Date January 20, 2005
Time 06:00 AM - 07:00 AM
Station WLIE-AM

DAVID WEISS, co-host: Time now to talk about the housing industry, though. What a bounce back month for December. We'll take a look at 2004 overall, and where we're going in the housing industry, and from a mortgage component as well.

Good friend Bob Moulton, president and founder of Americana Mortgage Group in New York.

Welcome back to BUSINESS TALK this Morning. First time we've chatted this year. Happy New Year.

Mr. BOB MOULTON (President and Founder, Americana Mortgage Group): Happy New Year, David and Amanda. Nice to talk to you again.

WEISS: Yeah. And same here, of course. Bob, 2004, overall, it was a good year.

Mr. MOULTON: It was a little bit of a seesaw ride there, David. It was like Mr. Toad's wild ride. I mean, November at the end of the year was a very down month, and December was a very strong month, which we are very pleased to see, because it's going to give us a perspective on where we go in 2005.

WEISS: Not too many expected this big bounce-back month in December. As you mentioned, November, the alarming figures had some saying 'Listen, we're seeing some cracks in the bubble, here.' And then all of a sudden, what do we have? 10.9 percent jump in December for housing starts, the biggest gain in seven years. What accounted for that?

Mr. MOULTON: Exactly right. I think there was a number of things that accounted for that, David. I mean, interest rates really have remained unchanged for mortgage rates in 2004. A lot of economists were projecting that the rates would go up. The Fed did steadily raise short-term rates in 2004. We hadn't seen it in the ten-year note, and it was not translated over into the mortgage rates.

Also, the jobs came in very strong in the month of December. And consumer prices fell a little bit in December as well. So I don't know if we have as much of an inflationary scare as people thought we would have. So, the housing market came back strong, making it the strongest year since 1978 for US home construction.

WEISS: Once again, we're chatting with Bob Moulton, president and founder of Americana Mortgage Group. So, you're in the camp who content that, if interest rates remain relatively low, yes, we'll get quarter point bumps in the Fed rate, which should trickle down to the mortgage rates. But if they remain relatively low and employment continues to pick up, housing will stay strong.

Mr. MOULTON: We're at that balance where jobs are starting to come back. We've not seen the change in long-term rates; we've not seen the change in mortgage rates. I think it's going to be a very steady year in the housing market, particularly in purchase transactions.

I don't think we're going to see it in the refinances, but as long as we have that particular climate, I think we're going to have moderately good year. Not as good as 2004, but we're going to have a good year in 2005.

WEISS: Yeah, Bob. Let's talk mortgages right now. Refinances are the talk, fixed versus variable rate mortgages. Where do we stand with all of that?

Mr. MOULTON: That's--we're seeing the fixed rate to stay at about 5 1/2 percent on a 30-year fixed with no points. The short-term rates, the three-year ARM are in the low-fours. The five-year ARMS are in the mid-fours.

What we're seeing now, actually, are those consumers who took at three-year and five-year ARMS, three and five years ago, coming back and saying, 'I'm going to stay in that house a little longer. Give me another three-year ARM, or give me another five-year ARM.' So, we're seeing about a 100 basis points spread.

If that continues, you're going to see probably more people going over to a fixed rate mortgage. If rates go higher, which they are predicted to do by the end of the year, I think you'll see more adjustable rate mortgages.

WEISS: And what about home values, too? I mean, this is a very regional type thing here, but in the Northeast and elsewhere, too, it's still supply and demand, and there's not enough supply.

Mr. MOULTON: Not a lot of inventory, Dave, particularly in the Northeast, on the West Coast and even down in the South. We're seeing limited inventory. We're seeing a number of buyers out there looking to either get into their first home.

And we're now seeing buyers who are a little dissatisfied, quite honestly, with the equity markets, looking for real estate as an investment and looking for that second home, that fixer-upper, that rental property, even looking for a third home in some of the nicer vacation areas.

WEISS: Oh, a third home. That wouldn't be bad. Last but not least, as you look at building permits, which is a forward indicator, other than housing starts which looks back? Building permits did edge down in December of 2004, three-tenths of one percent. Is this a cloud on the horizon?

Mr. MOULTON: Well, that was the third straight month in, you know--which permits, I think there were over two million. But in December, they were down 0.23 percent. I don't know if it's enough to get concerned about right now, particularly with the housing starts rising 11 percent in December. So, I think we need one more month to take a look at that figure.

WEISS: You know, Bob, you know what I'm going to do this year? I'm going to go out and buy a third home, and I haven't even bought my second home yet. I don't know how I'm going to pull that off. With your help, maybe I can do it.

Mr. MOULTON: There you go. That's creative financing.

WEISS: He's not kidding. Bob Mouton, president and founder of Americana Mortgage Group. He knows his stuff, one of our favorite guests here on BUSINESS TALK this Morning. Be well and we'll talk about soon.

Mr. MOULTON: Thank you. And Happy New Year.

WEISS: Same to you. Bob Moulton, thanks so much.