The report, “Regulation and the Rise of Housing Prices in Greater Boston,” said that a broad range of municipal regulations, from minimum lot size requirements to wetlands protection standards, have had a “dramatic impact” on housing production in the past 15 years. Additionally, housing prices in the Boston metropolitan area would be “23 percent to 36 percent lower” than they are now if the region’s housing stock had increased at a rate in the 1990s as it did from previous decades.

“There are various states that are attractive places to live, but they’re also some of the most regulated states in the country. We are talking about a national-level problem with regulations,” said James Stergios, executive director of the Pioneer Institute, speaking at the National Association of Home Builders’ International Builders Showhere.

The report, written by Edward Glaeser, a professor of economics at Harvard University, along with Harvard doctoral students Jenny Schuetz and Bryce Ward, examined 187 communities in eastern and central Massachusetts. They found that communities in Massachusetts have “extraordinary flexibility to impose a wide range of land use regulations” from which the market has not been able to respond effectively to increases in demand.

Between 1980 and 2004, house prices in greater Boston skyrocketed. In the three Census Bureau divisions of the Boston area—Boston-Quincy, Cambridge-Newton and Essex County—home prices rose between 179 and 210 percent, adjusted for inflation. This put those three areas behind only Suffolk County, N.Y., where home prices rose by 251 percent during the same period. The National Association of Realtors said the median sales price for existing single-family homes in the Boston area in the third quarter 2005 was $438,900, higher than any other region in the country except for portions of California, New York City and the Washington, D.C. metropolitan area.

High demand does not necessarily mean low supply, Stergios said. In Las Vegas, for example, demand has risen dramatically, but the number of permits issued for new construction also rose. Thus, while home prices in Las Vegas have risen, they have not risen “prohibitively,” Stergios said.

By contrast, the number of housing permits in the Boston area has fallen. During the 1960s, the Boston metropolitan area saw 172,459 permits issued; even as recently as the 1980s, 141,347 permits were issued. But in the 1990s, the number of permits issued dropped substantially, to just 84,105. The result, the report said, are inflated house prices stemming from a government-imposed clamp on supply.

"In well-functioning markets, when prices rise, supply increases; then prices stop rising and sometimes even fall,” the report said. “By this definition, the housing market in the greater Boston area is not working…the greater Boston area’s housing shortage is not the result of a shortage of land, but rather of local restrictions on the existing land that make denser development difficult to impossible.”

The report noted, for example, that for each instance that communities increased the minimum lot size by ¼ acre, the result is 10 percent fewer homes that can be permitted. Fourteen municipalities in eastern Massachusetts have zoning regulations that require 90 percent of all developments to be two acres or more in size, and half of the 187 municipalities surveyed required at least one-acre lot sizes for more than half of their land area.

Layne Marceau, president of Shea Homes, Livermore, Calif., said regulatory burdens are not limited to one region of the country. California, he said, has the most regulated housing industry in the nation.

“California is where a lot of regulations start—other states pick up on these ‘great ideas,’ Marceau said. “In California, we estimate that 20 percent of the cost of housing is directly related to government regulations.”

The regulatory burden in California and across the country threatens to drive developers away, Marceau said. “It’s getting to the point where developers are simply going to start walking away, saying that it’s not feasible,” he said. “The result in California is that we have a chronically undersupplied market that cannot keep up with housing demand.”

What makes the situation puzzling, Stergios said, is that communities have “strong incentives to attract new development, and they have the ability to subvert restrictive state regulations that stifle growth.”

To rectify the situation, the report recommends that “significant state-level action” could overcome local regulations and legal uncertainties. Massachusetts, for example, could offer local aid to reward cities that allow new home construction and punish those that do not; give state entities the power to override local regulations in communities with low density and few new permits; tightening the ability of frivolous lawsuits challenging local development project approvals; and revamping the impact-fee system.

The report was produced with the Rappaport Institute for Greater Boston at the Kennedy School of Government at Harvard. The report is available at www.pioneerinstitute.org/municipalregs.
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The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.07 percent from 6.08 percent on week earlier, with points remaining at 1.23 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. Since its most recent peak of 6.32 percent on December 2, the 30-year rate has dropped for six straight weeks. 

The average contract interest rate for 15-year fixed-rate mortgages also fell for the sixth straight week, to 5.64 percent from 5.66 percent, with points increasing to 1.23 from 1.17 (including the origination fee) for 80 percent LTV loans. The average contract interest rate for one-year adjustable-rate mortgages (ARMs) decreased to 5.39 percent from 5.42 percent one week earlier, with points remaining at 0.92 (including the origination fee) for 80 percent LTV loans. 

The seasonally adjusted Market Composite Index rose to 613.3, an increase of 2.2 percent on a seasonally adjusted basis from 600.1 one week earlier. On an unadjusted basis, the Index increased by 31.4 percent compared with the previous week but was down by 10.9 percent compared with the same week one year earlier. The four-week moving average for the seasonally-adjusted Market Index is up by 0.8 percent to 578.4 from 573.7. 

The seasonally-adjusted Purchase Index decreased by 3.0 percent to 443.9 from 457.4 the previous week. The four-week moving average is down by 0.5 percent to 438.1 from 440.4.

The seasonally adjusted Refinance Index increased by 9.9 percent to 1645.2 from 1497.5 one week earlier. The four-week moving average is up by 4.1 percent to 1441.3 from 1384.5. Compared to last year, the Refinance Index is down by 19.7 percent from 2048.6 to 1645.2. The refinance share of mortgage activity increased to 44.0 percent of total applications from 42.2 percent the previous week, its highest rate since September. The ARM share of activity increased to 30.6 percent of total applications from 28.1 percent the previous week. 

Other seasonally adjusted index activity includes the Conventional Index, which increased by 1.2 percent to 917.1 from 906.2 the previous week; and the Government Index, which increased by 18.9 percent to 106.5 from 89.6 the previous week.
 
The survey covers 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
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“We think we’re on the leading edge of a social phenomenon,” said Starkey, president and CEO of WCI Communities, Bonita Springs, Fla., speaking at the National Association of Home Builders’ International Builders Show here. “I think over the next few years you’ll see a significant mix of single-family and multifamily, and it could reach a 50-50 mix when it’s all said and done.”

While Starkey’s assessment might appear over-optimistic, he bases his opinions on certain realities. Over the past several years, he said, condos have been the big story in multifamily housing, representing half of new multifamily units built. WCI has been immersed in that trend—since 1993, the company has built 33 high-rises comprising 17 million square feet, mostly in Florida.

Now, WCI is focusing its efforts up and down the Atlantic coast. The emerging market, Starkey said, is the Baby Boomer generation, 78 million strong, of which two million are turning 50 every year and 8,000 are turning 60 every day.

“We’re seeing a higher demand for condos, particularly high-rise condos,” Starkey said. “The Baby Boomers are amassing wealth and approaching retirement. And they are benefiting from a huge amount of intergenerational wealth over the next two decades. And they’re out buying homes more than ever before, which is why demand is so high."

Another driver of housing demand, particularly high-rise housing, is the suburban commute. “It’s not uncommon for people to spend one-two hours commuting, which really takes away from the quality of life,” Starkey said. “They are looking for quality of life, which is not defined as time outside, but as time at home. So people are moving back from the suburbs to cities; and you have young professionals who are opting to never move to the suburbs.

Additionally, suburbs are driving the move back urban because of government regulations. “This is impeding the ability for growth in the suburbs, and placing stress on infrastructure,” Starkey said. “This is driving a new look at high-density urban areas, which in turn is driving the cost of land and real estate in cities through the roof. High demand and high cost forces housing to go vertical—so instead of the two-story, three-story apartment complex, you’re seeing 10-12 story buildings.”

Cities are better-equipped to handle infrastructure demands than suburban areas, said Bob Koch, principal and director of Fugleberg Koch Architects, Winter Park, Fla. “Many urban areas are encouraging density—that’s because their infrastructural costs can cover greater populations, at a lower unit cost,” he said.

Tom Bozzuto, CEO of The Bozzuto Group, Greenbelt, Md., countered that construction costs have risen, which makes pricing on condos less attractive. “Unit sales of condos are definitely slowing," he said.

And Steve Patterson, CEO of ZOM USA, Orlando, predicted that as many as 20 percent of all South Florida condos could be on the market in the coming year, creating a glut and possibly sparking activity in “vulture funds” which he said have been stockpiling cash to purchase unsuccessful condo communities.

Eric Bluestone, president of Bluestone Corp., Fresh Meadows, N.Y., echoed the pessimistic note, observing that rental units, which traditionally serve those who choose not to buy or who cannot afford to buy, are in shorter supply. In particular, he said, this is hurting the moderate-income renter who does not qualify for subsidies or who are not affluent to be in the luxury market.

“Ten years ago we were competing for space at $25 per developable square foot. Now we’re competing for space at up to $200 per square foot,” Bluestone said. “The good news is, the vacancy rates are dropping, so there’s not a lot of product out there. The bad news is, competition is becoming increasingly fierce. In 2006, competition for space will continue, so the number of multifamily rentals will probably continue to drop. Unfortunately, moderate-level workforce housing is going to suffer.”

To counter that trend, Bluestone is investigating rental areas outside of core areas, where the condo market is not as attractive. “There, the land is not as expensive and we can make the numbers work for rental housing,” he said.

Additionally, Bluestone and other rental unit developers have been appealing to politicians. “We’ve been working strongly in the New York area to lobby city and statewide to bridge the gap to address the middle income housing market, either through subsidies or through modernizing the laws,” he said.

Meanwhile, Starkey is reacting to the changing demands of the market by building larger condos. “Fifteen years ago the average size of a condo was 1,500 square feet; now, it’s not unusual for us to build units that have 2,000, even 3,000 square feet,” he said.

An exception is New York City, which has the highest condo prices in the world. “In New York, a 900-square-foot condo goes for $1 million,” Starkey said.

The only thing holding back the market is competition. “The inventory of existing condos will be larger in 2006, and, while there are an increasing number of buyers attracted to the condo lifestyle, some will be constrained by high prices and rising interest rates,” he said.

One thing that will not change, Koch said, is the demand for quality. “Even in the tightest, most expensive markets, well-designed communities with attractive features fill up first,” he said.
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GMACCM provided $74 million in floating-rate acquisition financing for a Niagara Falls, N.Y.,  retail property.

Fashion Outlets of Niagara Falls is a 531,423-square-foot retail outlet center. Situated on 41.3 acres, the property is currently 85 percent occupied. GMACCM Vice President Scott Crimmins, of the New York loan origination office, arranged the transaction, and Fashion Outlets of Niagara LLC received the funding.

Crimmins said GMACCM won the business based on its ability to close quickly on a highly structured acquisition loan. "The borrower is a repeat client with whom GMACCM originated more than $125 million in transactions in 2005,” Crimmins said. 

GMACCM also provided $70 million in fixed-rate refinancing for a portfolio of 26 properties located in California, Florida, Virginia, Connecticut Arizona, Texas and Ohio. The property types included industrial, retail centers, multifamily and office properties.

Steve Hollister, vice president at GMACCM in the San Diego loan origination office, arranged the financing, and National Enterprises Inc. received the funding.

The financing package included 10 years of interest-only payments and favorable rate-lock terms, according to Hollister. "The borrower has been a client of GMACCM since 1998," he said.

In Carlisle, Pa., GMACCM provided $10.25 million in permanent, fixed-rate refinancing for a retail property. Carlisle Marketplace is a 90,183-square-foot shopping center. Anchored by a 62,885-square-foot Giant Food Store and seven inline retail tenants, the center is currently 100 percent occupied.

David Fishler, vice president in GMACCM's New York loan origination office, arranged the transaction. Kimco Carlisle LP, a joint venture affiliate of Kimco, received the funding.

“We delivered what we promised and closed the loan with this repeat borrower within 45 days of signing the loan application," Fishler said. "The proceeds from the loan were used to allow the borrower to recoup a portion of the capital used to purchase the shopping center.”

Meanwhile, Bryan Leonard, vice president in GMACCM's San Antonio loan origination office, arranged $18.7 million in financing for a San Antonio multifamily property. The initial financing is in the form of a floating-rate construction loan, which will convert to a fixed-rate permanent loan. Leonard arranged the transaction through the GMAC-TIAA construction-to-permanent loan program, and Oaks of Redland Ltd. received the funding. 

The GMAC-TIAA construction-to-permanent loan program is administered by GMACCM through a special relationship with TIAA. Through this partnership, GMACCM combines its ability to fund construction loans with TIAA’s desire to capture permanent loan business on higher quality properties.

“The borrower is interested in retaining this property after construction and lease-up for long-term investment," Leonard said. "The GMAC-TIAA construction-to- permanent program was the ideal option. The permanent rate is locked at the time of application for the construction loan and the program provides for a one-time closing and funding of the construction loan...In this instance the borrower benefited from our ability to fund the construction portion and seamlessly convert to the permanent loan.”
 
The Oaks of Redland Apartments will be constructed on 26 acres and the property will consist of 276 apartments.

GMACCM also arranged $2.13 million in permanent, fixed-rate refinancing for an Apache, Ariz., manufactured home community. Boardwalk Estates Manufactured Home Community is an all-age community developed in 2000. The property is improved with 115 spaces, 114 of which can accommodate multi-sectional homes. Amenities include a 765-square-foot office building, a pool and a playground. The property is currently 74.7 percent occupied.

GMACCM Senior Vice President and Branch Manager Chad Hagwood, of the Birmingham, Ala., loan origination office, arranged the transaction through the Fannie Mae Delegated Underwriting and Servicing (DUS) program, and MHP #7 LLC received the funding.

“The purpose of this loan was to retire an existing construction loan," Hagwood said. "Through the Fannie Mae DUS program, the borrower has the ability to pull out additional equity during the loan term. This feature was attractive to the borrower, as he continues to lease sites and increase the property’s net income.”
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 “I present state and local regulation issues at other courses such as the School of Mortgage Banking and the Regulatory Compliance Institute, and it’s always a popular topic,” Maddox said. “There is never enough time to go through all of the issues that people want to hear; the State and Local Litigation & Regulatory Compliance Institute fills that need.”

Students attending the course will learn about the following topics:

• Compliance issues in the state in which you are licensed;

• Trends in state litigation:
o Consumer Protection Acts
o Financial services and mortgage lending litigation
o State causes of action
o Common law tort

• Guidelines for servicers:
o How to address title companies and previous servicers
o What to do if you are sued for something that happened with a previous servicer or title company

In addition to the course lecture, students benefit from participating in a lawsuit case study based on state and local jury trends, combined with a question/answer session, and open dialogue. Students attending this program will learn how to:

• Litigate a state court action (Consumer Protection Acts) in state courts;

• Gain licensure with state banking departments based on licensing types and requirements; and

• Operate in your state based on licensing requirements, predatory lending laws, and law preemption.

Attendees of the State and Local Litigation & Regulatory Compliance Institute will earn four points toward MBA's Certified Mortgage Banker (CMB) designation. Registration is $895 for MBA members, $1,343 for nonmembers. The registration fee includes all training materials, workshop tuition, refreshment breaks, as well as lunch on Days 1 and 2.

To register or learn more, visit the online store at http://store.mortgagebankers.org/ProductDetail.aspx?product_code=E2601778%2fREGIS, visit the program Web site at http://www.campusmba.org/index.cfm?STRING=content.cfm?section=1000 or call (800) 348-8653.
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Boomers—those born in the U.S. between 1946 and 1964—are virtually redefining all economic markets. They have stronger wealth compared to previous generations; they’re comfortable with investment strategies; and most are Internet-savvy.

Boomers also much more active—so active, in fact, that the National Association of Home Builders, sponsor of the International Builders Show here, recently changed the name of its Seniors Housing Council to the 50+ Housing Council. “Senior” and “Boomer” just didn’t seem to properly align, even though the first Boomers are reaching age 60 this year—of which previous generations that age were considered “elderly.”

“Today’s mature home buyers, especially the Boomers, don’t consider themselves ‘seniors,’” wrote John Migliaccio, a market researcher based in White Plains, N.Y., in the most recent issue of the newly renamed 50+ Housing magazine (formerly Senior Housing magazine).

Nowhere are Boomers redefining economic markets than in housing. And according to Bob Karen, managing director of the Symphony Development Group LLC, Owings Mills, Md., the housing industry is heeding the Boomers’ housing demands.

“Today’s 60-year-old feels like they’re 40,” Karen said. “We have to change accordingly.”

A recent survey by the ProMatura Group LLC, Oxford, Miss., found that the number of adults between the ages 45-74 who indicated that they plan to purchase a new home or second home/investment home in the next five years was 25 percent.

“Doing the math, that’s 19 million households,” said Margaret Wylde, president of ProMatura. “Today, there are 36 million households over the age of 45—that means in the next five years, more than half are planning to purchase a home or a vacation/investment home.”

Where are they going? The majority (75 percent) said they plan to purchase a detached single-family home—and they aren’t necessarily looking to downsize. Boomers who live in larger (2,500 square-feet-plus) spaces aren’t as likely to reduce the size of their next purchase, and those who live in smaller homes will want to move to a larger space, the survey found.

But these homes are different from the post-war homes in which they grew up. Boomers place a premium on first-floor master bedrooms, multiple-car garages and other maintenance-free amenities. Trends in design also move away from formal living rooms and dining rooms into a more kitchen-centric space with a "great room."

“We haven’t seen a real move by Boomers to move away from the formal dining room, but we think this will give way to the great room concept,” Karen said.

And they want convenience. The survey found that within a five-minute walk of their house, Boomers want a fitness center, restaurants and cultural amenities

Interestingly, the survey found that the number of Boomers who indicated they would move to a 55-plus “active adult” community jumped sharply, from 8 percent just five years ago to nearly 15 percent this year.

“But these are not ‘retirement communities,’” Karen said. “We’ve changed the way these facilities are designed. Today, any 55-plus community is going to have an indoor pool and an extensive exercise room. It’s not a place for sedentary activities like crafts.”

“We’ve always heard people say that ‘they don’t want to go to an old folks’ home,” Wylde said. “Well, they don’t have to.”

ProMatura conducted the online survey of 2,300 households in November.
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“The real estate industry is going through more change than it’s ever gone through in the past 10 years,” said Bruce Zipf, president and CEO of NRT Inc., Parsippany, N.J., here at the Real Estate Connect New York City conference. “Demographics are spurring this market and will continue to spur this market through 2012.”
 
The real estate industry is seeing unprecedented pools of buyers and generations buying real estate, Zipf said. “If you back up 20 years to 30 years ago, there were basically two pools of generations. There were the Veterans [i.e., the “Greatest Generation”] and the beginning of the Baby Boomer generation. Today Boomers remain the prominent population of buyers and sellers, but the other 50 percent is now made up of Gen X and Gen Y—and another pool of buyers that never existed in the mass that they exist today, the emerging immigrant population.”
 
Because of such diversity among buyers and sellers, realtors and brokers face challenges in catering to customer needs. “The convergence of all these generations, who all have different needs, is creating some of the excitement and the innovation. The technology that we are hearing about today is because the new generations are demanding a different way of doing business,” Zipf said.
 
Gen X and Gen Y are very different, Zipf said. “They have different ways of working things. They have different behavior patterns as far as buying and selling. They feel strongly about an interpersonal relationship versus the Veterans and the Baby Boomers.”
 
Character traits of Gen X and Gen Y spur the need for technological change, according to Zipf. Those traits include:

• Responsiveness and efficiency is a must. “They are a very impatient group,” Zipf said;
• Being competent is far more important than “schmoozing;”
• A rich Web site experience is critical;
• Don’t keep them in the dark—“they will drop you like a rock,” he said;
• Knowledge of technology is key; and
• Email is the preferred way to communicate.
 
“Gen X and Gen Y don’t necessarily want to come into the office,” Zipf said. “They want to do more things online. That’s going to represent an opportunity. There needs to be an office of the future, it’s going to have to look different. The behavior patterns are going to shift.”
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