Down Payment Assistance Cancelled For Builders [Housing Tracker]

Homebuilder Stocks

Builders Feel Pinch of Key Omission From the Housing Bill. “On the bright side, the [housing] bill shores up mortgage giants Fannie Mae and Freddie Mac, which should help restore some confidence in the mortgage market. It also provides a $7,500 tax credit to stimulate demand among first-time home buyers. But for homebuilders, the bill's elimination of seller-funded down-payment assistance on FHA-backed mortgages… is a big loss -- one that could eliminate as many as one in 10 home buyers from the market… Lennar Corp. (LEN) used down-payment assistance on 33% of the mortgages it originated in Q2, while Ryland Group Inc. (RYL) said 18%-20% of its buyers used down-payment assistance during H1’08.” (Wall St. Journal, July 30^th)

Home Builders Group Spent $1.6M Lobbying In 2Q. “NAHB Disclosure: The homebuilding industry's trade association spent more than $1.6 million lobbying in Q2 to support a slate of bills aimed at reviving the housing market... The National Association of Home Builders… has been pressing for lawmakers to include a tax credit… of up to $7,500 to first-time home buyers through July 1 2009, among other incentives for buyers. NAHB, which says its member companies account for about 80% of all new U.S. homes built annually, also lobbied on legislation dealing with climate change, energy issues and other matters in Q2.” (Forbes, July 29^th)

Homebuilder Centex Widens 1Q Loss. “Centex Corp’s (CTX) FQ1 loss widened from FQ2’07 on impairment charges on land and other assets… CEO Timothy Eller said he doesn't expect the housing market will improve this fiscal year. Centex said it lost $150.1 million, or $1.21/share, in the three months ended June 30. That compares with a loss of $128M, or $1.05/share, in FQ1’07. The latest quarter included $80M in impairments and charges related to land and the Centex's share of certain joint ventures. Revenue dropped 41% to $1.13 billion from $1.90B last year. Analysts were expecting Centex to post a loss of $1.10/share on sales of about $1.6B.”  (AP via Forbes, July 29^th)

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Comments

[TonyCinTX:]

Hi Judy,

I think an interesting "bright side" article on the housing recession would be how this is affecting building labor and materials cost (if at all).

After the dot-com bubble burst, salaries and contract rates for computer programmers dropped as much as 50%. This was good news for those of us with demands on the programming market unrelated to dot coms, suddenly we had great talent available for less per hour than *before* the bubble.

By supply-and-demand reasoning, I would expect a similar effect in housing. At least for a while, labor and material should be in over-supply and the non-housing market builders should be reaping benefits.

2008 Aug 01 10:21 AM

[Jane:]

IMO it's a good thing down payment assistance (DPA) programs were banned. Over the last few years I've seen them called a "scam" by the IRS because the "charities" doing them are basically just laundering money for builders. Artificial price inflation, risky loans, getting people into houses they can't afford, and increased foreclosures because of these things is NOT helping Americans achieve homeownership, it's helping Americans ruin their credit and finances for years to come. It is part of the cause of the bubble and bust. What I still find idiotic is there are still so many people in and out of the industry, and in govt, who STILL insist that we must stop the drop in house prices. This value was never real, and in some cases was fraudulent due to lenders and builder coercing appraisers to meet the number. Many appraisers have been quoted in the news saying this was going on and they'd get blackballed for not going along. Prices need to come back down to reality, to be in line with incomes. Until they do come down and consumers are again in a financial position to buy a house they can afford, with a loan that isn't risky, housing will not "recover." The economy put too much into housing, we were too dependent on this unsustainable growth and fake appreciation. It was never going to last and if the govt and industry had listened to warnings years ago, they could've reined it in before it got to this situation. Instead this industry shot itself in the foot out of greed. I don't like any bailout idea, but at least the builders didn't get their whole wish list, and at least those stupid DPA's are gone.

2008 Aug 01 10:49 AM

[billddrummer:]

Hi Judy,

Thanks for this thread. I wonder why down payment assistance on an FHA loan would be necessary--after all, the program will finance 97% of a home's appraised value.

If someone can't come up with 3% down, then why are they buying a house in the first place?

I think that the DPA programs should apply only to conforming mortgage transactions, not government sponsored low-down loans like FHA and VA products.

2008 Aug 01 11:35 AM