Friday, July 07, 2006

Construction Loans On The Rise

From the Herald/Record:

N.J. banks building bigger portfolios of construction, development loans

With home equity lending slowing down, New Jersey banks are increasingly counting on short-term loans to builders.

In the 12-month period ended March 31, construction loan portfolios at New Jersey-based banks were up 41 percent compared with the year-prior period, according to a Federal Deposit Insurance Corp. report released Thursday.

Construction lending nationwide grew by about 30 percent.

"Banks in New Jersey and nationwide are beefing up their construction and development lending," said Kathy Kalser, regional manager in the FDIC's New York office.

The increase reflects strong demand for housing construction loans, according to the FDIC's quarterly "State Profile" report on the economy.

Although the housing market has softened in recent months, home building speculators have been busy, and banks are eager to invest in floating-rate construction loans, which, in today's interest-rate environment, are potentially more profitable than fixed-rate mortgages, she said. The increase in construction loans also reflects commercial development like shopping centers and high-rise residential towers.

These construction loans can be riskier for banks than residential mortgages. After all, a lender behind a commercial project could be left holding the bag if a development fails. But if a mortgage debtor falls behind on payments, he can usually sell the house to repay the debt.

A majority of New Jersey's banks rely heavily on fixed-rate home loans, which generally are priced at rates below the current prime rate of 8.25 percent. These loan portfolios for New Jersey banks were up about 12 percent in the 12 months ended March 31.

Meanwhile, portfolios of home equity lines of credit are down 4.5 percent from a year earlier for New Jersey banks, as rates rise and borrowers refinance, paying off these increasingly costly floating-rate loans with new fixed-rate mortgages.

The report also suggests that some of the home builders taking out construction loans may have a harder time selling those new homes. The inventory of homes on the New Jersey market was 70 percent higher in April 2006, compared with April 2005, it said.

Some highlights from the FDIC State Profile Report:

New Jersey State Profile - Summer 2006

An increasing inventory of unsold homes suggests continued slowing in the state’s housing market. The supply of homes on the market in New Jersey was 70 percent higher in April 2006 compared with April 2005, and the increase was more pronounced in certain counties (see Chart 3). Unsold housing inventory in New Jersey represents an estimated 7-month supply, up from 3 months one year ago. The months of supply is higher for New Jersey’s high-priced homes, greater than $1 million, than lower priced homes. Home sales volume also is slowing in the state, declining by 14 percent through April (year-to-date) from one year ago.3

As the supply of unsold homes has grown, the rate of home price appreciation in New Jersey has eased from a high reached in late 2004. Nonetheless, appreciation rates remain high, and all of state’s markets recorded above U.S. average rates in first quarter 2006.4


Blogger grim said...

Payroll data came in weaker than expected at 121k. However, last month was revised upwards to 92k from a previously reported 75k. Seems that the ADP numbers earlier in the week caused a bit too much optimism..

However, while the headlines are fixated on the 121k number, it seems the markets are missing a very important number hidden in the data. Hourly earnings came in at 0.5%, significantly higher than the estimated 0.3%.


7/07/2006 08:19:00 AM  
Blogger Richie said...

Construction Loans being up is not necessarily a good thing. That means developers are cash-strapped, and looking for $$ to build their projects.

Construction loans are basically interest-only loans that turn into a balloon payment when the project is completed. They are monitored regularly by the banks/lending company to ensure that progress is being made.

What happens when no one buys those projects?


7/07/2006 08:21:00 AM  
Anonymous Anonymous said...

Payroll data came in weaker than expected at 121k.
Hourly earnings came in at 0.5%, significantly higher than the estimated 0.3%.

7/07/2006 08:36:00 AM  
Anonymous UnRealtor said...

This just in:

NY Daily News
July 7, 2006; Page 1

Bomb tunnel, flood city

One man is busted in Beirut, others hunted across globe and terrorists are seen linked to Zarqawi

Daily News Exclusive

The FBI has uncovered what officials consider a serious plot by jihadists to bomb the Holland Tunnel in hopes of causing a torrent of water to deluge lower Manhattan, the Daily News has learned.

The terrorists sought to drown the Financial District as New Orleans was by Hurricane Katrina, sources said. They also wanted to attack subways and other tunnels.


The FBI discovered the plot by monitoring Internet chat rooms, where the aspiring terrorists discussed striking the U.S. economy, rather than causing mass casualties, a source said.

"They're hell-bent on destroying the economy in the U.S.," a counterterrorism source said.

7/07/2006 09:07:00 AM  
Blogger skep-tic said...

a lot of foreclosures on newly constructed homes coming your way.

7/07/2006 09:21:00 AM  
Anonymous Anonymous said...

Anybody know What's up with
those New Homes on Valley Road
in Clifton?

7/07/2006 09:37:00 AM  
Blogger RichInNorthNJ said... seems the markets are missing a very important number hidden in the data. Hourly earnings came in at 0.5%, significantly higher than the estimated 0.3%.

Looks as if the market is catching on.
Well, maybe it's the idea that the economy IS actually slowing and earnings will be lower.

7/07/2006 09:45:00 AM  
Blogger grim said...

368 Valley
OLP: $799,900
LP: $699,000
DOM: 190

362 Valley
OLP: $799,900
LP: $729,000
DOM: 190

356 Valley
OLP: $849,900
LP: $749,000
DOM: 190

7/07/2006 09:55:00 AM  
Anonymous Anonymous said...

$750K to live on Valley Rd.

You have to be kidding, right?

It 's a mistake.

7/07/2006 09:58:00 AM  
Blogger grim said...

No mistake. The Quik Chek views are free, however..


7/07/2006 10:06:00 AM  
Blogger Richie said...

Hahaha.. "Valley Road Estates". Those have to be the UGLIEST houses I have ever seen.

They had a lot of problems with the town because they built them too high.

There's about 100 steps before you hit the front door, and your backyard is pretty much a steep slope.

I don't know how the hell anyone could call these "estates". Every house is the same, the color schemes are AWFUL, and shoveling those stairs in the winter is going to give someone a back-ache.

I did however notice that now there are 2 financing banks instead of one, so it looks like the builder is hitting a hard time.


7/07/2006 10:21:00 AM  
Anonymous Anonymous said...

I see. They have been reduced.

So what are they worth to a buyer?

500K or so.

I mean Quick Check, you can
watch the lights at night.

And the steps,, did not notice.

Valley Rd. even at 500k
I can't vision that, but oh

7/07/2006 10:37:00 AM  
Anonymous Anonymous said...

Stay away from Clifton period.

7/07/2006 12:43:00 PM  
Anonymous Anonymous said...

To close to Passaic, Paterson.

These are just dreadful towns.

Unless of course you like gangwarfare.

7/07/2006 12:44:00 PM  
Anonymous Anonymous said...

An article from Yahoo

Not Too Late for Real Estate
By Katie Benner

Despite an undeniable slowdown, the real estate market is far from dead....


7/07/2006 12:59:00 PM  
Blogger chicagofinance said...

Anonymous said...
Stay away from Clifton period.
7/07/2006 01:43:47 PM

Yo' in da dog-HOUSE!

7/07/2006 01:03:00 PM  
Anonymous Anonymous said...

Down goes Fraizer.

7/07/2006 02:40:00 PM  
Anonymous UnRealtor said...

Adding to the NY Daily News page-one story mentioned above, there are now reports that these islamic terrorists were/are also targeting PATH trains.

Police were riding the train this morning, and last week two cops with machine guns were patrolling the light rail station in Jersey City.

And, oddly, an AWACS plane flew up the Hudson river this morning.

Weird stuff going on.

I remember on Sept 10th 2001 there was a Coast Guard cutter patrolling a few hundred feet offshore from World Financial Center, by the World Trade Center.

7/07/2006 02:43:00 PM  
Anonymous Anonymous said...

362 Valley
OLP: $799,900
LP: $729,000
DOM: 190

Sorry your wrong on that one
DOM 251
MLS 2229475


7/07/2006 08:35:00 PM  

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