Archive for the 'General' Category

City council sets ‘07 budget at $631M

Wednesday, November 15th, 2006

Business First of Columbus – 5:15 PM EST Wednesday
by Saleha N. Ghani
Business First

Public safety will receive the biggest chunk of the city of Columbus’ $631.46 million budget next year, Mayor Michael B. Coleman said Wednesday.

Coleman said he doesn’t plan to increase income taxes or dip into the rainy day fund of $41.3 million.

The city plans to allocate $437.7 million, or about 70 percent of the general fund budget, for the Department of Public Safety. Rolled into that number is money to put 150 more police officers, increasing the city’s number cops to 1,909, and 65 more firefighters, increasing their total to 1,555, by December 2007. Money to update technology at fire stations and at the city’s crime lab is also included in the allocation.

Money spent on the payroll of elected officials adds up to about $56.7 million, or 9 percent of the general fund.

Coleman said the city plans to spend about $23.9 million, or 4 percent of the general fund, on development, including $4.4 million on job creation and economic development. The development portion of the fund also includes money for neighborhood services and housing initiatives.

The remaining budget has been allocated for public service, finance management, recreation and parks.

For 2007, the city expects general fund revenue to come in at $608 million. Income taxes will account for $391 million, or about 64 percent of the revenue, and shared state revenue adds another $57 million, or 9 percent. The rest is generated from property taxes, service charges, fines and penalties and investment earnings.

Coleman stressed he planned to maintain the city’s credit rating of AAA, given by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings in July for conservative sending and responsible capital budgeting.

Home inspection know-how

Friday, May 12th, 2006

Thursday, May 11, 2006

Harley E. Rouda Jr.

After narrowing your search and visiting various homes, you’ve finally found the home you want. But before you can confidently purchase that next home, it’s important to have the property inspected by a professional. Home inspections are a necessary method to ensure you’re getting what you pay for, while also alerting you of any potential repairs you may need to make in the future.

When planning for an inspection, be sure to ask your real estate agent for advice since they’ve undoubtedly worked with a number of quality inspectors in the past. Once you have recommendations, be sure to do your own research before hiring anyone. Find out a potential inspector’s qualifications, obtain sample reports of their work and ask for references from previous clients. Because home inspections are unregulated in many states — including Ohio — you should also look for candidates who are members of the American Society of Home Inspectors (ASHI). Inspectors certified by the ASHI meet stringent requirements and abide by a strong code of ethics.

Once you’ve hired a home inspector, try to schedule your inspection at a time when you and your agent can be present. In general, a typical home inspection can last anywhere from two to four hours, depending on the size of the home. Be sure to ask questions or raise any concerns you may have. The more you know about your potential new home, the better.

After the inspection, expect a report outlining all possible problems within the home, from minor quick fixes to major repairs. Large-scale problems (heating, cooling, roofing or plumbing) can set you back between $2,000 and $5,000, medium repairs (insulation or painting flaws) can run between $500 and $2,000, while smaller issues (electric outlets or kitchen sink) will probably cost under $500. Keep all of these costs in mind when reviewing the overall price of the home. Be sure to have your real estate agent look over the inspector’s report and offer any additional input.

While the home inspection may not reveal problems that affect your decision to buy, you’ll be aware of any minor repairs you may need to make in the near future. But it’s also possible that the complexity of problems may leave you feeling unsure about the home purchase. If that’s the case, review all of the details with your real estate agent and determine if the property is the right choice for you. Realistically, you can expect at least a few minor fixes, but it’s up to you to decide how much maintenance you’re willing to put into your new home at the very beginning.

Builders try to warm cool housing market

Thursday, February 9th, 2006

By Dan Eaton
Business First of Columbus
Updated: 7:00 p.m. ET Feb. 5, 2006

Central Ohio’s housing market is going through the equivalent of a closeout sale as builders slice prices in hopes of luring back buyers.

But whether a builder is cutting prices immediately or holding out until later, many observers agree the cost of a house will be dropping, discount or no discount.

M/I Homes Inc. is one of the builders cutting prices now.

Taking a page from the struggling U.S. automakers’ sales pitch last summer, the Columbus-based builder is offering an 8 percent discount on its houses in the area. M/I is marketing the discount as a special for the company’s 30th anniversary, but Chief Financial Officer Philip Creek acknowledged the motivator is the slumping Central Ohio market.

“This is one of the higher discount programs we’ve ever run,” he said, “but this is the slowest market in a few years.”

Construction permits for area houses plunged 25 percent in 2005 and are expected to drop again this year. Creek ticked off a well-known list of factors for the slowdown – higher mortgage rates, sluggish job growth and consumers’ declining confidence in the regional economy.

Dallas-based Centex Corp. is also cutting prices. During one hours-long selling campaign, it offered to take up to $70,000 off the price of a house, either one that could be ordered or from the 160 houses sitting in its area inventory.

Wayne Zill, Columbus division president for Centex, said in an e-mail the sale was intended to increase traffic and sales in the Columbus market, which are in a decline.

Executives at Dominion Homes Inc. didn’t respond to interview requests, but the Dublin company’s advertising on its Web site offers up to $40,000 off inventory houses and certain new builds in Central Ohio, and up to $17,500 off spec houses in its Louisville and Lexington, Ky., subdivisions.
Regional problem

Builders had anticipated a tightening market and are beginning to show their strategies for dealing with it in 2006.

Howard Schottenstein, president of the Building Industry Association of Central Ohio and owner of Markpoint Development in Bexley, said all builders are trying to come up with ways to combat the slump.

Some, he said, might be waiting to better gauge the depth of the downturn before taking steps to get through it.

“We’re seeing that the world is changing in regards to the housing market,” said Anthony Chan, economist with JPMorgan Chase & Co. “Discounting is the first sign of cooling prices.”

And as prices fall for the large builders, so will they drop for smaller builders, he said. The signs were evident last year: Chan said the mean price of a new house fell 4 percent to $272,900 in December 2005.

Still, builders view the problem as regional.

Creek said M/I Homes began offering its discounts in Central Ohio in early January, before adding it in its Indianapolis and Cincinnati markets. The company isn’t offering price cuts where sales have been healthy, including Florida, North Carolina, Maryland and Virginia.

Zill said Centex’s 12-hour sale produced the Columbus division’s best week of sales ever, though he declined to provide details.

He said the company has used the technique in other cities to build its brand, including St. Louis, Detroit, Washington, D.C. , and parts of California.
Waiting game

Bob Webb, chief executive of Bob Webb Group, a Lewis Center-based custom builder, said his company hasn’t seen an effect on prices yet, but it isn’t instituting discounts.

“There is too much inventory out there,” he said. “Some companies have a six- or seven-month backlog. Any builder with inventory is making concessions. We just don’t have much inventory.”

With the low interest rates that drove the area’s building boom gone, builders have little choice than to combat the cool-down by lowering prices, Chan said.

“We’re going to see more of this,” he said.

A drop in prices will mean a drop in profit for those who sell houses, but the head of the Columbus Board of Realtors thinks anything helps.

“Any incentive that can be provided to buyers is a great opportunity,” said Chris Reese, the group’s president.

She conceded lower prices on new houses likely will depress the market, but that might be what the industry needs to move many of the houses built on speculation or in deals that collapsed and now sitting empty.

“The bottom line,” she said, “is about getting people into houses.”
© 2006 Business First of Columbus

© 2006 MSNBC.com

New year could bring economic changes

Thursday, January 12th, 2006

JEANNINE AVERSA
Associated Press

WASHINGTON – People may feel less inclined to be big spenders this year as the housing market slips from its lofty perch, developments seen as producing slower, though still respectable, economic growth this year.

That is the picture emerging from economists, most of whom are projecting growth to top 3 percent in 2006.

Many analysts are hopeful the high-flying housing market will scale back at a moderate pace, boding well for a safe landing. A crash of a sector that has reliably supported consumer spending and economic activity for five years running could imperil the entire economy.

Rising interest rates and the toll of high energy bills also will play a role in the expected belt-tightening by consumers this year, economists say.

Consumer spending probably will increase by about 2.9 percent in 2006, compared with a projected 3.5 percent rise for 2005, according to the National Association for Business Economics.

The association and other analysts are forecasting economic growth this year of 3.3 percent, compared with a projected 3.6 percent increase for 2005.

Some experts believe the economy will grow at roughly the same pace as it did last year. A few think economic activity in 2006 will not reach 3 percent, a subpar performance.

The government’s tally of 2005’s economic performance, including consumer and business spending, will be known later this month with a report on the gross domestic product. It measures the value of all goods and services produced in the United States and is the most important economic gauge.

Consumer spending accounts for a big chunk of economic activity. Economists are confident that if people’s appetite for new purchases should wane, business investment and other parts of the economy will pick up and temper the decline.

“The mood in the executive suites I visit is generally optimistic,” said Thomas Donohue, president of the U.S. Chamber of Commerce.

Economists believe business spending should firm up as companies boost investment in response to global competition.

It’s that competition that should help keep inflation in check in the U.S. in 2006, economists say. Most foresee consumer prices moderating this year. Yet a big jump in energy costs could undermine the positive outlook.

“The potential for even higher energy prices is a risk to the economic outlook. The economy has digested the higher prices gracefully so far. But it can get a bit of indigestion if prices move higher,” said Mark Zandi, chief economist at Moody’s Economy.com.

The jobs climate is expected to improve slightly this year. The average unemployment rate should drop to 4.9 percent or 5 percent from last year’s 5.1 percent, economists said. The economy is expected to add around 2 million jobs this year – about the same as last year.

Home prices, after double-digit gains over the past several years, have helped power consumer spending. Borrowing against homes added $600 billion to consumers’ spending power in 2004, according to research by Federal Reserve Chairman Alan Greenspan.

Prices are not expected to go up as much this year and, according to analysts, could fall in some markets. That would make some homeowners feel less wealthy and more cautious in their spending, economists say.

“2006 is going to be a wake-up year for many homeowners,” said Greg McBride, senior financial analyst at Bankrate.com.

“Consumers have been using their house as an ATM. That is going to diminish considerably over the next several years” as the housing market slows, he said.

The Federal Reserve is expected to continue bump up interest rates this year. But central bank officials have suggested that the end of a nearly two-year rate-raising campaign may not be far off.

The Fed in December lifted a key short-term interest rate, known as the federal funds rate, to 4.25 percent; that’s the highest rate in 4 1/2 years.

The funds rate, the interest that banks charge each other on overnight loans, affects other interest rates.

The Fed’s action last month meant that the prime lending rate – for certain credit cards, home equity lines of credit and other loans – rose to 7.25 percent. That also was the highest rate in 4 1/2 years.

Many economists believe the funds rate will climb to 4.75 percent this year, which would push up the prime rate to 7.75 percent. Others predict the funds rate will go to 5.50 percent this year, leaving the prime rate at 8.50 percent.

Against a backdrop of rising interest rates, analysts suggest that would-be home buyers and other borrowers lock in loans with a fixed rates, versus a variable rate, sooner rather than later.

Rates on 30-year, fixed rate mortgages, now at 6.21 percent, could top 7 percent by year’s end, according to some economists’ projections.

Landfill debris causes contention

Friday, November 11th, 2005

COLUMBUS – “One man’s trash is another man’s treasure.” While that saying is normally used in reference to unwanted items being discarded by one individual and sought by another, it describes the ongoing battle between construction and demolition debris landfill operators and some of their proposed neighbors.

One of the latest sagas in this perennial battle is playing out in the Ohio House now, and it will be coming to the Senate committee I chair, Environment and Natural Resources, in a few weeks.

The budget bill passed earlier this year created the Construction and Demolition Debris Task Force, and required members to conduct hearings and submit a report to the legislature by September 30. That same bill included a moratorium on issuing new operating licenses for what are commonly called C&DD facilities between July 1 and December 31 The expiration of that moratorium is driving the initiative to adopt new rules.

C&DD landfills accept the waste material from new construction, remodeling and demolition projects. They cannot accept solid waste. The regulations governing solid waste, the material you put in your garbage cans at home, are more stringent than those for construction debris. Solid waste has more potential for harm to the environment than most construction debris.

As a member of the C&DD Task Force, I participated in the August and September meetings. The committee issued its report, and while there was agreement on many points, some issues remained problematic. Those remaining issues have been the focus of legislative hearings in the House and at least one marathon interested parties meeting.

The most contentious issue is the location of these landfills. Opponents do not want them in their backyards. Others want C&DD landfills to follow the tougher regulations governing solid waste landfills. One problem with that proposal is the C&DD waste will use up more of our dwindling solid waste disposal space.

In addition, if C&DD facilities must meet the solid waste regulations, they might as well accept solid waste, and these same opponents who do not want construction debris in their neighborhood are even less likely to want solid waste.

If the legislature does not act before December 31, the moratorium will expire and C&DD facilities will be free to operate under existing laws. The task force recommended tougher regulations, including greater setback distances from homes, and the House committee is rushing to pass HB 397 so those recommendations become law when the moratorium expires.

The Senate will have limited time for debate if we are to meet the Dec. 31 deadline, so I have taken the unusual step of participating in the House discussions. My goal is to be thoroughly familiar with the proposal so when it comes to my committee I am familiar and comfortable with its contents.

Last Wednesday the House heard various witnesses testify for three hours about the proposed changes. I then joined the chairman and one member of the committee and almost 40 interested parties at what turned out to be a marathon seven-hour interested parties meeting that did not break up until close to midnight.

The group agreed on a proposal, and sent the legislation back to be rewritten. An electronic version was made available for everyone to review over the weekend. The House committee will meet again this week to ensure the bill says what those involved agreed it would say.

Regardless of the outcome, it is certain everyone will not be completely happy with the results. Disposal of CC&D or solid waste is always contentious.

Low rates expand housing bubble

Friday, October 28th, 2005

Article published Oct 27, 2005
Speaker: Healthy construction industry helps Grant County
BY RACHEL KIPP

A nationally recognized economist told local business leaders Wednesday the recent national boom to the construction industry may decrease soon, leaving a potentially dangerous hole in already-shaky economic conditions.

“I know you don’t believe there’s a housing bubble, but there’s a huge bubble,” economist Edmond Seifried said, telling a story about his sister being offered double what she paid for a Florida condominium months after she bought it.

“We can’t afford for the housing bubble to burst,” he said. “It has to deflate.”

Seifried, an industry consultant and professor of economics and business at Lafayette College in Easton, Pa., was speaking as part of a daylong tour at STAR Financial Bank locations across the state as part of a series of economic forums.

Although Indiana and Grant County aren’t seeing the dramatically rising prices being experienced by parts of California and Florida, Seifried said the health of the national construction industry does have an effect here.

“A healthy construction economy nationwide will help even this county,” he said. “If the economy is healthy nationwide, there will be demand for products and services made here. I don’t think the construction trade here is dead. It would be helped if the mortgage rates stay low.”

The bank used to regularly have economic forums in Marion before moving the business’s headquarters from Grant County to Fort Wayne, bank President Jim Marcuccilli said. Last year, bank officials added Indianapolis as a second location for the forum and this year Marion was included as a third.

“This is our first economic forum in the area in recent years,” Marcuccilli told the group of business owners, local government officials, bank customers and employees who gathered at the Meshingomesia Country Club. “And I’m glad to be able to offer you this opportunity once again.”

Along with the national housing market, Seifried discussed energy prices, interest and mortgage rates and what effect those factors could have on the overall U.S. economy.

“In the last 15 years something very strange has happened in America,” Seifried said. “There’s been a real change in the way we do business … Cities like Marion, Muncie, Kokomo, Bethlehem, Pa., Pittsburgh, Columbus, Ohio, Midwestern cities, old industrial cities began to lose that industrial base to China, India and Asia.”

As Seifried talked, he asked forum attendees to examine charts of economic indicators including the U.S. trade deficit, the 30-year mortgage rate and the federal fund rate. Figures for each were included from 1991 to 2004 and Seifried read statistics for each month of 2005 to give participants an idea of which way the trends were heading.

After the speech, Jim Smith, superintendent of Oak Hill schools, said many of the topics discussed relate directly to what’s happening at the school corporation, particularly as officials deal with the rising cost of running school buses and prepare to begin a $10 million high school renovation project.

“Running a school corporation is like running a business,” he said. “We pay attention to all of the factors that he talked about.”

Americans dream of ever-grander homes

Wednesday, August 3rd, 2005

from the August 03, 2005 edition –
‘Great rooms,’ big kitchens, porches thrive. But formal dining rooms?
By Clayton Collins | Staff writer of The Christian Science Monitor

I have built a Dream House
Cozy little dream house
Happiness is there, hiding ev’rywhere.

By one historian’s account, those cheery lyrics from a popular 1926 fox trot mark the first reference to what had already become a golden goal in America: the perfect single-family dwelling.

The vision grew increasingly suburban as time went by, a home pristine on a plot of green.

Today, just squeezing into the housing market has become a dream for many first-time buyers, while for some who jumped in before prices spiraled in much of the nation, “cozy” and “little” are hardly the right adjectives for the current ideal.

Try “sprawling.” “Showy,” even.

Architectural tastes evolve with each generation and vary by region. Custom-built homes remain largely the province of the affluent, though mass-market builders continue to broaden their arrays of modular feature options – choose your dormers or gables, for example.

Traditionally, “a lot of new developments pre-sell their homes, so you go into the sales office and they say you can have model A, B, or C and trim packages one, two, or three,” says John Archer, professor of cultural studies at the University of Minnesota and author of “Architecture and Suburbia.”

As always, small counterculture trends offer alternatives. Condominiums, still a relatively small segment of the housing industry, have gained, serving both as starter homes for couples who want to delay having children and as havens for empty-nesters.

Even in the realm of the free-standing home a small-is-beautiful movement is afoot, some experts say, as renovators and new-home buyers become more receptive to more creative uses of smaller spaces – a more sophisticated tack than the competitive, more-is-better mind set.

“It’s a kind of personalizing that people are looking for but have a hard time articulating,” says Sarah Susanka, author of several books on home design. She advocates smaller homes with well-used space.

Still, a few transcendent trends – some long-running, some newer – have emerged in the evolution of the American “dream house.” Among them: ground-floor master suites (and more single-floor houses) opening onto landscaped grounds; walk-in closets; the continued erosion of formal spaces inside, but more exterior flourishes (even front porches) that project grandeur; inviting kitchens; dual-sink bathrooms with plenty of elbow room.

That’s according to two surveys on Americans’ architectural wishes released last month – one an annual poll of consumers nationwide, the other a first-ever survey of hundreds of architectural firms by the American Institute of Architects (AIA) in Washington.

“Everyone’s looking for that first-floor master bedroom, whether it’s a single or two-story house, and even [if they have] kids who will be leaving home soon,” says David Hughes, principal of David Hughes Architects in Columbus, Ohio. He’s a member of the AIA advisory group that put together the Design Trends Survey.

Whether the main motivation is ease of mobility in later years or just convenience and simple access to the grounds is difficult to know, Mr. Hughes and others say. “But that’s really the big trend,” he says. The next-biggest trend is the elimination of “wasted space or space that doesn’t get used like it used to in the past,” he adds. Parlors and formal living rooms “are kind of going by the wayside.”

“The ‘great room’ [open-concept design] keeps gaining in popularity,” says Stephanie Paddock, a spokeswoman for Associate Designs, the Eugene, Ore., firm that has run its national Home From the Heart survey since 1992.

Ms. Paddock also cites the ground-floor master suite trend and the decline of formal spaces, though she says the formal dining room, at least, seems to have inched back this year from the brink of extinction.

Broadly speaking, it’s a space race.

“You have homes that look almost like lofts” with their high ceilings, says Diego Saltes, the AIA’s director of economics and market research. People also like split foyers or “anything that has a shock-and-awe effect when you open the door of the house, that makes the house look bigger.”

Outside, Mr. Saltes cites “intensive use of the land.” Even as houses eat up a greater proportion of increasingly expensive lots, hefty resources are being poured into landscaping – and into the facades of the houses looming over the lawns.

Saltes points to heavy investments in costly stone, brick, or mixed-material facades, a preference echoed in the Associated Designs wish-list poll. “The visually appealing material says ‘This is a solid building, and at the same time fashionable,’ ” he says.

Better materials (and a rising economy that drives sales and allows builders to bulk-order such materials) continue to broaden design possibilities, says Professor Archer. Result: a broadening of the traditionally short A-B-C menu he cited earlier.

“Instead of getting an architect’s pattern for an Italianate villa, you get a brochure from the developer, and it has 15 different [options], and you’re free to associate however you want with those things – ‘This makes me look elegant,’ or ‘This says what I want to say about family values,’ ” he says. “It’s kind of a rhetorical catalog where you can pull out a whole set of messages that you want to project.”

That can lead either to a cacophony of mismatched “veneers” or to the kind of architectural sameness of which suburbs are often accused.

“Developments do faux bungalows in the Midwest,” he says. “Occasionally an interloper gets in there. In Virginia and Maryland [you tend to see] faux Alexandria, and Victorians stand out like sore thumbs in a sea of Federal-style homes.”

Still, Archer says, the love of do-it-yourself design is inherent in America. In frontier days, it was requisite. In the early 20th century it was facilitated by Sears “kit” houses. Today the trend is clear from the fact that 80 percent of those polled by Associated Designs want to build, not buy.

“We’re seeing people who are really interested in planning properly,” says architect Hughes, “who see the value of doing a proper job of planning spaces” for the way they live. For one current client, Hughes says, that means a half-court basketball gymnasium. More often, he says, it takes the form of “a really nice kitchen.”

“The more architects that are able to help people make good houses of all scales and at all price ranges,” Ms. Susanka says, “the more people are going to see [the new standard of self-directed design] and say ‘That’s what I want.’ I think it’s happening.”

Rapid pace of home-building slows down

Wednesday, July 20th, 2005

New construction in June matched May’s decline.
By Ron Scherer | Staff writer of The Christian Science Monitor

NEW YORK – For the second month in a row, developers have slowed down the pace of building all those new Cape Cods, colonials, and Spanish haciendas that Americans have been snapping up at a record pace.

While it may be too soon to write an obituary for housing, any twitch is watched carefully because the sector is one of the most vibrant in the economy. The housing boom has provided jobs for everyone from plumbers to roofers. And millions of Americans have watched their homes become swollen piggy banks, rising in value month after month. Indeed, almost everyone from the chairman of the Federal Reserve to the auto-body shop owner who has some “investment properties” is watching the housing market with a wary eye.

Tuesday, the Commerce Department reported that developers started 2 million new homes in June, the same pace as May, which was revised to show a decline of 1.1 percent. Economists had been anticipating a June bounce because mortgage rates fell.

“This is basically a temporary cooling in housing activity,” says Anthony Chan, an economist at JPMorgan Asset Management in Columbus, Ohio. “I think it’s premature to say we’ve turned the corner on housing.”

The numbers, however, are a change from the past, when developers were building homes as fast as carpenters could load their nail guns. Construction of single-family homes fell by 2.5 percent. In some parts of the country, the slower pace was quite noticeable: In the Midwest, construction fell by 12.1 percent; in the West, by 10.4 percent; and in the Northeast, by 0.5 percent. Only in the South, including Miami, where the condo craze is continuing, did construction rise – up 11.4 percent.

“This worries me that half the new building is in the South,” says David Wyss, chief economist at Standard & Poor’s in New York. “In the rest of the country, the pace appears to be tapering, although it’s worth noting that activity is up 5 percent from a year ago.”

The report on June’s slower pace comes right before Fed chief Alan Greenspan is scheduled to present his semiannual assessment of the economy to Congress Wednesday. In the past, Mr. Greenspan has said that he doesn’t see a national housing bubble but that there might be some areas of froth. He’s also found it unusual that long-term interest rates have remained low when the Fed is raising short-term rates.

The Fed is expected to raise rates another quarter of a percent for the 10th time in August. Expectation of this move has finally caused long-term rates to start to rise. Thirty-year mortgage rates have edged up the past two weeks.

If the pace of housing is slowing, says Mr. Chan, “the latest report should provide some comfort to policymakers – not because Greenspan wants housing to collapse, but because it may be showing that housing reacts to monetary policy.”

Because the Fed is expected to continue to raise rates through the year, economists are less sanguine about housing in 2006. “That’s when we will probably see some retrenchment,” says Joe Abate, an economist at Lehman Brothers in New York.

In a recent report, Mr. Abate says he believes that on a national basis, housing prices are overvalued about 15 percent. Some markets he refers to as “dangerously frothy.” In those areas, housing is becoming difficult for people to afford, so they are resorting to unusual mortgages that lower the monthly payment but make the overall cost of a house more expensive.

Still, the Lehman housing expert notes that the last time home prices fell on a national basis was in the 1930s, during the Great Depression.

Many economists, including Chan, argue that the fundamentals for housing remain favorable. Interest rates remain relatively low, with long-term mortgage rates at 5.66 percent. These economists estimate that mortgage rates will have to rise to 6.5 percent to dry up loan demand.

At the same time, the labor market is improving. In the latest jobs report, the unemployment rate fell to 5 percent. One possible factor in the improvement: Industrial production rose 0.9 percent in June.

The strong economy might be one reason why the number of applications for new permits to build is still going up.

“Permits tend to be a leading indicator,” says Mr. Wyss. “But sometimes projects get permitted and then not started.”

Finding your niche in a new city

Sunday, July 10th, 2005

Thursday, July 7, 2005

Harley E. Rouda Jr.

Moving to a new city is, at times, a shot in the dark. Although you’ve probably learned some information about your new neighborhood before the actual move, the details may still be sketchy.

Sure, your prospective area is only a 10-minute drive from your office. However, is it close to a good school system? Is a veterinarian located nearby for your pets’ yearly checkups? Is a 24-hour pharmacy nearby for late-night prescription refills?

A survey by the National Association of Realtors supports the idea that although home buyers consider cost and affordability when purchasing a home, location is a major selling point. Even though you may feel you’re getting a deal on the home of your dreams, consider its location: if it is next to a rundown neighborhood or lies a half-hour or so from any nearby schools, what you’re saving in price could cost you when it comes time to resell.

Consider these additional points when scoping out your new home’s location:

Ñ Evaluate your family’s day-to-day lifestyle. Do you enjoy a morning jog before heading to work? Ensure your new neighborhood’s streets are safe and well-lit. Is your spouse a movie buff? Check out the proximity of theaters and video stores. Does your daughter take dance lessons twice a week? Determine if a studio is located nearby. Otherwise, you’ll rack up the miles on your car and lose valuable time driving to and from your favorite activities.

Ñ Remember the value of educational facilities nearby. Even if you are a newly married couple, single person or empty nester — all without school-age children — homes near schools tend to retain their value over time. And when it comes time to sell your home, families will readily invest in a home that is close to schools and college campuses.

Ñ Take a look at established neighborhoods. True, older neighborhoods often feature homes with higher price tags. On the other hand, a house in a new neighborhood that today faces a sprawling field may one day look upon a parking lot, depending on the zoning of nearby land. Do your research — when viewing homes, be sure to ask your Realtor about any vacant property near the home.

Ñ Make a priority list. What’s most important to you and your family? Since it’s nearly impossible for you to be close to every amenity, decide which ones are at the top of the list. Once you narrow down the priorities, it will be easier for you to find a neighborhood that fits your needs.

Remember, many tools are available online to help narrow your location search. Some programs allow users to identify those amenities at the top of their priority lists and immediately view which are closest to their selected home via a detailed map. When you’re pressed for time, services such as these take the guesswork out of relocating.

It is, after all, these conveniences that make your house and the surrounding community a home — and the harried moving process often only allows you a few weeks (or at times, days) to check out your new neighborhood.

Nevertheless, any background research you can do prior to signing on the dotted line brings you that much closer to visualizing a seamless transition.

Lenders Retool

Monday, June 20th, 2005

Long-Term Mortgages
By RUTH SIMON
Staff Reporter of The Wall Street Journal

From The Wall Street Journal Online

The mortgage industry is starting to make the move from short to long.

Lenders are rolling out a new crop of 30-year fixed-rate mortgages that let homeowners make low, interest-only payments for as long as 10 or 15 years. It is the latest effort to snare borrowers seeking lower monthly payments. Also getting a new push: mortgages that stretch for as long as 40 years.

The newest crop of products is largely aimed at borrowers who are looking for lower payments but are also concerned about interest-rate risk. In recent months, mortgage experts have been surprised by the continued strong interest in adjustable-rate mortgages at a time when borrowers can still lock in a fixed-rate loan at rates well below 6%. With rising short-term interest rates reducing the relative attractiveness of adjustable loans, lenders are seeing greater interest in loans that protect borrowers from rising interest rates — and are introducing products for that market.

Last month, Wells Fargo & Co. rolled out a 30-year fixed-rate mortgage that is interest-only for the first 10 or 15 years. The interest rate remains the same throughout the life of the loan, but the monthly payment is recalculated after the interest-only period ends so that the mortgage balance is paid off over the remaining 15 or 20 years. U.S. Bank Home Mortgage, a unit of U.S. Bancorp, plans to introduce a 20-year fixed-rate mortgage with an interest-only feature for the first 10 years. Bank of America Corp., IndyMac Bancorp Inc. and LendingTree.com, a unit of IAC/InterActive Corp., all have fixed-rate interest-only mortgages in the works.

Forty-year mortgages — which keep monthly payments down but cost more over the long term — also are attracting more notice in the wake of Fannie Mae’s recent decision to expand its purchases of these loans. First offered in the 1980s, 40-year loans account for less than 1% of mortgage originations, according to the Mortgage Bankers Association. More banks may be willing to offer them now that they know they can be sold to Fannie Mae, which has been purchasing 40-year mortgages since September 2003 under a pilot program with 22 credit unions. Fannie will purchase both fixed- and adjustable-rate 40-year mortgages.

Next month, IndyMac Bancorp will reintroduce its 40-year mortgage, which was mothballed last year because of a lack of interest. Fannie Mae’s move “helps by bringing attention to the product and credibility to it,” says IndyMac Executive Vice President Frank Sillman. “It also brings a host of investors that will purchase 40-year loans.” Washtenaw Mortgage Co. in Ann Arbor, Mich., a unit of Washtenaw Group, began offering these loans in May. Old National Bancorp. in Evansville, Ind., says it will add them this summer.

Some lenders have been offering more and more interest-only mortgages in recent years to eager borrowers, though the vast majority of them have been adjustable-rate loans with interest-only features. These include both short-term adjustables, with rates that can adjust as often as once a month, and so-called hybrid ARMs that can carry a fixed rate for as long as 10 years, after which the rate can adjust annually.

ARMs and interest-only mortgages have been especially attractive to borrowers looking to keep their monthly payments down in the face of skyrocketing home prices. These loans accounted for nearly two-thirds of mortgage originations in the second half of last year, according to the Mortgage Bankers Association. Among the increasingly popular choices: so-called option ARMs, which are short-term ARMs that carry introductory rates of as low as 1% and give borrowers multiple payment options. Because these loans allow borrowers to afford more house with a lower payment, some observers worry that they have helped fuel a heated housing market.

The growing popularity of interest-only and adjustable-rate mortgages has also raised fears that borrowers and lenders are taking on additional risks that could create problems down the road. “The apparent froth in housing markets may have spilled over into mortgage markets,” Federal Reserve Chairman Alan Greenspan told Congress last week. He called the “dramatic increase in the prevalence of interest-only loans, as well as the introduction of other relatively exotic forms of adjustable-rate mortgages … developments of particular concern.”

Lenders that now offer fixed-rate loans with interest-only features say they have seen a spurt of interest in these products in recent weeks as the yield curve has flattened, making ARMs relatively less attractive. At Greenpoint Mortgage, a unit of North Fork Bancorporation Inc., interest-only loans now account for about 30% of fixed-rate mortgages, up from 15% earlier this year. Countrywide Financial Corp. says activity in fixed-rate interest-only mortgages has been “brisk” recently.

Because they allow borrowers to lower their monthly payments, the newer breed of mortgages is aimed at homeowners concerned about affordability and those who want to free up cash for other purposes. Unlike ARMs, which allow borrowers to get a lower rate in exchange for accepting the risk of future rate increases, fixed-rate interest-only mortgages carry the same interest rate over the life of the loan.

But like other interest-only loans, they tend to be more costly than standard mortgages. At Countrywide, the interest rate on an interest-only loan is typically one-eighth of a percentage point higher than the rate on a comparable loan without the interest-only feature. Wells Fargo says its borrowers typically pay about one-quarter point more in upfront costs — or $500 on a $200,000 mortgage.

Borrowers can face payment shock when the interest-only period ends. A borrower with a $200,000, 5.50% 30-year mortgage that’s interest-only for the first 15 years would see the monthly payment increase to $1,634 from $917 when the loan recasts so that the mortgage can be paid off in the remaining years, according to HSH Associates in Pompton Plains, N.J.

Some lenders and borrowers are looking to 40-year mortgages as an alternative to interest-only mortgages. The 40-year loans are likely to appeal to borrowers “in the middle of the country, who tend to be more conservative,” says James Cotton, vice president for single-family marketing at Freddie Mac, which is looking at buying 40-year mortgages.

Forty-year mortgages can be costly over the long haul. Rates on these loans tend to be about 0.25 to 0.375 percentage point higher than the rate on a comparable 30-year mortgage. Borrowers also pay more interest over time because the loan is stretched over an additional 10 years. With a $200,000 mortgage with a 5.75% fixed rate, a borrower with a 40-year mortgage will pay roughly $312,000 in interest over the life of the loan, according to HSH Associates, versus about $220,000 in interest if the same loan has a 30-year term, assuming both loans carry the same interest rate. If the rate on the 40-year mortgage is 6%, the total interest payments jump to about $328,000.

Some lenders are tweaking the formula. Hingham Institution for Savings in Hingham, Mass., last year introduced a 20-20 mortgage, a 40-year loan with a single rate adjustment after the first 20 years. Because it is essentially two 20-year loans, the rate on the mortgage is one-quarter to one-eighth of a point below the rate on a standard 30-year loan. “It’s been our most popular product,” says Hingham vice president Michael Sinclair.