Doug Francis

How Bloomberg Fabricates U.S. Housing Numbers

I once asked a question about new home statistics to a regional housing sector guru (a Ph.D. no doubt) and his answer just raised more flags in my head about the data.

The economy is lucky that so many of the I/O mortgages use LIBOR as their index, so their adjusted rates are now lower than they were. If LIBOR was at 3.5% like a year ago then we would really be sunk!

Yes, LIBOR saves America... for the time being.

FHA: The Next Disaster?

A number of my clients have opted to use FHA financing. My question is that no one seems to talk about the required up-front insurance (MIP) that buyers need to purchase... is it a "shell-game" since it can be financed? It is approximately 1.5% of the loan amount which adds up to a nice premium for these loans.

In the late 1990's, many banks came up with alternatives to FHA with 3% down and no PMI. These products killed FHA loans for years.

Thoughts on New Home Sales and Durable Goods Data

I think it is right to be skeptical of these numbers since they are based on new contracts signed. The picture may be clearer if data came in from lumber yards, adhesive producers, or just about any group of construction material suppliers.

Paper contracts are a good indication of promises to build, but 2 x 4's and plywood out the door show real economic activity.

Outlook for Interest Rates: The Fed's Unpublished Report

As someone in the front yard with consumer clients highly influenced by daily mortgage rate fluctuations, a 9% 30-year mortgage will stop the real estate market in its tracks. Incomes would have to increase substantially and the resulting wave of inflation would be a further blow to the economy.

Boeing Delays 787's First Flight- Yet Again

When this plane finally flies there will be a huge momentum shift for the company that will also impact the overall mood of the economy. It is easy to pick out the largest exporter tag and the high visibility this product has to offer around the world.

The problem is that the carbon fiber elements and energy efficiency bar is so high, advanced and complex, that everyone needs to remember is that this is an highly experimental piece of engineering.

Seasonal Housing Sales Cycles: Up-Market and Down

When I consult with buyer clients, I love using data like this even though I agree that it's not as accurate as statisticians would prefer. This situation calls for an on-the-ground observational assessment (good "recon").

It's been my observations over the past 18 years that there can be a heard mentality when it comes to buying homes, and I witnessed it again in the winter/spring market in Northern Virginia. The change in buyer behavior as of March 1st was remarkable as seller's prices had moved downward intersecting the buyer's expectations and boom - people were buying.

We will now see this trend drop-off sharply as rates ratchet up, buyers pull-back and retrench. I feel the official stats for June will show a sharp drop in buyer activity.

Behavioral Thoughts on Home Buying

When I first meet with buyer clients today, I emphasize that buying a home should be looked at with a five-year perspective... as we see drops down and pops up. Back in the mid 1990's, people were shocked when I would state 1-3% annual appreciation, but that whole theory was thrown out starting in 1998 when many people where I work outside D.C. were flush with profits from IPO's and wanted to buy homes at any cost. (they needed tax deductions)

American's are optimists by birth!

High Housing Affordability, Low Mortgage Rates Boost Pending Real Estate Sales

Looking back at old data from March and April shows how super low the mortgage rates had been... one of my clients locked at 4.5% fixed on a $584k mortgage at Wells Fargo in April!

But it is now June and rates have popped up to 5% or 5.25% for the same loan. Also, appraisals are nixing many of those pending contracts all over, so a downward revision of "pending" is my forecast (from the front yard) and buyers will ride it out until rates come back below 5%.

Things will heat up in the fall as people rush to beat the November 30th tax credit deadline.

Housing: Playing Games with Appraisals and Value

It is a tough time to be an appraiser... because no one is happy with them. So I would not be surprised if many quit the business due to high stress and reduced income (another story).

I recently had a low appraisal on a home sale in Vienna, VA where the appraiser did not include significant and obvious upgrades for some reason. Under the new guidelines (5/1/09) he was not allowed to take any supporting material from the owner or the agent to justify the value.

So appraisals aren't getting any looser (see typo in post) standards any time soon... actually just the opposite is true.

Low Housing Start Numbers: Good News for Real Estate

I have seen builders aggressively adjust their price-points to mirror the $417,000 conforming mortgage cap. It is this magic number in my market area of suburban D.C. that shows strength. As you push over $500k, the new mortgage lending criteria has pinched that market segment of buyers even with good FICO scores. Also, the factor of consumer confidence can't be overlooked.

The Housing Bubble: Greenspan's Wayward Son

I remember the rush of available money. A few of my clients quit their secure jobs where they had been successful to become mortgage loan officers. And I can clearly remember a few saying "we don't go by Fannie rules, this is Wall Street money!"

I think you give Greenspan too much, pardon the pun, credit. Everyone was just acting like they were at a frat party... it was a booze cruise except the money was flowing.

Real Estate Values: The Real Truth

That may be a great house and a super value on paper... but the fact it overlooks Interstate 66 is going to be a deal breaker. Yes, the square footage is the same... but the fact it overlooks an industrial area is a deal breaker.

I see this first hand everyday on the ground floor of the business... academic numbers mean nothing to buyers who have compared 20 homes in any town across the U.S. Buyer confidence changes on a dime, and today's buyers create the data you'll see next month.

The FHA No Down Loan - Hasn't This Lesson Been Learned?

I have been probing this issue, and one of my best lenders just sent me a memo stating that HUD just pulled the plug today on this idea of tax credit "bridge loans". dated 5/19/2009 - Doug