October 19th, 2010
01:06 PM ET

Contractor: We could build homes if banks 'loosen up'

Contractor Paul Kinney, owner of Race Point Inc., on the site of a $3.5 million new home, says the Building Permit/Housing Starts report is misleading. Banks are not funding the permits. Most projects, like the one he's building now, are funded by foreign money.

The U.S Census Bureau and Department of Housing and Urban Development released its monthly report on housing permits and new construction and it shows the upward trend in this economic indicator continues.

The report shows single-family home building permits in September were 405,000 up 0.5 percent above over August. Single-family housing starts in September were 452,000; this is 4.4 percent over.

CNN's Jim Roope reports however that the contractors who turn building permits into buildings say these numbers are not necessarily reality because banks are still hesitant to fund permitted projects. Contractors say new homes may be getting the green light by cities, but not the greenbacks by the banks to start construction or in some cases complete construction.

Paul Kinney, owner of Race Point Incorporated, a top 500 builder of new homes, says he can get 30 permits by the middle of next week, but the banks aren’t lending money so the report is misleading.

“Remember a couple of weeks ago when they came out and said guess what the recession was over? That rumble you heard was the construction industry laughing their ‘friggin’ brains out,” said Kinney.

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Filed under: Economy • Jobs
soundoff (127 Responses)
  1. Kimo

    The banks took the bailout money that was intended to free up lending and said "thank you very much" and have invested it in safer investments. These guys caused the problem but they are not willing to help solve it. What do you expect from people whose whole reason for living is to make more money for themselves.

    October 19, 2010 at 2:16 pm | Report abuse |
    • redisgreat

      And what is wrong, in a capitalist society, with making money.

      October 19, 2010 at 3:14 pm | Report abuse |
    • Barbara

      Nothing wrong with making money, redisgreat.. How it is being made is wrong when it is at the expense of others and in this case, our country's expense.

      October 19, 2010 at 6:15 pm | Report abuse |
  2. Jenny

    Finally! This has made the national media. Banks have more money on hand than ever before. Yes, they should be smart about lending it – but right now they have made it near impossible for anyone (even with a great credit history) to get a loan.

    October 19, 2010 at 2:18 pm | Report abuse |
    • Seymour

      Jenny....try a small, local community bank. If you have good credit, can show cash flow and have some sort of down payment, you will get a loan.

      October 19, 2010 at 3:58 pm | Report abuse |
  3. MollyBee

    OK but we ordinary Americans are asking, "Who needs a $3 1/2 million home?

    October 19, 2010 at 2:25 pm | Report abuse |
    • steve

      The economy does. Do you know how many average americans it takes to build that 3.5 mil house. And then those average americans go to the grocery store and pay there mortgage etc. 20% pus of economy.

      October 19, 2010 at 2:31 pm | Report abuse |
  4. steve

    There isn't one thing the obama administration has done to stimulate the economy in a long term fashion. Most stimulus jobs are all temporary( ie-census} and will be going away. Changing healthcare in the middle of a deep recession was dumb. Do it when things are good, you'll have less resistance. At least Hoover bulit a dam that supplies power to a huge part of the country. Obama's caulking houses?

    October 19, 2010 at 2:25 pm | Report abuse |
    • sdmco

      I work in telecommunications and there are billions out there from the Recovery and Reinvestment Act for broadband infrastructure and transportation projects - both of which fuel economic growth. These projects will employ hundreds of people for years – and lead to other projects in the future. That's what government spending can do to spur growth. Give billions to the private sector? We did that (had to) and the banks (for example) are sitting on it ...

      October 19, 2010 at 2:51 pm | Report abuse |
  5. rabbitg

    The main problem with the housing issue is with the mortgage itself. On a 30 yr fixed rate loan, you end up paying 2-3 times more than the original price of the house; this model is simply not sustainable.

    Once again, the greed of contractors and overzealous developers, as well as the banks and unscrupolous mortgage lenders are going to put the U.S. economy into an even worse state than before, I fear that total collapse is inevitable at this point.

    October 19, 2010 at 2:28 pm | Report abuse |
    • Rus

      Um, how is the model not sustainable? It's been working for nearly a century, and not just in the US, all over the world. Canada didn't have a housing market crash, yet still use 30 year fixed loan models, why is that? If it truly were unsustainable, then the credit card market would have crashed decades ago. Anytime you take out credit, you end up paying more than what you actually borrow, be it a car loan, a business loan, student loans, etc...

      If anything, the mortgage rates are now making it more sustainable, if you think back even to the 1990's, that everyone loves to talk about the good Clinton years and the economic boom then, mortgage rates were around 7.5%. Go back to the Carter years, and we're looking at 19% mortgage interest rates.

      How could you possibly claim that the current model is not sustainable?

      October 19, 2010 at 2:51 pm | Report abuse |
    • Seymour

      How is it not sustainable? With rates where they are now, it is more sustainable than ever.

      So how much should it cost to borrow $150,000? Should you have to put any money down? What would you charge me to borrow $150,000? The bank is taking the risk. The bank is having to endure government regulation. They shoudl be compensated.

      October 19, 2010 at 4:01 pm | Report abuse |
  6. Jack

    Banks don't exist to serve depositors and borrowers, they exist to make profits from those depositors and borrowers. If they'd been more prudent with their borrowers earlier, we wouldn't have had the bust as badly as we have. However, they seem to be going to extremes now, refusing even well qualified borrowers while sitting on mountains of unsellable repossessions. Employers share the blame. No work=no money=more problem loans + less consumer purchasing. I've seen news releases from so many employers who announce record profits and dividends while also laying off more workers, shipping more jobs overseas, and freezing hiring or bringing in cheaper temps instead of a decently paid perm. When business starts hiring, disposable income will rise and banks will be forced to relax their strict lending standards or lose their market share. The glut of repo's will delay new construction for a while, but not long once people have money to spend again. Until then, "make do or do without" to bring back a quote from the great depression.

    October 19, 2010 at 2:34 pm | Report abuse |
    • Judy

      Well said, Jack.

      October 19, 2010 at 5:14 pm | Report abuse |
  7. Mike in Vermont

    I understand the need to be more careful in providing loans. What would help is for the underwriters to actually get off their butts and look a little closer at the people that are applying for loans. In my case, I am funding the construction of an addition on my home because I am recently self-employed and the banks don't really care how much money you make...they only care about what a tax return says. No problem with that...if they don't want my money I will build slower and fund it myself. What would be better, for me and the economy, is to get a construction loan which would allow me to build faster, and still have funds for other discretionary spending.

    Regardless, I understand that the pendulum swings and it's usually a 10 year cycle from one side to the other.

    October 19, 2010 at 2:43 pm | Report abuse |
    • Rus

      Mike, self-employed is difficult to deal with. They used to be able to use No-Income verification programs, specifically for self-employed folks, but after the market crashed, that is one of the first thing that was shut down from federal regulators.

      It's not the banks, it's the regulations, they won't allow those type of loans now, and for any larger bank that has to comply with federal guidelines, they cannot make that loan without the income being shown. You'd honestly probably have better luck with smaller banks, that fall under the federal regulator's reach. Many times with these type of loans, they are the best way to go.

      But any bank that has to go through an annual federal audit, yeah, they will not touch a self-employed borrower with little income reported on their 1040.

      October 19, 2010 at 2:55 pm | Report abuse |
    • Seymour

      Hate to sound like a broken record, but go see a local, community bank. THey can take the "get to know you as a person" into account when making credit decisions.

      However, it's not that banks aren't willing to lend as much as it is the regulators have put banks into a very, very small box. You could offer to put 90% down on a loan and if it is an area the bank is restricted in lending, they can't do it. An example....say a bank's capital is $10 million and they are limited in concentration to 25% of capital on hotel loans. Bank makes that 25% in loans and they can't make anymore without facing scrutiny from the regulators.

      October 19, 2010 at 4:05 pm | Report abuse |
    • banker

      So rather than consulting your tax returns, you want lenders to take your word for what you make? Isn't that just the thing that got us to this position?

      October 19, 2010 at 5:49 pm | Report abuse |
  8. PJAFL

    The banks and their Wall Street cohorts are the main cause of the mess we are in. Despite their bailouts, they have done and apparently are not willing to do anything to help the American public. They line their own pockets with obscene compensation and bonuses.

    Their greed and avarice continue unabated. If a lot of jail cells were filled with their crooked executives, maybe they would get the message.

    October 19, 2010 at 2:58 pm | Report abuse |
    • Seymour

      Simply not true. Wall Street and your local bank on the corner are not the same thing. At all.

      October 19, 2010 at 4:06 pm | Report abuse |
  9. Reynardine Greencastle

    The banks are not going to loosen up, nor large employers to hire, until they have driven a desperate people to eject this administration from power and hand control of the country back to them forever. What they will do after that... well, it won't be an improvement, I fear.

    October 19, 2010 at 3:02 pm | Report abuse |
    • redisgreat

      Sadly I agree with you. With less regulation there will be more greed. Who has all the money now?Do you think those with all the money are going to let the rest of us have any?

      October 19, 2010 at 4:34 pm | Report abuse |
  10. It's Me

    And we could fix this countries problems if Americans would take pride in their country and what it/they produce instead of foolishly buying foreign over domestic. But that won't happen either becuse we have raised a bunch of morons.

    October 19, 2010 at 3:04 pm | Report abuse |
    • rodfromnc

      We produce almost nothing as the Bush administration allowed all our manufacturing job to go to China. Almost all of our textiles, pharma and manufacturing and shortly, service jobs, are overseas just so the CEO's can make more money by cutting labor costs at the expense of the American worker.

      Capitalism isn't patriotic but apparently greed is.

      October 19, 2010 at 3:45 pm | Report abuse |
    • redisgreat

      Take Wal-Mart for instance. They buy products to sell to consumers and for the most part they buy the lowest priced itmes that they can find. They pass that along to the consumer. Too bad most of the lowest priced items are not made in America anymore.

      October 19, 2010 at 4:31 pm | Report abuse |
  11. Mike

    Is there a lack of open homes on the market that we need to keep building new ones. I would like to see all the for sale / foreclosure signs gone. Building new homes is only flooding a saturated market with more supply, with a currently lower demand-this equals lower housing prices, which equals more people upside down in their mortgages–>more need for short sales and the cycle continues on.

    October 19, 2010 at 3:07 pm | Report abuse |
    • LeftMind

      There is northern Va.

      October 19, 2010 at 3:17 pm | Report abuse |
  12. Roger Krueger

    As long as the banks have massive inventory of REO they'll do whatever they can to choke supply thus driving up the pricing/demand for their white elephants. C'mon, this is Econ 101 stuff.

    October 19, 2010 at 3:13 pm | Report abuse |
    • Seymour

      Simply not true REO is toxic to banks. Regulators make banks (if under any sort of consent or memorandum) meet certain ratios of REO. Not to mention that REO has to be written down, which comes straight out of income, has to be maintained, taxes paid, marketed, etc. REO is toxic. No bank wants it and to say they don't lend to boost up prices of REO is ridiculous.

      October 19, 2010 at 4:09 pm | Report abuse |
  13. LeftMind

    Not everywhere is there a problem with new construction. Here in Northern Va, housing is booming. The builder in my new community has a backlog of 30 buyers waiting for the next section to open.

    October 19, 2010 at 3:14 pm | Report abuse |
  14. Masonwasp

    All of this hyperbole about the "fat cats" on Wall Street is not going to change things. The people in the top 3% income bracket are going to continue to have money. It is highly unlikely that any government administration, left or right,will really hold these folks accountable.

    What we are overlooking is that it is already is the Great Depression for the construction industry, which has seen a 18-20% unemployment rate (compared to the national average of 9%). What would increased bank lending do? It would help get a lot of these people back to work and off unemployment benefits.

    October 19, 2010 at 3:20 pm | Report abuse |
  15. dj

    Well.. obviously some discretion is involved here. It's possible there are parts of the country where new homes are needed, but there are already so many foreclosures that it seems like an isolated opportunity.

    October 19, 2010 at 3:25 pm | Report abuse |
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