 percent jump in the group’s refinancing index.

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Housing Starts Down 1.5 Percent In July

Associated Press         August 16, 2011

Builders broke ground on fewer single-family houses in July, leaving home construction at depressed levels.

The Commerce Department said Tuesday that builders began work on a seasonally adjusted 604,000 homes last month, a 1.5 percent decrease from June. That’s half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market.

Single-family homes, which represent 70 percent of home construction, fell 4.9 percent.

Apartment building rose more than 6 percent. Building permits, a gauge of future construction, declined 3.2 percent.

Though new homes represent just 20 percent of the overall housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders.

Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales. A short sale is when a lender allows the owner to sell for less than what is owed on the mortgage.

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Work on block grant homes blasted

By Amanda Casanova         Galveston County Daily News        August 15, 2011

GALVESTON — Earlier this summer, Norris Cronovich carefully watched construction workers as they repaired his Driftwood Lane house, one of the homes in the disaster housing recovery program. He wanted to be sure the foundation repairs and roofing work was perfect, and since construction finished in May, he hasn’t complained.

“It’s first class,” the former military man said. “They did a good job. I’ve got no complaints.”

But others on the island do.

While residents have blasted the program’s pace since its start, recently, more complaints have emerged about the quality and scope of construction work of homes in the Community Development Block Grant program meant to repair or rebuild houses damaged in Hurricane Ike.

City officials and contractors, however, said federal regulations dictate the rehabilitation and reconstruction work in the multi-million dollar program.

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Council approves $25M for public housing work

Galveston County Daily News      August 12, 2011

GALVESTON — Worried about an impending deadline in September from the state, the city council approved releasing $25 million in federal funding to the Galveston Housing Authority to start work on a controversial plan to rebuild 569 public housing units destroyed during Hurricane Ike.

The council voted 4-3 at Thursday’s lengthy council meeting after debating the topic both in a workshop and during the regular meeting.

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Zero growth budget in talks

By Amanda Casanova          Galveston County Daily News         August 16, 2011

GALVESTON — City council members worked through parts of a proposed 2012 budget Monday in the first day of a three-day budget workshop.

The city is eyeing a zero-growth budget for fiscal 2011-12, which starts in October.

While property tax revenues are slowly climbing, sales tax revenues for this year have slipped nearly 4 percent below budgeted expectations, according to the proposed budget prepared by Thomas Muehlenbeck, interim city manager.

“(Sales tax) is the most unpredictable revenue we have,” he said. “We’re trying to be conservative.”

On Monday, the council discussed the city’s capital improvement plan budget, which includes round two of Community Development Block Grants.

The first phase of the second round of federal funding is a $17.4 million grant for street, water and sewer improvements.

City staff advised not issuing any bonds until 2014 because of the recovery work from Hurricane Ike’s blow in 2008.

Under the capital improvement plan and in light of the record drought, the city staff is proposing a $60,000 study of an Alta Loma well field.

“We have to be ready for the extraordinary,” said Eric Wilson, managing director of municipal infrastructure. “I’ve got to be ready for that worst-case scenario.”

Full story at:


Soaring rents, occupancy rates have Austin apartment market among hottest in nation

By Shonda Novak       Austin American-Statesman        August 13, 2011

With rents at an all-time high and occupancies rising, the Austin-area apartment market is among the healthiest in the nation right now and it could stay that way for a while, national and local real estate experts say.

Thanks to the area’s job and population growth and the limited number of apartment units under construction, the Austin market is performing at a level similar to cities like San Jose, Calif.; San Francisco; Portland, Ore.; and Seattle.

“In my 25 years of analyzing the apartment market in Austin, I’ve never seen things as tight as they are right now,” said Charles Heimsath, president of Capitol Market Research, an Austin-based real estate consulting firm.

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