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Our TARP Dollars At Work: New Auto Teller Machines at Comerica

I love Comerica Bank and it is where we have banked for years. After this post,  they are probably going to cut off our access to any credit, raise our fees, but I just cannot help it.  I go to the drive-through yesterday to make a deposit, and I note these shiny new auto-teller machines. I’m sure this wasn’t paid for with TARP funds, and if it was, purchasing them had a trickle-down effect that created jobs for the guys who molded the little plastic tubes. They are quick and nice, but the realtor voice in my head says, hey, why not just make some non-conforming real estate loans?

Will CIT’s Bankruptcy Filing Affect Dallas Real Estate?

By now you’ve heard that CIT Group has filed for Chapter 11 bankruptcy protection. Taxpayers, who gave the company 2.3 billion last year, will likely not be re-paid. I’m not discounting that, but even worse, CIT is one of the country’s largest lenders to small business and retailers, like Neiman Marcus. Two months prior to the holiday season is not a great time for retailers to lose access to capital. My concern is how this will trickle down: small and mid-size businesses will not be able to fiance short-term surges, which will seriously affect their business models, and commercial real estate may take another bullet. We have seen the effects of the credit crunch in real estate, now we’re going to see it in the retail industry, which is in everybody’s face on a daily basis. Consumer confidence? You see where I’m going with this: we’ve had 60,000 home foreclosure postings this year.

I so do not like being Debbie Downer, truly, but the prognosis isn’t looking too positive. Your thoughts?

Update: Today’s New York Times downplays the disaster scenario I envisioned last night. Apparently this is a pre-packaged, “different kind of bankruptcy” that allows the company to re emerge from court protection by the end of the year, which is a pretty speedy recovery.

Homebuyer Tax Credit Likely To Be Phased Out

There are those who say the First Time Home Buyer’s Tax Credit has artificially boosted the market, that some in D.C. are afraid to pull the plug for fear of what may happen– an even softer market. Even more somber news: it appears that the the federal government is now securitizing 95% of U.S. home mortgages.

I’m torn. I think the credit was necessary, and not only do I think it should be extended, I think it should be expanded. Goldman Sachs, otherwise known as Government Sachs, has said it pushed up home prices by 5%. There are simply too many people who bought adjustable rate mortgages in the past few years, too many people who, if they have to sell their homes, will have to carry cash to closing. What if they don’t have it? I’ve heard that many banks are shelving some bad loans, others making deals as low as 2% interest rates just to keep folks in the home, the property off the courthouse steps.

Almost makes you want to stop paying your mortgage. But then, who said life was fair?

The housing market is a vital component of our economy, and when people move and buy homes, they tend to spend money — movers, hardware, paint, soft goods, hard goods.

As for the government propping up an industry, I have this to say: Amtrack.

Breaking: Dallas-Based PlainsCapital Offers First U.S. Bank IPO in Two Years

Further proof of how Texas is an island of stability in this recession: PlainsCapital Corp. is going public, to not only re-pay its government loans, but to increase revenue — though the Dallas-based bank and mortgage holding company has done extremely well with revenues increasing 30% over the last five years. PlainsCapital is the parent to PrimeLending, a local residential mortgage company with offices nationwide.

Maybe there’s hope for jumbos after all.

Don’t Faint: A Shortage of New Construction In Dallas Real Estate?

That’s what Steve Brown wrote Friday, but this little quote peeped right out at me because I’ve had this nagging fear —

“Tim Jackson, a Collin County custom builder who is president of the Home Builders Association of Greater Dallas, predicts new-home prices will rise next year unless starts increase.

“We just can’t get the funding to start new houses,” Jackson said. “I’m fortunate to have a good relationship with a local lender, and they allowed me to start a speculative home four or five months ago.

“But I doubt they would allow me to start another one,” he said. “Even if we have a customer who wants to build, they are oftentimes finding it difficult to find construction financing, too.”

What’s my fear? That all the elements putting the brakes on the market — in effect, constipating it — will ultimately raise prices on construction costs, new homes, taxes, closing costs, materials and labor so much that homes will be out of the average or lower-income individuals grasp.

Dallas Real Estate Round Up: Bottomed Out, Getting There or Way to Go?

Residential Strategies’ Ted Wilson tells Steve Brown we are close, all depends on how much inventory gets sucked up… which depends on the credit market, MAYBE extension of the first time home-buyers tax credit, though that sure has not helped the higher end market. But the story outside of Texas continues to rain doom and gloom: in 2005, about 1.25 million homes were destined for foreclosure. Now an analyst has set the number at 7 million, using data from the Mortgage Banker’s Association. Look at this:

“Ms. Goodman uses data from the Mortgage Bankers Association to estimate there are 55.9 million American homes with mortgage debt. She notes that at the end of the second quarter, an MBA survey found that more than 13% of single-family home mortgages were at least 30 days delinquent or in foreclosure.

Then Ms. Goodman looked at “cure” rates, the percentage of delinquent loans that return to current status. Those cure rates lately have been puny. The report assumes that about 99% of loans that are 90 days or more overdue will result in homes lost to foreclosure. The assumption for those 60 days or more delinquent is that 96% are toast, and for 30 days or more, 72%.  All in all, she estimates that 12.4% of the mortgages outstanding as of June 30—representing about 7 million homes—are going to end up changing hands on the courthouse steps.”

Thought: using 1.25 million during the peak of the real estate boom may not be the greatest of benchmarks, however: 7 million homes in foreclosure is almost mind-boggling. That’s like one whole city the size of Chicago of foreclosures!

Decorating Bachelor Brown’s Castle

Not a bad Great Room for a bachelor pad, but I think we need some more pillows. Guys just LOVE pillows.  Do we agree the exercise room, which used to be a baby’s room, needs a paint job? (Or do we want to keep the tree tops for treadmill stim?) The upstairs game room where Ernie tucked away his media apparatus. What do we think about the (lavendar?) wall color in there?

Your Favorite (Dallas) Real Estate Blog

The Real Estate Center at Texas A&M is looking for your favorite Real Estate blog. This is a contest. May I humbly suggest you send the name of your favorite real estate blog (ahem, ahem) to RECON Associate Editor Bryan Pope. You know, just in case you have a favorite Real Estate blog or something.

Only Modernists Need Apply… In Dallas?

The wonderful Nancy Keating’s story on Texas Modern in the Wall Street Journal is a real estate junkie must-read. (Hurry, the free article vanishes in a few days.) She talks to our fabulous Lionel Morrison, who I am tempted to say has tilted downtown Dallas into an architecturally sleek city, but we have to give his wife, designer Susan Seifert,  equal credit. Pictured here is Morrison’s latest masterpiece, the Ricks Circle/Northaven home of Darren and Amy Kozelsky. Here is one down the street from that number built by Ms. Cheatham herself. No doubt, Dallas architectural tastes are leaning modern: even spec home builders dare to erect “Austin contemporaries” in lieu of the sales-safe Frenchette McMansions.  Mr. Morrison tells me he is working on an East Texas vaca home for a client that will knock our modern socks off even more. But I digress: my only dispute with Ms. Keating’s piece is location. We who live here know that Urban Reserve and Kessler Woods  are in two different geographic worlds. Diane Cheatham’s moderns-only development is on the periphery of the LBJ-635 Loop in a location that, like the new student at Beverly Hills High, is desperate to fit in. Facts are, Urban Reserve is east of Central. Kessler Woods is down skirting Kessler Park, in an area enjoying urgent revitalization and an influx of stylish young buyers. I see Kessler as thriving as Uptown in ten years. Wish I could say the same for Urban Reserve, because I love the concept. Years ago Big Sky near Denton tried to create a “only moderns need apply” dictum that didn’t work out so well. I’m told the development has since dropped the modern-only requirement, while this home langishes on the market. So while I think we will continue to see more — and better — fabulous modern homes in Dallas, I think we will see them as higher-end single family custom homes rather than neighborhood developments.

State Of The Dallas Market: We May Not See Mega Leverage For 50 Years

W. Michael Cox is the Director of the O’Neil Center for Global Markets and Freedom at the Cox School of Business at SMU, and a Chief Economist for the Federal Reserve Bank of Dallas for the past 25 years. Cox, appraiser Brad Edgar, and economist Britt Fair (Hexter-Fair Title Company) spoke to a group of Realtors today about the Dallas market. Couple highlights:

No inflation is going on right now, the government is trying to stop de-flation. Almost all the experts agree that we may see eventual inflation because of the economic stimulus — that money pumping into our systems. We may have a window of about 12 to 16 months before interest rates will have to rise to control it.  The Fed can and will monitor inflation tightly 24/7 and may in fact want to see a bit of inflation, say 2 to 4%, anything but hyperflation or deflation.

The banks still aren’t lending, what will it take to move them? Maybe higher interest rates. Cox doesn’t think you can pass laws forcing banks to lend money.

“When the risks and rewards are in balance, they will lend,” he says.

Our day of reckoning for the stimulus package will be when we convince China and Japan that treasuries are worth buying.

Why are the banks doling out TARP funds to the “troubled” banks rather than the solid banks, so the solid banks could lend the funds?

Good question, said Cox.

Unemployment is starting to affect everyone, even in the higher net worth classes. Though Texas thankfully lags the nation in unemployment, layoffs may not be over yet. Two solid businesses now: healthcare and education.

And these men think Americans’ spending habits have changed dramatically, maybe forever for a generation. Just as they did after the Great Depression, people are tightening their belts. Whether they keep them tight and how many years they live lean depends on how affected they are by this economic downturn, how long it lasts. We may not see mega leverage for another twenty years.

Higher taxes may force people out of states like New York and California, and we could see another wave of  sunbirds heading here for our sensibly valued homes. Watch: commercial real estate failings. Be glad we live in a city that continues to attract business and generate jobs as well as technology (intelligent medical systems being developed at Texas Instruments) and varied corporate headquarters. Buffalo, New York was home to the largest number of wealthy individuals in the U.S…  once upon a time.

The Credit Noose Gets Tighter?

Implode-Explode reports that Guarantee Bank and National City (PNC) are exiting their warehouse lending lines of credit. In other words, no more “securitizing” of loans. I ask, is this a good thing, bad thing… or might it lead to higher interest rates?

Zillow Explains Obama’s New Home Loan Modification Plan

Many of you probably read the news last week regarding the Obama administration’s plan to come up with a rather aggressive effort to stem the tide of foreclosures. In short it’s a way for homeowners to reduce their monthly payments (not including PMI) to 31% of their pre-tax monthly income. For the full monty visit Zillow’s blog post here that explains the process in detail and even points you to the right documents.

Here are the dirty details on qualifying:

• Must have originated mortgage before Jan. 1, 2009.
• Be an owner-occupant.
• Have an unpaid balance that is equal to or less than $729,750 (for a single-family home).
• Have trouble paying your mortgage due to financial hardship.
• Your monthly mortgage payment must also be more than 31% of your gross (pre-tax) monthly income. Duh.There’s a three-month trial period before you lock in the lower rate for five years and if your home is in danger of foreclosure the process will be halted while you apply for the program.

Who Else Is Doing Well In This Economy?

Book keepers and anyone who sells alcohol, wine and beer.

Who’s Doing Well In This Economy

Bankruptcy attorneys, loan mitigation officers, realtor’s specializing in short sales and foreclosures, residential leasing agents, appraisers, who else?

The D Word

They were using it in New York City when I attended Inman Real Estate Connect in January, but Steve Brown used it today in his outlook report from Moodys Economy: Dallas, they claim, is no longer dodging the depression recession.

Home Ownership, Canadian Style

I had the pleasure of having lunch today with Bob Schlegel, Chairman and CEO of PAVESTONE, the Grapevine-based manufacturer of concrete pavers and building products, and his darling daughter, Kim Schlegel Whitman. We discussed home ownership in Canada versus the U.S. Canadians cannot deduct the home mortgage interest from their taxes. (Which does not steer them away from home ownership in the least.) President Obama is looking to limit that deduction for high net worth individuals to recoup additional revenue. With our Wall Street meltdown, many folks are looking closely at our rock solid neighbor to the north where the banks are not hemorrhaging and socialized medicine is the health plan. Canadian mortgages, says Bob, are higher. Schlegel told me his first home in Canada cost about $25,000 in the mid 70’s and held a 12% interest rate. Since you cannot deduct home mortgage interest in Canada, he says, the incentive is to hurry up and pay off that mortgage and own the home, which he and his wife Myrna did. Business interest is deductible, so Canadians tend to pay off their homes and take out other loans with deductible interest. The end result — more paid-off homes. From the perspective of good conservative fiscal living, says Bob, that’s what happens in Canada.

Businesses That Did Well In The Great Depression

My morning reading was so depressing, I found this article on businesses that fared well during the Great Depression the only happy note. I will add that cosmetics tend to fare well in down economies as they offer a cheaper pick me up — Avon doubled sales during the Depression years. Rentals are faring well. Experts tell me that as buyers hold back, there is a surge in leasing activity. Spoke with a Preston Hollow builder over the weekend who is leasing one of her 6500 square foot homes homes to cash-flow for $5500 per month, rather than sell it at a loss.�

Golden Parachutes, Gilded Mansions

Interesting. And you know they are NOT living in $300,000 homes.

What If There Was No Home Mortgage Deduction

For folks who earn more than $250,000 per year. How would that affect home building and sales?

Real Estate Doom & Gloom… But Maybe Not So Much In Dallas

Order an extra $4 latte today because the housing headlines will give you a headache: January sales plunge to lowest levels since 1963, JP Morgan warns of upcoming problems now in home equity . Thank you, Texas legislature, for keeping our home equity at an 80% loan to value ratio, there isn’t much difference between 2007 and the days when paps gambled away the ranch at poker! Let’s see, my financial blogs say the Fed is zombified, and a $250,000 annual salary is the new max before you have to equalize society. Must see for all: House of Cards . But the sun is shining — just received word that a property I toured last week, haven’t even downloaded the photos yet, is being circled by a buyer who’s interest renewed after the agent put some time, elbow grease and love into this house. Kind of turned it from S&M Dungeon dark (do I capitalize dungeon?) to bright, fresh, light, airy… details and photos forthcoming.

House Porn: Turtle Lake, Not Creek

Right in your own backyard at 5815 Bent Trail.

More Troubles For Highland Capital

$745 million more in troubles. Meantime, here are the homes for sale in Dallas that I am told by sources are backed by James Dondero, one head of the firm — each home appears to be it’s own limited liability partnership: 3500 Beverly, 4223 Bordeaux, 4041 Grassmere . These are exquisitely built and designed by Andrew Merrick Custom Homes, just waiting to be loved by a homebuyer.

RE: Just So We Don’t Blame Bush

Vital point from a commenter:

“Regardless of political mudslinging, the crux of the discussion is this section
“Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a
conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes
his or her monthly payments on time for two years, the one percentage point premium is dropped.”

So Candy, how many of the current defaulters used that program? I am sincerely asking the question. Is it 1% of the current defaulters, 10%, 50%, 0%? What is it?

Don’t go pointing fingers without having some answers.”

Anyone have the answers?

Inman News: Lenders Not Exactly Gaga Over HASP

The Mortgage Bankers Association sees weaknesses in Obama’s real estate stimulus plan in the lending realm, like the upper limit of a 105% loan-to-value ratio required for refinancing, and the role of Freddie Mac/Fannie Mae as guarantors.

Case-Shiller: Biggest Home Price Drop Since 2000

2000 was when Standard & Poor’s/Case-Shiller National Home Price Index first started tracking home sales, but the drop is significant. However, this very cool interactive widget from the NYT allows you to find your city — Dallas is one of the 20 and at 4.3% our price plunge is a mere dip (and I contend it depends on the area, some are actually up and lots are hot hot hot) compared to the double digits other cities are experiencing. U.S. home prices sank a record 18.2% during the last three months of 2008, compared with the same period in 2007.