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More Rough Times Ahead for US Economy Despite Recent Improvements.:
RISMEDIA, September 29, 2009—Despite recent signs of improvement, more rough times are ahead for the U.S. economy, according to several prominent experts in real estate and the economy who attended a recent forum at the Nixon Presidential Library. “You look at the numbers and everything points to the fact that we not only have bottomed, but things seem to be improving,” said Christopher Thornberg of Beacon Economics, citing increases in durable goods orders, exports and auto sales. He added, “When you think about the problems we’ve been through and what government has done, in many ways, they have, in fact, stabilized the economy. But you know what? They haven’t actually solved the underlying problems in the economy.” Thornberg cited real estate as a case in point. While home sales are up in some areas of the country, 6 to 7% of home mortgages nationally are 60 to 90 days delinquent. In California alone, 250,000 mortgages are 60 to 90 days late. And there’s more economic trouble on the horizon, he said, with rising unemployment and additional waves of foreclosures. “The second half of 2010 will be very weak,” he said, adding, “2011 will be very grim.” Thornberg was one of several nationally known experts in real estate and the economy who shared their perspectives during a Sept. 11 forum and charity event for the Orange County affiliate of Susan G. Komen for the Cure, one of the world’s largest grassroots organizations dedicated to finding a cure for breast cancer. Real estate analyst and investor Bruce Norris of The Norris Group in Riverside organized and moderated the event, which included experts from the California Building Industry Association, the National Association of Realtors, the Mortgage Bankers Association, RealtyTrac, The Appraisal Institute and the National Auctioneers Association. While all of the panelists agreed that the economy will rebound in another two or three years, several pointed to tough economic conditions in the interim. John Young, vice president of the California Building Industry Association, said new housing starts are at their lowest levels since the early 1950s. He added that new home sales are often stymied by appraisals coming in lower than contracted home sale amounts. Meanwhile, foreclosures continue to mount. Rick Sharga, senior vice president of RealtyTrac, one of the leading online marketplaces for foreclosure properties, said the nation has had 43 consecutive months of foreclosures. “We’re dealing with foreclosure activity that is six times what it would be in a normal market,” he said. Sharga added that legal and legislative efforts aimed at helping consumers modify the terms of their loans “merely delay the inevitable.” After all, he said, modified loan terms are not going to help someone who loses their job. Sharga also sees another big wave of foreclosures hitting the market next year, which will reflect rising unemployment rates, which are expected to peak during the first quarter, as well as the resetting of adjustable rate mortgages to higher rates. The real estate market is also negatively affected by a “shadow inventory” of perhaps 400,000 to 500,000 homes, which have been taken back by banks, but haven’t been put back on the market for resale, Sharga said. Home sales are also being frustrated by appraisals that underestimate true market value of properties being sold, said Joseph Magdziarz, vice president of The Appraisal Institute, the Chicago-based trade association that promotes the highest standards of professionalism and ethics in the appraisal business. Many problematic appraisals are coming from appraisal management companies that use unqualified appraisers who lack geographic competency in the markets where they are accepting assignments. Banks, for their part, won’t lend money on appraisals they can’t trust, Sharga said. Despite these negative assessments, the panelists said there are many things that Congress, consumers and the real estate industry can do to facilitate our nation’s economic recovery. Magdziarz, for his part, said The Appraisal Institute has been trying to warn Congress for years to take action to better regulate the appraisal business. One pending bill, HR 1728, includes many of the Appraisal Institute’s recommendations, has passed the House and is currently in a Senate committee with bipartisan support. The Appraisal Institute has also alerted its 26,000 members that it will take aggressive enforcement action against any members who accept assignments they are not qualified for. “We cannot sit back and allow bad appraisals to prevent deals from going forward,” Magdziarz said, adding that investors should work only with appraisers that belong to professional appraisal associations. He also encouraged consumers and investors to report incidents of substandard or incomplete appraisal work to state authorities as well as to The Appraisal Institute. While Congress considers HR 1728 to improve appraisal industry, another pending bill, Senate Bill 1230, would nearly double home purchase tax credit to $15,000. For his part, David Kittle, chairman of the Mortgage Bankers Association, said it is up to consumers, investors and the mortgage industry itself to weed out bad apples and not to count on Congress to solve the problem. “The people in Congress making laws don’t understand our business,” he said, adding, “When somebody’s doing something wrong, call them out and get them out of our business.” Pat Vredevoogd Combs, 2007 president of the National Association of Realtors, also recommended that Congress make tax credits available to all homebuyers and not just first-timers. Tommy Williams, 2008 president of the National Auctioneers Association, said professional auctioneers could also help market recovery by selling real estate at real market values. He added that auction participants already have their financing in place before they bid on properties. Norris, for his part, recommended that Congress do several things to boost the real estate market. These include: Increase the number of loans made available to well capitalized investors: Expand Fannie and Freddie loan programs from a maximum of 10 loans per investor to an unlimited number of loans for qualified investors. Make the 203K FHA loan program available to investors: A 203K loan allows a property needing work to be purchased “as is,” but included in the loan amount is money for repairs. The loan funds both the purchase and rehab of the property. Investors need this loan now, but this loan is currently only available to owner occupants. FHA previously made this loan available to investors, but stopped the practice in 1996 when HUD ran out of lender owned, fixer uppers. Banks could solve the vacant house problem by giving investors back the 203K loan program. Eliminate the 90-day waiting period before a repaired property can be sold to a buyer using an FHA loan: Investors who purchase fixer uppers can often completely repair the property in a matter of weeks. But the current law prohibits investors from reselling the property within 90 days. The assumption is that fraud must be taking place if a property is resold within 90 days. It’s ridiculous to assume that every investor who purchases a property, improves and resells it is committing fraud. All this policy does is increase investors’ costs of purchasing and rehabbing vacant homes. Allow loans to be taken over by credit-qualified new buyers with no down payment. Through this process, which was successfully used in the 1980s, new buyers simply step in and take over the loan payments. The only stipulation is that the loan has to be made current at the close of escrow. The U.S. currently has about one million owners who will not be capable of keeping their homes without a huge discount on the principal balance. Many of these properties have fixed rates at very favorable rates. Allowing willing and capable buyers to come in and take over these loans would help contain the spread of foreclosures across the country. Thornberg, for his part, said it’s not realistic to assume that our nation’s economic problems will be solved by increased regulation or by presidential action. The economy simply needs some time to heal itself, he said. But despite the near term trouble, Thornberg remains optimistic about the future. “I have tremendous faith in the U.S. economy rebounding again in the future,” he said. “And when we come out of this in two or three years, we’re going to have cheap housing and a weak dollar, which will be good for exports.” For more information, visit www.thenorrisgroup.com.

Understanding What Causes Interest Rate Movement:
The Federal Reserve and Mortgage Rates The Federal Reserve constantly evaluates the US economy and, when necessary, takes steps to address inflationary concerns and avoid economic recession or depression. The mass media, in turn, reacts by providing a wide range of opinions and interpretations of the Fed's monetary policy. This can make it very difficult for consumers to decipher how such actions will influence interest rates in general and mortgages in particular. And although actions of the Federal Reserve can have a direct impact on the Prime rate, mortgage interest rates are dictated by the trading of mortgage-backed securities, which are similar to bonds and trade on a daily basis. This means that the real dynamic at the heart of interest rate movement is the competitive relationship between stocks and bonds. Stocks, bonds, and mortgage-backed securities compete for the same investment dollars on a daily basis. There is literally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased in an effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomes bullish, the money to invest in stocks comes from the selling off of other investments, including mortgage-backed securities. Unfortunately, when mortgage-backed securities are sold off to fuel stock market rallies, this causes interest rates to go up, not down. Historically, there have been many instances where the Federal Reserve has increased interest rates, arousing fears that corporate profit margins would be affected. This resulted in stocks being sold off, leading money managers to search for a place to invest their newly liquidated assets until the next market rally. One such safe haven has been mortgage-backed securities, which cause mortgage rates to drop. The daily ebb and flow of money is what matters most when it comes to the movement of mortgage interest rates. I make it a point to continuously monitor interest rates for my clients and advise them of opportunities to manage their mortgage debt at a better rate. This is the foundation of my business model as a trusted advisor.

Green Built Homes:
Green Building a Plus for Builders in Tough Market Home builders attending the May 11-13 NAHB National Green Building Show in New Orleans were told by market analysts that they have a long way to go to sell the benefits of sustainable construction technologies to their prospective customers. But at a time when housing demand remains largely sluggish around the country, advances in green building are providing a notable shot in the arm for builders, and as the housing industry moves out of its cyclical downturn green business appears headed for a galloping rate of growth. Builders polled in the latest survey by McGraw Hill Construction on the evolving trends and opportunities in the green residential marketplace cited demand from this quarter of the industry for keeping their businesses alive during hard times. “We have hit the tipping point for builders going green,” said Harvey M. Bernstein, McGraw Hill’s vice president of industry analytics, alliance and strategic initiatives. “This year, the number of builders who are moderately green — those with 30% green projects — has surpassed those with a low share of green — those who are green in less than 15% of their projects,” Bernstein said. “Next year,” he predicted, “we will see even greater growth, with highly green builders — those with 60% green projects — surpassing those with a low share of green. This year has seen an 8% jump over last year, and we expect another 10% increase next year.” “It’s official. Green has gone mainstream,” said Ray Tonjes, chair of the NAHB Green Building Subcommittee. “And now, the NAHB National Green Building Program is making it easier for home builders to provide sustainable, environmentally friendly homes for their customers. We’re ready for the market transformation that McGraw-Hill Construction estimates.” “Green is driving a lot of what really is happening in this marketplace,” said Bernstein. Green home building is poised to generate between $12 billion and $20 billion in sales this year, accounting for a 6% to 10% share of the housing market, according to the McGraw Hill report, up from $7 billion in home sales and a 2% share in 2005. This year’s green building is projected to double over the next five years, reaching a 12% to 20% share of the U.S. housing market with $40 billion to $70 billion in sales in 2012. Green homes are defined by McGraw Hill as those containing energy-efficient, indoor air quality, water-efficient, resource-efficient and site management features. Forty percent of those surveyed by McGraw Hill said that the down market has made it easier to market green homes, and 16% said that the housing slump has made it much easier. The higher quality associated with green building appears to be the key factor driving demand going forward at a time when homes need to stand out in a market with a glut of inventory, Bernstein said. Acknowledging that current adverse economic conditions are imposing an obstacle, he said that rising energy costs are influencing customers and increasing their willingness to pay a premium for green housing. Experiencing the strongest growth in green building this year are the Pacific, South Atlantic and Mountain regions, in that order, the survey showed. From consumer surveying, the states with the highest percent of green home purchases from 2004 to 2006 were Washington, Nevada, Colorado, Texas and Florida. Texas was the one state where builders seemed to be less bullish on prospects for green building than their customers, he said. Among other survey findings: Eighty-five percent of those polled said that homes have become more energy-efficient over the past two years. Other features making homes more environmentally friendly include: tighter insulation (55%), more recycled content (41%), better indoor air quality (39%) and more water conservation (28%). To learn more about green building, builders are most often using print sources (90%), followed by home building Web sites (71%); home building product manufacturers (64%); and NAHB trade shows, conferences and workshops (58%). Seventy-six percent reported no difference in the time it takes to gain project approval for green homes versus those that are non-green. Ninety-five percent said that creating a better quality product that would retain its value longer was a very or somewhat important motive for building green. Next down on the list of motives was “it’s the right thing to do” (91%), which was the top motivating factor in a similar 2006 survey. That was followed by “expanding business with customers interested in green building” (90%), lowering recycling costs (90%) and staying ahead of the competition (80%). Triggers impacting expansion of green building include: energy costs and utility rebates (84%), emphasis on efficiency (77%), superior performance (76%) and gaining a competitive advantage (74%). Among obstacles with the greatest impact on future green home building: consumer willingness to pay (82%); higher first cost (82%); overall economic conditions (81%); lack of education about green building (72%); lack of awareness about green products (72%); and codes, ordinances and regulations (67%). Builders who are heavily involved in green building said there was an average 7.5% higher incremental cost to build green over an average project; moderately involved builders reported an average 10% cost premium; and builders who are only minimally involved perceived a 10.8% higher cost on average. Only 24% agreed that environmental regulations hinder green building. The most highly used green building features were: air sealing/tight construction; increased insulation; water-reducing plumbing fixtures; Energy Star windows, appliances, HVAC, exterior doors and lighting; and instant tankless water heaters. The most requested green building features were: increased insulation, instant tankless water heaters, Energy Star appliances, air sealing/tight construction and insulation foundation walls and floors. The top five most important energy efficiency options were: high-efficiency HVAC equipment (94%), Low E glass windows (92%), reduced air infiltration (90%), more energy-efficient appliances (90%) and above-code energy programs such as Energy Star certification (84%). The most important water conservation options were: water-efficient fixtures and faucets (81%), water-efficient appliances (80%), storm water mitigation (65%), water filtering systems (42%) and gray water recycling (33%). The most important green material options: hi-performance, engineered wood products (78%); allergen-free, chemical-free building materials (66%); recycled building materials, such as those used in decks and sheds (63%); alternatives to wood products (61%); and certified sustainably harvested lumber (53%). The most highly rated green materials: OSB (78%), alternatives to dimensional lumber (72%), construction waste reduction (55%), easily available products and materials (54%) and recycled/recyclable products (52%). The most important indoor air quality options were: HVAC (90%), formaldehyde-free finishes (73%), low VOC paint (66%) and minimum off-gassing (65%). Seventy percent of those surveyed recognized green brands in house wrap, doors and windows, insulation, water conservation and HVAC. No product category had less than 25% recognition, Bernstein said, and anything over 5% is considered significant. Without prompting, green product brands cited by builders included: GE (34%) and Whirlpool (13%) appliances; Tyvek house wrap (63%); Andersen (17%), Pella (12%) and Marvin (8%) windows; Trane (17%), Carrier (14%) and Lennox (13%) HVAC; Trex exterior framing (27%); Owens Corning insulation (26%); Kohler (21%) and Delta (14%) water conservation; Sherwin Williams (32%) and Benjamin Moore (8%) paint and wall finishes; TJI wood framing (8%); and James Hardie cladding (19%). More information on green building from McGraw Hill construction can be found at: analyticsstore.construction.com and greensource.construction.com. For information on green building resources from NAHB, click here; or e-mail Calli Schmidt, or call her at 800-368-5242 x8132.

Greening your Home:
RISMEDIA, August 3, 2007—”Extreme Makeover: Home Edition” is building an extremely energy efficient home in Bridgeport, Connecticut with a Milford, Connecticut company leading the way by providing an insulation system that will cut the family’s energy bills by 50% or more. Justin Breiner, co-founder of EcoLogic Energy Solutions, a company providing spray foam insulation, was chosen to insulate the home by the Danbury-based architect for the project, Leigh Overland Architect, and New Canaan based builder Gulick Associates. EcoLogic’s spray foam insulation can reduce heating and cooling costs by 50-70%. While it is initially more expensive than traditional fiberglass, the more efficient foam pays for itself through reduced energy bills in as little as three years. “We like to tell our customers that our spray foam is actually free – it is the only component of their home that is specifically designed to save them money every month. With spray foam, homeowners are literally putting money in the bank every day at a rate that even a hedge fund cannot promise,” said Breiner. The foam is sprayed on as a liquid. It then instantly expands 100 times to fill in every nook and cranny to create an airtight seal – critical when trying to keep in the heat in winter and keep out the heat in summer. The U.S. Department of Energy estimates that air-leakage is responsible for 40% of the energy used to heat and cool our homes and buildings. Breiner noted that spray foam also excels at absorbing sound, creating a quiet home. In addition, unlike fiberglass, spray foam does not contain formaldehyde and will never disintegrate or break down, creating a healthy and dust free environment. “The architects and builder for the Extreme Makeover home in Bridgeport selected us based on our company’s capabilities and knowledge – and our ability to meet the very rigorous construction timetable,” Breiner said. “We were given the task of insulating the home in two hours—a job that would normally take three days.” “We brought two trucks containing special equipment for spraying foam; typically one truck would be sufficient for an average home. We also brought along a crew of nearly 25 men and women, all volunteers from our company, allowing us to complete the job in record breaking time,” he said. Breiner said that while the homeowners may not see their insulation as it is hidden inside the walls, they will quickly experience its benefits — a healthier, quieter, warmer and more cost effective home. EcoLogic Energy Solutions offers the advanced insulation systems for both residential and commercial construction. With four different types of spray foams, including soy-based foam, the company works to meet individual project needs. “Of all the beautiful components going into the Extreme Makeover home in Bridgeport, spray foam insulation is one that is truly a gift that will keep on giving,” said Breiner. Breiner is a resident of Fairfield, Connecticut. EcoLogic Energy Solutions, LLC, donated all materials and labor for the Extreme Makeover home in Bridgeport. The firm is based in Milford, Connecticut, and serves the entire tri-state area. Extreme Makeover: Home Edition, which has won back-to-back Emmy Awards as Best Reality Program (non-competitive), is entering its 5th season on ABC. The program is produced by Endemol USA, a division of Endemol Holding. Denise Cramsey is the executive producer; and David Goldberg is the president of Endemol USA. For more information, visit www.EcoLogicES.com.