Delinquencies, Foreclosures Hit New Heights

At the end of August, some 6.6 percent of all mortgages were at least 30 days past due, up from 5.8 percent at the end of June and 4.51 percent a year earlier.
REALTOR®Magazine
That's according to an analysis prepared for The Wall Street Journal by Applied Analytics, a unit of Lender Processing Services Inc.

The largest percentage-point increase came on subprime loans, where the delinquency rate jumped more than 2.2 percentage points from June and July levels to 24.48 percent in August.

But other types of loans deteriorated rapidly, too. Delinquencies on option adjustable-rate mortgages, which let borrowers make minimum payments that may not even cover the interest due, jumped 1.17 percentage points, to 14.38 percent in August.

Delinquencies on Alt-A mortgages, a category between prime and subprime, also rose 1.17 percentage points, to 10.73 percent.

Doug Duncan, chief economist for Fannie Mae, said that as credit worries worsened, banks tightened their standards, making it tougher for borrowers with adjustable-rate mortgages to refinance and for homeowners in financial distress to sell their homes, which is causing some of them to fall behind.

Job losses also are taking a toll on borrowers, said Thomas Lawler, an independent housing economist. Previously, he said, housing troubles were largely independent of the overall economy.
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Banks: No Exceptions for Short Sales

Increasingly, sellers seeking short sales are encountering a new twist.
REALTOR®Magazine
Lenders are agreeing to let some short sales go through, but they want the home owners to sign a note promising to pay some or all of the balance due – debts that could burden borrowers for the rest of their lives.

Moody’s Economy.com estimates that about 10 million home owners have negative equity, a condition known colloquially as being upside down or underwater. By next June, the forecasting company expects the total to rise to 12.7 million — a quarter of all home owners who have mortgages.

“The first wave of foreclosures involved a lot of investors who just disappeared,” says Lance Churchill of Frontline Seminars, which teaches real estate practitioners how to negotiate with lenders on short sales. “Now, home owners with jobs and assets are underwater and want to sell. The banks want as much as they can get, today or in the future, and the owners want to get away clean.”

If the lender does a short sale without extracting anything from the seller, everyone in the country who is upside down could try to wiggle out from under and banks will take a fresh wave of hits. But if the lender pushes too hard, the borrower will default, leaving the bank in worse shape.
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Mortgage Applications Surge

Mortgage applications rose 33.4 percent last week on a seasonally adjusted basis, rising to 661.7 from 496.2 the previous week, according to the Mortgage Bankers Association weekly survey of mortgage activity.
REALTOR®Magazine
Total applications reached their highest level since early May.
On an unadjusted basis, the index rose 65.3 percent compared with the previous week, which was shortened by Labor Day. It was down 1.3 percent compared with the same week a year ago.

Refinances fueled the increase. The Refinance Index increased 88.1 percent while the seasonally adjusted Purchase Index increased only 2.4 percent. The refinance share of mortgage activity increased to 51.6 percent of total applications from 36.3 the previous week.

“Renewed financial concerns should keep long-term Treasury yields low and translate to lower mortgage rates in the near term, despite some widening in mortgage spreads,” says Orawin Velz, MBA’s Associate Vice President of Economic Forecasting in a statement. “We expect to see meaningful increases in mortgage demand in coming weeks on both the purchase and refi sides.”
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Why This Autumn is a Great Time to Buy

This fall could be a particularly great time for first-time or buyers long out of the market to jump in, say a variety of real estate professionals.
REALTOR®Magazine
Here are the reasons why:

    • Prices are probably as low as they are going to go as the market stabilizes, 
      thanks to the government takeover of Freddie Mac and Fannie Mae.

    • Interest rates are likely to decline as Freddie and Fannie get government help.

    • The Federal Housing Administration recently boosted its loan limits to $729,750
      in expensive areas. It's going to take some of that back come Jan. 1, when the 
      loan limit will shrink to $625,500.

The FHA allows down payments of as little as 3 percent, but that will rise to 3.5 percent as of Oct. 1. People scraping dollars together for a down payment should try to set their closing for the end of this month.

The tax credit will shave $7,500 off a first-time buyer’s federal tax bill due April 15. Buyers who don't owe tax, will get the money as a refund.

The government's definition of a first-time buyer is anyone who hasn’t owned a home in the last three years.
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How buyers, sellers are closing deals in today's market

Negotiation is back in style, and is likely to remain a necessary part of buying or selling a home in today's beleaguered residential housing market.
By: Dian Hymer: CAR.org
Other key elements to a satisfactory closing are flexibility, perseverance, creativity and diligence.

Needless to say, you need to work with the best real estate professionals you can find in your area. In most cases, it takes a team effort to put a home-sale transaction together and see it through to fruition.

HOUSE HUNTING TIP: Successful negotiations usually require give and take by both parties. It has been said that the sign of a successful negotiation is one where both parties walk away feeling they have won. It has also been said that the key to a mutually acceptable agreement is that both sides feel a little wounded.

A must in this market is a commitment to exhaust all possible ways to put and keep a deal together before calling it quits. Recently, it looked like a purchase contract was about to fall apart. The buyers had originally offered a price that seemed insultingly low to the seller.

The seller set his personal feelings about the price aside and countered the buyers' offer at a price he felt was reasonable. The buyers accepted. As it turned out, the price was one that was halfway between the seller's list price and the price the buyers offered. Splitting the difference is often a winning strategy.

The house in question had been well inspected before the buyers entered into contract to buy it. However, when it came time for the buyers to remove their inspection contingency, they requested a large monetary credit from the seller. Not only did the buyers discover a few health and safety issues that weren't covered in the previous reports, they also developed a serious case of cold feet.

These buyers were able to find jumbo financing at a good interest rate. However, to obtain this financing, they had to make a larger cash down payment than anticipated. This left them feeling cash-strapped.

The seller refused to credit the buyers the amount of money they requested. However, he was willing to credit some money. Or, he would carry a second mortgage for the buyers so that they didn't have to put so much cash down.

Flexibility gives the parties to a negotiation a way to explore options for making a deal or for keeping one moving forward. In order for the buyers in this case to feel comfortable closing the sale, they needed a concession from the seller in order to ease their financial strain. By offering to carry a second mortgage against the property, the seller found a way to free up more cash for the buyer.

As it turned out, the buyers elected not to take the seller-financing offer and accepted a monetary credit at closing.

Credits at closing require approval by the buyers' lender. Most lenders have limits on how much money a seller can credit a buyer at closing. It is often equal to 3 percent of the purchase price, but cannot exceed the actual amount of the buyers' nonrecurring closing costs. These are costs paid for the buyers on a one-time-only basis at closing, such as title insurance or a transfer tax.

A seller carry-back would also need lender approval. The lender in first position would want to ensure that the terms of the second mortgage were reasonable and would not be likely to put the buyers in financial jeopardy.

THE CLOSING: Sellers should carefully consider whether it makes good financial sense to carry financing for a buyer who is making a relatively small cash down payment.

Read more!

Sellers, pay attention to lowball offers

Selling a home can be an emotional experience because most sellers have a lot more than money invested in their homes.
By: Dian_Hymer: CAR.org
So, it's understandable that sellers might be reluctant to respond to an offer that is for less than the asking price.

Most sellers have a difficult time being objective about their homes. But, detachment is something sellers should strive for, particularly when the market favors buyers. To be a successful seller in a buyer's market, you need to be able to put yourself in the buyer's shoes. Ask yourself if you were a buyer if you would pay the price you would like to ask for your home.

In a soft market, like we are currently experiencing in many parts of the country, buyers are prone to make a low offer on any listing that doesn't receive offers from more than one buyer. The exception is when a listing is priced so competitively that a buyer recognizes a good deal and buys the property before others have a chance.

Some sellers might be inclined to inflate their asking price so that they will have room to bargain with a buyer. This is a risky strategy for serious sellers. In a buyers' market where there are a lot of homes for sale, the best listings at the best prices sell.

The listings that don't sell usually need price reductions to get them to a marketable range. If the market is trending downwards, this could mean selling for a lower price than might have been possible if the listing had been priced competitively to begin with.

HOUSE HUNTING TIP: Sellers whose homes are not competitively priced are prime targets for low offers. Even if your home is not badly priced, you could receive a lower-than-asking-price offer if market conditions are uncertain. Rather than being insulted by a low offer, sellers should view it as the beginning of a dialogue that could result in a sale.

Pay close attention to the buyer's financial capability. Gone are the days where buyers could buy a home with little or no cash down, and without verifiable income. Today's buyers are subjected to far more financial scrutiny by lenders than they were a year ago.

Ideally, buyers should be preapproved for the financing they need before they make an offer. If they are not, make sure there is a clause in the purchase contract that requires the buyers to apply for financing within a several days of acceptance.

Find out what kind of financing the buyers are applying for and which lender they intend to use. Some mortgage lenders recently failed to fund buyers' loans at the last minute. Make sure your buyers receive underwriting approval from a bona fide lender. The number of days for lender approval should also be included in the contract.

Sellers who receive an offer that is unacceptable regarding any of its terms and conditions - not just the price - should have their agent draft a counteroffer. Buyers and sellers often don't know in advance what price they'll accept until they're in the midst of a negotiation.

For example, a seller who bought another home before selling might accept a lower price if his house has been on the market awhile and the buyer's offer is not contingent on the sale of another property, and if the transaction will close quickly. Likewise, a buyer could agree to pay more than he thought he would if interest rates were to drop.

THE CLOSING: The counteroffer process can happen quickly or it can be long and tedious. Be prepared to explore all options before letting a negotiation fail.

Read more!

How to Green Your Cleaning

What’s the Big Deal?
YAHOO! Green
Cleaning products are everywhere in our homes and offices: on dishes, countertops, furniture, clothes, floors, windows, and floating through the air. In our war on dirt and germs we may often actually be making things worse. Most of the conventional cleaning products we all grew up with are petroleum-based and have dubious health and environmental implications. Instead of opting for cleaning products that annihilate everything in their path, there are plenty of natural products and methods that keep a house clean and fresh-smelling without the toxic side effects.

Top 10 Tips
Here are 10 highly effective ways to go greener. Hit it.
1. Cleaner, greener, meaner
As the health and environmental impacts of conventional cleaning products become more thoroughly understood, more and more brands of healthy, green, and effective cleaning products have started hitting the market and competing for that coveted place of honor under your sink. Many of these products are non-toxic, biodegradable, and made from renewable resources (not petroleum). But if designer labels aren’t for you, home-mixed cleaners can get the job done and then some. Vinegar and baking soda can be used to clean almost anything. Mix in a little warm water with either of these and you’ve got yourself an all-purpose cleaner.

2. Healthy airflow
It is not uncommon for the air inside a home or office to be more toxic than the air outside. This is because of the presence of toxic materials and substances and the fact that homes and buildings are better insulated than ever before (which is a good thing from an energy standpoint). Keeping windows open as often as possible allows fresh air in and keeps toxins flowing out. This is especially important when cleaning your home.

3. Are we breeding super-germs?
The antibacterial and antimicrobial ‘cleaners’ that many people think are necessary, especially during cold season, don’t clean hands better than soap and water, and also add to the risk of breeding “super germs,” bacteria that survive the chemical onslaught and have resistant offspring. The FDA has found that antibacterial soaps and hand cleansers do not work better than regular soap and water, and should be avoided.

4. Help your home smell soda-licious
Baking soda not only removes those strange smells coming from your fridge, it’s also a great odor-eliminator for your carpet. Just sprinkle on a little baking soda to soak up some of those odors and then vacuum it up.

5. Clean peace
Skip the store-bought air fresheners and instead try boiling cinnamon, cloves, or any other herbs you have a fondness for. Fresh chocolate chip cookies also have been known to create a friendly aroma. Also, plants may not make your house smell different but are good for filtering interior air--pretty much any broad green leaf plant will do. Peace Lilies are a favorite choice.

6. The toxic toss
When replacing your cleaning products, don’t just throw the old ones in the trash. If they’re too toxic for your home, they won’t be good for the drain or the landfill either. Many communities hold toxics & electronics recycling days and will take all of these off your hands. Throwing chemicals in the trash or down the drain means they might end up back in your water supply and come back to haunt you (see How to Green Your Water for more).

7. Dry cleaners
Conventional dry cleaners are the largest users of the industrial solvent called Perchloroethylene, or perc, which is toxic to humans and also creates smog. The two most common green dry-cleaning methods are carbon dioxide cleaning and Green Earth. Seek out cleaners that use green methods. If you do take clothes to conventional cleaners, be sure to air them outside before wearing them or putting them in the closet.

8. Green house cleaning service
For people don’t have the time to clean their own homes, fortunately there are an increasing number of green cleaning services out there to help get things spic and span. If you can’t find one in your area (or their rates are outlandish), call around until you find a service willing to use the products and methods you specify.

9. Leave the toxins at the door
Imagine what’s on your shoes at the end of the day. Bringing that oil, antifreeze, animal waste, particulate pollution, pollen, and who knows what else into the house is not good news, especially for kids and other critters that spend time on floor level. Keep the sidewalk out of your home with a good doormat or a shoeless house policy. Many green buildings now include entryway track-off systems as a means of maintaining a healthy interior environment. Less dirt also means less sweeping, mopping, and vacuuming, which means less work, water, energy, and fewer chemicals.

10. Clean design
Designing houses and other building with cleanability in mind can create spaces that are cleaner, healthier, and require fewer substances to maintain. In larger buildings, good cleanability can also be a big money-saver as cleaning costs can often add up to as much as half of a building’s total energy costs.

So You Wanna Do More
Not content with just getting by? Go hardcore.
1. DIY
Create your own cleaning solutions made from products you have around the house. These save money and also keep toxic chemicals out of your house. See below for suggestions on homebrewed cleaners.

2. Taking it to the cleaners
Talk to your boss/co-workers/custodial team about switching cleaning products to green cleaning products. The people most at risk from the toxic effects of cleaning chemicals are custodial workers.

3. Underneath it all
Consider replacing your carpets with wood, linoleum or other non-carpet flooring. This will reduce the toxic cleaners needed for rugs as vinegar and water works great for cleaning non-carpet floors. This can also save energy, because you won’t need to run that vacuum.

4. Clean carpets
When getting carpets steam cleaned, look for companies that use only water or natural solvents.

5. Non-disposable
Paper towels and other disposable, single-use cleaning things can be replaced with reusable clothes and mircrofiber wipes. Clean them in the dishwasher and whiten them with hydrogen peroxide when they need it. Also, when it comes to buying sponges, natural ones are biodegradable and can break down or be composted when their useful life is through. But make certain that the natural sponges you buy come from a "sponge farm" and not from a natural ecosystem.

By the Numbers
Want the real deal? Here's where the rubber meets the road.
1. 17,000: the number of petrochemicals available for home use, only 30% of which have been tested for exposure to human health and the environment.

2. 63: the number of synthetic chemical products found in the average American home, translating to roughly 10 gallons of harmful chemicals.

3. 100: the number of times higher that indoor air pollution levels can be above outdoor air pollution levels, according to U.S. EPA estimates.

4. 275: the number of active ingredients in antimicrobials that the EPA classifies as pesticides because they are designed to kill microbes.

5. 5 billion: the number of pounds of chemicals that the institutional cleaning industry uses each year.

6. 23: the average gallons in chemicals (87 liters) that a janitor uses each year, 25% of which are hazardous.

Dig Deeper Into TreeHugger
Dig deeper by perusing some of our thousands of posts.
Here is a sampling of relevant topics and products TreeHugger has covered. Also take a dip into the TH archives for more on almost any topic you can think of. If the answer you are looking for is glaringly absent, feel free to drop a TreeHugger writer an email and raise the issue.

· A TreeHugger survey polls the electorate on their use of green cleaning products.
· A look at two specialty cleaning services that employ eco-friendly methods.
· TreeHugger roots into the question what do I do about clogged drains? and offers a more natural alternative to busting out the Drain-O.
· Pots, pans, plastic: all are possible causes of Toxic Shock Syndrome. This Canadian report looks at over 4,000 common chemicals and their links to your health.
· Good advise on taking care of your floor the way grandma used to.
· Conventional dry cleaning is anything but green. Carbon dioxide and Green Earth are two friendly alternatives that get the job done.
· TreeHuggers give their thoughts on Seveth Generation’s book, Naturally Clean, by CEO Jeffrey Hollender.
· TreeHugger interviews Gregor Barnum, Corporate Consciousness director for Seventh Generation.
· In the battle between hand washing and machine washing the dishes, who really wins?
· Some products for keeping the pool naturally clean.
· A how-to guide for the laundry room.
· Kyeann Sayer shares some tips on how to sweat without staining.
· Zeolite is a natural mineral that absorbs odors and moisture.
· Some valuable techniques on how to use tea tree oil around the home.
· Most of us share our home with dangerous substances-here is a review of some of the pertinent knowledge and how to steer clear.

Books we’ve covered:

· Better Basics for the Home: Simple Solutions for Less Toxic Living
· Clean Sweep: The Ultimate Guide to Decluttering, Detoxing and Destressing Your Home
· Green Clean: The Environmentally Sound Guide to Cleaning Your Home
· Naturally Clean: The Seventh Generation Guide to Safe & Healthy Non-toxic Cleaning

Dig Deeper Into Other Sources
TreeHugger is one of many sources; here are some other great ones.

· The Union of Concerned Scientists has a thorough list of definitions for common household cleaning products, including an explanation of what makes them harmful and alternative options.

· This National Institute of Health web page allows for searches on a variety of products, including cleaning products and their health and toxicity ratings. The database includes a multitude of companies but is limited to information provided by company reports.

· Under the LEED certification system, a building can receive as many as fourteen points for green cleaning products and cleanability.

· Grist offers tips on how to get your cleaning crew at work to switch to safer products.

· GreenBiz.com provides in-depth reports and articles on the business breakdown of a green approach to cleaning.

· The Children’s Health Environmental Coalition offers great advise on how to make your own cleaners that can handle just about any corner of the home and lays out the five products needed to clean just about anything.

· What’s the difference between a sanitizer, disinfectant, and a sterilizer? The U.S. Environmental Protection Agency Antimicrobial Pesticide Product page will clear that up for you. Its Green Cleaning Products page also lays out the basics of why cleaning chemicals can be so harmful.

· CleanerSolutions Database is a free online tool for evaluating surface-cleaning products.

· The Center for a New American Dream offers advice on how to change the cleaning products used by your custodial staff as well as the statistics to back it up, and they also offer reports from cities that have greened their cleaning practices.

· Environmental Choice is an international organization that certifies green cleaning products and other home and office products.

· The Ashkin Group advises cleaning services on greening their cleaning.

· Green Seal is another standardization organization that is certifies cleaning products among other things.

· Green Earth is one of the most widely available ecologically preferable dry-cleaning systems.

· Seventh Generation’s Making a Difference Newsletter provides regular doses of sound advice.
Read more!

Lenders Help Borrowers Avoid Foreclosure

Mortgage industry's Hope Now alliance helped more than 500,000 financially-stressed home owners in the second quarter of the year.
By:Stephanie Armour: REALTOR®Magazine
While foreclosures have soared, some home owners have found ways to stave off auction and keep their homes.

In the second quarter of 2008, mortgage servicers that are part of the industry-sponsored Hope Now alliance finished more than 522,000 workouts. That doesn't include home owners who have worked out loan modifications on their own with lenders or those who received counseling or financial aid from charitable groups that aren't part of the alliance.

Here are some of the possible options:

· Lenders agree to a repayment plan, tacking delinquent payments onto the end of a
  home loan.
· Lenders allow borrowers to switch from adjustable rate to a lower fixed rate.
  About 14 percent of subprime loans are in default, according to the Center for
  Responsible Lending.
· Lenders allow some borrowers temporarily to pay less than the full amount of their
  monthly payment, a rarer measure usually approved in cases of a financial
  emergency, such as a health crisis.

Read more!

Real Estate Outlook: Positive Trends In Housing Studies

This just might be the turn in the numbers we've been waiting for: Resales of existing houses jumped by 3.1 percent in last month to the highest level in nearly half a year.
By: Kenneth R. Harney: Realty Times
On top of that - and to the near total surprise of Wall Street analysts - new home sales also rose 2.4 percent, according to the Commerce Department.

Resales were up almost everywhere: Up 9.7 percent in the Western states, up 6 percent in the Northeast, one percent in the Midwest. Only the south saw a slight decline - one half of one percent.

New home sales showed a similar pattern: Up an amazing 39 percent in the Northeast, 10 percent in the West, 8.2 percent in the Midwest and down by 2.5 percent in the South.

Most notable of all were the strong rebounds in sales in areas that had seen the biggest drops following the boom years - especially in California and Florida.

Now, in fairness, before we get too enthusiastic about these sales gains, let's be frank about what's pushing this trend: The large numbers of short sales and foreclosures in many once-booming markets are cutting prices to the bone.

But rock bottom prices are also bringing in a flood of first time buyers, fence-sitters and investors who've been waiting for hard, statistical evidence that the cycle is flattening out.

Well, it looks like that hard evidence has finally arrived.

Sales in places like Riverside-San Bernadino, California, and Fort Myers, Florida - once the West and East Coast symbols of boom and bust - are now seeing strong growth in sales, according to the National Association of Realtors.

Keep this in mind too: The July resale numbers represent transactions closed before the passage of the new $7,500 federal tax credit. When the impact of the credit begins kicking in during the coming several months, you can bank on even higher sales numbers ... and a turnaround in prices.

In other key economic developments this week: Mortgage applications rose nationally for both conventional and FHA loans to buy houses. Interest rates dropped for the third straight week - hitting an average 6.44 percent for 30 year fixed rate loans and 5.94 percent for 15 years.

Also the federal government's monthly survey of home prices in more than three hundred markets around the country found that although the national average of prices was down slightly, prices rose in 20 states … and are up year to year in 30 of the 50 states.
Read more!

California Seeks to Curb Sprawl

Bill Links Funding For Development To Lower Emissions
By: ANA CAMPOY: The Wall Street Journal Online
California lawmakers passed a bill aimed at cutting carbon-dioxide emissions by rewarding cities and counties that prevent urban sprawl and improve public transportation.

The bill's proponents and transportation experts say it is the first measure in the nation to link government transportation funding with urban planning and CO2-reduction goals. Senate Bill 375 contends that cutting back on driving is as critical in the fight against global warming as producing cleaner fuels and more-efficient vehicles. Transportation experts say they expect the bill to become a model for state and national policy makers.

Under the new bill, regional planning authorities will have to develop realistic plans to meet emission-reduction targets in order to receive transportation funding and lighter regulations for builders. Compact projects built close to public-transportation options are rewarded with fewer regulatory hurdles.

The bill, which was passed Saturday, must be signed into law by Gov. Arnold Schwarzenegger. Gov. Schwarzenegger's office wouldn't say Monday if he will sign the bill. Proponents of the bill say they are optimistic he will approve it because it was designed to help meet CO2-cutting goals he signed into law in 2006. With passenger vehicles accounting for about 30% of the state's emissions, lowering the number of miles Californians drive is indispensable, said Stanley Young, a spokesman for the Air Resources Board, the agency that implements the 2006 law.

The bill is an example of how environmental concerns -- and the regulatory burdens they entail -- are forcing opposing factions to hammer out compromises. "I call it the coalition of the impossible," said Sen. Darrell Steinberg, the bill's main author. Supporters of the bill include environmentalists, builders, local governments and affordable-housing advocates.

At first, city governments opposed the bill, fearing it would encroach on their authority to determine land use. Home builders said it would raise the costs of building and owning a home. But after tough negotiations and much back-and-forth on the bill's wording, both groups are now among the legislation's supporters. "Every stakeholder gave up some important sacred cows," said Ray Becker, chairman of the California Building Industry Association.

Mr. Becker's group had to accept that regional authorities will do the planning, a practice the group considers more cumbersome than dealing with local officials. At the same time, the bill will streamline the legal process required to erect a building by reducing requirements for environmental studies, among other measures.

Environmentalists agreed to water down stringent protections to undeveloped land originally in the bill, but say the final result is an improvement over existing protection laws. "California made sprawl famous. The bill will turn the corner away from sprawl," said Tom Adams, board president of the California League of Conservation Voters.

The final bill still has some detractors. The state's Chamber of Commerce has said the legislation will impede "California's necessary growth of commerce, industry and housing" and increase frivolous lawsuits.

Sacramento and its surrounding counties offer a glimpse at how the bill might affect regional development if it is implemented. In 2004, the area's regional-planning agency approved a voluntary growth plan that calls for more-compact development and increased public transportation. There are signs that the region is successfully curbing sprawl. The number of apartments and townhomes for sale has risen in the past four years, while the number of subdivisions with single-family homes in big lots dropped, housing data show.

Read more!

Big Bucks Buildup

Public projects dominating L.A.’s construction landscape
By: CHARLES PROCTOR: Los Angeles Business Journal Online
The economy may be down and the price of construction materials may be up, but Los Angeles builders are about as busy as ever.

For the second straight year, there are 50 projects valued at $100 million or more under way in Los Angeles County, as shown by the Business Journal’s annual survey of construction in the county. Four years ago there were only 11 such projects.

Although private-sector construction is hitting a rough patch, builders can thank voters who years ago approved funding for massive public-sector projects, and hundreds of millions of dollars in government subsidies for infrastructure improvements.

Many of the big public projects are schools that are part of a $19 billion, multiyear effort to refurbish and replace the Los Angeles Unified School District’s aging campuses. Three others are freeway projects funded by the state and federal governments.

It’s a trend that builders say they have seen before: In an economic downturn, government-funded projects come to the fore, as the money is usually set aside years in advance.

“When things get slow in the economy, the public side kicks in,” said Kevin Dow, vice president and manager at the regional office of New York-based Turner Construction Co., which this year broke ground on two LAUSD campuses with a combined value of $218 million.

Among the new public projects is the $391 million Central Los Angeles Learning Center on Wilshire Boulevard, being built by Colorado-based Hensel Phelps Construction Co. The campus will serve more than 4,000 students at the site of the old Ambassador Hotel. The sprawling complex is slated to open in 2010, and will include a public park and three separate school buildings.

Road work

Three new highway projects with a total value of over $470 million also broke ground this year across Los Angeles County. Two of the projects will add carpool lanes to parts of the Golden State (5) Freeway, and the Pomona (60) Freeway. The third is a repaving project along nine miles of the Long Beach (710) Freeway.

“All of these projects are helping to stimulate the economy and provide needed improvement for our infrastructure,” said Jeanne Bonfilio, a spokeswoman for the California Department of Transportation. “We feel it’s a win-win situation, especially as the economy is in a downturn.”

In fact, public transportation projects took three of the top four slots on the list.

The two biggest projects on the list are the Metro Gold Line across East L.A., at $869 million, and the Expo Light Rail Line, from downtown L.A. to West Los Angeles, at $862 million. The fourth project on the list is the $504 million renovation of the Tom Bradley International Terminal at Los Angeles International Airport.

While several big private-sector projects are being built, many of them were started before the credit crisis hit. And the number of private-sector projects in the future may fall. Lenders are extremely cautious in this environment, and that makes it more challenging for developers to get their ventures financed. “Instead of two years ago when we had one lender ready to jump in, we’re now seeing developers having to rally numerous lenders,” said Michael Bernica, the senior vice president of operations at Webcor Builders Inc.

“A lot of our livelihood in this next year, as compared to two years ago, is going to depend on the lenders.”

Bernica said the problems with the economy haven’t significantly impacted Webcor’s largest projects, such as the $478 million LA Live complex downtown and the Century luxury condominium tower in Century City. But it’s different for the company’s smaller projects.

“I almost want to say they’re on life support,” Bernica said.

The rising cost of construction material, which has been an ongoing issue, hasn’t helped. Material prices, already up, are expected to increase 4 percent in 2008 as demand rises in developing countries. Also to blame are the volatility of the commodities market and the weak dollar, according to Reed Construction Data.

Waiting for turnaround

Developers and builders alike are waiting for the situation to turn around so private projects can move forward.

Among them are the first phase of the $1.8 billion Grand Avenue project, the $1 billion Park Fifth condo tower downtown, and a slew of multimillion-dollar groundbreakings for and expansions of hotels and condos across the county.

“They have to be able to get investors,” said Dow of Turner. “I don’t know what will trigger that, but it will take some sort of movement in the economy.”

The construction boom hasn’t translated favorably to the job market. Construction jobs in the county in July totaled 149,700, a decrease of almost 7 percent from the same time last year, according to data from the Los Angeles County Economic Development Corp.

The job losses can be traced to the depressed housing market, which drove down demand among home builders. However, the impact was lessened because public works jobs increased and nonresidential construction jobs didn’t register a steep decline.

“A lot of public-sector projects always take a long time to get going,” said Jack Kyser, LAEDC’s chief economist. “But once they do, that will provide a little bit of a cushion this year and into 2009.”

Kyser predicted that public projects would buoy the construction market even more next year.

“It’s very tough out there, and a lot of people think that private-sector construction is going to continue to struggle to find financing into 2009,” he said. “You’re probably going to see more public-sector projects on the list next year.”
Read more!