Business TalkRadio

DAVID WEISS, co-host: First, let's talk about home sales and a very healthy sector it is. Bob Moulton, CEO and founder, Americana Mortgage in the New York area. Bob, welcome back.

Mr. BOB MOULTON (Americana Mortgage CEO): Good morning David, good morning Amanda. Thank you.

WEISS: Great to have you back here as always. Existing home sales numbers came out earlier this week; healthy new home sales though blew away expectations, its largest monthly jump since September of '93, up 12.2 percent in March; a month that did feature some climbing interest rates. Were you surprised?

Mr. MOULTON: I was very surprised and what we're seeing is a lot of investors getting into the real estate market right now. Last year one in four real estate transactions were conducted by investors and on these pre-construction houses investors are getting in holding on to the contract, when the house is complete, they're selling it at a profit. I think that might be driving it up.

WEISS: Yeah that's where the demand is coming from evidently. There are a lot of people trying to jump into the housing sector before it's too late.

Mr. MOULTON: Exactly right and if they can get in with a small down payment and get a nice profit within a year from a new construction; we're seeing a lot of that in the Southeast and out in the Midwest.

WEISS: What are you seeing in terms of the aggressiveness where people are trying to jump in just home buyers, those shopping for a house knowing full well that interest rates are creeping up?

Mr. MOULTON: We're seeing those people look for a longer term interest rate products. We're seeing them still get in to fixed rate products. Rates are relatively the same as where they were in December of '03. We saw a 50 basis point increase in the month of February. We saw it come back down in the month of March. Rates are still relatively low and very favorable.

WEISS: Again we're chatting with Bob Moulton, CEO, founder, Americana Mortgage, talking about this red hot housing sector and not cooling off to any degree here. When it comes to the home equity loan type of things, that cooled off a while ago, didn't it?

Mr. MOULTON: It cooled off a little bit when the fed funds rate went up. The prime rate right now is at 5.75 percent. It's still relatively inexpensive on 100,000. It would cost you $500 a month. Borrowers are using their home equities on their primary residences to buy second homes and to buy investment properties and rent them out.

WEISS: And what are we seeing overall in terms of bidding wars for houses appreciated value of homes? I mean here in the northeast again of course they've gone through the roof literally and figuratively for a while but region by region, what do you see there?

Mr. MOULTON: Still very strong market in Manhattan. We're seeing bidding wars on co-ops and condos in Manhattan driving prices higher. Borrowers taking on interest only mortgages which the payment is 25 percent lower than what it would be on a fixed-rate mortgage with the higher price, they're looking for more creative financing. We're seeing it in the northeast, we're seeing it in California and we're seeing it in Florida as well.

WEISS: The housing sector is so emotional at times, it's more than just the numbers. You see the interest rates creeping up and that maybe kicks you into action and doing things that you wouldn't ordinarily do. But as you've pointed out when we take a look at what our interest rates are now, to where they were 20 years ago or when we were paying double digit interest rates, I mean we're still at historic lows.

Mr. MOULTON: We're still at historic lows; rates were about 16 percent 20 years ago. Right now they're in the mid fives on a 30 year fixed rate but it's the psychological perception of the return on investments that one can get from real estate as opposed to being invested in the equities market or fixed income market. So there is that perception out there that's driving the market higher.

WEISS: With those new home sales numbers through the roof, they came out yesterday, people asking where's this demand coming from? Bob Moulton with one of the answers that makes a lot of sense. People are using as an investment.

Bob Moulton, CEO, founder Americana Mortgage. One of our good friends, weekly contributors, BUSINESS TALK this morning. Thanks so much.

Mr. MOULTON: Thank you very much. Enjoy the day.

WEISS: You too Bob. Coming up to 21 minutes before the hour on BUSINESS TALK this morning coast to coast on the BUSINESS TALK RADIO NETWORK.