Date February 17, 2005
Time 06:00 AM - 07:00 AM
Program Business Talk This Morning

DAVID WEISS, co-host: Housing numbers came out yesterday and housing starts rising to a level not seen since 1984. Housing starts up to an annual seasonally adjusted pace of $2.16 million in January up from the revised $2.06 million in December. Building permits up as well. To talk about this in some depth and a mortgage update as well, Bob Moulton, frequent contributor to BUSINESS TALK THIS MORNING, president of Americana Mortgage in the New York area.

Bob, good morning and welcome back.

Mr. BOB MOULTON (American Mortgage): Good morning, David. Thank you for having me this morning.

WEISS: Did these numbers even surprise you? I mean, we expected to go down a bit from December to January. We went up.

Mr. MOULTON: It seems that the interest rates are still fueling this wonderful real estate market. We're seeing a lot of buyers come into the market that are investing in properties for investment purposes, and the interest rates are still very low and the housing market remains very strong. It is, quite honestly, a very pleasant surprise for us.

WEISS: Yeah, the last time housing stocks were stronger than this, February of 21 years ago, 1984, with still continued predictions that this can't last, but there's no end in sight.

Mr. MOULTON: We're hearing about the real estate bubble, particularly in some areas in Florida I've heard, some areas in California. I've even heard about a real estate bubble in Las Vegas, but nothing seems to be slowing it down. If interest rates start to go up a little bit, if unemployment rates start to go up a little bit, we might see a downward trend in real estate, but as of now we're going to enjoy the wave.

WEISS: Overall, Bob, we're talking an average of 30-year mortgage rate at, what, about five and three-quarters?

Mr. MOULTON: We're five and three-quarters on a 30-year jumbo. We're at 5-1/2 percent at 30-year fixed, no points up to $360,000. So still great rates, pretty much unchanged the last year and a half.

WEISS: And some areas of the country, and we've talked about this previously, there still seems to be wild appreciating value of homes, and that doesn't do a lot for the first time home buyer trying to get their way into their first home.

Mr. MOULTON: The first time home buyer and even senior citizens, David, are going to have a hard time if they're looking to get into a home for the first time. If rates stay low, there are still some first time programs that will enable them in some great adjustment rates and great interest-only programs. But the average price of a house right now is almost $400,000, and for some young couples and older citizens, that's still a tough number to reach.

WEISS: Once again, we're chatting with president of Americana Mortgage, Bob Moulton, on BUSINESS TALK THIS MORNING. Building permits, more of a forwarding indicator, also up. What do you think about that?

Mr. MOULTON: It seems that new construction and some of the bigger construction companies are still enjoying the benefit of low interest rates. And they're out there marketing their product; they're making the houses a little better. People want new construction and as long as there's a, you know, desirable buying climate and available land, I think that number's going to remain strong.

WEISS: And Bob, what have you noticed in terms of refinancing, home equity lines and credit? Has there been any drop off there?

Mr. MOULTON: It's funny. With the Fed raising rates, we've seen an immediate negative impact to home equity lines of credit. Home equity lines of credit are directly tied to the prime rate.

WEISS: Right.

Mr. MOULTON: They're the same rate as first mortgages. A lot of people who have taken home equity lines of credit are now refinancing those into first mortgage because they know the Fed's going to continue to raise, and those home equities will be up six and a quarter by the end up the year.

WEISS: Correct me if I'm wrong, but it was about four or five months ago, once again, when the Fed was raising interest rates and we assumed mortgage rates would go up in concert with that, we saw an anxiety, fever-pitch of people trying to get their deals done because they felt rates were going up.

Do we still see that kind of emotion?

Mr. MOULTON: Well, what we're seeing is a lot of infusion of investing from Europe and Asia into our treasuries. And when they can get 4 percent on a 10-year note versus 1 percent in their country, it's taken off the anxiety that rates are going to go up in the long-term. So as long as that influx of cash is continuing, the long-term rates will not go up.

We really didn't have that perspective about a year ago because with the Fed announcing that they were going to raise rates, everyone thought that the mortgage rates were going to go up. But we have new phenomenon now and with this infusion of cash, long-term rates are staying low.

WEISS: All right, we summed it up well. Here again, the latest reading on the real estate market overall, strong and well-above Wall Street forecasts. The figures came in from the Commerce Department yesterday.

President of Americana Mortgage in the New York area, Bob Moulton, always a pleasure. Thanks so much from BUSINESS TALK THIS MORNING.

Mr. MOULTON: Thank you very much and have a great day.