Condo Conversions are on the Rise

RISMEDIA, Oct. 5, 2005—(KRT)—North Miami needs to move faster to find decent housing for low-income renters because condo developers are now competing with the city by converting rental apartments, officials say.

After a 10-year lull in condominium conversions in the city, there are now 33 pending applications for condo conversions, Mayor Kevin Burns said.

That will complicate the work of the city's Community Redevelopment Agency, which, among other things, is supposed to buy apartments and renovate them on behalf of renters. That means the agency must take action now rather than setting up plans for the future, said Burns, echoing concerns of other council members.

"Private enterprise is doing this and they're doing it today," Burns said. "I'm looking to put some people into housing now."

State records show that condo conversions peaked in North Miami in the early 1970s, when hundreds of apartments were converted every year. Before buildings in Sans Souci and Keystone Point converted earlier this year, there had been no conversions since 1995.

It's not clear where the pending conversions are located, though Burns fears that some will be within an area set aside for city redevelopment.

Burns said that won't be known until they're finalized, which can take several months.
Frank Schnidman, a consultant acting as director for the redevelopment agency, said he understands the need to create housing quickly before renters are displaced.

"Something needs to happen. We can do it," Schnidman said.

Burns said long-term projects, such as affordable housing at Rucks Park on Northeast Fifth Avenue, may have to wait.

Burns said he is in favor of quicker projects like renovating apartments.

"Rucks Park may need to be redesigned a little bit, to make it more practical, but in the meantime we can get some people into rehabbed housing," Burns said.

The agency's task is to create decent housing on the city's west side, using tax revenue from the luxury Biscayne Landing development on city-owned land. Traffic and business improvements are also planned.

The city will be ready to take applications for new housing by early next year, planning consultant Steve Siskind said. Thousands will apply, he said, and the agency needs to be prepared to keep track of them and counsel them on good credit ratings and other issues.
Schnidman also agreed to a request by council member Marie Steril to hire a Creole-speaking staff member for the agency. In the last Census, the city was about one-third Haitian, one-quarter Hispanic, and one-sixth each African-American and white non-Hispanic.

Copyright © 2005, The Miami Herald
Distributed by Knight Ridder/Tribune Business News.

RISMedia welcomes your questions and comments. Send your e-mail to: editorial@rismedia.com.

Who wins in a real estate market downturn

Perspective: Many lose, but some win when housing market slows

Friday, October 07, 2005

Inman News

If the housing market turns south, a lot of people will lose: homeowners, investors and real estate professionals, to name a few. But a lot of people would benefit from a slower real estate market. Inman News has compiled a list of beneficiaries:

1. Foreclosure and pre-foreclosure investors: Marla Webb, a senior advisor to the Foreclosure Economic Advisory Council, a non-profit group affiliated with the for-profit Foreclosures.com, said experienced foreclosure investors and investment groups who are wise to long-term real estate cycles can profit in a downturn.

"The folks who do best are those who are already engaged in foreclosure investing – people who are building a portfolio. It's not those who like to buy and flip," she said. "Much of the hot markets have been heated up by people who don't have a real understanding of long-term management aspects of real estate. People who are speculators jump in and out."

Real estate speculators can boost a booming market higher and, similarly, drive a slumping market further down, Webb said. Rising foreclosure rates may scare some short-term speculators away while attracting the more seasoned investors, she added.

"Investment in real estate, like in many other commodities, tends to provide momentum in the direction it started to go. I call it the 'greased rails syndrome.' I think investors are greasing the rails in the direction of less of a seller's market." As investors who rode the boom bail out, they may precipitate a faster downturn, she said.

While foreclosure statistics don't yet indicate a significant turn in the U.S. real estate market, Webb said there are signs of cooling. And higher interest rates and higher energy costs could be a factor in a real estate downturn.

2. Borrowers who took out conservative mortgages and didn't get in over their heads: Prudence wins in a slow housing market. While those buyers who took a risk with exotic products like interest-only, no-money-down loans could get hit hard, the ones who borrowed under more traditional terms and stayed within their buying power should have no worries.

Likewise, lenders that kept tight underwriting standards during boom times shouldn't have to worry too much about excessive defaults or foreclosures coming their way.

3. Tax lien investors: These investors would benefit if there's a rise in delinquencies, said Howard C. Liggett, executive director of the National Tax Lien Association, which represents lien investors. Investors buy liens on the property taxes, which are auctioned off by local governments, and profit from the interest that is set by the state. In some cases, investors can receive up to 18 percent return on investment, according to NTLA.

The property tax lien market has prospered during boom years, with 32 states auctioning off $5 billion to $7 billion of unpaid cash bills per year, Liggett said. This segment also is expected to do well in a housing slump.

4. The prognosticators: While most economists and academics have shunned the notion of a housing bubble, some have been talking about it and predicting it's downturn for years. Among them: Yale University Economist Robert Shiller, author of "Irrational Exuberance" and cofounder of real estate analytics firm Fiserv Case Shiller Weiss; Dean Baker, co-director of the Center for Economic and Policy Research; and economists working on the Anderson Forecast produced by the University of California, Los Angeles.

"Each month that goes by with higher and higher levels of spending on homes, and higher and higher prices of existing homes, we are building a larger and larger mountain of adjustment to come," according to an analysis by Edward Leamer, director of the UCLA Anderson Forecast, said in a June forecast. "The next recession is highly likely to get started in the housing market, which has been made very fragile by very high levels of appreciation in some markets and by high levels of residential investment nationwide."

5. Wait-and-see buyers: They shopped around for a home at the top of the market, but backed off because there were too many multiple-offer situations and the asking prices were too high. As long as interest rates for mortgages remain low, these wait-and-see buyers will benefit from a slowing market, which shifts the balance back from the seller's corner. Plus, real estate agents will be fawning over them and treating them much better than during boom days when buyers were a dime a dozen.

6. Auction companies: Historically, auctioneers have done well in booming markets, and even better in slower ones, said Tony Isbell, president and CEO of RealtyBid International, an online auction company based in Gadsden, Ala. "Auctioneers as a whole had a record year last year in real estate, and it's anticipated that (the sector) will really explode as things slow down," he said.

Auctions typically take less time than traditional selling methods, Isbell said, and especially during slower markets. The two main benefits of selling by auction are that sellers maintain more control over the terms of the process, and the process is expedited, he said.

7. Lead generation companies: Companies offering up home buyer leads to real estate brokers and agents may see a surge in customers as more agents eye prospective buyers as clients. The listing agents who relied solely on listing properties for business during boom days will be looking for new ways to build up a network of buyer clients since listings will be scarce during a slowdown.

8. REO companies: These companies will benefit because slower markets tend to churn out more real estate foreclosures. Banks that end up holding title to a bunch of property will likely hand it over to an REO outfit that can sell it off quickly so they don't have to waste any time holding ownership of the property.

9. Wall Street: During the housing boom, many investors turned to real estate while the stock market slumped after the dot-com bust. If home-price appreciation rates slow or stagnate, many investors will pull out of Main Street and head back to Wall Street.

10. Scam artists: They benefited from the boom and they'll benefit from the big chill too, but will switch their focus. Instead of offering people broad advice on how to get rich quick in real estate investment, they'll be offering to save troubled borrowers from foreclosure using dicey tactics that many times result in the borrower losing his or her home.

Las Vegas High Rise Condo Hotels

Las Vegas High Rise Condo Hotels

Real Estate Internet Technology

Real Estate Internet Technology

Pimco's take on housing

Chris Palmeri

October 03, 2005

Pimco, the big bond fund manager run by Bill Gross, has a long record
of beating the market. Their take on housing prices and the economy?
Pimco predicts a "stagflationary soft landing." The fund company
figures the Federal Reserve has just about reached its limit on
interest rate hikes and will stop the increases at a 4% federal funds
rate. As a result, Pimco expects that housing price appreciation will
slow to the mid-single digits. Couple that with higher energy prices
and Pimco expects the economy to slow slightly, hence the
stagflation. But the bond gurus aren't taking any chances. Fearing a
housing meltdown in some markets, Pimco has representatives riding
around with realtors in some cities, monitoring listing times, price
reductions and other signs that housing is slowing down even more
than in Pimco's rather benign forecast. Stay tuned.

02:40 PM

S&P: Housing bubble more likely to fizzle than crash

By John Spence, MarketWatch
Last Update: 11:22 AM ET Sep 20, 2005

BOSTON (MarketWatch) -- The popping of the red-hot U.S. housing market will likely play out as a steady deceleration of prices followed by stabilization, rather than a dramatic national downturn, Standard & Poor's said Monday.

"The bubble should end with a fizzle, not a bang," said S&P Chief Economist David Wyss in a conference call Monday, adding that it's difficult to nail down exactly when the market might weaken, and what the implications might be for the overall economy.

Still, Wyss indicated that rocketing home prices in several parts of the country are unsustainable and cannot go on forever. Looming interest-rate increases are another potential problem that may affect two sectors linked to the housing market: home-builder stocks and real-estate investment trusts.

Credit rating and investment-research agency S&P unveiled multiple reports on the global housing market Monday.

Currently, the average U.S. home price is roughly 3.1 times the average household income, the highest in history and up from an average of 2.6 times since 1960, according to S&P. Driven by low mortgage rates and looser lending standards, home-ownership levels of 69.4% are also at an all-time high.

Yet most of the price appreciation is concentrated in sizzling markets in California, Florida and the Northeast. For example, on both coasts, housing costs have risen at least 30% above the normal home price-to-income ratio, S&P calculated.

Despite regional dangers, S&P estimates it would take a 30% decline in national home prices, combined with a 50% drop-off in new-home starts, to drive the economy into even a slight recession, Wyss wrote in a recent report.

"We think such a scenario is unlikely," he said.

Tiny bubbles for home-builders

U.S. home-builders have been one of the most volatile and closely watched stock sectors in recent months, with heated debate devoted to the existence of a housing bubble. Over the past year, the Dow Jones U.S. Construction Index (DJ_HOM) has gained 48.4%.

Part of the reason the sector's stocks have been on investors' radar screens is that many of the largest builders do significant business in the country's hottest markets.

The 19 home-builders rated by S&P accounted for about 25% of the 1.6 million new single-family homes purchased in 2004, said S&P credit analyst James Fielding. They operate in only 25 states and approximately half of their revenue comes from California, Florida and Texas.

Therefore, home-builder earnings could take a hit if there is a cooling in the hottest, most profitable housing markets.

In the most likely scenario, Fielding sees rising long-term interest rates making homes less affordable in the important coastal markets. This could lead to a leveling-off of prices and higher cancellations in the speculative markets, with builders "slow or unable to quickly adjust production and overhead to lower demand," he wrote in a report.

"As a consequence, profitability weakens bur remains above historical averages, resulting in a deceleration of positive ratings momentum," Fielding concluded.

Mixed outlook for REITs

Historically low home-mortgage rates and a lack of rental demand have weakened fundamentals in the REIT market, according to S&P equity analyst Raymond Mathis.

However, REITs have managed to outpace the broad market so far this year. An exchange-traded fund tracking real-estate stocks, StreetTracks Wilshire REIT Fund (RWR) , is up 9.9% year to date, 6.4 percentage points higher than the S&P 500 Index (SPX) over the same period, according to investment research firm Morningstar Inc.

"The stocks are not tracking fundamentals, but responding to the housing bubble," Mathis said in the conference call Monday.

In particular, he sees a bubble in the valuation of multifamily residential REIT stocks, which he believes are overvalued by about 13.6%.

Yet rising interest rates and falling home prices could be a good thing for REITs as "new households and even some existing homeowners gravitate toward rental housing," S&P said.

How to get the best appraisal of your home

By ROBERT J. BRUSS, Inman News Features October 2, 2000

A few months ago I refinanced my home mortgage to lower the interest rate and combine my old first mortgage with my home equity credit line and lower my payments. I figured it was time to get rid of that adjustable-rate home equity credit line because it looks like interest rates are heading up.

My current mortgage lender offered a "stated income" jumbo fixed-rate loan with virtually no fees except for the lender's title policy and an appraisal fee. It seemed like a very good deal. Incidentally, a stated-income mortgage means the lender doesn't demand income verification, such as income-tax returns or W-2s. It's great for self-employeds like me.

The two most important things to the lender on such a mortgage are (1) the borrower's FICO (Fair, Isaac and Co.) credit score, and (2) the mortgage's loan-to-value ratio. With a FICO score around 750 and a loan-to-value ratio about 50 percent, my mortgage was an obvious "no brainer" for the lender.

But I was worried about the appraisal. The reason is I live in a town where every home is different. A "bad appraisal" can kill a home sale or mortgage refinance. I know. It happened to me in the past.

In the past, I've written many times that real estate appraisal is an art rather than an exact science. But, thanks to computerized appraisals, I'm beginning to wonder.

After my refinanced mortgage was approved, subject to the appraisal, my lender's loan agent (who was located in Las Vegas) asked if I knew of any good local appraisers. Even after phoning some of my Realtor friends who sell homes in my town, there was no consensus of who is the best appraiser.

So the loan agent phoned a few nearby bankers and hired a highly recommended appraiser from a nearby community.

When she arrived at my house in her sports car, with her dog in the back seat, I wasn't sure what to think. Although my house is "average" for the area, the appraiser was neither critical nor praising. But she was very professional and extremely competent.

I was armed with some recent "comps" (sales prices of similar nearby homes) to hand to the appraiser, along with a list of my home's features. But when I mentioned what I thought my house is worth, she replied, "You might be a bit on the low side."

That's when I decided to keep that information to myself and see how the appraisal turned out. Two days later, the loan agent phoned from Las Vegas to tell me the appraised value. It was about $100,000 higher than I estimated.

When I received a copy of the appraisal from the lender, it turned out the appraiser knew of several very recent comparable home sales prices within a block or two of which I was not aware. I'm sure glad I kept my mouth shut.

Wondering how I could be so wrong about undervaluing my home, I then went to several Internet Web sites. Some had outdated nearby home sales prices as much as 12 months old (most mortgage lenders will only accept comparable sales prices within the past six months).

But then I found a Web site where all I had to do was enter my address and my home's square footage. Within a few seconds, it came back with a valuation at almost the same amount as the expert appraiser's valuation of my home, based on four nearby recent comparable home sales prices.

This was my second personal experience with computerized appraisals. My first was a few years ago when I obtained a home equity credit line on my second-home condo in Minnesota.

A day or two after I gave the loan agent my guesstimate of the condo's value, based on recent sales prices I knew about, she phoned to politely inform me I was about $50,000 too low, based on the lender's computerized appraisal confirmed by a drive-by appraisal. The result was a larger credit line than I requested.

My third computerized appraisal experience occurred about six weeks after my refinanced home mortgage was recorded. I was contacted by another lender offering me a large home equity credit line with no income verification, no costs and a below-prime interest rate.

Although I didn't need the money, remembering the old motto, "Borrow money when you don't need it," I accepted. This second lender used a computerized appraisal, which confirmed I had plenty of home equity.

A few days later, I received an overnight package of papers to sign in front of a notary public (which cost me $20). The "clincher" was I got 25,000 frequent flyer miles on my favorite airline (United) just for taking out the home equity credit line.

Now I've got a low-interest credit line, a checkbook, and even a Visa credit card just waiting for me to find a place to use that money.

Are appraisers obsolete? I don't think so. Every month I read the excellent "Appraisal Today" newsletter by Ann O'Rourke, which reports on new developments in the appraisal industry.

Appraisers are the mortgage lender's eyes and ears to verify the property's condition and market value. Especially with VA and FHA home loans, appraisers are required by lenders to note the need for any repairs that affect the desirability and market value of the property.

For example, I once had an FHA appraiser require the back of a house he appraised be painted (although in my opinion the front of the house also needed fresh painting).

As an outside observer, I am amazed at the never-ending changes in professional appraisal rules (called USPAP), the importance of computers to appraisers, and the need for an appraiser's personal judgment and experience to estimate a property's market value.

I am also surprised at the critical role a few dishonest appraisers play in the many real estate mortgage fraud cases where crooked appraisers get sent to jail. But I hasten to add those "bad appraisers" are a very small portion of all the hard-working honest appraisers.

Savvy homeowners and realty agents can use the Internet to research home values within a specific area. As I recently discovered, computerized appraisals are becoming more and more accurate. But there are still a few basic rules to assure an accurate appraisal:

1. If you need a top-dollar appraisal of a house or condo, whether you are a buyer, seller or refinancing homeowner like me, the first step is to get it into its best "model home" condition. Experienced realty agents can provide excellent advice on how to do this, such as by cleaning, repairing and fixing up.

2. Either the property owner or the realty agent involved in the property sale should always accompany the appraiser to answer any questions about the home's benefits and features.

As I was prepared to do when my home was recently appraised, it helps to be prepared with a list of nearby recent comparable home sales prices and a list of the home's features.

It is not unusual for a busy appraiser to inspect three or four homes per day and, after a while, even with the help of digital photos, those homes tend to blur in the appraiser's mind so any information the appraiser has when writing the appraisal can help.

3. Although the home buyer or owner often pays for the appraisal, technically the appraisal belongs to the mortgage lender who ordered the appraisal. Borrowers should be certain the lender agrees to promptly supply a copy of that appraisal so the borrower can review it and correct any mistakes the appraiser might have made. My lender (Wells Fargo) even sent me a FedEx overnight copy of the appraisal.

If you feel the appraiser has made a serious error and he or she refuses to correct it, ask the mortgage lender for a prompt "review appraisal" by another appraiser to be paid by the lender. Should you discover a violation of appraisal standards, a complaint to the state appraisal license agency will usually produce an investigation and even discipline, if warranted.

MORE BRUSS COLUMNS »

Copyright 2005, Naples Daily News. All Rights Reserved.

Dot-com pioneer auctions home on eBay

Homeowner sells luxury home online

Monday, October 03, 2005By Janis Mara
Inman News


Dan Whaley's house for sale in San Mateo, Calif.

An Internet pioneer who founded one of the first online
travel networks is selling his Northern California waterfront home on eBay.

Dan Whaley, who founded The Internet Travel Network in 1994
and later sold it to Sabre/Travelocity for $750 million, had href="http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=4407785634" target=blank>received 96 bids on the San Mateo, Calif., house as of Friday, with the highest bid at $812,100.

Selling a home without the help of an agent is unusual under any circumstances, even when the seller uses established companies such as Help-U-Sell and services like ForSaleByOwner.com. But Whaley has gone even further. He put his 1,600-square-foot, three-bedroom house for sale on eBay without even naming a reserve fee.

This meant that, at least in theory, the 1957 waterfront bungalow with a koi pond, a pool, a stone hot tub and a dock on the San Mateo Lagoon, could have sold for 99 cents – a bid that actually was in effect for a couple of days.

"It's a little surreal to be sitting in my house watching the bidding on eBay," admitted Whaley, 36, who also listed the property on craigslist with a pointer to the eBay auction.

"I get my coffee in the morning and sit down and see how much my house is worth. It was really nice to get beyond the 99-cent mark – that really improved my sense of self-worth," joked the millionaire.

Other three-bedroom homes in the San Mateo lagoon area have sold for between $525,000 and $899,000 in the last year, according to San Mateo Realtor Sal Rodriguez. The bidding ends Oct. 5, so there's plenty of time for bids to go higher. Whaley feels confident he'll get a good price.

"So many people early on asked me, 'Why didn't you set a reserve price?'" Whaley said. "But there's an interesting option pricing psychology. Non-reserve auctions outperform reserve auctions by a wide margin because you draw a huge pool of people who bid off each other," Whaley, who was designated one of the "Top 25 Most Influential Travel Executives" by Business Travel News in 1996, said.

The businessman, who says the first travel reservation over the Web went through his living room in 1995, spent a lot of time talking with real estate agents before he decided to sell the house himself.

"When I talked to agents, I know how much I invested here, I know what it's worth and I know it's special, it's outside the norm – this one required special effort. Nobody came to me in a way that convinced me I could have some peace of mind and leave this in their hands. Nobody was really hungry for the deal. So I thought I would do it myself," Whaley said.

Whaley said, "It's not that I would never use a real estate agent, or that I have it out for agents. I think this is a unique sale and I know the house best, so maybe it's the kind of thing where a sale by owner makes sense."

For-sale-by-owner listings are not new on the Internet, but selling a home on eBay is unusual. Whaley acknowledged that the giant auction site isn't the best vehicle for marketing the property to a large number of people.

"I am using eBay as an order taker, a broker between parties, while I market it outside using different techniques," he said.

To market the house, in addition to listing the house on craigslist, Whaley is discussing the sale on a neighborhood e-mail list. "That list is a great place to let people know you're selling your home. Members tend to tell friends who want to live here that a home is up for sale."

The craigslist and eBay listings include links to a href="http://www.lagoon.org/" target=blank>Web site Whaley established as another marketing tool. The uncluttered, vivid site consists of one large square in the center of the page that rotates photos of the Mediterranean style pool, koi pond, Moroccan style fireplace and other features of the home. The site also has links to a description of the house and the bidding process.

There's also a link to the "href="http://www.ellabakercenter.org/page.php?pageid=20" target=blank>Books Not Bars" organization, a group that works to direct youthful offenders to schooling and
other organizations instead of incarceration. Whaley has long been associated with Books Not Bars and is donating a large part of the money he'll save on real estate commissions to the group.

Though eBay's auction system isn't geared toward selling houses, Whaley has come up with a number of mechanisms to compensate.

"Within 72 hours of the close of bidding, I have asked to see some documentation from each bidder that this is a legitimate offer," Whaley said. Bidders must fax scanned copies of loan approval letters or other documentation to a number provided on the eBay and Lagoon.org sites.

This forestalls the possibility of a last-minute flurry of bids, as is often typical on eBay, and also makes it possible to arrange a showing of the property to those who prove acceptable, Whaley said. He'll figure out how to handle the showing later on in the process, he said.

"If there's 200 qualified buyers, I'm going to open the house for two days and not have a private showing. If it's 10, then I'll schedule people independently," Whaley said.

Whaley is working with an attorney who will write the contract, he said. He has also enlisted Rodney David Mann Jr., a mortgage broker and close personal friend, to work with buyers on the financial end of things. Escrow will be handled by Kim Robertson at Chicago Title in Palo Alto, with whom he has worked before. "They will handle the closing," Whaley said.

Whaley is upbeat about the process and sees his novel approach as a natural given his background.

"I've been actively involved in Internet projects, it's in my blood. The Internet is not a different universe," the businessman said. "It's a better way of connecting directly to people than we've had before, and so to me it seemed like a natural way to sell a house."