Foreclosures vs New Home Sales?(Conference notes)

New Orleans-Foreclosures and real estate-owned assets are competing with new home sales and the excess supply of existing homes on the market. As a result, speakers at a recent conference in New Orleans say construction lenders are finding it hard to get project financing across the nation.

Every time a house isn't built, jobs are lost, said Jack Haynes, executive vice president, national builder division, Countrywide Home Loans Inc., at the Strategies for Success in Construction Lending Seminar, hosted by Granite Loan Management.

"Consumers, the whole country is built on a dream of homeownership. We need to heal the psychological damage and get consumers back to feeling secure. If banks cut the spigot off, we won't get through this. As a lender, we have to look from area to area, project to project, for special niches, to see what we can do."

Mr. Hayes said the market could start to see a lift in the middle of 2009 but it won't be until 2010 until the construction lending industry feels it.

Tim Sullivan, president, Sullivan Group Real Estate Advisors, says the presidential change of leadership will be a good thing for the industry and that he hopes it makes a difference. "The uncertainty and fear - the human element, can't be modeled."

The lender goal should be the preservation of the asset value, Mr. Sullivan said. Is the project a good deal, considering the market position and the challenge of competing REOs in the area? "2012-2014 will be a whole different world."

Financing sells REO, and financing is not available now under terms people can or want to qualify for, especially in big cities with larger inventory. But things will get better following the downturn if the mortgage market burns through more REO.