The Fed Stands Pat

Kiplinger writes that the "Fed Won't Ride to Housing's Rescue" as it keeps its eye on inflation. This concern stems from the Fed's belief that the economy may heat up during the second half of this year. The Federal Open Market Committee (FOMC) has conceded that the economy has weakened since it last met on Jan. 31, when it stated that housing had begun to stabilize. It more recently stated that "adjustment in the housing sector is ongoing", perhaps caught flat-footed by the unfolding subprime mortgage fallout. The Fed still isn't overly worried about the housing sector pulling down the broader economy. The Kiplinger article predicts that the 30-year fixed rate mortgage will increase from 6.1% to about 6.4% by the end of 2007.

Naples...Florida

A Businesswire story sings the praises of mixed-use development. First, it points out that this concept existed since the beginning of American cities in the 17th century, when, for example, there would be homes above small shops. Then, the segregation of land uses began in the 1920s, mainly in an effort to keep industrial uses away from residential and lighter commercial uses.

“The mindset of many Americans today is changing. They want to be in a place where there is activity, where they can walk to work, get a cup of coffee, enjoy community events and rely less on their cars,” said Jack Antaramian of Antaramian Development Group, a Naples, Florida-based company that specializes in mixed-use development.

Antaramian’s newest offering, Naples Bay Resort, encompasses three distinct locations within the City of Naples that together provide a variety of residential and commercial environs, each with its own unique character, including a state-of-the-art marina, a four-star condominium hotel, a 15,000 square-foot club that just opened, and waterfront shopping and dining. Renaissance Village, the third and final component of Naples Bay Resort, will have 300 luxury residences with up to 2,935 square feet of living space. Pre-construction pricing starts from the mid-$700s. Construction is set to begin in the summer. In addition to the luxury residences, Renaissance Village will also have over 200,000 square feet of commercial space, including a boutique grocery, restaurants, shops and office space. Additionally, Florida Gulf Coast University will locate its Naples Educational Center and Renaissance Academy there, which includes a 350-seat performance venue.

Keys to success:

“You need to be careful to have the right amount of retail and commercial uses and the right residential density,” said Matthew Kragh, partner of Architectural Network Inc., a Naples, Florida-based architectural and planning firm and the designer of Naples Bay Resort and Renaissance Village. “There needs to be a sense of cohesiveness and connectivity with the project’s surroundings. Renaissance Village is a great example of this with its mix of residential, commercial and retail. Plus the bonus of a performance venue and open spaces for community events in an open and ungated location. It’s important to see activity with people enjoying all the project offers.”

Some of the challenges of mixed-use development cited are the presence big box retail with vast surface parking lots and the need to build at much higher densities (than surrounding areas) in order for these projects to make sense financially.

For many of us, deciding where to live has a lot to with affordability. For ski/ride bums, this often entails couch surfing, living in closets or commuting to resort communities. The Town of Vail wants 30% of its workers live in Vail, which is about where it stands right now, but there is a concern that escalating rents and home prices will drive too many workers out of Vail. A story in the Vail Daily introduces an eight-year resident and Australia native who plans to move this year to New Hampshire since "rent these days is out of control". Vail's $1 billion Lionshead redevelopment will be subject to stricter affordable housing rules. Council Mark Gordon is pushing a program that purchases then sells "buy downs" to qualified buyers with ownership subject to deed restrictions.

State Houses

"Housing Slump Pinches States in Pocketbook" (NY Times, Apr. 7): "State tax revenues around the country are growing far more slowly this year and in some case falling below projections, a result of the housing market slowdown that has curbed voracious spending on real estate, building materials, furniture and other items... Nowhere is the downturn more apparent than in Florida, where tax revenue is projected to drop this year for the first time since the energy crisis of the 1970s... Those events not only threaten revenue streams for things like building materials and labor, but also affect spending on big-ticket items like cars and furniture, which many homeowners financed with home equity lines of credit... In one hint of how much Floridians were relying on property wealth during the real estate boom, 16 percent of new car purchases here were being made with home equity loans in 2006, compared with 7 percent nationally... In California, the percentage was even higher — about 30 percent, said Art Spinella, the firm’s president... Arizona, California, Florida and Nevada, the chief beneficiaries of the housing rush, are also expected to suffer disproportionately from the slump. From late 2005 to late 2006, existing home sales fell by 21 percent in California, 27 percent in Arizona, 31 percent in Florida and 36 percent in Nevada, the steepest drop in the nation... others expect the revenue lag to last two years at most, because with the exception of industrial Midwestern states like Michigan and Ohio, the economy remains relatively healthy.... Alan Greenspan, the former Federal Reserve chairman who has expressed worries about the housing market, has said he believes there is a one-in-three chance the economy will slip into recession in 2007.

Michigan's House of Representatives is fielding a bill that would provide property tax relief from the state's "pop-up tax".

Massachusett's Sec. of State is urging to Legislature to make foreclosures a little bit less automatic for those facing the possibility of losing their homes by forcing mortgage lenders to get permission from a local judge before seizing a foreclosed home.

Here's some in-depth info on Northern Colorado's housing market, primarily Mar. 2006 vs. Mar. 2007.

Las Vegas developer Jim Noteware takes a personal read on the direction of the Las Vegas residential real estate market in a series of essays.

I’ve come to the conclusion that the reason for the confusion, denial and dismay is that few local participants have previously been through anything like our current situation. The Las Vegas residential market has been so strong for so long that few know how to interpret and respond well to the new market signals they are receiving. Some are overreacting; some are not reacting at all. Very simply, few know how to behave and plan for the future when the old rules do not work as before... Three primary causes can be ascribed to the current real estate softness: overbuilding, media confusion and now, of course, buyer skepticism.

Yahoo and RealtyTrac have teamed up to beef up the search giant's foreclosure feature on its real estate page, which prominently features its mapping tools, including an option for a map-based search for foreclosures.

The Economist worries about overreach from legislators, many of whom are eager to score points with their constituents suffering from the sluggishness of the housing market in their home districts. In its characteristically dry tone, the magazine smacks at America's homeownership "fetish": Populist politicians may well make much of the contrast between a second house in the Hamptons and no house at all. Instead, they should stop making a fetish of homeownership. That people are free to borrow to buy their own home, should they wish, is fine. That politicians should encourage homeownership for its own sake is not. That they foster it with tax breaks, as they do in America, is daft.

CNN/Money link the housing slowdown to sluggish auto sales.

HUD is fielding more complaints, a 65% increase in 2006 vs. 1996.

For fiscal 2006, HUD said the basis of 40% of the complaints was disability, 39% was race, with familial status and national origin each accounting for 14%. Other reasons for complaints included sex, religion and retaliation. Complainants most often alleged discrimination in the terms and conditions of the sale or rental of housing, or refusal to rent.

HUD believes that this upsurge in complaints has resulted from its outreach and education efforts. Nonetheless, its staffing has been reduced by 20% since 1993.

In Austin, New Urbanism is arriving in the form of affordable homesteading at the cite of the city's extinct Robert Mueller Airport: Homesteaders adventurous enough to settle this new territory can register – through April 30 – to become one of the "Mueller Pioneers," the first 340 households to stake a claim at Mueller. Already, more than 4,500 Austinites enticed by the future New Urbanist community – on a 711-acre site east of I-35 near 51st Street that today looks like, well, an abandoned airport – have registered to receive information about possibly living at Mueller.

Meet Alt-A, the New Subprime

On Wednesday's page A2, the WSJ runs a story about continuing bad news surrounding growing late payments, not just among subprime loans but also Alt-A, the category between subprime and prime that doesn't typically require income and asset verification. Late payments in this category rose to 2.6% in Jan. vs. from 2.3% in December vs.1.3% in January 2006. Mark Zandi, the oft-quoted chief economist at Economy.com, predicts that median home prices will fall almost 5% this year, the biggest drop since the Great Depression. This appears to be a classic credit crunch in the work as lenders tighten standards, preventing some potential buyers from getting loans. Combined with rising foreclosure, the shrinking availability of credit looks to be putting downward prices on home prices. The next couple or few years could be ugly or uglier as some borrowers face "resetting" mortgages, i.e., higher payments. That said, not all markets are reeling. The last sentence of the article: "Prices are falling in some areas but still rising in others."

Today's WSJ Marketbeat runs commentary about "More Housing Pain". He quotes NAR's characteristically rosy David Lereah, who explains that the 8.5% drop in pending new home sales since last Feb. wasn't so good because of "unusually bad weather in February" [Hey, what about bad weather in Colorado circa Decemeber and January?]. Citibank's Lewis Alexander strikes a much more ominous tone: "The U.S. housing market faces considerable challenges, notably the overhang of unsold [and resale?] new homes, the tightening of lending standards for new mortgages, a and a substantial volume of adjustable-rate mortgages that should reset to higher interest rates over the next couple of years." Ouch!

Taking light to Park Meadows...or not

The WSJ today reported on page A4 that "New Century Buys Time With Bankruptcy Filing", namely in the form of Chapter 11 bankruptcy in order to allow NC time to sell its business.
"The subprime business is dwindling as fast as it grew during the housing boom of the first half of this decade. the dollar value of subprime loans granted this year is likely to drop 30% from last year's total of around $600 billion," said Bear Stearns. Now there are signs that "Alt-A loans", a category between prime and subprime loans, may be susceptible to a similar retraction. The article goes on to say that remaining subprime lenders have quickly tightened up their rules, eliminating no-money-down loans and stepping up income verification.

Back in Denver, or south of Denver, RTD has criticized operators of the Park Meadows mall for planning to build a circuitous walkway to the adjacent County Line light rail station rather than, say, a more-or-less straight line, reports the Denver Post. Apparently, Nordstrom doesn't want light riders (criminals? thrifty spenders?) from walking through its store. The plan had been for RTD to spend $4.5 on this more direct path pointing towards Nordstrom, it appears that the
city of Lone Tree, where Park Meadows is located is going to build the alternate ped route along the mall's ring road, which, if you haven't ever been to Park Meadows, is like the edge of any mall's vast parking lots - not somewhere where you're ready to take on -- with your own two hands and feet -- ravenous shoppers roaring away with their loot.

RTD director Bill McMullen: "I'm going to walk right across the parking lot" and into Nordstrom from the light-rail elevator tower.

There does happen to be an existing shuttle that connects light rail riders to the mall, but RTD states that "Park Meadows has determined that they will no longer fund their portion of the full-week service and it will recede to weekends only". Service had been daily until February 19.

In other news, downtown Denver office space remains red hot. John Rebchook reports that many would-be Class A tenants are being steered to slightly lower quality properties after rents rose 28% in Class A from $20.68 to $25.68, according to Studley, a commercial real estate firm. This bodes well, at least indirectly, for the residential side, in the sense that jobs are staying and growing in the CBD. Now if only the Rockies could have a winning season, downtown would really be on a roll.

[Image credit: SEMA Construction]

Ups and downs, mostly downs

The NAHB/Wells Fargo index of homebuilder fell for the 1st time since Sept. to 36 (50 or less means "poor"; the index rose from 35 to 36 in the West). Builders are apparently skittish about the spectacle of tightening mortgage lending standards. Toll Bros. CEO Rbt. Toll says that cancellations remain high. Reuters reports that housing's impact on jobs appears to be spreading beyond construction jobs closely tied to homebuilding.

This just in...Vail has ahousing affordability problem, and the local government plans to "approve new affordable housing rules that outline two methods for adding affordable housing to the denser areas of Vail Village, Lionshead and the West Vail mall area. They include requiring developers to provide housing for a certain amount of jobs they create and changing zoning to require that a certain percentage of new homes or housing be affordable." This sounds pretty vague?

The S&P/Case-Shiller Home Price Indexes are decelerating, especially in Detroit (-6.9%) and Boston (-5.6%).