Just Asking

The Senate has approved a two-month extension of the payroll tax cut and gone home for the holidays, but today it appears the House may not approve the deal as written. We'll leave the complexities of tax cuts, Social Security and the like to others to wrestle with, but we do have a question: Where, exactly, is the nexus between continuing a reduction in the FICA payroll tax with a home mortgage?

The question arises because the Senate chose to pay for the tax cut by raising fees on mortgages backed by Freddie, Fannie and FHA. The fee right now is only $17 a month, but knowing the way fees, once established, never go away and virtually always go up over time, we imagine this is just the proverbial camel's nose under the tent.

Here's the WaPo article if you want to read more.

A Tale of Two Cities

UPDATE: Camarillo officials have postponed the public hearing on the sewer and water fee increases until Jan. 11. We'll keep you posted.

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While builders understand the necessity of growth related fee increases, the City of Camarillo’s proposed fee increases are very untimely and will have negative consequences for near-term housing starts.

The Ventura City Council is expected on Monday to extend the city's fee deferral policy for another year - and to add Quimby and park fees to the list of fees deferred - just two days later the Camarillo City Council will be asked to increase fees by more than $1,700 on each new single-family home. That's on top of an average existing fee load of between $40,000 and $50,000 per home. Ventura and Camarillo are only four miles apart. However, they are handling development impact fees very differently in this difficult economic climate.

Builders understand that some fees are necessary to pay for growth-related services, but adding $1,700 to the cost of doing business in this economic climate just doesn't make sense, especially at a time when it appears some construction will finally get under way in 2012 after four years of virtual no housing starts.

That's because builders face stiff competition from the sale of existing homes, especially foreclosures and short sales that sell below real market value. Projects simply have to pencil out, and with margins so small a couple of thousand dollars can mean the difference between beginning construction and continuing to wait until the economy improves even more.

Just 8 homes have been built in Camarillo in the past four years combined, down from 123 in 2007 and 612 at the market peak in 2005. That has cost the city millions of dollars in building fees and tax revenues, and has exacerbated the region's unemployment problems.

What's worse is that the fees are intended to help pay for a series of water and sewer projects, the largest one of which - estimated to cost $12 million - might not even be necessary if the proposed Conejo Creek master planned community is developed.

The BIA asks the City to reconsider adopting the fees at this time. As Ventura's staff points out in its report, deferring fees there may allow even more projects to move forward. We would suggest the same point holds true in Camarillo as well.

Encouraging News for a Saturday Morning

There are some encouraging words out there this morning about the U.S. economy and homebuilding so naturally we thought we'd share them.

First off is Time Magazine's "The Curious Capitalist" blog, which argues that despite the continuing European debt crisis, the U.S. economy may do better in 2012 than previously expected. The first reason given is housing.

But there is reason to believe that 2012 will be better than 2011, not worse as everyone seem to be predicting just a few months ago. Here's why:

Remember how everyone has said that the economy won't recover until housing recovers. Well, that's true to some extent. And don't expect home prices to rise very much or at all in the next year or so. But the part of the housing market that matters most to the economy - new constructions - does seem to be picking up, and is perhaps primed for more growth. In October, the pace of construction of single family rose 5%. And we may soon amazingly have a shortage of housing because of the fact that building has been so weak for a number of years. Indeed, construction of multi-family homes has been rising for some time.

Blogger Stephen Gandel also points to an improving job picture and an increased feeling of optimism among consumers.

(And while for some reason the photo that went with the article isn't showing up, the caption that does appear makes this a local story for your Chapter blogger: "A sold sign sits in front of homes under construction by developer KB Home in Valencia, California, Oct. 1, 2011.")

More encouraging news comes from the financial Website Motley Fool. In an article titled "Don't Miss This Homebuilder Turnaround," blogger Neha Chamaria takes note of some good news reported by homebuilders D.R. Horton, Beazer and Standard Pacific (the Chapter's Builder of the Year).

Take a look at D.R.'s numbers, and you'll be amazed at how the important metrics are heading north. From a net loss of $8.9 million in the fourth quarter last year, D.R.'s bottom line has turned to black with a profit of $35.7 million.

Homebuilding revenues crossed the billion-dollar mark to reach $1.1 billion, compared to $925.7 million last year, as home closures shot up 16.5% to 4,987 units. Are homebuyers flocking to the market? Higher home orders seem to say so. D.R.'s net orders in value terms rose 13.5% to $927.6 million. A definitely encouraging sign is how peers are also reporting a flow of orders.

Chamaria notes that Beazer's fourth-quarter new home orders surged 33 percent to 1,006 homes from last year, while Stan Pac's third-quarter home orders rose even more, by 38 percent to 764 homes. And finally, Horton's backlogs -- an important indicator of future revenues – were up 17.6 percent in unit terms to 4,854 homes.

Higher FHA Loan Limits Back in Effect in High-Cost Areas

President Obama today signed legislation that reinstates higher limits for FHA-backed mortgages in high-cost areas, such as most of California. In L.A. County, the bill raises the loan limits from $625,500 back to $729,750, where they were before Oct. 1.

NAHB Chairman Bob Nielsen said the legislation, which reinstates the higher limits for another two years, is an important step to help mend the struggling housing market.

We commend congressional leaders in both parties and each chamber of Congress for taking this action to boost overall mortgage liquidity in the marketplace, create jobs, and provide home owners and home buyers with safe and affordable financing.

Restoring the higher FHA loan limits will help to stabilize home values, provide constancy while private investors re-enter the market, and enable millions of creditworthy consumers to get home loans with the best mortgage rates and lowest fees and downpayment requirements.

As Alejandro Lazo wrote in the L.A. Times' online edition today, "Uncle Sam has thrown California and other high-priced housing markets a lifeline." Lazo pointed out that sales of properties in Orange and Los Angeles counties with loans between $625,500 and $729,750 dropped by 71 percent last month compared to September.

We would like to thank all the BIASC members who took the time to write or call your Member of Congress in the past few weeks to urge them to vote in favor of the higher loan limits.

Awards/Installation Pix Now Online

Members check in at the annual Awards and Installation Event for 2011.

Check out the photos from this year's Awards and Installation Event at the Skirball Center in the Events section of the Website. Here's how CEO Holly Schroeder described the events in the Chapter newsletter Blueprint:

Chapter members had a great time at last night's Chapter Awards and Installation Event at the Skirball Cultural Center in Los Angeles. Besides the great networking and wonderful hors d'oeuvres, the highlight of the evening was the chance to recognize our Board; our President Jonathan Lonner, who has agreed to serve a second year; and of course, our honorees.

Standard Pacific Homes was named Builder of the Year, Hanley Wood Market Intelligence was selected as the Associate of the Year and Paul DiCecco was named the Member of Excellence.

A number of local officials were also on hand, including Los Angeles City Council Member Jan Perry, who made brief remarks to the Chapter members in attendance.  

I'd also like to thank our sponsors who made the evening possible: Underwriting Sponsor Bank of America Home Loans; Platinum Sponsors Standard Pacific, Centennial Founders LLC and Energy Efficiency Education Partner The Gas Company; Program Sponsor All Pro Promotions; Centerpiece Sponsor Gothic Landscape; Silver Sponsors KB Home, Pardee Homes, Watt Communities, TRL Systems, Williams Homes and Cox Castle Nicholson LLP; Bronze Sponsors Lennar Homes, Burns & Bouchard, Project Approval Services, MetLife Home Loans and Hanley Wood Market Intelligence; and Energy Efficiency Education Partner Southern California Edison.