Tax Credit Changes Could Unleash Home Sales
If all home buyers become eligible for a tax credit without a repayment feature, it could result in an additional 555,000 home sales, enough to meaningfully draw down excess housing inventory, the NATIONAL ASSOCIATION OF REALTORS® says.

An evaluation of options for a home buyer tax credit by NAR shows wide ranging implications and benefits. A full credit to all buyers means an additional 2.22 million households would meet the income requirements for purchasing a home, but only one in four of those households would actually make a purchase.

Under the current $7,500 first-time home buyer tax credit, which must be repaid over 15 years, 264,000 households meet the purchase requirements. Using the same assumptions, with plans to hold their home for a median 10 years, it would mean only 66,000 additional sales.

Lawrence Yun, NAR chief economist, said NAR is advocating a tax credit for any home purchase meeting qualifying underwriting standards. “A home buyer incentive is critical to help reduce housing inventory and stabilize home prices,” he said. “The bigger the incentive, the faster housing can help pull the economy out of recession. The cost to the Treasury would be far less than the additional costs of a prolonged recession with insufficient housing stimulus.”

Analysis of other options shows that if only first-time buyers are eligible and the repayment feature is dropped, it could mean an additional 202,000 home sales. If extended to all home buyers but the repayment feature is retained, the gain would be 181,000 home sales.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said a flexible approach to the tax credit would have added benefits. “A home buyer tax credit also should be allowed to be used as a part of downpayment. This would instantly add an equity cushion for homeowners – a vested financial interest provides the foundation for sustainable homeownership, which helps improve economic stability,” he said.

NAR estimates only 25 percent of newly eligible households would become homeowners, and does not capture the effect of increased trade-up buying activity. As such, these projections may understate the full impact of a home buyer tax credit.

Source: NAR

30-Year Rates Fall Below 5 Percent
Mortgage rates dropped to their 11^th straight weekly decline, reaching new record lows, according to Freddie Mac.

Interest rates on 30-year, fixed rate mortgages averaged 4.96 percent this week, down from a previous week's 5.01 percent.

The low rates have caused a spike in home refinancing loans and a welcome relief to cash-strapped home owners facing a slowing economy and rising unemployment rates.

"The fact that interest rates have dropped to a record low is an important development since more affordable home financing could help bring buyers back to the market and prevent some of these foreclosures," says Lawrence White, professor of economics at New York University's Stern School of Business.

Other rates were mixed for the week:

• 15 year fixed rates: averaged 4.65 percent, up from 4.62 percent.
• 1-year adjustable rate mortgages: fell slightly averaging 4.89 percent from 4.95 percent last week.
• 5/1 ARMs: averaged 5.25 percent compared with 5.49 percent last week.

Mortgage rates have continued to drop ever since the Federal Reserve announced a plan in December to buy up $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae—the government-sponsored enterprises.

Freddie Mac started recording mortgages in 1971.

Source: Reuters, Julie Haviv (1/15/09)

Who owns Colorado: Durango tries to hang onto its steam

 

Without a doubt, Durango is one of the coolest burgs on Planet Earth.

How cool is Durango? Durango is Aspen without all the phonies. It’s Vail without underground bumper cars, Steamboat Springs minus the construction, Beaver Creek sans snobs.

In a highly competitive field, Durango might be the slickest little city in Colorado, especially if you like skiing, hotels, history and trains. It has the picturesque Strater Hotel, built in 1887, with 93 authentic Victorian-furnished rooms; the Durango & Silverton Narrow Gauge Railroad & Museum; the Durango Mountain Resort; and the Animas River, one of a handful of free-flowing rivers in America. Durango also has developers who actually seem to give a damn.

Durango, alas, also has contracted the same economic sickness afflicting Manhattan and Malaysia, Reykjavik and Bangkok. On the bright side, if you think progress has become too swiftly progressive, you surely will like Durango’s rapid slowdown.

How slow a slowdown, you ask? In October 2007 Durango permitted 248 new dwelling units. In October 2008 it had permitted 78, a 69 percent slump. In 0ctober 2007, it had issued nine commercial permits, compared to four permits in October 2008, a 55 percent decline.

"Our permit activity is down; our sales tax revenues are down. It’s not as bad as many other cities we’re aware of — the Front Range cities actually are in more of a bind than we are ¬ but the national economic problems have come home to roost locally," planning director Greg Hoch says.

There appear to be two sources of slowing. One is simple prudence. Another is the credit crunch, or whatever one calls the stark fear that’s gripping banks.

"I definitely think our downturn in building activity is related to the lack of available financing," Hoch says. "There’s a reason why the headlines are the way they are, not only nationally but locally."

Two real-life examples
The 1111 Camino project was going to be a no-lose sort of development, a small condo development on the Animas River on the site of an unimpressive office building. When it is built, the complex will feature a sawtooth-shaped design that gives most tenants a view of the river and a few others a fine view of downtown.

Delaying the deal was particularly painful given the two-year wrestling match its owners engaged in with the city council (height restrictions aimed at 1111 Camino and one other project; the near-miss of a moratorium on projects by the river).

"We decided in March. We were looking at pre-sales and the economy, and it was just not feeling very positive from the economic standpoint," partner Dan Baker says. "We put the project on hold till maybe fall of ’09 or May 2010. We were trying to make 50 percent pre-sales, and we probably made 40 percent to 45 percent pre-sales, but we felt consumer confidence was falling, and in hindsight that was a good call. Now it’s in free-fall."

Meantime, construction costs have dropped 15 percent or more from unprecedented peaks a year or so ago, Baker says. That’s the good news.

Example No. 2
Al Harper, owner of the Durango & Silverton Narrow Gauge Railroad & Museum, together with his partners has big plans for the nearby Grand Central Hotel and Conference Center at Railroad Square. Now a parking lot, he says it will become a $70 million "total immersion in railroad history and culture."

It’s hard to imagine the hotel/conference center not becoming a mecca for conventioneers, railroad buffs and families with little boys.

Harper describes his plans this way:

"You arrive and at the porte-cochere you’re greeted by a gigantic real steam engine. The whole lobby is a replica facade of Grand Central Station with curved steel arches and a master time clock in the center. All the personnel will be in Pullman uniforms. When you go into the restaurant it’s in Harvey House décor with ladies in Harvey House uniforms. You sit at your table and you can pick up a remote control and drive a train around the ceiling. All 200 rooms will be decorated in different railroads from America’s past. The phone doesn’t ring; it’s a steam engine whistle."

And Harper is just getting warmed up.

It’s all close enough to touch, but for that little thing called the credit crunch.
Harper and his partners want to borrow $50 million. The Colorado Housing and Finance Authority, he says, pledged $16 million and might go up to $20 million. The bank has said it will lend $30 million, but ...

"They want a third guarantor," Harper says. "Now, I’m guaranteeing and (partner) Karen (Langhart) is guaranteeing. Is a limited partner going to throw that in? Who’s going to throw that in? I don’t know. How much ownership do I have to give away to do that?

"I get a kick out of seeing an article now and then about how banks have lots of money and no borrowers. The truth is they have lots of borrowers, but they have so tightened their restrictions that no one can afford to borrow money. It’s a vicious circle. It’s so frustrating."

Good news? Sure.

"The early part of this decade witnessed a bit more rapid growth than we had experienced in the ‘90s, so people felt we were growing a little too fast," planning director Hoch says. "But we’re not worried about that anymore."

The weekend before Christmas The Wells Group promoted "stuffing the moving truck" with needed items for our community. The recipients of our efforts were The Durango Food Bank and Manna Soup Kitchen. The success of this food drive was tremendous. We were able to fill the large moving truck twice in two days. The generosity of our great La Plata County community was overwhelming. We are priviledged to live amongst such caring and giving people and our plans for 2009 are to continue this grass roots efforts for a variety of charitible causes in our area.