The housing bust that’s hurting pool construction first struck the subprime lending market last year. Then, this summer, even major brokerage houses began pulling back from lending money to their wealthy clients.
The crisis now seems to be coming full circle, striking so-called “Alternative-A” loans. Prevalent among middle-class homeowners with good credit, these loans helped fuel the housing and pool-building booms of the outer suburbs.
In August, mortgage research firm LoanPerformance reported that nearly 13 percent of Alt-A loans are delinquent by more than 60 days — that’s four times as high as 2007. And the delinquency rate today is 16 times higher than in 2004, according to the company’s research.
“Now even people with good credit have a problem,” said Glen Rich, president of Riverbend Sandler Pools in Plano, Texas, a Pool & Spa News Top Builder. “We’ve seen people not get approved for a loan, and they had no idea that they would have a problem with a lender.”
Financial research company Standard & Poor’s released a report in late August predicting that the crisis in housing and lending is only half over, stating, “We’re expecting more fairly significant problems to come.”
In short, defaults in every mortgage category are dramatically on the rise, even among borrowers with the very highest credit ratings.
“The credit markets will be difficult for a while, and that will affect the new-construction segment of the industry,” said Manuel J. Perez de la Mesa, CEO of Covington, La.-based PoolCorp. “It will take a sustained period of earnings by banks for their capital bases to recover the write-offs of the last two years before we see a return to ‘normalcy.’”
Builders in some markets, especially Texas, say they think they’ve reached the bottom of the trough for the housing crisis and the downturn in pool construction. When that line begins to move up again is a guessing game.
Many look to no sooner than the end of 2010 to begin to see even a mild uptick in sales among middle-income pool buyers.