Date June 17, 2004
Time 06:00 AM - 08:00 AM
Station Business Talk Radio Networ
Program Business Talk Radio

DAVID WEISS, co-host:

We know that our good friend Bob Moulton, who is founder, the man who heads up Americana Mortgage, who talks to us about the housing industry from time to time on BUSINESS TALK THIS MORNING. He is out to the East this morning himself on Long Island. Bob, good morning.

Mr. BOB MOULTON (Founder, Americana Mortgage): Good morning, David. How are you today?

WEISS: Are you watching golf, playing golf, or doing both today?

Mr. MOULTON: Honestly, I've been at the US Open everyday this week. I was at the practice rounds Monday, Tuesday, and Wednesday and followed around a lot of the PGA Tour players. Very hot, but really exciting, particularly during the practice rounds because you can get very close to the players.

WEISS: Yes. The access in the practice rounds is even better than the tournament itself. We should've bumped into each other. I would've love to known you were going to be there because I've been all over the course myself the last few days. We'll bring you continued coverage right through the week. We'll here more from Tiger Woods, Phil Mickelson, among others later on this morning on BUSINESS TALK THIS MORNING.

But, nice to have you here to talk about the housing industry as well. Housing starts fell in May. Permits jumped up. Do you want to analyze the numbers for us? Where do we stand?

Mr. MOULTON: Yeah, Dave. The numbers were better than expected. The May housing starts fell less than expected, down .7 percent. Building permits were stronger than expected, up 3 1/2 percent.

I think consumers have excepted the higher interest rates that they see. They're inching up slowly, not very quickly. They're up about 100 basis points. In the last few months or so, we're favoring adjustable rate mortgages instead of looking at the fixed rate mortgages right now.

WEISS: Building permits is an indicator of confidence in future sales. And that did jump, as we mentioned, to a seasonally adjusted annual rate of over 2 million units from a little less in the month of April. So, it looks like the optimism in the overall industry is still there?

Mr. MOULTON: Very much so. The job numbers have been very strong lately, which is helping to offset the rise in mortgage rates. Inventories still remain low. Income is up, so there is a lot of consumer confidence. And I think the real estate market will stay strong, at least, for the next quarter of this year.

WEISS: Are you still seeing, or sensing that urgency on the part of homebuyers to get it done as mortgage rates start to inch up?

Mr. MOULTON: We saw that more in April, Dave. When consumers thought that interest rates were going up, there's a strong sense of urgency to get into a longer period rate lock, normally for 60 days or for 90 days before the rates have gone up. They've pretty much leveled off since May, and I'm not seeing that sense of urgency as much as I was about a month and 1/2 ago.

WEISS: And I would guess that, as compared to maybe a year ago or so, you're not seeing many people roll the dice with variable interest rates are you?

Mr. MOULTON: About 40 percent of clients right now are going into adjustable rate mortgages. Very popular are the 51 ARM interest rate--interest only mortgages.

WEISS: But, of course, that is a lower rate on the way in, but it could go up obviously?

Mr. MOULTON: They do have high caps, normally about 9.95 percent, so the consumer does need to know how long they're going to stay in the house for. And they do need to understand what the risk is associated with those particular types of mortgages.

WEISS: And your company, which is a very busy one in the New York area. Are you seeing a lot of folks trying to fold finance costs into the mortgage. Are the down payments a lot less now?

Mr. MOULTON: We're seeing a lot of people buying higher-end homes, particularly in the tri-state area. They're putting 10 percent down, or 20 percent down. What we're seeing are hybrid mortgages.

People borrowing, let's say, the first 70 percent of the purchase price as a fixed rate and then offsetting that or piggybacking that, as we call it, with a home equity line of credit. Reason being, is they might be commission driven, they might be bonus driven, and they want to pre-pay the home equity portion of the mortgage and be left with either a 51 ARM or a fixed rate mortgage. So, we're seeing a lot of piggyback mortgages right now.

WEISS: Yeah, there are a lot of ways to go right now in what is still a red hot housing market in many areas in this country, including the greater New York City area too. Still seeing that slowdown in home equity loans?

Mr. MOULTON: Actually, those are becoming a very creative way to finance vacation homes.

WEISS: Really?

Mr. MOULTON: We have clients buying homes in Florida and in the West. But they're tapping into the equity in their primary residence, using that, which is normally at the prime rate to finance vacation homes and investment property.

WEISS: All right, one more topic of discussion here Bob Moulton. Pick a winner. Who's going to win the US Open?

Mr. MOULTON: I like Ernie Els, Dave. I think he is looking very good. He played well up at the Buick. This is to Sergio Garcia who also played well. I think his style of game plays well to the conditions out at Shinnecock.

WEISS: Bob Moulton, founder, Americana Mortgage, New York City area. Thank you so much, Bob.

Mr. MOULTON: Thank you very much, Dave.