Home sales have rebounded from a steep fall triggered by the terrorist attacks on Sept 11, but they are still lower than levels recorded before the attacks.

The attacks have shaken consumer confidence and adversely affected the demand for new homes. The National Association of Home Builders notes that 41% of some 150 homebuilders surveyed recently report a decrease in sales of more than 10% from the pre-attack pace. As a result, builders are expected to build fewer homes than originally planned this year. Some buyers have canceled sales contracts. Options to purchase land are being lengthed.

The National Association of Realtors (NAR) expects home resale activity to average less than a five million per year rate through the first quarter of 2002. That’s down from the seasonally adjusted annual rate of 5.5 million in August and 5.2 million in July. In August 2000, the rate was 5.24 million.

"The negative effect should be temporary because the fundamentals of the U.S. economy remain favorable, and we should experience a delayed rebound," says Dr. David Lereah, NAR’s Chief Economist. "Assuming we’re successful in preventing additional attacks, the rebound will be postponed until next year as we work toward market stabilization."

Low interest rates will help. NAR President Richard A. Mendenhall says one positive factor in the current market is the low level of interest rates. The national average commitment rate for 30 year, conventional, fixed rate mortgage was 6.95% in August, down from 8.03% a year earlier. Not everyone, however, is optimistic.

Home appreciation will slow next year, says Mark Zandi, Chief economist for Economy.com. Growth in residential values hovered between 4 and 5% before the terrorist attacks, and that should drop to about 2 to 2.5% next year, said Zandi.

Experts note that low mortgage rates have insulated the housing market somewhat from a harder blow by encouraging many consumers to buy homes while rates remain favorable.

On October 5, the 15 year mortgage rate hit its lowest rate since 1991- 6.11%. The record for 30 year fixed rate mortgages fell to 6.64%, the lowest since the week of October 9,1998. The record low interest rates are especially helpful to first time buyers.

In the aftermath of the terrorists attacks on America, uncertainty seems to be the only certainty. Those who plan to wait on buying a home until things "get back to normal" may be renting for a long time to come.
Source: David Jones, rismedia.com 12/01

HUD Moves Against Property Flipping
The Department of Housing and Urban Development has proposed a rule to discourage property "flipping," or fast turnaround sales at artificially inflated prices to unsuspecting buyers. The agency proposed that FHA financing be generally denied for a purchase from a seller who has owned a property for less than six months or is not its owner of record. An exception could be made if the price were shown to correspond with market value.
Source: American Banker 9/2001

Home is Greatest Source of Wealth
Affluent households consider their home to be their greatest source of wealth, according to a recent survey. The study by the consumer Federation of America indicated that house equity represents 34 percent of affluent Americans’ wealth. Affluent was defined as those having net assets of $100,000 or more. It was noted that in 1998, 56 percent of the households headed by someone 45 years or older had net assets of at least $100,000.
Source: Mortgage Originator, 9/2001

HUD Proposes Hike in FHA Multifamily Loan Limits
In its proposed FY 2002 budget, the U.S. Department of Housing & Urban Development (HUD) is seeking a 25 percent increase in the base amount of multi family loans insured by the Federal Housing Administration (FHA). The increase reflects the 25 percent average increase in construction costs since 1992, the last year FHA multifamily loan limits were raised. HUD’s proposed increase, if approved, would boost the per unit FHA limit from $67,000 to $83,000 in several high cost cities and help stimulate construction of more affordable housing units in areas that have become too costly for the FHA program.
Source: Bay State Realtor, May/June 2001

Single Women make Strides as Homebuyers
A study by the National Association of Realtors (NAR) shows that single women are increasingly making their presence felt in the real estate market. In fact, twice as many single woman bought homes as single men in 1999, the latest year that figures are available. A decade ago only 13 percent of all homebuyers in the country were single woman, but by 1999 single woman comprised 18 percent of the U.S. of the U.S. home buying population. Meanwhile only 9 percent of single men purchased a home that same year. NAR reports that the median age of single buyers female buyers is 41, but nearly a third (30 percent) are 35 or younger. The median income of single female buyers is $39,700.
Source: Bay State Realtor, May/June 2001

Legislative/Regulatory Update
Change in affordable housing "threshold" contemplated

As currently written, the Commonwealth’s anti-snob zoning law- Chapter 40B – allows developers to bypass local zoning ordinances and file a comprehensive permit with the state if less than 10 percent of a community’s housing is classified as "affordable." The law was enacted in 1969 to off-set the effects of "exclusionary" zoning regulations and expedite the permit process for the development of low-to-moderate income housing. But, some legislators now say Chapter 40B is being used by big, out of state builders to gain entry into middle income, suburban communities, where they’re primary intent is to build large, high-end condo and apartment developments. In response, Rep. Carol Donovan (D-Woburn) has filed a bill to lower to 8 percent, from 10 percent, the affordable housing threshold that communities must meet to continue enforcement of the local permit process. Whether this will spur construction of more or fewer affordable housing units is a question for the Legislature to decide. Presently, 23 Bay State communities have met the 10 percent threshold and another 23 count at least 8 percent of their local housing stock as affordable.
Source: MAR, Realtor Digest, 12/2000

Affordable Housing
The Metropolitan Affairs Coalition (MAC) led by Bernard Cardinal Law is discussing ways to improve its housing production recommendations developed over the past two years through a process in which GBREB continues to participate. The housing study sponsored by the MAC concluded that 35,000 new housing units need to be built in Greater Boston over the next five years in order to meet demand that exists at virtually every income level.

More affordable housing is needed in the United States, especially in the high-priced 24-hour markets, to sustain the strong economy in areas such as Greater Boston, according to "Emerging Trends in Real Estate 2001". The report presented by Lend Lease Real Estate Investments and Pricewaterhouse Coopers last week noted that, "Without a sufficient labor pool of lower-paid support staff and service personnel, these markets could price themselves into a downturn as companies move to cities where the rank-and-file labor force can afford to live."

The GBREB (Greater Boston Real Estate Board) is working with the Cellucci/Swift Administration to support new ways to encourage housing production. The GBREB has testified in support of two Administration bills, one that would make 1,000 acres of surplus state owned land available for housing production, and one that would expand the state’s job creation program to allow its incentives to apply to housing production. In addition, RHA President, Andrew Chaban, is serving on an advisory committee for the state’s new $100 million tax credit program.
Source: GBREB Government Affairs, 12/2000