Archive for December, 2011
The BuildFax residential remodeling index reached a record high in October, extending its 23-month climb another month, as homeowners opt to stay put and remodel rather than buy a new home.
The index, which began in 2004, rose to 147.6, up 40% from 105.8 in October 2010. The index stood at 141.4 in September, which was also a high.
"The economy is returning in respect to people investing in their own housing — not in terms of dollars, but in terms of individuals in the U.S.," Joe Emison, vice president of research and development at BuildFax, told HousingWire. "What we are seeing is that people who might have bought a new house before are no longer doing so because they can't, and that energy is being channeled into remodeling."
Emison said while the number of remodeling projects is rising, the average estimated construction cost of each project is falling.
"We see that as an indication that people are doing more comfort remodels, meaning they're modeling to make their homes more comfortable as opposed to flipping it," he said.
The company found the average project cost of a major remodeling project for 2011 was $39,460, down from an index high of $43,808 in 2004. The average project cost of a minor remodeling project in 2011 was $10,968, down from an index high of $12,623 in 2006.
BuildFax's data reveals continued month-over-month gains for most regions of the country as consumers invest in remodeling in the face of growing fears of a double-dip recession and an unemployment rate that stands at 8.9%.
In October, the West (53.6 points; 52.5%), the Midwest (21.4 points; 20.2%) and the South (9.5 points; 10.6%) experienced year-over-year gains from October 2010. The West (9.6 points; 6.8%), the Midwest (7.6 points; 6.2%), the Northeast (1.2 points; 1.6%) and the South (.4 points; 0.4%) had month-over-month gains. The Northeast dropped 3.5 points (4.5%).
The BFRI tracks remodeling activity via building permit activity filed with local building departments across the country.
Write to Justin T. Hilley.
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There is a movement afoot in Washington that has the potential to set a dangerous new precedent that would open a Pandora’s box of bad public policy by robbing Peter to pay Paul and in the process, increasing the cost of purchasing a home for most Americans.
In their effort to raise revenue in order to extend the current payroll tax holiday, policymakers have proposed imposing a new tax on homebuyers that will cost each homebuyer thousands of dollars over the life of their loans. This new tax comes in the form of a proposed 10-basis-point increase in the guarantee fees charged by Fannie Mae and Freddie Mac on new loans. For the average borrower, that could mean an additional $4,000 in fees over the life of a $200,000 mortgage.
However, rather than going to help Fannie and Freddie mitigate their risk — the express purpose of their guarantee fees — the monies raised from this new tax on homebuyers would go directly into the U.S. Treasury to pay for a two-month extension of the payroll tax holiday. Almost every borrower who gets a mortgage in the next 10 years will endure 30 years of increased fees for just two months of reduced payroll taxes?
I don’t object to raising guarantee fees if it serves to strengthen the institutions and their risk management. In fact, I raised premiums three times when I was Federal Housing Administration commissioner for that exact purpose — repaying the taxpayers for their 2008 investment in Fannie and Freddie, or as part of a more comprehensive policy effort to reduce their footprint in the mortgage market. But this proposal would accomplish none of these goals. Instead, it would simply allow policymakers to fund the tax whims of the day.
And where does it stop? Will we see another increase down the road to replenish the piggybank the next time policymakers need more money to spend? What happens when the two months are up and policymakers want to extend the payroll tax holiday again? Ten basis points here and 10 basis points there adds up to real money for millions of American homebuyers.
Given the current economic climate and exploding federal deficits, outside-the-box thinking and innovative solutions are imperative to getting our country back on the right economic track. But this is not the answer. Congress needs to take a hard look at all the implications before rushing into such a short-sighted decision.
Stevens is president and CEO of the Mortgage Bankers Association.
Tags: Congress, Fannie Mae, Federal Housing Administration, freddie mac, g-fee, guarantee fees, homebuyer, homeowner, mortgage, payroll tax deduction, policymakers
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