As reported in the Biz Times Daily:
Thursday, November 12, 2009
Real estate experts say we’re in a ‘U-shaped’ recovery
The U.S. economy is in the midst of a “U-shaped” recovery that will continue to be sluggish in 2010 but pick up steam by 2011 and beyond.
That was the consensus outlook of a national panel of experts speaking at the BizTimes Commercial Real Estate & Development Conference this morning at Potawatomi Bingo Casino. More than 400 people attended the conference.
For the short term, the panelists expect a “jobless recovery.”
They are encouraged that the nation’s gross domestic product improved in the third quarter. Employment will be the next lagging indicator, followed by occupancy rates at properties.
The panelists are most bullish on the industrial space market, and they said that should bode well for the Milwaukee region, rather than the coasts.
“I think Milwaukee and the Midwest in general is the best-positioned region in the United States. I would be rather upbeat. It will be slow, but it will be steady,” said Rhyne Brown, executive vice president of client development at NAI Global.
Jack Durburg, executive managing director of the Chicago region for CB Richard Ellis, and Ross Moore, executive vice president and director of market and economic research at Colliers International, agreed that the industrial property market is better-positioned for recovery than office or retail.
As jobs are created, consumer spending will rise, followed by the need for additional manufacturing and distribution, which will benefit the Midwest, according to panelist Maria Sicola, executive managing director and head of research for the Americas at Cushman & Wakefield Inc. in San Francisco.
Robert Bach, senior vice president and chief economist of Grubb & Ellis Co., said the industrial market is challenged by a shortage of demand, rather than an “over-supply” problem.
The panelists said they are “doves” about worrying about the threat of inflation, and they said the credit markets are slowly loosening.
Banks are engaged in a practice of “extend and pretend” in addressing distressed real estate liabilities on their balance sheets.
Brown predicted a “managed tsunami” of bad commercial real estate debt coming due, and he said up to 200 more banks may need to be closed by the Federal Deposit Insurance Corp. (FDIC).
The seventh annual BizTimes Commercial Real Estate & Development Book will be published with Friday’s edition of BizTimes Milwaukee.
Today Congress passed a new extension and expansion of the Home Buyer’s Tax Credit. It is before the President for his signature, anticipated within the next couple of days. There are some changes to the tax credit which you can view here: Comparison Chart of Home Buyer Tax Credits. Questions? Contact us today!
Isn’t it time for encouraging news? Well here it is:
|
Posted: Monday, November 2, 2009
 The housing market continues to steam forward.
As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.
It’s the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006.
A Pending Home Sale is a home under contract to sell, but not yet closed. It’s the precursor to an Existing Home Sale.
Trade group data shows that nearly 80 percent of “pending” homes close within 2 months. The majority of those remaining close within months 3 and 4.
When the Pending Home Sales Index rises, it tells us that market activity has picked up. September’s data confirms what we’ve been noticing since February — the Buyers Market is ending.
With more homes under contract in the marketplace, homebuyers typically face one or more of the following:
1. Competitive, multiple-offer situations
2. Reduced purchase price leverage over sellers
3. Fewer seller concessions
Therefore, if you’re buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales. It should result in higher home prices, too
Indeed, we’re already seeing it.
|
Are Short Sales Really the Next BIG THING?
By Rick Sharga
If you believe the hype, it appears that the next phase of the housing market recovery is going to rely heavily on short sales to help remove distressed properties from the home sales pipeline.
A “short sale” is a sale where the bank accepts as full value a price that’s less than what’s owed on the property. The debt is forgiven (although not always without some tax consequences), a foreclosure is avoided, a buyer gets a good deal on a property, the bank saves thousands of dollars in legal fees and the real estate agent makes a commission. Elegant. Practical. Simple. But as we’ll see later, not really quite so simple.
Short sales were never intended to be a mass market solution. Rather, they were relatively rare occurrences that took place when an unfortunate homeowner had a financial catastrophe — a job loss, a divorce, a medical problem — at precisely the same time his or her home lost significant value. When that happened, a loss mitigation manager at a bank would research the market, review the homeowner’s financial documents, carefully consider whether the borrower and loan in question met the criteria to justify a short sale and act accordingly.
This approach worked well when there was one request a week or a few a month. But with over 1.1 million homes in various stages of pre-foreclosure in the RealtyTrac database, the workload for these loss mitigation managers has exploded from several a month to hundreds a week, with no drop-off in the amount of paperwork or research needed. So there are unavoidable delays in simply processing the volume of paperwork.
But it gets worse. Each lending institution has slightly different versions of short sale forms. Property valuations, even — perhaps especially — appraisals, are in a state of flux, so loss mitigation managers are at a loss to know whether a short sale offer is reasonable or just plain silly. And there are some accounting issues: in many cases, lenders may opt to decline a good short sale offer today so that they can defer the loss (even though it may be a much greater loss) to a subsequent quarter — or even later.
And there’s more. A second loan on a property makes it much more than twice as difficult to execute the sale. The second loan either needs to be negotiated away completely, or satisfied with some nominal payment. In other cases, the holder of the primary mortgage may find it better financially to foreclose, wipe out the second lien, and simply use that amount as a discount to sell the property at a profit. Similarly, if there’s mortgage insurance on the note, the investor may decide it’s better to foreclose, collect the insurance, and let the insurer worry about getting value for the house.
So why all the hype? Well, with the REO pipeline clogged and choking, and loan modification programs failing to make a dent in foreclosure numbers, short sales represent an opportunity to feed the demand for discounted properties while reducing the number of foreclosures. What can you do to help make this happen? What does the government have in mind? We’ll cover all that and more in next month’s column.
This morning I received an article that only confirms the trend for Northern Nevada. Take a look at how the foreclosure rate and Notice of Default rate in Nevada compares to other cities throughout the nation:
New Foreclosure Hot Spots Emerge in Q3 2009
By Daren Blomquist
Cities in California, Florida, Nevada and Arizona accounted for all but one of the top 20 metro foreclosure rates in the third quarter among metro areas with a population of 200,000 or more. But one city in the Top 20 was a surprise. Boise City-Nampa, Idaho, posted the nation’s 19th highest metro foreclosure rate, with one in every 57 housing units receiving a foreclosure filing during the quarter — more than twice the national average. Foreclosure activity in Boise increased nearly 142 percent from the third quarter of 2008.
Five of the Top 10 metro areas reported decreasing foreclosure activity from the third quarter of 2008, while many other metro areas with Top 50 foreclosure rates reported sharp increases in foreclosure activity.
“Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,” said James J. Saccacio, chief executive officer of RealtyTrac. “While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A Option ARMs are spreading the foreclosure flood to more metro areas in 2009.”
New foreclosure hot spots flare up
Among the top 50 metro foreclosure rates, the three biggest year-over-year increases were in Boise City-Nampa, Idaho, and Provo-Orem and Salt Lake City in Utah. In several states the largest increases were posted in cities not previously a focal point for foreclosure activity. The Chico metro area posted the biggest year-over-year increase in California, with foreclosure activity up 98 percent from the third quarter of 2008. The medium-sized metro about 100 miles north of Sacramento had a 12.8 percent unemployment rate in August, above the state and national averages.
A similar trend was seen in cities like Reno-Sparks, Nev., with an 80 percent year-over-year increase in foreclosure activity, Prescott, Ariz., with a 77 percent increase, Jacksonville, Fla., with a 64 percent increase, Rockford, Ill., with a 64 percent increase, and Lansing-East Lansing, Mich., with a 41 percent increase.
Top metro foreclosure rates
Las Vegas posted the nation’s highest metro foreclosure rate, with 5.13 percent (one in 20) of its housing units receiving a foreclosure filing during the quarter — nearly seven times the national average. A total of 40,408 Las Vegas properties received a foreclosure filing during the quarter, an increase of nearly 9 percent from the previous quarter and an increase of nearly 54 percent from the third quarter of 2008.
Despite a 13 percent decrease in foreclosure activity from the previous quarter, Merced, Calif., posted the nation’s second highest foreclosure rate, with 3.72 percent (one in 27) of its housing units receiving a foreclosure filing during the third quarter. A total of 3,092 Merced properties received a foreclosure filing during the quarter, down 11 percent from the third quarter of 2008.
Foreclosure activity in the Cape Coral-Fort Myers metro area in Florida also decreased from the previous quarter and from the third quarter of 2008, but the metro area still registered the nation’s third highest metro foreclosure rate — with 3.67 percent (one in 27) of its housing units receiving a foreclosure filing during the quarter. A total of 13,206 Cape Coral-Fort Myers properties received a foreclosure filing during the quarter, a decrease of 5 percent from the previous quarter and down 2 percent from the third quarter of 2008.
Other metro areas in the top 10 were the California cities of Stockton (3.53 percent), Modesto (3.39 percent), Riverside-San Bernardino (3.37 percent), Bakersfield (2.88 percent), and Vallejo-Fairfield (2.85 percent), along with the Reno-Sparks metro area in Nevada (2.67 percent) and the Florida metro areas of Port St. Lucie (2.63 percent) and Orlando-Kissimmee (2.57 percent).
View all metro data.
