Hotels Revisited

A day after my posting 'Luxury Hotels + 2', Steve Brown from the Dallas Morning News comes out with a suggested surprise. The Mandarin Oriental may be more nothing than a garage. Well for now he is right because the building has stopped on the once named 'flagship building' in Victory Park. While the Mandarin Oriental website still lists the project to be completed in 2010. Time will tell how this story plays out.

Luxury Hotels + 2

The Ritz The W, The Mandarin Oriental and a remodel of the Stoneleigh Hotel makes for a pretty good group of new luxury lodging for Uptown. But wait two more luxury hotels are on the drawing board, The St. Regis and Capella Hotel.

Within a rock skip across Turtle Creek from each other. The St Regis is to be constructed on a coveted site adjacent to the Katy Trail bordered by Cedar Springs and Carlisle. Already in the Dallas planning commission, plans include 150 rooms plus 60 condos and scheduled to be open in 2011. Capella is planned to be constructed near the intersection of Turtle Creek Blvd and Fairmont. Plans include 5+ star restaurant, 70 hotel rooms and 70 Condo’s all within an ultra contemporary building. Opening date slated for 2011.

Interest Rates Up / Down / Flat ?

The topic of the week has been “Why aren’t interest rates moving downward as the Federal Reserve cuts?” Well everybody is voicing an opinion on what to do and it seems that the Fed (minus our local Uptown Fed President Fisher) is pushing ahead to cut rates further. Steve Brown from the Dallas Morning News wrote a brief story today on Mortgage Rates providing his own ideas on why they are not falling. What have mortgage rates done in the last 9 months? Well the national average on a 30yr fixed rate mortgage has actually risen from 6.39% in May 07 to 6.42% in Feb 08 according to HSH Associates (a publisher of national mortgage rates).

So we have the Federal Reserve cutting key rates and the consumer mortgage rates rising, hmm? The details are sticky but the reality is simple mortgage rates have moved around some in the last 3 quarters but are basically flat. Does the Fed know what it is doing or are the markets acting in their own best interest due to higher mortgage defaults? More questions more detailed economics but the bottom line gets to this, the cost to get a loan hasn’t changed in 9 months but the cost of living e.g. Inflation has risen dramatically – Food and Energy – we can’t live a single day without spending money on either on of those 2 items and they keep getting more expensive. The government likes to quote inflation rates minus these 2 variables because the do rise and fall more than other variable but the reality is they are persistent costs for everybody everyday. If they go up people can afford less for their mortgage, whether they are buying a new house or paying for the one they already own.

The good news is interest rates are still near historic lows, the Uptown market is still slightly more of a Buyer’s Market and building has slowed allowing for supply and demand to even out.

For more local economic information

Appraisal Conflicts Resolved?

Today something was done in the mortgage business many people thought already existed. The large mortgage underwriters are now not going to use Appraisers that have an affiliation with parties to the transaction. Fannie Mae and Freddie Mac are implementing this practice so loans and the underlying real estate truly reflect the value.

Many people may think "was it different before?" and the answer is Oh Yes! Appraisers have been chosen by the lenders for years. Why? Possibly for many reasons, control of the underlying real estate value whether up or down, fee sharing or rebates (appraisal fees are paid by the borrower), control of the loan process, etc. As one could imagine these reasons also open up the possibility of mis-management and possible fraud in the loan underwriting process.

Let's think "we need a value of $100k" to make this loan work, Mr. Appraiser proposes a value of $95k. Well the loan cant' be underwritten at that value, so the appraiser and the underwriter who have a common/affiliate relationship get together and the the appraiser goes back and makes an upward adjustment of $5k (equals 5%) to the value of the home. Why would the appraiser do that? Well if they have something called an Affiliate relationship why wouldn't they - if they cant' underwrite the loan at $95k then nobody makes money if they do they "all' make money and the "all" were somehow the same company (e.g. Affiliate).

Interesting nobody thought of this before? Or better yet nobody put this into place until now.