Date: September 22, 2004
Time: 06:24 AM
Station: Business Talk
Program: Business Talk

DAVID WEISS and Amanda Clark, co-anchor:

Let's talk about the housing industry. We welcome back a monthly contributor to us on Business Talk this morning,Bob Moulton, founder of Americana Mortgage…

David Weiss: Bob, welcome back!

Bob Moulton: Good morning, Dave…Good morning, Amanda.

David Weiss: Nice to have you here, Bob. We could only hope your golf game is as healthy as the housing industry was in August.

Bob Moulton: Well, if my golf game is up and down just like the housing starts are, David, so the housing starts were great in August, I played great in July; I need a little improvement right now.

David Weiss: If we can continue this discussion…You should've been on the Ryder Cup too. Housing construction surging in August to its highest level in five months…Did you see this coming? Did you anticipate a very strong August?

Bob Moulton: It's all fueled by interest rates. What we're seeing is a direct correlation; when the interest rates drop, people are out there shopping for houses again. And with the rates dropping the way they did in late August, people are out there looking for houses again, so it's a nice surprise, it's a pleasant surprise, I didn't necessarily anticipate it. The average rate on a mortgage dropped about a half a percent in August, so that helped the housing starts.

David Weiss: Well there is a correlation. We've seen it before in the months we have spoken and remember earlier this year when interest rates edged up a bit, then we had a slowing of the numbers right?

Bob Moulton: That's absolutely correct. Rates spiked up to about seven percent back in the March/April time frame, we are back down to 5 ½ percent now, so hopefully we'll stay there. Once the economy starts to kick back in, I think the rates will start to go up again, and we might see a little softening in the numbers.

David Weiss: Now as far as the interest rate hike yesterday, by the Fed, there are those who anticipate an impact when it comes to mortgage rates, but this relationship is not direct, is it?

Bob Moulton: Well, it's direct to home equity lines of credit. It's direct to things like credit cards. It could be direct to adjustable rate mortgages. The 30-year fixed rate mortgages, the 15-year fixed mortgages, are tied to more longer term securities such as the 10 year note, so the Fed decision yesterday raising the rate from 1 ½ to 1 ¾ percent will affect short term money, not necessarily long term money.

David Weiss: And speaking of refi's, refinancing and home equity loans too, we have heard there's been a surge with those loans too. Have you seen that?

Bob Moulton: The home equity lines of credit are a great bargain for any home owner that is looking to get money for home improvements, college education or to make investments. It is a variable rate mortgage, it's tied to prime, which in now at 4 ¾ percent, but it's an excellent opportunity and we have seen a surge in the home equities and the refinances.

David Weiss: Oh, here is something I've never asked before, but during the summer period, do you often see a surge and increased numbers in home equity loans in that many will be going off to college for the first time and that's where many Americans do get that pocket of cash.

Bob Moulton: Well, over the years, there's been seasonality in the numbers and it's been very busy in the spring time, it actually slowed down in the summer time. What we're seeing now is a leveling of the seasonality and people applying for mortgages. It seems to become a constant throughout the year, a lot of the colleges are looking for money earlier than later now to make sure that their children do get into the college.

David Weiss: And as we look at the numbers, the housing construction numbers, which showed such positive numbers for the month of August, all regions of the country except for the west showed gains. What does that tell you?

Bob Moulton: It tells me that across the country there is still limited housing and I think there is still limited inventory, there's a lot of pre-qualified buyers out there are that are looking to get into a house right now. Two out of three Americans own a home and they're projecting by 2013, that three out of four Americans will own a home, so as long as there is a shortage of inventory, I think the housing market will stay strong.

David Weiss: Demand outweighs supply in many areas of the country, what about the sky rocketing cost a home, the appreciated value. Was it starting to level off somewhat?

Bob Moulton: Around the metropolitan area, we're anticipating that it might level off a bit. We haven't necessarily seen it, simply because these low rate adjustable rate mortgages are continuing to keep prices inflated. So as long as rates stay low, I think prices will remain strong. Once the rates start to go up, we might see a softening.

David Weiss: Bob Moulton, founder, the man who heads up American Mortgage. We want to thank you so much for joining us. As always, on Business Talk this morning. Hit them straight, and keep it in the short grass!

Bob Moulton: Always my pleasure, take care

David Weiss: Amanda is looking at me like I have three heads…Keep it the short grass means…

Bob Moulton: We have to go to the driving range

Amanda Clarke: I like to "hit them straight"…

David Weiss: Short grass means fairway, alright? It means nothing to her. Believe me…We'll get her out there.

Bob Moulton: Absolutely!

David Weiss: Golf course with windmills and the clown head.

Amanda Clarke: That's my kind!