Condo market seeking respect

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Condo market seeking respect

Betty Beard
The Arizona Republic
Dec. 29, 2005 12:00 AM

Some housing experts still look down on condominiums, but this might be the year that these little housing units finally get some respect.

The condo market in the Southeast Valley isn't just a group of Mesa patio homes popular with winter visitors anymore. It now includes penthouses priced at more than $1 million being built along the shores of Tempe Town Lake and luxury apartments being converted to condos in Ahwatukee Foothills and Chandler.

The market for condos, townhouses and patio homes in the Southeast Valley also changed radically over this past year because the lower-priced offerings became one of the most affordable options for new home buyers and young families who were priced out of soaring single-family homes. And Tempe's man-made lake became a place where people are willing to live a dense lifestyle.

While Realtors aren't all convinced this condo activity is a good thing, they agree it started because the prices of single-family homes climbed rapidly during the past year.

"This last year just wiped out first-time home buyers unless they can buy condos," said Elaine Sans Souci, a Realtor with Keller Williams East Valley in Gilbert.

A year ago, she could have showed someone willing to spend $150,000 a detached, single-family home. Today, if anyone wants to buy a nice home for less than $200,000 they likely have to look at a condo, she said.



Some housing experts remain leery about condos because they remember the last condo construction and conversion craze in the late 1970s and early 1980s. The condo market soured, and some of those converted condos eventually reverted to apartments.

Casey Strunk, chief executive officer of Diamond GMAC Real Estate in Scottsdale, is especially blunt, saying "When you see conversions coming into any market, it's time to get out . . . They are the hardest thing to get to work - condos, townhouses or patio houses. They are just so far overdone in my opinion it's not even funny."

He started his real estate career in 1979, during the height of the previous conversions, and saw many of those units depreciate and being sold for sinking prices.

Jay Butler, director of the Arizona Real Estate Center at Arizona State University, points out that homeowners don't like having homes 12 feet apart.

"What are you going to do if you are six inches apart?" he said. "The more intensive, dense lifestyle brings a greater requirement to get along with your neighbors.

"They are not a real preferred lifestyle. We like our open space and the whole bit."

Nevertheless, condos have become so popular not only as homes but investments in the past year that their prices appreciated at least 30 percent in the Southeast Valley, according to Sans Souci.

The average 1,100-square foot condo that sold for about $120,000 last December is selling for about $170,000, she said.

Josh Crockett, an account executive with a home-warranty service company, got tired of paying rent and bought a 1,600-square-foot condo a year ago in Gilbert for $179,000. "I didn't feel like I needed a full home. I didn't want to worry about landscaping," he said.

The condo had appreciated from March to December 2004, and he thought he was buying at the top of the market. But since he bought, its value has soared about 50 percent.

"I didn't buy it with the intention to buy an investment," he said.

Lois Tiedemann, with Keller Williams Southeast Valley, said condos can be excellent investments because their associations maintain the exteriors and make sure they are kept up.

"Condos or townhouses basically take care of themselves as long as you have good renters in there," she said.

She bought one herself in Tempe in February 2003 and said it has doubled in value.



At least 7,800 apartment units are being converted to condos and at least, 3,300 new units are being built this year throughout the Phoenix area, according to Butler.

The conversions aren't going to make much of a dent in the rental market because condos represent only about 8 percent of the housing units. And Butler believes most condos will end up being rentals anyway, especially since many of them appeal to winter visitors and retirees.

Brad Johnson, a researcher with CB Richard Ellis, said there are at least 330,000 apartment units in the Phoenix area.

"By no means will there be a shortage of rental units," he said.

But will the construction and conversions continue in 2006?

Johnson said he read that investors are starting to pull back in some areas to avoid risk of a market downturn.

"Lenders with three deals they are financing might hesitate to take on a fourth or fifth to see how the first ones sell," he said.

TV's Hot Properties: Real Estate Reality Shows

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TV's Hot Properties: Real Estate Reality Shows

By Teresa Wiltz
Washington Post Staff Writer
Wednesday, December 28, 2005; C01

This, people, is how you know the fearsome bubble is finally bursting (as if the moss growing on your neighbor's For Sale sign weren't enough of a clue): We're finally left with nothing to do but watch. Indeed, this collective lust for landholding, this national pang for property, has morphed into a strange new obsession. Instead of shopping for a house, we've taken to camping out in front of the telly, watching other people on the prowl for a place : "House Hunters" and "What You Get for the Money" on HGTV. "Location, Location, Location" on BBC America.

For a change of pace, we watch other people trying to get rid of their homes: HGTV's "Designed to Sell" and A&E's "Sell This House" and "Flip This House" (not to be confused with TLC's "Flip That House"). For the truly desperate, there's "Buy Me," HGTV's 30-minute cinema-verite excursion into the addled brain of the distraught homeowner trying to unload a money pit, and quick. And for anyone addicted to the blood lust of the sport, there's Discovery Home Channel's "Double Agents," which pits two Realtors against each other.

These shows "are not really for people that are going to buy and sell a home," says Jeffrey Sconce, associate professor at Northwestern University's screen cultures program. "They're for people who have a fantasy of buying and selling a home."

We've moved beyond the makeover mania of a couple years ago, when everyone was "Trading Spaces" and doing unto their neighbor what they would not do unto themselves, painting living rooms chartreuse and carving up Grandma's dining table and turning it into faux modern modular blocks. This isn't about designing on a dime or extremely redoing our homes or our lives.

In the past year, a batch of new shows-- about 20 of them -- have cropped up on HGTV, Fine Living, Discovery Home, A&E and TLC. ("House Hunters" is the most popular, averaging just under a million viewers per episode, with the nakedly greedy "Flip This House" coming in at a close second, an average of 802,000 viewers per episode -- big numbers for cable TV.)

These shows are all about the minutiae of real estate, condensed into easy-to-digest, made-for-cable bites: Stomping around scary-looking fixer-uppers. Scoping out the moldy tile in a "vintage" bathroom. Sitting out open houses while complete strangers turn up their noses at your rehabbed kitchen. Signing reams of paperwork. Waiting for the Realtor to call you with the news: You've been outbid. Or, since this is The World of TV, where everyone (usually) has a happy ending: "Congratulations!"

And, this being television, these shows are just a beat or two behind real time, a case of pop culture bringing up the rear in what economists like to call your classic lagging indicator: The bubble's bursting, and now we have a slew of television programs coming at us, after the fact.

Never mind the softer market -- which many real estate industry types deny -- we're still obsessed. "All of America right now is having a love affair with real estate," says New York real estate mogul Barbara Corcoran, founder of the Corcoran Group.

Most Americans -- almost 70 percent -- are homeowners. "Everybody's bought in," Corcoran says, "everybody's in the parade. . . . With so many people bragging at cocktail parties or at church how much their properties have gone up," it was just a matter of time before we'd see our personal obsession played out on the little screen, says Corcoran, who has her own real estate television show in the works. Especially now that we can't brag so much anymore and are praying to hold on to that equity.

Plus, watching others suffer can be so darn compelling. Maybe this isn't destination TV -- most shows air during prime time and are repeated during the week -- but if you're surfing and happen to settle on one of them, it's hard not to get sucked in.

Witness a recent episode of "Buy Me": We see the breezy Natalie and Henry, who figure that while the market's hot, they might as well make a mint on their McMansion. And then, after the first open house, when no one bites, we find out the truth: Said McMansion costs about 10K a month just to keep the lights on, the propane gas grill fired up and the pool and the Jacuzzi bubbling along, and the couple is desperate to ditch their property. Still, they list their three-bedroom place at $875,000, when houses in their neighborhood go for $750,000 at most. Soon they're screaming at their agent, they're screaming at the buyer's agent, and they're screaming at each other, too.

Drama.

Or, as the narrator intones at the show's end in a classic Rod Serling timbre:

"High expectations and economics often clash in the real estate market. . . . Buying and selling your home is more than just a business transaction. It's a roller coaster of emotion."

Which is exactly why it makes for good TV, says HGTV President Judy Girard. "Real estate lends itself very, very well to television. It touches people. It's storytelling at its best," she says. "It's a framework where people are bringing their lives, their hearts and souls into buying a house or selling a house."

Observes Kent Takano, vice president of programming for Fine Living: "We're all creatures of curiosity. It's very vicarious. It's window-shopping without" leaving the comfort of the couch.

While the audiences for these real estate shows are small compared with network TV, they attract a middle-class demographic that advertisers desire, Sconce says, hence lots of commercials for Home Depot and Benjamin Moore paint.

At HGTV, three of the five top-rated shows revolve around buying and selling homes. In 2004, the channel had two real-estate-related shows. This fall, it added two more, "Buy Me" and "What You Get for the Money." Next year, it will add four more, including "International House Hunters" (the titles of the others have not been announced), where yuppies from around the globe hunt for a home, for a total of eight shows. And that's just on one network.

Coming on Bravo: "Million Dollar Listing: Hollywood" is what the network describes as "a six-episode original series chronicling the high-stakes, cutthroat world of real estate in a thriving market."

Fine Living has two in the hopper, scheduled for early 2006 release. One will focus on architecture, the other on the "science" of real estate, the anatomy of the deal.

Yes, Takano says, the network is cutting "this pie thinner and thinner . . . ." But, he adds, "we're trying to skin it one more time. We think we're going to do great."

Even demi-celebrities are getting in on the act. The Learning Channel recently launched "The Adam Carolla Project," where the host of Comedy Central's "Too Late With Adam Carolla" (a former carpenter) guts his childhood home with the goal of flipping it for more than $1 million.

"Many of us are cynical," says Corcoran, who goes into production in January with her reality TV show, "The Bubble." "We don't trust the stock market. We don't trust corporate America. We don't trust the government. There's a tremendous need to put your money into something you can put your hands on."

Earlier this year, Vincent Hurteau, a D.C. real estate broker and president of Continental Properties, started shopping around a show he calls "Unreal Estate." His idea: Each episode would take viewers to a different city, contrasting the most expensive house in the city with what you can reasonably expect for your money -- say, a Dupont Circle mansion vs. a Brookland three-bedroom.

"A lot of people go to open houses," Hurteau says. "They love to see how other people live. And they love to know what things cost. Open houses are a way to that. Now they can do that on TV."

Hurteau started peddling his show around in the spring of 2004. And then the real estate market heated up. And then he got so busy working on real estate dreams, he says, he became too busy to pursue his small screen ones.

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Contractor getting ready to demolish Tokyo condo

The Yomiuri Shimbun

Demolition workers start preparatory work ahead of the demolition of Stage Daimon in Minato Ward, Tokyo on Tuesday morning.

Preparation for demolition work started Tuesday at a condominium in Minato Ward, Tokyo, that was built using fudged earthquake-resistance data. The residents have already moved out of the building.

Stage Daimon, a nine-story condo with eight units for rent, was one of four buildings the Construction and Transport Ministry cited when filing a complaint with the Metropolitan Police Department against the former architect Hidetsugu Aneha, 48, on suspicion of fudging the buildings' design specifications.

The condo's quake resistance is only 26 percent of that required under the Building Standards Law. It is feared the building would collapse if hit by an earthquake with an intensity of upper 5 on the Japanese seismic scale of 7.

A demolition contractor assigned by Shinoken, a Fukuoka-based builder and developer, started to erect scaffolding around the building at 9 a.m. The contractor will begin ripping out the units' interiors on Jan. 10 and plans to demolish the building between Jan. 23 and April 1.

1 BR @ Plaza, no park view: $2M

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1 BR @ Plaza, no park view: $2M
New York's Plaza hotel goes condo, with 181 posh units and a new mall area.
December 27, 2005: 2:04 PM EST

NEW YORK (CNNMoney.com) - The first condos have gone on sale in one of the most storied of New York hotels, the Plaza, and they're anything but cheap.

Prices start at $2 million for an 1,100-square-foot one-bedroom condominium -- and that's for one that doesn't have views of Central Park -- and max out at $32.5 million for the penthouse, the New York Daily News reported Tuesday.

A one-bedroom facing the park will set you back a cool $4.5 million, the newspaper said.

The hotel is being renovated and converted into a mixed-use apartment complex with 181 condominiums and high-end retail stores. An Israeli company, Elad, bought it for a record $675 million in the fourth quarter of last year.

The renovation has not been without controversy, as groups have argued that the mall will detract from the hotel's historic integrity.

"It isn't part store, part hotel, part condo," Elizabeth Ashby, president of New York's Historic Neighborhood Enhancement Alliance, told the Daily News. "It is The Plaza."

Donald Trump owned the hotel from 1988 to 1995, and married Marla Maples there in 1993. Michael Douglas and Catherine Zeta-Jones were married there in 2000.

The hotel will soon celebrate its 100th birthday -- it debuted to the public in October 1907.

Al Gore's Move to San Francisco Generates Real Estate Buzz

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Al Gore's Move to San Francisco Generates Real Estate Buzz

When Al and Tipper Gore move into a neighborhood, the place suddenly has a whole new buzz.

San Francisco, California (PRWEB) December 28, 2005 -- Following news that Al Gore and wife Tipper have purchased a multimillion dollar condo at the new St. Regis highrise in San Francisco, well-heeled home buyers throughout the city are clamoring to join the neighborhood.

"Ever since people learned that Al and Tipper Gore were moving into the St. Regis, I've had three times as many inquiries about the place," says Damion Matthews, a realtor specializing in San Francisco's luxury condo market.

"There's something about living near a person so powerful and important that really excites folks," he says.

"A client of mine just moved into the swanky Four Seasons a few blocks away, where the Mayor happens to be. It's a great place. But when she heard the Gores were moving into the St. Regis, she called me up and said she wants to sell her place so she can move to the St. Regis right away! I guess it's more exciting to live near a former VP than a current Mayor."

The Gores' new neighborhood, formerly a block of drab old office buildings and parking lots, has recently been revitalized by construction of the Museum of Modern Art, the beautiful Yerba Buena Gardens, and now the gleaming new 40 story St. Regis tower.

But before the Gores bought their condo, there was already considerable interest in the building. Of the 102 units put up for sale, less than 20 are still available.

"It's gorgeous! One of the finest condo buildings in the country," says Matthews, who points out that among it's best qualities are its spectacular views of the city and bay.

"Al might prefer to have a view from the Oval Office, but the stunning sights he gets from his new condo must be a good consolation. From his vantage point, he can even see his new television studios across town," says Matthews, speaking of the "Current TV" headquarters on Townsend Street.

To much of the country, the estimated $2 million the Gores spent for their condo might seem astronomically high, but in the pricey San Francisco market it's considered reasonable. Just a few floors above the Gores, one investor purchased three Penthouses for a total estimated at $30 million.

Amenities at the building include 24-hour room service, butler service, a fitness center, spa, lap pool, even a world class restaurant that's been receiving rave reviews.

"With such high demand for this kind of luxury living, if the Gores decide to move out in a couple of years, they could pocket at least $500,000 in profit," says Matthews, who tracks the condo market for the website www.liveinsf.com

"But if Al and Tipper Gore are as happy to be in San Francisco as we are to have them here, they won't be leaving anytime soon."

Public Meeting on Condo Plan Set

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Published Tuesday, December 27, 2005
WINTER HAVEN
Public Meeting on Condo Plan Set

City officials will have a public meeting to discuss the impact that planned condominiums will have on the neighborhood around lakes Howard and May.

The meeting will be at 6 p.m. on Jan. 5 at the Winter Haven Church of God at 675 Ave. E S.W.

The Maxcy Development Group plans to build 150 to 200 condominium units on property purchased from the city that was the site of the Public Works complex, and adjacent property that is now Osborn Marine.

Representatives of the developer and city staff will be at the meeting to provide information and answer questions.

For more information, call the Neighborhood Services Division at 863-293-4482 or 863-298-4483.

Note to tenant: Your home's for sale

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Dec. 24, 2005, 8:58PM

Note to tenant: Your home's for sale

Florida condo conversions create complex situation

By JOHN PAIN
Associated Press

MIAMI - Diana Perez got the letter a few months ago: the apartment complex where she and her family live was converting into condominiums. They had to leave if they couldn't pay a 20 percent down payment on their two-bedroom apartment, now selling for $185,000.

That's $37,000 up front on the apartment they now rent for $900 a month - too much for the 36-year-old who works in a nail salon and her car salesman husband, so they're looking for someplace else. But in the red hot Florida real estate market, they're having trouble finding anything comparable nearby.

"What I want to find is a place where I can stay and they're not going to kick me out" if the owners decide to convert into condos, she said.

As apartment building owners face rising property taxes and rents lower than home prices in certain areas, many are deciding to convert them into condos. That can generate large profits for owners, but the dwindling supply of apartments makes it harder for renters like Perez to find a place to live.

But developers say they help people who can't buy a single-family home by providing more affordable condos.

Affordable option

Problems finding apartments are more due to population growth and the difficulty for building owners to stay afloat with lower rents, said William Friedman, chief executive of Tarragon Corp., a New York-based urban homebuilder and condo converter.

Converted condos offer first-time buyers an affordable option to build up equity and live in more desirable locations with fewer responsibilities than owning a home, he said.

So far this year, the value of apartments sold to become condos is $22.6 billion, or about 152,655 units, according to Real Capital Analytics.

And the benefit for developers to convert is clear. So far this year, apartments converted into condos sold for an average of $154,000, compared to an average of $88,000 for units in buildings that were sold as rentals, according to the research firm.

Rents have been creeping back up as the market gets tighter after falling from 2001 to 2003, when more people were buying homes and avoiding renting.

In the third quarter of this year, the national average rent for a 1,000-square-foot apartment was $1,258 a month, up from $1,195 in the fourth quarter of 2003, according to Global Real Analytics, another research firm.

And rents have increased faster than wages, making it increasingly difficult for poorer families to afford even modest apartments, according to a report from the National Low Income Housing Coalition.

Rentals become rare

South Florida has been a pioneer in the condo conversion craze. Last year, 17,000 units were converted into condos, and that could surpass 30,000 this year, said Jack McCabe, chief executive of McCabe Research in Deerfield Beach.

There were 176,000 apartment units in large complexes with unrestricted rental rates in South Florida at the start of 2004, but that is down to about 128,000 now, he said.

Wait lists for affordable apartments in the Miami and Fort Lauderdale areas stretch for up to two years in places.

"We have a lot of renters who whether by choice or necessity can't find another rental that's comparable in price. We're seeing a lot of displaced people in Florida," he said. "We're not getting companies relocating because their work force is not willing to lower their standard of living to move to southeast Florida and other expensive areas."

And Florida is not alone anymore. The craze has spread across the country to other hot spots such as Washington and San Diego, and even to less in-demand areas such as Charleston, S.C., Dallas and St. Louis.

But the trend likely will be temporary because, once the real estate market slows down, the incentive to convert will decrease, said Scott MacIntosh, senior economist of commercial investment real estate at the National Association of Realtors.

Many real estate investment trusts still are looking to buy apartment complexes because they provide income over a sustained period instead of a one-time benefit from selling buildings for conversion, he said.

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'Bookend' groups drive condo-buying binge

Sunday, December 25, 2005

By Cami Reister

The Grand Rapids Press

Lois Medema and Yulia Barai are at different stages of life, but when it comes to home sweet home, they are looking for the same thing -- a condominium.

With the last of her three children soon to leave home, Medema is looking to downsize from her 5,200-square-foot house in Southeast Grand Rapids.

"When you're a growing, active family, you need lots of space," said Medema, who is in her 50s. "Now that it's just me, slowing down, I don't need so much."

Barai, a 24-year-old software engineer at Siemens, wants to stop paying rent and start building equity. But she travels a lot for her job.

"I don't have time to maintain a yard, do snow shoveling or landscaping and all that kind of stuff," she said. "Condos just seem to be low maintenance."

AJS Realty Vice President Pat Vredevoogd said people such as Medema and Barai are driving the condominium market in West Michigan.

She calls them "bookenders" -- young singles or couples with first jobs and the baby boomers with empty nests and plans to travel.

"Both are sets who don't want maintenance and don't want the burden of taking care of a yard," Vredevoogd said. "They want to be able to pick up and go when they want to."

The "bookenders" have been busy this year. While single-family home sales in the metropolitan area are down 1.2 percent for the year, condo sales are up nearly 18 percent, according to the Grand Rapids Association of Realtors.

Condo sales along the Lakeshore from Muskegon to Saugatuck show similar gains -- up 17 percent for the year, according to the West Michigan Lakeshore Association of Realtors. That compares to a 5.5 percent dip in single-family homes for the same period.

On Monday in East Grand Rapids, people got in line at 3:30 a.m. to buy one of the first 22 condomimiums that went on sale as part of Jade Pig's project in Gaslight Village. The units were gone two hours after the doors opened at 7 a.m.

One reason condos are popular is the price, Vredevoogd said. Some of the new condominium developments and conversions of apartments into condos have prices that rival rent payments.

"You can buy one for $67,000," she said. "That's cheaper than rent, and you're building some equity."

Greg Carlson, a co-partner of Five Star Real Estate, agrees the trend toward condominiums is changing.

"The mentality used to be, 15 to 20 years ago, that it was only for retired people," said Carlson, who moved into a condo at age 43.

"I wanted to simplify my life," he said. "It's about lifestyle, and I think you're going to have more people getting into condominiums."

Others are drawn to living on a single level or they are buying a vacation home or a future retirement home.

Still others look at condos as an investment. Debbie Yealin, vice president of sales and marketing for Redstone Group, which has been building condo developments since 1977, said they are getting a lot of interest from investors.

"Currently, 5 percent of our customers buy condominiums as an investment. I expect that percentage to increase over time," Yealin said. "If you get into the right project that has strong velocity, condominiums can be a great investment."

Building boom

Those looking for condominiums in West Michigan have a lot of choices.

In the City of Grand Rapids alone, more than 1,150 condo units have come on the market, are under construction or have been proposed in recent years.

The Jade Pig project in Gaslight Village will add 107 condos to the market, with prices ranging from $400,000 to $2 million.

Builder Track, a local publisher of building trends, reports condo starts through the third quarter are up 39 percent over 2004 (241 units to 334). In Ottawa County, they are up 11 percent over last year (219 units to 242).

Prospective owners can take their pick from high-rises to converted factories to site condos to traditional multi-unit buildings. Barai is looking at four developments, "but I just started my search a week and a half ago," she said.

Medema recently spent a day looking at eight developments. At their first stop -- Inglenook, a new, detached-unit development off Burton Street SE -- she found little that did not meet her criteria.

The Inglenook units sell for $247,000-$298,000 -- a figure Medema said is right in her price range.

She liked the 2,200-square-foot mission-style unit's large, open kitchen with enough room for a cabinet to display her crystal. It also had maple floors, a three-season porch and the option of finishing the lower level with two more bedrooms so her children can visit.

Medema said she lived in a multi-unit condo for a few months when she was first married. While she found that lacked privacy, "these (detached units) seem very private," she said.

"It's been a good year" for condo sales, said Amy De-

Kleine who has been selling condos and homes for DeKleine Builders in Byron Center for six years. But the slower single-family housing market is starting to affect her business.

"I've had a ton of reservations on our condos, but they can't sell their current homes to get into the condos," she said. "So, here we sit in the waiting game."

Statewide condo alliance taking agenda to Tallahassee

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Statewide condo alliance taking agenda to Tallahassee

Group looks to influence association law

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By Patty Pensa
Staff Writer

December 25, 2005

The newly formed statewide Coalition of Community Associations is readying for its first descent on Tallahassee.

With representatives from nine counties, including Palm Beach and Broward, the coalition is looking to spread its influence to legislators who write homeowner and condo association law. The group formed earlier this year as a way to counteract the influential consumer group Cyber Citizens for Justice, which advocates for homeowners battling their association.

Coalition leaders say they represent association leaders and homeowners alike, and they are intent on opposing "efforts to tear at the fabric of neighborhoods."

"People have no idea what it takes to be on a board and run a community," said Bob Schulbaum, a coalition member and president of the Alliance of Delray Residential Associations.

For a coalition that believes in less state intervention, this spring's legislative session will be the first test of its political prowess.

Some of the issues the group will pursue: ensuring a board's ability to place a lien on owners who fail to pay dues, eliminating mandatory mediation for homeowners and boards and adding standards of objectivity to the condo ombudsman's office.

"How it's going to play out remains to be seen," said Charlotte Greenbarg, a coalition member and president of the Broward Coalition. "This will be a learning experience."

The success of the group could hinge on bringing Democrats and Republicans to its side. Considering South Florida leans Democratic and northern Florida goes Republican, there might be something to this loose network of community leaders, coalition members said.

Three influential groups from southern Palm Beach County -- the Delray Alliance, West Boca Community Council and Coalition of Boynton West Residential Associations -- are members. Together, they represent more than 200,000 residents.

The coalition's strategy will be face-to-face contact with legislators, said Spears, who criticized Cyber Citizens for bombarding Gov. Bush and legislators with e-mails about home- and condo-owner issues across the state.

Cyber Citizens president Jan Bergemann had his own criticisms for the new coalition. He contended the group does not represent homeowners because its members are not elected by homeowners.

"In this country, people should speak for themselves," he said. "There should be nobody there that says, `I'm the big yahoo and I speak for you.'"

Morning File: It's a condo boom!

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Morning File: It's a condo boom!

Monday, December 26, 2005

By Gary Rotstein, Pittsburgh Post-Gazette

Condo shortage? What condo shortage?
OK, is there anyone not already constructing or planning to build condominiums Downtown? I think we see hands of a few Candy-Rama employees and some squatters from beneath the Fort Pitt Bridge, but other than that, there's the PNC developers, the new arena developers, the Lazarus developers, the First Avenue developers, the Union National Bank developers, and probably lofts more -- whoops, lots more -- we're forgetting. They've all gone condo-crazy! All those people from the suburbs who for years viewed Downtown as a bleak, scary place they wanted to be nowhere near? ("Careful down at Saks, Edna -- I heard they've got some foreign-looking people behind the perfume counter.") Apparently, they moved to Charlotte long ago, as developers are planning to build condos at a rate of about 2.3 units for every man, woman and child now living between Aleppo and Zelienople. People must really hate their longtime homes, which is kind of odd considering Pittsburghers are known to stay in the same dwelling longer than residents of any other metropolitan area.

We're ahead of Wichita . . . possibly
The condo-mania sounds kind of surprising until you realize that, yes, this is just one more party to which Pittsburgh is late in arriving. Scan headlines around the country, and there are plenty of other cities large and small already on the developers' dance card.

From the Providence, R.I., newspaper on Oct. 21: "Condos, condos everywhere."

From Boulder, Colo., on Sept. 13: "Condo boom continues."

From Starkville, Miss., on Aug. 29: "Mississippi State alums, fans fueling condo boom."

When the national urban trends are hitting Starkville before Pittsburgh, it's a sign that things may be progressing just a little tooooo slowwwwly here at the rivers' confluence. Around the country, more and more people are living in some kind of planned, collective community instead of independent, single-family homes. As they say in Ho Chi Minh City, "Socialism rocks, dude." The U.S. Community Associations Institute says 22.1 million housing units today are part of some condominium community, homeowners association or similar cooperative. That's about twice the number that existed in 1990, and they house 54.6 million Americans. In shared-ownership housing such as a condominium, people typically pay a monthly fee for services and for upkeep of common areas, and they agree to abide by legally binding restrictions on use and appearance of their own housing units. If you like to keep a large reptile collection and play Black Sabbath at full volume, your neighbors on the condo board may be only too happy to remind you such rights were sacrificed when you signed your covenant.

Bud Selig must live in one
For a comparison more apt than Starkville, one need only look to the Midwest to Milwaukee. The Business Journal in that city wrote that from 2002 to 2005, 2,352 condos valued at $739.4 million were built or planned in or around Downtown. The growth got real estate executives to discuss the saturation point they'd hit, with the housing volume exceeding job growth. "There are simply too many projects about to go forward," said one architect. "The area is not big enough to support all the projects because there aren't that many people interested in moving Downtown." One executive noted that Milwaukee was itself tardy to embrace the condo movement, trailing Midwestern trend-setters Cleveland, Minneapolis, Columbus and Indianapolis. Oh, how they must be snickering in Milwaukee now (and Starkville), to hear that Pittsburghers feel they've discovered some new-fangled style of living.

Anti-condo word of caution
Liz Pulliam Weston, a personal finance columnist for MSN Money, thinks the condo market is a bit out of control. She wrote of it being like "the tech-stock bubble," with too many speculators involved attempting to make quick profits. She's talking about "hot" markets like Las Vegas and Miami, rather than dowdy Downtown Pittsburgh, but notes that the rise in condo values nationally has begun slowing down after shooting past that of single-family homes in 2004. Yes, she agrees that some upscale baby boomers becoming empty nesters are willing to pay to avoid shoveling the sidewalk, to have a building fix-it man at their beck and call, and to be within walking distance of a city's cultural center. "But anyone who expects vast numbers of boomers to shift to condos is delusional," Ms. Weston wrote this fall. "Like their parents, 80 percent of whom age in place, most boomers will stay in the houses where they retire. Familiarity, and family ties, will, for most, trump Arizona golf courses and Florida early-bird specials."

Can't we all just get along?
Actually, a Pittsburgher is at the forefront of the condo movement in one respect. Virgil Rizzo, who grew up in the Steel City, graduated from the University of Pittsburgh in 1959, and taught in the city's public schools for several years, is the first condominium ombudsman in the United States. He has filled that new role in the state of Florida for the past year. The Fort Lauderdale condo-owner, who became both a lawyer and doctor in his later years, was appointed by Florida Gov. Jeb Bush to help reduce disputes between condo-dwellers and condo boards, which are made up of neighbors elected to run things. "He will strive to achieve harmony among those who reside in the many condominiums in the state of Florida," said the press release announcing Mr. Rizzo's appointment. He had practice in working out problems among his own condo's board and owners. He was in fact involved in some personal litigation of that sort, which is what he's trying to help other others avoid. "What happens in these communities is that they get polarized," the ombudsman told the (Fort Lauderdale) Sun-Sentinel. "You get a 50-50 split and you have discontent. They shouldn't be fighting amongst each other. They should be together and the board should keep them unified."

A role model for us
It took Florida long enough to find a Western Pennsylvanian to straighten things out. Way back in 1989, about the time that tepees and log cabins were being replaced in Downtown Pittsburgh, the Los Angeles Times was writing about the name-calling, back-biting and political shenanigans that marked condo life among the Sunshine State's older population. "Some of them sit around and read the Condo Act all day," said Alex Knight, then the chief of Florida's Bureau of Condominiums. "They have time to fight. Condo politics is like a hobby." Some condo developments were already like small cities, with 8,000 dwellers in 75 buildings at Century Village in Pembroke Pines. At the latter, the article noted such volatile board meetings that "people have dropped dead" and, during elections, "they fight for proxies like piranhas." The leaders of the condo board and the activists taking them on had nothing but vile things to say about one another, concerning such issues as mowing of lawns and consumption of electricity. "There are people around here who've never accomplished anything in life and this is their last guttural gasp to make something of themselves," said the beleaguered condo board president, Kitty Thibault. Now there's something that ex-City Council members and former row officers can look forward to, finally, in Downtown Pittsburgh.

The Age of Reinvention

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The Age of Reinvention

In 2005, There Were Soaring Condo Prices, A Row Over Skid Row and the Billion Dollar Babies' First Steps

by Kathryn Maese

If you had told people in 1995 Downtown what the community would look like in a decade, they would have laughed. But in 2005 the amazing reinvention of Downtown Los Angeles continued, with condos fetching upwards of $600 a square foot, cranes sprouting across the skyline and thousands of people moving into the fancy new residences. It was the story that dominated talk in the Central City, both for its potential and its pitfalls.

Of course, the housing boom didn't happen in a vacuum. Downtown was abuzz over the groundbreaking of L.A. Live and its roster of big-name tenants. Grand Avenue made strides as well, with plans for architect Frank Gehry to design a signature tower for the project.

From a battle over the new police headquarters to renewed attention on Skid Row to a new direction for the L.A. River, here's a look back at the stories that had Downtown talking.

Story of the Year: The Residential Rush: Despite endless talk of a real estate bubble and predictions of a market slowdown, Downtown's housing spree continued its frantic pace. According to the Downtown Center Business Improvement District, more than 19,500 units are under construction or in the planning stage, with 29,000 people expected to move in over the next four years. Projects became bigger and bolder, with high-rises such as the 50-story Zen Tower at Third and Hill streets capturing vertical imagination. A handful of openings - the Douglas Building Lofts, Metro 417 and the Pacific Electric Lofts - added hundreds of bodies to the mix. Waiting lists continued to grow, despite prices north of $600 per square foot. So how big is the appetite for Downtown living? Consider: In October, South Group's 191-condo Luma in South Park sold out in a dizzying seven hours.

L.A. Goes Live: On Sept. 15, Anschutz Entertainment Group's $1.5 billion sports and entertainment district broke ground to the Latin beat of Poncho Sanchez. The salsa impresario plays at the trendy Conga Room, which will become one of at least a dozen high-profile tenants when the retail, dining and activity promenade opens. Additional arrivals will include Gladstone's, P.F. Chang's, a 15-screen Regal cine-plex, an ESPN studio and a Grammy museum. The retail and restaurants, along with the 7,100-seat Nokia Theater and the 2,400-seat Club Nokia, are set to debut in 2007.

Down on Skid Row: A number of issues riveted attention on this stretch of missions, homeless encampments and crime east of Los Angeles Street. A Los Angeles Times series focused on the human tragedy of homelessness and the plight of families, while community walks on Skid Row brought attention to street conditions and safety. In September, the news focus shifted to illegal dumping of criminals by city and county law enforcement agencies and hospitals onto Downtown streets. Prodded by the outcry, state lawmakers began to craft legislation that could force the Sheriff's Department to stop letting released criminals wander into Skid Row.

Hospitality Ups and Downs: The usually lifeless hotel and tourism industry was alive and kicking in 2005. The Hyatt turned into a Sheraton, the Wilshire Grand announced a $40 million renovation, a handful of older hotels unveiled plans to convert rooms into condos or apartments, and a slew of investors clamored to create high-end boutique hotels. A potentially devastating hotel strike was averted in June, which segued into a double-digit surge in occupancy aided by big events such as the Siggraph conference and X Games. The biggest news came with the September approval of the 1,100-room Convention Center hotel. However, an unexpected blow occurred in November when the project's equity partner backed out over rising costs.

Old Landmarks, New Futures: It was a year of highs and lows in the preservation community. A beautifully refurbished (former) St. Vibiana's cathedral opened in November as a performance and event space. A glittering assemblage of city leaders, celebrities and preservationists turned out to fete the rehab by Gilmore Associates. It was a different story for the fabled 1921 Ambassador hotel on Wilshire Boulevard. The Los Angeles Conservancy, which led the charge to preserve the site where Sen. Robert F. Kennedy was assassinated in 1968 and where Hollywood frolicked at the Cocoanut Grove, lost its battle to an LAUSD plan to create a K-12 campus and demolish most of the property. In September the hotel's furnishings were auctioned off. Demolition began shortly after.

Return of the River: It was a big year for the L.A. River. Proposals aplenty were generated by the city, activity on the state level focused on the Cornfield Park, and federal funds were funneled in for feasibility studies. A $3 million, 18-month master plan got underway in September, including a series of community workshops. As part of the campaign to bring attention to reviving the waterway, a splashy press conference unfolded at the adjacent Cornfield, which is envisioned as part of the river's comeback.

Grandiose Plans: May brought the $1.8 billion Grand Avenue proposal into the spotlight, with plans unveiled for sleek towers and a lively nine-acre retail and cultural promenade. The County Board of Supervisors approved the project in August, allowing developer the Related Companies to move forward with a master plan. Further buzz came from the announcement that shape-shifting architect Frank Gehry would design a 50-story "iconic" tower to mark a project some have likened to the Champs-Elys�es. Plans currently call for 2,600 condos and apartments, a park, 400,000 square feet of retail and a 275-room hotel.

Planning Department Plight: In early 2005, Planning Director Con Howe announced he would retire after 13 years. Though he was praised in some circles, City Hall whispers said that Howe was pushed out by city and community leaders unhappy with his management. The department's woes were made public following a November audit by City Controller Laura Chick that called it "an agency caught in a time warp of past practices, old procedures and outdated technology." The report slammed the 270-employee department for being poorly managed and understaffed. Facing pressure to lead city planning in a new direction, Mayor Antonio Villaraigosa launched a search for a permanent department head and installed Mark Winogrond as interim chief.

Let's Make a Deal: It was a busy year for Downtown brokers, who closed dozens of deals from Chinatown to South Park. One of the busiest players was Jamison Properties Inc., which acquired the $135 million California Market Center in May and the $160 million Macy's Plaza in April. That same month, Union Bank Plaza sold for $144 million to Hines. In July, Meruelo Maddox Properties purchased the Union Bank & Trust Building at Eighth and Hill streets for $12 million; it will be converted into 90 loft-style apartments by 2007. The 7,200-seat Grand Olympic Auditorium sold to the Glory Church of Jesus Christ and Chinatown's Dynasty Center went to a private investor in June for $25 million. In January, Beacon Capital Partners paid $116 million for the Class A office tower at 1000 Wilshire.

Police HQ Gets OK: For the better part of a year residents and community groups battled to stop a new police headquarters from rising at Second and Main streets. The Cultural Affairs Commission became an unlikely forum of last resort, and voted against the location in May. Nonetheless, the city moved forward with the replacement facility for the aged, quake-damaged Parker Center. In late summer the department agreed to a compromise, increasing the amount of green space and adding trees fronting Second Street, as well as an expanded outdoor plaza and ground-level retail. Many park advocates, however, felt they got an unfair shake, since the site had long been envisioned as a civic park. The environmental impact report was completed in October and demolition of the old Caltrans building is nearly complete.

Which Way Downtown L.A.?: In April, after more than seven years of work, officials from Downtown's nine business improvement districts began installing 1,300 directional signs across the community. However, shortly after the signs in the $2 million program dubbed Downtown L.A. Walks began cropping up, complaints started trickling in. A number of the signs used puzzling abbreviations and shorthand, such as "Spring St Hist/Fin" and "Broadway Th District." The kinks continue to be worked out, but most people have nonetheless welcomed the project.

Mr. Smith Comes to Town: LAPD Central Division Capt. Andy Smith could very well have been the department's poster boy for community policing in 2005. Though he arrived just this spring, nearly every story dealing with crime and quality of life in Downtown had Smith's name attached to it. Whether it was drug pushers, illegal vending, stolen goods, homelessness or the issues facing Downtown's new crop of residents, the 42-year-old captain made a big impact on the Central City.

Making a Fashion Statement: Some believe that once you are profiled in the New York Times, you've arrived. Indeed, the 90-block Fashion District made the Times, and also made a big splash with 32 new projects in the past three years, including 13 in 2005 alone. In total, more than $510 million has been invested in the neighborhood since 2000. A new branding campaign gave some much-needed panache to the district's stodgy and industrial image. What was once known as the Garment District is now a Fashion District with trendy designer showrooms, restaurants, an expanding retail sector and international recognition.

MLS ballot initiative is 'ill-conceived,' says Realtor lawyer

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MLS ballot initiative is 'ill-conceived,' says Realtor lawyer Ballot measure seeks to open up real estate data to consumers Thursday, December 22, 2005 By Glenn Roberts Jr. Inman News

The proponent of an effort to establish a statewide database for property listings in California said today that the planned system could be modeled after the successful privatization of a Web site registration service. David Barry, a San Francisco lawyer who has aggravated real estate industry groups for filing a steady stream of antitrust lawsuits that span several decades, is behind this effort to establish a comprehensive property listings database that consumers can access free of charge. According to the text of the proposed ballot initiative, "Visitors to the open MLS Web site may access non-confidential MLS data and utilize search functions for free. All search reports are downloadable and printable for free." While MLS data in California is divided amongst dozens of local MLSs -- most of them owned by local Realtor trade groups -- the new proposal would require that all real estate professionals in the state place their listings in the statewide MLS, unless home sellers specifically request to withhold information about their properties from this database. Barry's plan calls for a private entity to manage the MLS for the first 10 years, and to keep monthly fees between $20 to $50 per month to enter property information into the MLS. The idea, he said, is similar to a technology company's handling of Web site registrations. In 1993, Network Solutions Inc. won a federal contract to handle the registration of Internet domain names, a duty that had formerly been conducted by the Internet Network Information Center, a U.S. government-created registry. The company lost that monopoly in 1999 but still handles millions of registered domain names. "They had a monopoly for a limited period of time ... to kick-start the thing, get it up and running," Barry said, adding that he is hoping some big technology companies -- such as Yahoo!, Google, eBay or Microsoft -- will consider bidding for the contract to operate the proposed statewide MLS service. June Barlow, vice president and general counsel for the California Association of Realtors trade group, which has about 180,000 Realtor members throughout the state, said today that she believes Barry's effort is "ill-conceived." "We're always looking for ways to make the (MLS) system more efficient and we do acknowledge that it could be more efficient," Barlow said, adding that the free market should develop the solution "as opposed to people trying to legislate their business model through the initiative process. "There's no need for an effort like this because free enterprise has worked well for a number of years," she also said. What the initiative proposal is seeking could be accomplished outside of the initiative process, Barlow said, adding that it "shows a lack of confidence" in attempting to place the issue before voters. "You can certainly do any kind of business without the initiative process."   Barry has targeted the state association of Realtors and other local Realtor associations several times in lawsuits he has filed. In September, the state Realtor group fired back against Barry with a "malicious prosecution" lawsuit, charging that Barry re-filed the same complaint twice.   Barry said he plans to be a bidder for the entity that he is proposing to create, and the bidding process is slated to close Jan. 11, the law firm announced Wednesday.   To qualify for the ballot, Barry said that initiative supporters will need 373,700 signatures. If obtained through signature firms at a rate of $1.50 to $2 per signature, it would cost about $1 million to qualify the initiative for the ballot, he said, adding that he expects the contract winner to pay this cost.   "I'm hoping to encourage innovation here," Barry said, adding that he has received mostly positive feedback from industry professionals about his proposal.   The text of the proposed initiative states that the purpose of the initiative is to "induce the creation of an open MLS in California and the United States of homes for sale and rent that provides free access by Web browser to buyers and renters," "to lower the cost of MLS services for real estate professionals," and to "lower commission rates," among other aims.   "Any person will be permitted to establish a paid subscriber account with the open MLS operator," and subscribers -- who do not need a real estate license -- can enter an unlimited number of property listings, the initiative text also states. "Subscribers will be required to agree that all persons have the fair use right to unlimited copying and republication of all MLS data, including visual and auditory data, when used as part of an effort to market, promote, or value real estate, and all such use will be free of all copyright claims and restrictions."   Such language may worry real estate brokers, who typically are protective of property information associated with their companies' listings. Data ownership and control issues are a hot topic in the real estate industry, particularly as the U.S. Justice Department has filed an lawsuit against the National Association of Realtors over the trade group's policies for the online sharing and dissemination of property listings among its members.   Industry players in California have discussed the possibility of a more widespread sharing of property listings information in California, and there are already some regional efforts in the San Francisco Bay Area and in Southern California through which local MLSs share data with other local MLSs. The discussion of more widespread data-sharing in the state "is making some progress -- more so than in any other year," Barlow said.

Local condo flippers may be in too deep

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Local condo flippers may be in too deep
By Scott Van Voorhis
Thursday, December 22, 2005

The Hub's jittery condominium market faces another storm cloud: hundreds of unsold units in new condo towers that brokers and mom-and-pop investors had bought early on in hopes of flipping for quick profits.

    Some have exited, as planned, with thousands in windfall profits. But others may not be so lucky amid falling sales and dropping prices in an overloaded condo market, real estate executives say.

    Thousands of new condo units, in glitzy downtown towers and modest suburban projects alike, are opening up across the Boston area. And more than 10 percent of these units have been snapped up by investors of various stripes, according to Brian Rugg, who puts out an influential market report at ERA Boston Real Estate Group.

    With the market sliding, a flood of condo flips could grease the market's downward slide, executives warn.

    "Putting more supply in a soft market, that obviously would create more volatility in prices on the down side," said Thomas Meagher, head of Northeast Apartment Advisors.

    One project where condo flippers can clearly be seen at work is East Boston's newly minted Porter 156, a one-time lightbulb factory where loft-style units sell for prices ranging from the high $200,000s to well past $400,000.

     Amid this rush to cash out, Rhonda Kelley, a local music publicist, counts herself among the lucky ones, flipping her condo for $439,000 shortly after Porter 156 opened this fall and pocketing more than $100,000. But she winces when she looks at the myriad of online postings from other would-be Porter 156 flippers.

    "There are a huge number of flippers," Kelley said. "If I didn't close quickly, I would be up against 30 or 40 units in a matter of a week."

    Still, Porter 156 is far from unique, with condo speculators flocking to an array of new Boston towers and projects.

     Looking to cash in, Will Montero, a top Boston real estate broker, has created his own condo flip investment pool that includes cash from Ohio doctors, San Francisco investors and overseas financiers.

    Over the past three or four years, Montero and his fellow investors have snapped up as many as 40 condos in some of the city's top new high-rises: Fort Point's Channel Center, South Boston's Court Square Press and various Leather District buildings. Some were buy and holds, others quick flips.

    Not to mention East Boston's Porter 156, where Montero finds himself with two units to unload.

    But he has no plans to quit flipping, even with signs that the condo market's best days may be gone.

    "It's a pretty interesting game," Montero said. "Real estate blows away anything in the stock market for the average investor."

Housing gets more affordable

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Housing gets more affordable

By TAVIA GRANT

Thursday, December 22, 2005 Posted at 8:07 AM EST

Globe and Mail Update
 
 Housing became sligGhtly more affordable for most Canadians in the third quarter of the year as incomes grew and the pace of house-price increases slowed, a Royal Bank of Canada report showed Thursday.

The RBC affordability index, which measures the proportion of pre-tax household income needed to service the costs of owning a home, shows a standard condo remains the most affordable type of housing. A standard townhouse is next, followed by a detached bungalow. A standard two-storey home remains the least affordable.

Housing markets, which have been on fire this year, are cooling gradually across most of Canada as the pace of price increases slowed, RBC said. There are exceptions, however, notably in Alberta, Saskatchewan, Manitoba, and parts of Atlantic Canada.

Overall, "as demand softens, there has been a gradual decline in new home construction activity across most markets as well, helping to alleviate any sudden price movements," said Derek Holt, RBC's assistant chief economist, in the report.

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"Even with interest rates going up, housing markets will remain healthy going into 2006," he said.

Condominiums remain "by far" the most affordable housing option across all markets, the report said.

"Rising apartment rental vacancy rates and significant numbers of investor-owned condos will likely serve to keep condo affordability well in line as price pressures ease."

In a comparison of affordability among the largest cities, Vancouver remains the most expensive place to own a detached bungalow, followed by Toronto. Housing is more affordable, however, in Calgary and Ottawa.

Condo Crazy: Renters hurt by conversion trend

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Condo Crazy: Renters hurt by conversion trend

 

Thursday, December 22, 2005

MIAMI

Diana Perez got the letter a few months ago: The apartment complex where she and her family live was converting into condominiums.

They had to leave if they couldn't pay a 20 percent down payment on their two-bedroom apartment, now selling for $185,000.

That's $37,000 up front on the apartment they now rent for $900 a month - too much for Perez, who works in a nail salon, and her car-salesman husband, so they're looking for someplace else. But in the red-hot Florida real-estate market, they're having trouble finding anything comparable nearby.

"What I want to find is a place where I can stay and they're not going to kick me out" if the owners decide to convert into condos, she said.

As apartment-building owners face rising property taxes and rents lower than home prices in certain areas, many are deciding to convert them into condos. That can generate large profits for owners, but the dwindling supply of apartments makes it harder for renters like Perez to find a place to live.

But developers said they help people who can't buy a single-family home by providing more affordable condos.

Problems finding apartments are more because of population growth and the difficulty for building owners to stay afloat with lower rents, said William Friedman, the chief executive of Tarragon Corp., an urban homebuilder and condo converter based in New York.

Converted condos offer first-time buyers an affordable option to build up equity and live in more desirable locations with fewer responsibilities than owning a home, he said.

So far this year, the value of apartments sold to become condos is $22.6 billion, or about 152,655 units, according to Real Capital Analytics.

And the benefit for developers to convert is clear. So far this year, apartments converted into condos sold for an average of $154,000, compared to an average of $88,000 for units in buildings that were sold as rentals, according to the research company.

Rents have been creeping back up as the market gets tighter after falling from 2001 to 2003, when more people were buying homes and avoiding renting. In the third quarter of this year, the national average rent for a 1,000-square-foot apartment was $1,258 a month, up from $1,195 in the fourth quarter of 2003, according to Global Real Analytics, another research company.

Rents have increased faster than wages, making it increasingly difficult for poorer families to afford even modest apartments, according to a recent report from the National Low Income Housing Coalition.

South Florida has been a pioneer in the condo-conversion craze. Last year, 17,000 units were converted into condos, and that could surpass 30,000 this year, said Jack McCabe, the chief executive of McCabe Research in Deerfield Beach.

There were 176,000 apartment units in large complexes with unrestricted rental rates in South Florida at start of 2004, but that is down to about 128,000 now, he said. Wait lists for affordable apartments in the Miami and Fort Lauderdale areas stretch for up to two years in places.

"We have a lot of renters who, whether by choice or necessity, can't find another rental that's comparable in price. We're seeing a lot of displaced people in Florida," he said. "We're not getting companies relocating because their work force is not willing to lower their standard of living to move to southeast Florida and other expensive areas."

Florida is not alone anymore. The craze has spread across the country to such other hot spots as Washington and San Diego, and even to less in-demand areas such as Charleston, S.C., Dallas and St. Louis.

But the trend will likely be temporary because, once the real-estate market slows down, the incentive to convert will decrease, said Scott MacIntosh, a senior economist of commercial investment real estate at the National Association of Realtors.

Also, many real-estate investment trusts are still in the market to buy apartment complexes because they provide income over a sustained period instead of a one-time benefit from selling buildings for conversion, he said.

Alphonso Jackson, the secretary of the U.S. Department of Housing and Urban Development, acknowledged that HUD can't stop apartment-building owners from selling to converters. But HUD has tried to persuade landlords it works with to sell their properties to nonprofit groups to keep rents affordable.

"And we have been very successful right now in keeping about 10,000 units in affordable housing areas around the country that would have been converted into condos," he said.

$130-million condo sale blasts record Bear Mountain Resort: One day, two buildings

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	Monday � November 14 � 2005
$130-million condo sale blasts record Bear Mountain Resort: One day, two buildings   Rob Shaw Times Colonist Sunday, November 13, 2005 CREDIT: Debra Brash, Times Colonist Condo buyer Semion Strovski, left, thinks Bear Mountain Village Resort is the next Whistler. Strovski looks over the village golf course with his wife Galina and another condo-investing couple: Lize and Johan Blignaut. Langford's Bear Mountain Resort is the new Whistler -- at least, that's what Semion Strovski is betting. The Quesnel doctor, who moved to Canada from Russia in 1998, was one of scores of people Saturday who snatched up 271 condominiums in a record-setting real estate grab. "Whistler has reached its top as far as investment, I think," he said, describing property he owns there yet intends to sell. "But Victoria is the retirement capital of Canada as far as we can see ... we hope [the condo] will appreciate [in value], and we hope we'll use it as well." Bear Mountain Resort estimated $130 million in sales Saturday when two condo buildings -- Finlayson Reach and St. Andrews Walk -- officially hit the market. It is the highest one-day total for condominium real estate in Greater Victoria's history. Bear Mountain mauled even monthly records kept by the Victoria Real Estate Board, beating $66 million in condo sales recorded for this March and $39 million in October. Strovski paid $341,500 for a 562-square foot, one-bedroom, condominium in St. Andrews Walk. From the fourth floor perch atop the west building, he and wife Galina will have a view of the golf course. Strovski admits Bear Mountain's 18-hole course, designed by golf legend Jack Nicklaus, was a major reason for his purchase. He, like fellow Quesnel doctor Johan Blignaut, views the property as an investment in Greater Victoria, the golf course, and a village planned for Bear Mountain. Blignaut and his wife Lize had never been to Bear Mountain before they arrived Saturday, cheque-in-hand, to buy their 630-square-foot, $349,900, one-bedroom suite on the third floor of Finlayson Reach. "I was amazed by the view and the buildings," said Lize. The investment "risk is minimal" said Blignaut. The couple, in their early 30s and originally from South Africa, intend to make at least yearly visits to their new Langford condo. Inside the busy clubhouse Saturday, buyers were ushered upstairs to select one of 127 units in St. Andrews ranging from $205,000 to $949,000, or 154 units in Finlayson Reach, from $400,000 to $1.8 million. After they signed on the dotted line, they went outside to a heated tent where champagne was served in the company of a live band. A large display showing individual units inside was covered with sold signs. All but 10 units in Finlayson Reach were gone, and penthouse apartments were not yet on the market. Much of Bear Mountain is still under construction. The Fairways hotel -- Phase 1 of development -- is open with 65 suites. The resort's new clubhouse building -- a massive structure with suites, a restaurant, ballroom, spa and pro shop -- is considered Phase 2 and should be done by May 2006, said Bear Mountain Resort CEO Len Barrie. Barrie said many of the current buyers are from Alberta "and are looking at it as a vacation or secondary home." Some came from as far away as Germany and the Middle East, he said. Victoria Real Estate Board president Garry McInnis said Bear Mountain's "site-specific" golf course attraction highlights a larger demand for real estate in the region. "I'm very confident that 2005 will go down as a banner year for real estate overall," he said. "There's just nothing to stop it from being one of the most remarkable years of all time." Saturday's buyers will have plenty of time to sit and anticipate their new Bear Mountain condos. The St. Andrews building isn't scheduled to open until mid-2007, and Finlayson Reach until 2008. � Times Colonist (Victoria) 2005

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Builders aim high on Merritt Island

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December 14, 2005

Builders aim high on Merritt Island

BY ERIKA PESANTES
FLORIDA TODAY

As the Hubert Humphrey Bridge dips away from Cocoa, Island Pointe's nine-story tower and three of its eight-story luxury condo buildings gradually emerge from the Indian River's edge.

For some, these are stately pillars of progress. For others, these multistoried buildings are menacing misfits that make Merritt Island's skyline strangely unfamiliar.

As developable land disappears on the island, as elsewhere in Brevard County, some developers are looking to maximize desirable properties by building taller.

Three separate Merritt Island projects -- all nine to 11 stories -- await approval from the county. All are centrally located on the island, not far from the State Road 520 commercial corridor.

But some longtime residents fear that as developers build up, they'll whittle away at Merritt Island's character.

"It's pitiful going over the bridge. I think 'Boy, I'm glad to be home,' but with all the high-rises, it don't look like home," said Norma Bennett, a resident of the island's Bel-Aire subdivision for the past 25 years. "I'm for progress, but it seems we
have a little more than we need."

Although north Merritt Island is home to the tallest building in Brevard, the 525-foot, 52-story Vehicle Assembly Building at Kennedy Space Center, structures beyond a few stories aren't the norm. Much of the riverfront property still is the domain of single-family homes -- some palatial estates and some much less.

David Hobbs, president of the East Merritt Island Homeowners Association and a resident since 1977, said he's paying close attention to the proposed developments.

"I think it's getting exponentially worse as Merritt Island builds out and gets build up," he said. "There just isn't that much property where people can keep expanding. They're being forced to go up."

A small group -- branching out from his association -- is being created to watch the path of growth.

"We're trying to preserve our single-family neighborhood," Hobbs said.

New projects

The three proposed "tall" projects are in various stages of approval, but all will need the final OK from the Brevard County Commission. They are:

An 11-story commercial and residential building as part of Island Pointe.

A nine-story condominium project at the site of the Banana River Marine.

The nine-story, 112-unit River Fly-In Condos next to Merritt Island Airport.

Commissioner Ron Pritchard, who lives on and represents Merritt Island, said he didn't consider the recent proposals part of a trend. He added that the multistoried building have some plusses.

"One advantage to condo lifestyle is it tends to inhibit the creation of additional subdivisions," Pritchard said. "It focuses construction in specific areas. As for density, I'm not particularly fond of the density created."

He said his constituents want to preserve the pristine areas of the island, but they also want to improve blighted neighborhoods.

"Most folks don't have a problem with growth or change, they're concerned with nine-story buildings," Pritchard said. "When it comes to your neighborhood people are always concerned as to what will happen; there's a certain lifestyle they've adapted to."

Favorable outlook

Some residents and business owners think the developers will help build back areas of Merritt Island that need revitalization.

"I absolutely am in favor of Merritt Island building up. It adds value to our property, it removes blight in many situations," said Fran Quattrochi, who lives on Merritt Island and works in real estate. "I believe just coming over the causeway and seeing those condos on both sides of the road makes an impressive entrance into Merritt Island."

"I know people feel that we're losing the smaller town feel, but I really feel it's advantageous to the economy."

Antonio Rovira, an East Merritt Island Homeowners Association member who moved from Orlando, said he thought he'd left the big-city madness behind and found paradise.

"Development's not needed in the area, especially nine-, 10-story buildings, which don't add to the beauty of the island," he said. "We don't oppose progress, but at the same time we know that we're going to have big problems."

Contact Pesantes at 242-3618 or epesantes@flatoday.net

 

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South Florida Business Journal - 2:47 PM EST Wednesday

Theater company to move into condo

A West Palm Beach theater company has signed a letter of intent to relocate into the ground floor of a proposed downtown condominium.

Palm Beach Dramaworks is negotiating with Miami-based BAP Development for the buildout and lease of a 240-seat, 20,000-square-foot venue at Opera Place, at 322 Banyan Blvd. Construction is set to start in early 2006, with delivery and move-in expected in two years.

"We are thrilled to have created an alliance with Opera Place so we can continue our dedication to helping downtown West Palm Beach revitalize through the contribution of arts and culture," Dramaworks Executive Director Sue Ellen Beryl said.

Dramaworks was founded in 2000 as a nonprofit organization.

Florida Stage was originally expected to move to the proposed development.

The 26-story Opera Place has 536 units priced from the $400,000s to $4.5 million. BAP's current portfolio represents 3,200 condominium units valued at $1.5 billion, including Onyx and Onyx 2 in Miami, and 610 Clematis in West Palm Beach.

Westside Lofts condo files for bankruptcy

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Westside Lofts condo files for bankruptcy

Proposed South Beach condominium Westside Lofts filed for bankruptcy in a bid to reorganize the troubled development.
BY MATTHEW HAGGMAN
mhaggman@MiamiHerald.com

A real estate development company whose investors include Major League Baseball players Edgar Renteria and Luis Castillo with plans to build a trendy five-story South Beach condominium has filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Miami.

The move comes amid legal battles in Miami-Dade Circuit Court between the development company and its lender and general contractor. Eastern National Bank is seeking more than $2 million for an overdue construction loan and Diez Construction $200,506 for unpaid bills, according to court filings.

Developer Robert Thorne of Royal Bay Group headed up the development company called Westside Lofts LLC. Its investors include Minnesota Twins second baseman Castillo and Atlanta Braves shortstop Renteria. Both players are former Marlins.

Westside Lofts isn't the first of Thorne's projects to run into trouble. He is managing partner of the Chelsea, a proposed 30-unit condo in Miami Beach that is delayed, and the entire project is for sale.

Attorney John Kozyak filed papers late Tuesday on behalf of Westside Lofts LLC, seeking bankruptcy protection from creditors in a bid to reorganize the company. U.S. Bankruptcy Judge A. Jay Cristol is presiding over the case.

''Edgar Renteria invested $600,000 in one of the hottest real estate markets and persuaded his friend and former teammate to put up $430,000,'' said Kozyak. ``Construction was delayed, the construction loan matured, contractors and suppliers were owed money, yet only the second slab was poured for a five-story project. We need to find out what happened and turn this situation around.''

The troubled 15-unit condo at the corner of West Avenue and 14th Terrace has been stalled for many months, not only prompting legal action from its lender and builder but exasperating buyers who made deposits on units there.

''People were getting very upset,'' said Cara Mantovani, owner of Mantovani Real Estate in Key Biscayne, which previously sold Westside Lofts units but is no longer associated with the project.

``There is only so long you can tell people there is a project coming when the weeds are growing faster than the rebar is coming in.''

Thorne has now been replaced as the project's managing partner by Jeffrey Lane, who is also Renteria's baseball agent.

Lane couldn't be reached for comment.

Thorne -- who this year sold an interest in the Coconut Grove project, Lofts at Mayfair -- attributed Westside Loft's troubles to rising construction costs and the fact Eastern National insisted the project go forward even though construction costs hadn't been nailed down.

''When we got to the point the construction numbers were higher, we went back to the bank,'' Thorne said. ``We agreed to put up some more equity, but at the eleventh hour they backed out and doubled the amount of equity we had to put in. If not for that, the building would be up and done.''

Eastern National's attorney Geoffrey Travis, a partner with Shutts & Bowen, didn't return calls for comment.

In a twist, Thorne also insisted that he transferred his entire interest in Westside LLC to Renteria and Castillo earlier this year. His claim runs counter to Tuesday's bankruptcy filing, which lists Thorne with Castillo and Renteria as investors with more than a 5 percent stake in the company.

Asked Wednesday if he has a stake in Westside Lofts LLC, Thorne responded: ``I can't answer that question. It's a legal question.''

Neither baseball player could be reached for comment.

But bankruptcy attorney Kozyak said he was surprised that Thorne claims no ownership interest.

Impact of condo conversion projects to be studied

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Impact of condo conversion projects to be studied

Critics, Aguirre set tentative pact

By Roger M. Showley
UNION-TRIBUNE STAFF WRITER

December 22, 2005

City Attorney Michael Aguirre has worked out a tentative agreement with critics of condominium conversions to study any impacts the projects are placing on the San Diego rental market.

Assistant City Attorney Karen Heumann said details of the study will be hammered out next month. Who will conduct the review, what it will cover and how it will be funded are to be decided.

More than 150 condo conversion projects are affected by the agreement and it is unclear how many of the developers will try to move forward with their plans. The impact study is expected to be completed sometime next year.

The issue arose after attorney Cory Briggs, representing the Affordable Housing Coalition of San Diego and Citizens for Responsible Equitable Environmental Development, argued in lawsuits and appeals to the San Diego City Council that the city needed to conduct a thorough environmental review of the projects.

Briggs is challenging approval by the city's Development Services Department of the conversion of hundreds of rental units within specific projects. He also is seeking a Superior Court injunction that would prevent the city from processing new conversion applications.

Critics of the conversions say that thousands of tenants are being forced from their homes and that the conversion process places burdens on traffic, housing and schools as the renters try to find new units.

Developers say alternative rentals are available in the area and the converted units are desperately needed entry-level housing that is affordable to first-time home buyers.

Heumann said Briggs has agreed not to proceed with the injunction request for now and the first group of appeals has been delayed from the original hearing date of Dec. 6 to Jan. 24.

"It's really better than litigating each of these suits," she said.

She noted that developers can proceed with their conversion plans but they will do so at their own risk if a final agreement isn't reached and Briggs moves forward with his lawsuits and appeals.

"I'm hoping we can enter into the settlement arrangement whereby he might no longer contest these projects," she said.

Briggs could not be reached for comment, but Tom Scott, executive director of the San Diego Housing Federation, said his group, while not a party to the lawsuits and appeals, is worried that many small conversion projects having few units will not be well maintained over time and will pose a risk to future homeowners.

"That's one of the things the study is going to look at," Scott said.

Condo-Modity

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Condo-modity
By Jennifer Martin

In some markets, investors viewing condominiums as commodities are making profits.

The condominium market saw record sales in 2005, and developers and investors are optimistic that the strong market will continue. In particular, flippingthe practice of buying a property and then selling it fairly quickly for a profithas skyrocketed among condo buyers in trendy cities such as Las Vegas and Washington, D.C. This year alone, 18,586 condo units were expected to be added to Miami, another 10,875 to San Diego and 8,533 to Chicago, according to the Wall Street Journal.

Developers say theres ample room for more purchases as European and Latin buyers flood the U.S. market. With the strength of the euro against the dollar, purchasing property in the U.S. has become much more feasible for European buyers, and Latin buyers are showing record levels of interest in Miami and other Florida cities.

Investors are eager to get in on the action early. Condos, particularly preconstruction condos, have become a somewhat commoditized product, says Richard Swerdlow, CEO of U.S. Condo Exchange, a Web site that serves as a virtual marketplace for buyers and sellers of Florida condos. Theyre boxes in the sky. Most of these units are sold sight unseen.

In Miami alone, real estate values have soared 85 percent since 2001. Flipping is such a hot trend that entrepreneur Mark Zilbert recently launched condoflip.com, a Web site solely devoted to Miami sellers whose condos are still in preconstruction. U.S. Condo Exchange (www.uscondex.com) does the same but expands the service to connect sellers with long-term buyers as well. U.S. Condo Exchange will list condos available in Las Vegas, Chicago and San Diego by early 2006.

Some analysts fear that the condo market could be looking at a bubble with so much speculation. However, others say the Internet has given the market an unprecedented level of exposure worldwide. We have quite a few European and South American buyers, Swerdlow says. Were averaging well over 200,000 page views per month.

Still, to protect themselves and their investors, some developers have taken control of the flipping process within their own high-rises. This type of servicecalled the Miami modellets developers govern resales of their own units and offer marketing services to investors.

With this type of marketing, we control the inventory, says Paul Scaringe, vice president of sales for Sasson Hallier Properties, which is developing the Panorama Towers complexes in Las Vegas. At any given point, there are only a few units available to end-line users. As long as there are ready, willing and able buyers, typically you have no downside at all.

Like many other developers, Sasson Hallier took several other steps to prevent a flood of new inventory. It sold half of its initial condo offerings to personal acquaintances of the developers, then opened sales to the general public, allowed only one unit per buyer, reserved the power to choose which units hit the resale market at which times, and set prices at the corporate level. We will not negotiate prices with our resale program, Scaringe says. That is the number one thing.

So far, the model seems to have worked: The companys three Panorama Towers sold out to the public in a matter of weeks, and Sasson Hallier has a waiting list of at least 900 buyers interested in picking up speculators units.

There are a few caveats for investors interested in flipping. Analysts say there could be a softening of prices in the next year as the supply of condominiums keeps rising. Weve had the perfect set of variables contributing to this boomhistorically low interest rates, an easing of credit restrictions and the euros very high valuation against the dollar, says Jack McCabe, CEO of McCabe Research & Consulting L.L.C., in Deerfield Beach, Fla. Our concern is that theres going to be a tremendous amount of competition.

While that creates grounds for caution for investors, from an end users perspective it creates an ideal opportunity. The Chicago market, for example, is already showing signs of an oversupply of inventory, giving long-term buyers a chance to take advantage of price discounts in the next six to 12 months. Analysts say if youre buying a condo, particularly new construction, its best to treat it as a long-term investment.

Still, in some markets, flipping will remain a viable option for the indefinite future. In Manhattan, where demand consistently outweighs supply, prices are jumping. From 1995 to 2004, condo prices in Manhattan rose from $250 per square foot to $800 per square foot, and the number of condo sales annually jumped from 3,000 to 8,500, according to the Prudential Douglas Elliman Manhattan Market Report.

In Manhattan, theres so little room for new construction that developers are converting older buildings. This is good news for investors and buyers with less discretionary income: Analysts expect converted condo units to retain their value more solidly in the next four to five years than newly constructed ones.

Las Vegas is another market thats considered more insulated from softening prices. Its employment rate has grown 7.9 percent in recent years as tourism continues to boom and a rising number of long-term buyers settle in the area. The existing inventory still remains in relatively strong balance with the population growth that were experiencing, says Brian Gordon, principal of Applied Analysis, a Las Vegas economic and real estate research firm. We are the fastest-growing metro area in the country, and that bodes well for the residential markets.

Investors will need to be savvy about their purchases, however. Some 50,500 luxury condo units are either under construction or in the planning stages in Las Vegas, and Gordon expects about 35 to 40 percent to survive. The winners will be the developers who have an excellent location (on or near the Strip), experience in marketing condo projects such as these, and a strong brand identity. The Palms, the Hard Rocks, and the MGMs of the world will be the clear-cut winners, he says.

Investors can take a lesson from the Las Vegas market. If youre thinking about flipping, analysts say, look for a region with sizable growth potential. Were continuing to see 40 million visitors to southern Nevada, and nearly 100,000 people moving to Las Vegas, every year, Gordon says. So theres a relatively strong demand. As long as that continues, there should be a demand for the condominium product.

A look back at 2005's biggest real estate news

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A look back at 2005's biggest real estate news Ringing in the New Year by peeking at the past Wednesday, December 21, 2005 By Tom Kelly Inman News

What stories brought the most interest from all sectors of the real estate community in 2005? The devastation of Hurricane Katrina clearly was the leader in more than the real estate category. Thousands of residents losing their loved ones, homes, jobs and dreams became reality for one of the more popular areas of the country. Scores of Gulf Coast people continue to live in hotel rooms and trailers. The uncertainty of how, when, and where to rebuild will continue for countless months for many families. May the spirit of the Christmas season bring renewed hope to all hurricane victims. Certainly rising interest rates made news this year. The prospect of higher home-loan payments began to slow sales--and investor speculation--in many markets. When monthly mortgage costs leap to levels that cannot be countered by higher rents, low-down payment landlords would rather walk away than sell for a loss. Become a Member of Inman News . Access 30,000 articles . Weekly print newsletter . Special reports . Reprint rights . Audio content . Members discounts Despite what you might have heard, the Federal Reserve's 12 moves to lift rates did not cripple sales in many popular owner-occupied neighborhoods. That's because consumers, spoiled by a terrific borrowing environment for the past three years, often jump down off the fence and buy when rates rise in an effort to catch rates before they move even higher. Home-loan rates, expected to rise considerably by the fourth quarter of 2005, finally did so; yet they were bouncing lower at the end of November than they were at the end of October. A rather surprising subject that rocked the real estate world late in the year was the suggestion that the mortgage interest deduction on primary residences would be altered and reduced for most taxpayers itemizing their federal tax returns. The issue of tax reform was rumored a year ago but few analysts believed such a long-standing, seemingly untouchable subject could possibly be headed for the chopping block. The mortgage-interest deduction, viewed as a primary incentive to home ownership, was put on the table recently by a commission appointed by President Bush. Also up for discussion is the elimination of state and local property taxes as income tax deductions. Themortgage-interestdeduction is not a dollar-for-dollar tax deduction; instead, it reduces taxable income. What has been recently proposed is disallowing federal tax deductions for first and second mortgages and replacing those write-offs with a 15 percent credit on some mortgage amounts (the mortgage interest deduction is a combined $1.1 million on first and second homes). The 15 percent credit would only be for mortgages up to $359,650. Not only would interest on home-equity loans no longer be tax-deductible but also deductions for state and local property and income taxes would go out the window. What tax benefits would come to homeowners to replace those lost by the mortgage interest deduction? The proposal includes eliminating the alternative minimum tax, adding $100,000 to the current $500,000 tax-free exclusion on home-sale profits ($250,000 for single persons) and lowering capital-gains tax rates. Realtors, builders, appraisers, title insurers, inspectors, lenders--just about anybody associated with a home-loan deal--quickly came to the defense of the mortgage interest deduction. The most vocal group has been the one million-member National Association of Realtors--the largest trade association in the United States. "In my opinion it's terrible timing--it's almost irresponsible," said David Lereah, NAR's chief economist. Lereah also said that if the proposals became part of a new tax plan, local markets would be negatively affected. "That would do severe damage to a lot of the local markets across the nation. We are looking at probably a 10 to 15 percent drop in home prices." John Burns, who heads John Burns Real Estate Consulting in Irvine, Calif., said politicians should learn from their mistakes when it comes to a person's primary residence. "A stable housing market is in the best interest of almost every household in the country,'' Burns said. "In the past, it has been elected officials that have created booms and busts. Let's encourage the elected officials to leave the housing market alone or, at a minimum, implement changes over a long period of time instead of the immediate 'phase-in' of radical changes that has occurred in the past.'' And finally, current and future retirees do not want a house built for old people. This past year, builders again heard the message loud and clear this year from their next biggest housing niche. Aging boomers and retirees want an easy living home that an Olympic athlete would also enjoy, and their preferences will vary greatly. Who wants to dwell in old . . . especially when it's time to usher in the new?

Wall St. vs. Main St.: Real estate forecast

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Wall St. vs. Main St.: Real estate forecast Experts: Housing boom will end, not with a bang but a soft drop Wednesday, December 21, 2005 By Janis Mara Inman News Dave Seiders, NAHB. The real estate market is gliding toward a soft landing in 2006, according to a Wall Street economist and a real estate economist who discussed the issue in a national teleconference Tuesday. What was billed as a debate between Wall Street and Main Street sounded more like a duet by the time David Seiders, chief economist for the National Association of Home Builders, and James Glassman, senior economist for JP Morgan Chase, ended the NAHB-sponsored teleconference. "I do foresee weakening of the housing sector, but this should be a simmering-down process toward a more realistic condition, not part of a classic housing downswing leading to a recession," Seiders said. Become a Member of Inman News . Access 30,000 articles . Weekly print newsletter . Special reports . Reprint rights . Audio content . Members discounts The economist predicted that housing prices, which he said increased about 11 percent nationally this year, would increase about 6.5 percent in 2006 and about 4.4 percent in 2007. Seiders said this was because growth in the Gross Domestic Product would be strong, though not as strong as in 2005, and job creation would happen at roughly the same pace as it did this year. Also, "interest rates will be up some, approaching 6-3/4 by the year," Seiders said. "Single-family home sales, single-family home starts will be moving down," he said. "Given the numbers, I'm looking for housing to swing from a strong growth engine of the GDP to a drag in 2006," said Seiders. Giving the Wall Street perspective, Glassman said, "There are two things most Americans know about: the price of gas and the price of real estate. From train talk, anecdotes, we all sense the market shifting to a buyer's rather than a sellers' market." Glassman predicted that home price appreciation would slow from double digits to single digits, hovering in the 5 to 8 percent range. Citing inflation as one of the most critical influences on housing, Glassman said inflation "has been creeping down all year long," and is actually at the low end of the Federal Reserve's comfort zone at 1-3/4 percent. "In my mind, inflation is the dramatic story of the year and makes me optimistic for next year," Glassman said. The economist also cited employment as another critical factor for the housing market. "I think we're not at full employment yet," Glassman said. "Some say we're at full employment, but if that is the case, why is it that wage and salary income is at a record low? If we had a tight economy you wouldn't see that." Saying, "We have a way to go," Glassman characterized the economy as "a pretty good backdrop for growth over the next few years." Both economists agreed that interest rates, which the Federal Reserve's overnight funds rate raised to 4.25 percent Dec. 13, the 13th increase since June 2004, won't go up much more. "I agree that the Fed is just about done raising interest rates," said Glassman. "Why would the Fed need to drive short-term interest rates up above long-term unless they see glaring inflation?" He was referring to the fact that 10-year bond rates are currently at 4.5 percent. "It looks to me like a pretty good - if not boom-y - outlook," said Glassman. Federal financial regulatory agencies Tuesday issued proposed guidance on so-called "exotic" mortgage products such as interest-only loans, and a caller asked the two economists their opinions on the development. Space at the Real Estate Connect NYC conference (Jan. 11-13) is almost gone. Don't miss out! Secure your exhibit spot this week to receive a free ad in the conference program. More info here! "Everyone knew it was coming. It doesn't sound like a blockbuster; it's not a regulation," observed Seiders. "My understanding is that a lot of these kinds of loans have been made in the private asset securities market, outside of regulated institutions. It's a murky area right now," said Glassman. The two were also asked if appreciation in the nation's most overheated markets, such as New York City and Southern California, would be in line with the numbers they had projected, or if there was any chance of prices falling. "The Federal Deposit Insurance Corporation put out a publication about this in May," said Seiders. "The FDIC found that in places that get into boom conditions, unless you have an economic setback caused by something else, prices decelerate but don't' fall at all. Household income keeps growing, supply keeps growing and you get a balance that way." The economist added, "Over the years we have seen prices decline, but it was linked to deceleration in the economy." Hedging their bets, the two concluded on an optimistic note with a few qualifiers. "The role of investors, how much buying activity was added in 2005 by investors with no intention to occupy or even rent units, and how many units might come out of their hands - that's the downside risk," said Seiders. He pointed out that "in 2005, the threats to the overall economy we were worried about, oil prices and so forth, seem to have faded." According to Glassman, "The downside risk is that we might get more of a correction if the market slows down. But at the end of the day, the U.S economy has impressed me in how flexible it is. Overall, it's a pretty good picture."

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DECEMBER 20, 2005

NEWS ANALYSIS
By Michael Englund and Rick MacDonald

Weakness in Housing? Forget It

The November numbers put to rest the pessimists' claims that the market is popping or about to. If anything, it's gaining steam

As if to tweak the noses of housing-sector pessimists, the November U.S. housing starts report released on Dec. 20 revealed another stellar performance: a rebound of 5.3% on the month, to a 2.123 million annual pace, from a revised 2.017 million in October (2.014 million previously). Building permits rose 2.5%, to a solid 2.155 million pace, from a 2.103 million rate in October (revised from 2.071 million).

The report showed broad-based strength that defied another wet month and made clear that residential construction will enter the new year on a solid footing. As we at Action Economics have previously noted, all major seasonal adjusted data from the housing and real estate sectors remain strong through the fourth quarter -- and may actually be gaining steam.

This is true despite a small scattering of negative anecdotal evidence and swings in the some of the weekly data that are notorious for both false signals and seasonal fourth-quarter weakness. These reports are no more pronounced then those seen in most fourth-quarter periods -- when the sector always posts a significant seasonal slowdown (see BW Online, 11/29/05, "A Standard Season for Housing").

POST-KATRINA REBUILDING.  The November report pushed the most recent figure above the sideways trend that has kept these numbers in or near the 2 million to 2.1 million rate since the start of 2004, despite ongoing fears in the sector of a "popping bubble" (see BW Online, 11/18/05, "Housing: A Blip, Not a Bubble Pop"). November was a relatively rainy month, especially in the Midwest and Northeast, as was October. But adverse weather had little impact on the robust figures for both starts and permits. Starts bounced higher in all but the already robust South, with particular strength in the West.

As some argued with strength in the October new-home sales report, the initiation of sold but unstarted homes -- which is of growing importance for these monthly measures -- likely contributed to strength in the figure, as did rebuilding efforts in the aftermath of Katrina. The permits figure implies that starts will remain robust as entering the new year, with figures in the 2.05 million to 2.1 million area and chances of a surge above this range in good weather months, following the relatively wet and cold start to winter (see BW's Hot Property blog, "An Overhang of New Houses?").

At Action Economics, we expect a solid 0.7% rise in construction spending in November that will likely be followed by similar strong gains through the remaining winter months, led both by new-home construction and repair work.

NO WAVERING.  Residential construction in the quarterly GDP reports grew at a 10% rate through the first half of 2005 and is likely to post the same 10% rate in the third quarter once these figures are revised upward again in the final GDP report for the quarter. As it stands, Action Economics expects 13% real growth in residential construction in the fourth quarter, which would mark an acceleration into yearend. Virtually no evidence points to any wavering in this sector, despite pessimists' efforts to keep finding signs of weakness.

Overall, low interest rates, a solid economy, and good growth in income and profits are continuing to support housing, despite recent jitters by a bubble-wary market. In our view, the sector's peak will likely not be seen until 2006. Housing has powerful momentum, and mortgage rates should remain near historically low levels of 7% or less in 2006. Indeed, these rates may moderate somewhat if the Federal Reserve chooses to pause in its tightening path at some point early in the year, as many expect.

A housing-sector correction will clearly remain a big risk through this business cycle. But no meaningful evidence shows that it will emerge anytime soon.

Mortgage Stress Seen for '06

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Mortgage Stress Seen for '06

Delinquencies on Subprime Loans Likely to Spike, Report Says

By Kirstin Downey
Washington Post Staff Writer
Wednesday, December 7, 2005; D02

Mortgage delinquencies among homeowners with high-cost loans will rise by 10 to 15 percent in 2006, as borrowers struggle with higher interest rates, high debt levels and higher energy costs amid flattening home prices, a new report from investment analyst Fitch Ratings predicts. Consequently, overall mortgage delinquencies are likely to rise next year, as well, according to the report's authors.

"We think borrowers will be under more stress and have more propensity to be delinquent," said Glenn Costello, managing director of Fitch, which follows the market for bonds backed by residential mortgages. Recently, prices of such bonds have been falling, particularly those with lower-credit-quality loans.

Most high-rate mortgages, known as subprime loans, have adjustable interest rates, Fitch said. That means borrowers are more sensitive to fluctuations in rates, because rising rates mean their mortgages payments rise as well. About 19 percent of home loans nationwide are subprime, up from about 5 percent a decade ago, as homeowners take on heavy debt burdens. Many people have used the equity in their homes to pay off high-interest credit cards, reducing their monthly obligations, but those with poor credit have done so by shifting to subprime loans. Prime loans, those at the best rates, are given to only borrowers with good credit.

Costello said the increase in subprime lending meant more people could "come under financial pressure" than in the recent past, when home values were rising.

About 4.3 percent of all loans were delinquent in the second quarter of 2005, and about 1 percent of loans had passed the overdue category and were actually in foreclosure, according to the Mortgage Bankers Association. But the rate for subprime loans was much higher -- about 10.3 percent of such loans were in default, and about 3.5 percent were in foreclosure. Most borrowers find ways to catch up on their payments, refinance or sell their homes before they go into foreclosure.

"Some of that is these are inherently riskier borrowers," said Keith Ernst, senior policy counsel with the Center for Responsible Lending in Durham, N.C. "Research also shows that the loan terms increase the likelihood they'll go into foreclosure."

Many subprime loans, for example, feature prepayment penalties that make it too costly for borrowers to refinance, even after they have mended their credit. A study by researchers at the University of North Carolina found that 20 percent of subprime loans went into foreclosure within four years, Ernst said.

A recent government analysis of which borrowers have subprime loans found that they were disproportionately black and Hispanic. Whites and Asians were less likely to hold subprime loans.

Investors in the mortgage-backed securities that own the borrowers' loans will be only slightly affected by an increase in delinquencies, in that the returns may not be quite as good as they were, Costello said.

"Actual losses from foreclosures would have to happen before investors are adversely affected," said Arthur Frank, director of mortgage research at Nomura Securities International Inc.

He said that higher-rated mortgage-backed securities, such as AAA, AA and A-rated, usually are well-insulated from losses but that investors in lower-rated securities, the BBB-rated and below, could be more adversely affected. In addition, delinquencies may or may not lead to foreclosures, and only foreclosure losses hurt investors. But rising delinquencies means that the performance of the pool of mortgages is declining.

Frank said bigger problems for borrowers will come in 2007, because many of the subprime loans that feature adjustable-rate mortgages "reset," or change rates, that year. People who will be "stressed" will be those who were unable to refinance before their rates begin rising or whose home prices have fallen so that it becomes too difficult to sell and get out from under the mortgage, he said.

� 2005 The Washington Post Company

Few investors worried about real estate bubble

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Few investors worried about real estate bubble Investors are neutral or positive about real estate brokers, survey finds Tuesday, December 20, 2005 Inman News When owners of a primary residence or rental real estate were asked how concerned they are about a real estate crash within the next six months that will have a major impact on their personal financial situation, 14 percent said they are "very concerned" and 4 percent said they are "extremely concerned," according to a survey of 1,000 investors. The survey, conducted by Amplitude Research in mid-December for AFA Financial Group LLC, a securities broker-dealer firm, also found that television and radio financial hosts received the lowest rating for ethics and trustworthiness among professions related to providing financial advice to individual investors, while certified public accountants and certified financial planners received the highest ratings. Survey participants were asked to rate the level of ethics and trustworthiness of 11 professions using a five-point scale ranging from "not trustworthy at all" to "extremely trustworthy." The professions included: attorneys (tax or estate planning); certified financial planners; CPAs; financial journalists (newspaper or magazine); financial show hosts (radio); financial show hosts (television); hedge fund managers; investment advisors or managers; life insurance agents; real estate brokers; and stock brokers. Become a Member of Inman News . Access 30,000 articles . Weekly print newsletter . Special reports . Reprint rights . Audio content . Members discounts CPAs had the highest overall score and were selected more than any other profession as being "extremely trustworthy" (22.7 percent). Certified financial planners had the second-highest overall score and were selected as being "extremely trustworthy" by 18.3 percent of the respondents. Financial television show hosts garnered the lowest overall score, with only 2.7 percent of the respondents identifying them as being "extremely trustworthy." Space at the Real Estate Connect NYC conference (Jan. 11-13) is almost gone. Don't miss out! Secure your exhibit spot this week to receive a free ad in the conference program. More info here! About 5 percent of respondents said real estate brokers are "extremely trustworthy," while 34 percent found them to be "somewhat trustworthy," 33 percent "neutral," 22 percent "somewhat untrustworthy," and 6 percent "not trustworthy at all." Of the 480 individual investors who have obtained a new mortgage or refinanced within the past three years, about 17 percent indicated that they were "very concerned" or "extremely concerned - I think about it constantly" that the loan amount is too high or the mortgage terms too risky, according to the AFA announcement, while 34 percent were "not concerned at all." When asked "how do you primarily make financial investment decisions," 30 percent identified "with counsel from a certified financial planner" and 16 percent "with counsel from an accountant or CPA." The most frequently identified source of outside input was "from family and friends." Amplitude Research conducted the online survey from Dec. 15-17. Qualifying criteria were respondents who have investments besides their primary residence (stocks, bonds, mutual fund, money market fund, real estate, or individual retirement account). About 55 percent of the respondents had household income over $60,000, with 20 percent having household income over $100,000. There were 1,007 survey completions, which represents a margin of error of 3.07 percent at a 95 percent confidence level.

Wealthy Americans believe real estate to go up, up, up

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December 20, 2005

Wealthy Americans believe real estate to go up, up, up

Dean Foust

Remember back in 1999 and 2000, when surveys showed that-even with the Dow Jones and the Nasdaq indices in nosebleed territory-many investors still believed that the market would rise at least 10% a year as far as the eye could see? Back then, earning 10% on stocks was seen as a birthright.

Even with the torrid runup in housing prices, seems that Americans believe that same to be true in housing. According to a survey of wealthier Americans released today by PNC Financial Services Group, 65% of those surveyed said they expect to see double-digit increases in the value of their primary homes over the next five years, with 31% expecting an increase of 20% or more.

Other findings:

--Only 7% of wealthy Americans expect any decline in the value of their primary homes over the next five years.

--Break it down by region, and Floridians (who have seen a dramatic appreciation in their home value) are the most bullish. Interestingly, New Yorkers and New Englanders are the most bearish, with Californians close to the median. (More survey findings available at the link above.)

What do I think? I think there's a parallel to what happened in stocks. Not predicting a nationwide 30% downturn, but perhaps a 10% to 20% downturn in overheated markets, followed by a long stretch--perhaps a decade or more--of flat returns. I think there's a good chance that come 2015, Americans will be so conditioned to earning NOTHING on their home that the days when housing was viewed as an "investment" will seem quaint.

An Overhang of New Houses?

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December 20, 2005

An Overhang of New Houses?

Peter Coy

Just when it looks like housing construction is finally going to cool off we get another number like today's stat from the government. Construction began in November on 2.12 million privately owned homes (seasonally adjusted). That's up from 5.3% from October and 17.5% from last November.

And it doesn't look like this is the end of it, either, because permits are up, too. Permits were issued in November for 2.15 million housing units, which is up from October and from a year earlier.

This is great news for buyers. It means the supply of housing is increasing, which means sellers are going to have to compete harder for your business.

It's not such great news for homeowners who are looking to sell, or for the builders themselves.

The more bullish analysts are saying that housing still has plenty of room to run. Here's what Action Economics said about the Census Bureau report this morning:

[T]he U.S. starts report revealed another stellar performance in November .... A housing sector correction will clearly remain a big risk through this business cycle. But, there is no meaningful evidence that this correction will emerge anytime soon.

High Frequency Economics, which is more bearish on housing, called the numbers a surprise but added that construction numbers take a while to respond to changes in the economy:

The bottom line here, though, is that construction activity lags changes in demand; mortgage applications and sales are the key data.

It's worth pointing out that just yesterday, the National Association of Home Builders came out with a negative report. saying that the confidence of home builders fell again in December from its summer peak. The latest level of the NAHB/Wells Fargo Housing Market Index is 57, down from a June high of 72.

Here's what David Rosenberg of Merrill Lynch said about the home builders' survey:

Taking a long view on this index, even at 57 it still remains high, but the downward move from the high of 72 in June cannot be ignored. Within the details the big decline came in prospective buyer traffic, which fell 7pts. This would seem to confirm the concern of many homebuilders who recently cut sales forecasts for next year; little wonder with housing affordability measures deteriorating. The present single family home index fell 4pts which points to some slowing in housing starts for December.

It feels to me like the buyer's market is flipping over into a seller's market.

A futures market for housing prices

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December 19, 2005

A futures market for housing prices

Dean Foust

If you've bought a house in a bubbly urban market and are suddenly fearful of losing a big chunk of your nest egg if prices fall, what do you do? While stock investors have long been able to hedge their bets by taking short positions, homeowners were simply left to sweat. Until now.

Come April, the venerable Chicago Mercantile Exchange will launch trading in U.S. home prices by allowing investors "to trade in housing-price futures based on the median home price in each of 10 U.S. cities," according to this article.
Between now and then, there are a few other avenues for betting on housing prices. One is HedgeStreet.com, a Web site that lets you bet on housing trends in six markets. The contracts, which are three- and six-months in duration, are benchmarked against the National Assn. of Realtors reported Median Sales Price of Existing Single-Family Homes in Chicago, LA, Miami, NY, San Diego and San Francisco.
Given the recent softness in these markets, seems it would be much harder to get anyone to take the other side of the bet (i.e., wager that prices in those markets are going UP in the coming months.)

I'm no expert at derivatives, so I have no idea the kind of bet you're making for a bet on declining prices to actually net you a meaningful return. so I'd invite anyone who is to take a gander at the HedgeStreet site and report back as to the current bet that you'd have to be willing to make on further price declines, because it strikes me the easy money has been made here. Anyone willing to report back?

A futures market for housing prices

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December 19, 2005

A futures market for housing prices

Dean Foust

If you've bought a house in a bubbly urban market and are suddenly fearful of losing a big chunk of your nest egg if prices fall, what do you do? While stock investors have long been able to hedge their bets by taking short positions, homeowners were simply left to sweat. Until now.

Come April, the venerable Chicago Mercantile Exchange will launch trading in U.S. home prices by allowing investors "to trade in housing-price futures based on the median home price in each of 10 U.S. cities," according to this article.
Between now and then, there are a few other avenues for betting on housing prices. One is HedgeStreet.com, a Web site that lets you bet on housing trends in six markets. The contracts, which are three- and six-months in duration, are benchmarked against the National Assn. of Realtors reported Median Sales Price of Existing Single-Family Homes in Chicago, LA, Miami, NY, San Diego and San Francisco.
Given the recent softness in these markets, seems it would be much harder to get anyone to take the other side of the bet (i.e., wager that prices in those markets are going UP in the coming months.)

I'm no expert at derivatives, so I have no idea the kind of bet you're making for a bet on declining prices to actually net you a meaningful return. so I'd invite anyone who is to take a gander at the HedgeStreet site and report back as to the current bet that you'd have to be willing to make on further price declines, because it strikes me the easy money has been made here. Anyone willing to report back?

Home Mortgage Rates Fell in Latest Week

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Home Mortgage Rates
Fell in Latest Week

From Dow Jones Newswires

Home mortgage rates fell slightly in the past week, as the Federal Reserve signaled it might consider ending its lengthy campaign of interest-rate boosts sooner rather than later, said Freddie Mac, the housing finance agency.

The average for 30-year fixed rates for the week ended Dec. 15 was 6.30%, down from 6.32% a week earlier. One year ago, the rate was 5.68%.

The average for 15-year fixed-rate mortgages was 5.85%, down from 5.87% a week ago, but up from the year-ago 5.11%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.77%, down slightly from 5.78% a week ago. One-year Treasury-indexed ARMs were down slightly from last week at 5.15%. A year ago, the rate was 4.18%.

Financial markets had been "a little anxious about what language" the Fed would use in its statement, said Frank Nothaft, Freddie Mac chief economist. When the Fed signaled that its rate increases may be ending, "the financial market breathed a sigh of relief, and rates eased somewhat."

Email your comments to rjeditor@dowjones.com.

-- December 19, 2005

 

 

Remodeling Helps Resale, Regardless of State of Market

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Remodeling Helps Resale,
Regardless of State of Market

By Gene Colter
From The Wall Street Journal Online

The housing-bubble debate has served as a full-employment act for economists. It's also left some folks wondering how much they should shell out on remodeling if their as-yet-unfinished hardwood floor is about to drop out from under them.

Irresolute remodelers can get off their picket fence: Projects that make your patch of the American Dream more pleasant usually help sell it -- regardless of where real-estate is headed -- and a lot of the cost can be recouped if you move. How much depends in part on location, with buyers in some of the hottest housing markets willing to pay a premium for fancy fix-ups.

But poorly done, or overly personalized, remodeling works against you at resell: As a conscientious contractor told a couple with a starter home, "You do not want orange tile."

Home-improvement dollars should first go toward jobs that make your pad more livable, if not lovable. These improvements may not boost resale value, but good luck selling the house at market value without them: If the pipes sound like whale-song, the pipes come first, because even the most hapless home inspector will bother to flush the toilet.

Many homeowners fixate on and fret about kitchens and baths. As Martha Stewart might say, that's a good thing, because these rooms count for a lot. Don't touch the rest of the house if you're planning a move within a few years.

"There is a higher return on renovating a kitchen than any other project in the house," says Cory Marks, a Re/Max Realtor in Northern New Jersey. "That can include even a minor kitchen repair. What I've seen people do is keep a lot of existing structures in place."

Elise Haeussler's Baltimore design firm does a lot of Band-Aid work on kitchens, and she tells clients to avoid contractors who default to a tear-down. Provided the room isn't about to burn down, you can get just as much joy from new cabinet fronts, a new sink and similar touch-ups. In a kitchen in a small home in Arlington, Va., Ms. Haeussler tiled over "ghastly" linoleum, replaced cabinet hardware and the sink and repainted, but not with bland "contractor's beige." The result? Like a picture postcard from Provence, and it later sold the house.

Not a cook? You spend more time in the kitchen than you think, and house hunters -- be they chefs or eat-out executives -- obsess over it. "I've seen homes sit that are in great shape because the kitchen was not redone," says Mr. Marks. "If every other house on the street has a remodeled bath or kitchen, then on resell it's kind of an expected standard."

If every nail you drive is with an eye toward selling, you may as well use the bible the Realtors quote from: Remodeling magazine, whose "Cost vs. Value Report" reveals average costs recouped on major kitchen work are above 90 cents on the dollar, and nearly 100% on a minor job. Returns on buff-and-polish work soar to as much as 170% in major cities and drop to as low as about 60% elsewhere.

Those figures cut both ways. If you live in an economically less buoyant part of the country, your renovation should cost less. Should you need professional help, your contractor likely will show up, which often doesn't happen in towns where overextended "professionals" remodel homes whose values resemble the GDPs of small nations.

Email your comments to rjeditor@dowjones.com.

-- December 20, 2005

 

Six key real estate negotiation tips for buyers, sellers

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Six key real estate negotiation tips for buyers, sellers Determining other party's motivation paramount to success Friday, December 16, 2005 By Robert J. Bruss Inman News The year 2005 has been very good for most property owners and realty sales agents. Home sales prices appreciated handsomely in most communities and the sales volume of new and resale homes were near-record. But 2006 promises to be more "normal" as mortgage interest rates slowly rise, resulting in a modest new home construction volume decline with a corresponding residence market value appreciation and sales volume slowing. Purchase Bob Bruss reports online. Having been through many real estate market ups and downs over almost four decades, both as an investor, sales broker, and realty writer, I've learned that success in a slowing real estate market requires paying greater attention to negotiation skills. NEGOTIATE WITH PEOPLE WHO WANT TO NEGOTIATE. As a lifelong student of real estate negotiation techniques, because there is always more to learn, I've discovered it usually is a waste of time to attempt to negotiate with people who are not highly motivated to make a change. Most experienced real estate agents hate the situation when a home seller lists their desirable property for sale with a top price but they really don't have a good motivation for selling. These sellers often have the attitude "If we can get our price, we'll sell. Otherwise, we won't sell." Their homes often take "forever" to sell. But in 2005, many homes sold for above their asking prices because buyers wanted to purchase more than sellers wanted to sell. A strong motivation for many buyers was to beat the long-predicted rise in home mortgage interest rates. The result was a "seller's market" in many communities with more qualified buyers than motivated sellers. However, as the number of residence listings for sale has risen recently and is expected to continue rising in early 2006, especially after the customary holiday 2005 year-end lull in home sales, many real estate economists are predicting a more normal balance of motivated sellers and buyers. The result should put a premium on negotiation skills for home buyers and sellers, as well as their realty agents, to conclude successful sales. HOW TO ACHIEVE A SUCCESSFUL NEGOTIATION. Whatever your role in a home sale, as buyer, seller or realty agent, you can't ask too many questions. Of course, the best negotiators inquire in a friendly manner interjected with compliments. Here are the six key questions to get answered for a successful home sale negotiation: 1. WHY IS THE SELLER SELLING THIS LOVELY HOME? One way or another, successful home buyers and their realty agents need the answer to this key question so the buyer can make a purchase offer which meets the seller's needs (of course, buyers should leave out the word "lovely" if the place is a dump!). As a long-time investor in rental houses, and my personal residences, I always try to tailor my purchase offers to meet the seller's needs (and mine too). For example, several years ago I bought a house from an elderly lady who was retiring. So I offered her 10 percent cash down payment and a 90 percent seller carryback mortgage to provide for her retirement income. When she saw my offer and how much she would receive from my payment each month, she accepted (although the listing agent previously told me she wouldn't carry back any mortgage financing). Another time a listing agent told me the retired sellers of an "el dumpo" house were living in a boarding house and needed cash. As a result, I figured they wanted an all-cash sale so I arranged 100 percent financing at a community bank. The sellers immediately accepted my low purchase price offer for cash. 2. WHAT WAS THE HOME SELLER'S PURCHASE PRICE? Buyers who don't find out the answer to this key question, either from the listing agent or their buyer's agent, are at a severe negotiation disadvantage. Here's why: If the seller purchased the home many years ago for a low purchase price compared to today's market value, that seller has lots of negotiation room. However, if the home seller bought within the last few years for a price not far from today's market value, there isn't much negotiation flexibility. Of course, if the seller has a high-motivation reason for selling, as disclosed by the answer to the first question, even a recent home buyer is often willing to sell in a quick sale for close to the seller's purchase price. Such a situation is an ideal candidate for the buyer to take over payments on the current mortgage with the lender's permission. 3. DOES THE OTHER PARTY HAVE A TIME DEADLINE? This is a question both home buyer and seller should ask of their realty agent. To illustrate, if one party has a job transfer, then purchase or sale of the home can be very important. But if the seller is moving to a retirement residence, time usually isn't so critical. However, if the seller already bought another home and needs to sell the current home to produce the down payment, then closing time is ultra-important. As experienced real estate agents know, the worst home buyers and sellers are those without any time deadlines. Those folks can take forever to make decisions. 4. HAS THE SELLER OBTAINED A PROFESSIONAL HOME INSPECTION REPORT? Today's smartest real estate agents suggest their sellers obtain a professional inspection report at the time of listing the home for sale. Then the seller is fully aware of most home defects and can either have the defect repaired or fully disclose it to prospective buyers, thus averting future lawsuits. Sharp home purchasers, and their buyer's agents, understand this trend. When a buyer is seriously interested in a house, always ask if the seller has already obtained a professional inspection the buyer can review before making a purchase offer. Even if the seller has obtained customary professional inspection reports, smart buyers should always include in their purchase offers a contingency clause for the buyer's approval of their own inspection report obtained at the buyer's expense. Most states now have some form of required seller disclosure statement revealing known home defects. However, many sellers are not aware of all their home's defects, or they might "forget" to disclose a defect. The old days of "caveat emptor" (let the buyer beware) have disappeared. Today, the new rule seems to be "let the home seller beware of the buyer and his lawyer." 5. WHAT IS THE BUYER'S MOTIVATION TO PURCHASE MY HOME? Just as home buyers need to know the seller's reason for selling, to create a harmonious negotiation situation, home sellers should ask why the buyer wants to purchase. Of course, there are many home purchase reasons. However, if the buyer has indicated a key reason why that particular house is under consideration, such as its great condition, outstanding school district, or need to move in quickly, the seller can use that information to enhance their negotiation position. 6. ASK AN OPEN-ENDED QUESTION, SUCH AS WHAT ADDITIONAL INFORMATION SHOULD I KNOW BEFORE MAKING A DECISION? There are many variations of this question home sellers and buyers can ask, especially of their real estate agents. To illustrate, a home buyer might ask their buyer's agent "What else should I know about this house?" Or the seller might ask their listing agent "If you were in my situation, would you accept or counteroffer the buyer's purchase offer?" SUMMARY: When negotiating a home sale, sellers and buyers can't ask too many questions to enhance their negotiation position. The prime reason is to determine how motivated the other party is to buy or sell. If there is weak motivation, you aren't in a strong negotiation situation. However, if the other party is highly motivated, then you are in a strong circumstance to negotiate your strongest price and terms. More details are in my special report, "How to Become a Super-Successful Real Estate Negotiator," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Next week: The Five Most Profitable Negotiation Tactics. (For more information on Bob Bruss publications, visit his Real Estate Center). *** What's your opinion? Send your Letter to the Editor to opinion@inman.com. Copyright 2005 Inman News

Demystifying Escrow For First-Time Home Buyers

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Demystifying Escrow
For First-Time Home Buyers

By June Fletcher

Question: Why is money put into escrow when you buy a home?

-- Myra Brown, Norfolk, Va.

Myra: Like "Is there a Santa Claus?" this question is deceptively simple and profound -- because in a world where we all knew and trusted each other, there would be no need for escrow.

Unfortunately, that's not the case. Most real-estate deals are conducted between strangers, and you don't know whether or not you're dealing with a Grinch. Hence the need for escrow, a word that can be either a noun or a verb, and which refers to the process of having money, deeds and other documents held by an impartial third party in a transaction until the principals perform as they agreed they would.

The term can be confusing to first-time home buyers, because both brokers and lenders use escrow for different reasons. When a seller accepts an offer on a house, the money that the buyer included in the bid is put into an escrow account, usually at the title company conducting the closing. At that point, the deal is said to be "in escrow." When the sale is finally complete and the escrow officer distributes all the money and ownership documents as specified in the purchase agreement, escrow is said to be "closed."

But that's not the end of escrow for many buyers. Lenders don't quite trust that their customers will pay taxes and insurance on the properties they've just purchased, and they want to protect their investments. So they insist on opening new escrow accounts -- sometimes called escrow impound accounts -- for any property purchase where the borrower has put less than 20% down. Typically, the lender will collect taxes and insurance pro-rated by month, along with a two-month cushion to guard against tax increases. The money that goes into the account earns interest, but unless state law specifies otherwise, the lender usually receives it.

Borrowers who put down more than 20% can choose to waive escrow, pay their taxes and insurance directly, and invest their funds elsewhere. But because lenders can't be sure you will pay these fees, they consider these loans to be riskier, and usually charge a waiver fee, often around a quarter of a point. On the other hand, if you put more than 20% down and still have the lender escrow the funds, you can often negotiate a lower interest rate.

Whenever your money is put into escrow, it's important to read supporting documents carefully, because mistakes and oversights do happen. For instance, the Real Estate Settlement Procedures Act requires that lenders send borrowers an annual statement showing current and projected payments, and any shortages, and that they return any excesses of $50 or more. I recently received such a statement for a property I own in Florida. The statement projected that I needed to escrow more than $100 a month for flood insurance next year, even though I have always paid for flood insurance through my monthly homeowners' association dues. (It fell to me to call the homeowner's association and have them fax a document proving the insurance had indeed been paid for the coming year.) 

For more information, consult Sandy Gadow's "The Complete Guide to Your Real Estate Closing" (McGraw-Hill, 2003) and Peter G. Miller's classic guide, "The Common-Sense Mortgage" (Contemporary Books, 1999).

-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Her "House Talk" column appears most Fridays on RealEstateJournal.com. Email your questions about the residential real-estate market. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.

Email your comments to rjeditor@dowjones.com.

-- December 16, 2005

 

Most Expensive Home Sales In The U.S. 2005

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Most Expensive Home Sales In The U.S. 2005
Sara Clemence

Builders and pharmaceutical distributors made it, as did Donald Trump. So did reality show maestro Mark Burnett. And media mogul Rupert Murdoch nearly had the distinction of appearing twice.

For the third year in a row, Forbes.com has compiled a list of the most expensive home sales of the year. In 2005, some real estate records were snapped multiple times, while others remained firmly intact. The average price of a home on our list was up just slightly from last year, rising from about $35 million to approximately $36 million (the exact averages are elusive, because some of the final sales prices are estimates), but increasing nearly 40% from 2003.

The priciest sales were all in California, Florida and New York. And though Palm Beach estates constituted nearly half our list, nothing came close to the national standard set in 2004, when Ronald O. Perelman, the billionaire who controls Revlon (nyse: REV - news - people ) and other brands, sold his oceanfront estate there for $70 million. That's still the record for the most expensive home sale in the U.S. (Lakshmi Mittal's 2004 purchase of a house in London for approximately $125 million is the highest price ever paid.)

Slide Show: Most Expensive Homes

In New York, stratospheric sales kept the country's most real-estate-obsessed city enthralled throughout 2005. Just weeks after Murdoch, head of News Corp. (nyse: NWS - news - people ), agreed in late 2004 to pay the highest price in state history for a single residence--$44 million for the late Laurance Rockefeller's Fifth Avenue triplex--a little-known pharmaceuticals tycoon bested him.

Stewart Rahr, president and chief executive of Whitestone, N.Y.-based Kinray, the largest privately held wholesale pharmaceuticals distributor in the country, purchased Burnt Point, a sprawling estate on East Hampton's Georgica Pond, for $45 million from commodities trader David Campbell. Both deals were at the top of our list. (Murdoch's purchase closed in the spring, once he passed muster with the building's board.)

Murdoch still held the New York City record--until, that is, it was busted by hedge fund manager Daniel Loeb, who plunked down a whopping $45 million for something that doesn't even exist. His mansion-in-the-sky will occupy the 39th floor of the Robert A.M. Stern-designed luxury complex, Fifteen Central Park West. Completion is planned for 2007.

However, Murdoch also set a listing record for downtown Manhattan, putting his SoHo loft on the market for $28 million. Clothing designer Elie Tahari has reportedly agreed to buy the spread. If the deal had closed this year (and for close to the asking price), Murdoch would have hit our list twice.

We compile our list by tracking media reports, examining public records and talking to real-estate brokers and consultants around the country. In some cases, we obtained prices from public records. In other cases, they come from published reports or local brokers who are in the know. We're certain there are also other deals that would have made our list but were kept extremely quiet. Our list did not include land deals, nor did it include sales where the prices were totally undisclosed. For example, Little Jennie Ranch, a Wyoming property that made our list of the most expensive homes in the U.S. with an asking price of $55 million, changed hands this year for a sum that has not leaked into the public sphere.

That was far from the only big sale in the West, though none broke price ceilings, says Steve Lewis of Beverly Hills brokerage Hilton & Hyland. "There are houses out here that would set records," Lewis says. "But nothing is on the market. Everyone's yelling and screaming. There is no inventory."

The Beverly Hills home of the late oilman, real-estate developer and former owner of 20th Century Fox, Marvin Davis, sold for somewhere in the mid-$40 million range. A stunning oceanfront property in Montecito, Calif., was sold for a reported $27.5 million to Peter Sperling, senior vice president of the Apollo Group (nasdaq: APOL - news - people ), parent company of University of Phoenix Online, and his wife, Stephanie.

In Malibu, an elegant oceanfront estate was sold by Sandy Gallin, who produced the 1991 film Father of the Bride and its sequel, among others, as well as television shows such as Buffy, the Vampire Slayer and Angel, to another television bigwig. Mark Burnett, the executive producer of reality hits, including the Survivor and The Apprentice series, reportedly paid between $26 million and $27 million for the house, rounding out the bottom of our list.

Meanwhile, in Palm Beach, Bruce Toll, vice chairman of homebuilding giant Toll Bros. (nyse: TOL - news - people ), bought himself a luxurious spread on the water. And Paul Saville, chief financial officer of construction company NVR purchased a villa for $32 million--half what his boss, Dwight Schar, paid for Perelman's place.

Not every pricey locale has seen such real-estate bounty. Aspen, home to the $46 million sale of Hollywood producer Peter Guber's ranch, which made last year's list, was conspicuously absent in 2005. The Miami area is said to still be staring down the record set in 1999, when Sylvester Stallone sold his villa for $27.5 million.

"It was not a record-setting year," says Audrey Ross, a broker in Coral Gables for Esslinger Wooten Maxwell. The most expensive home sale in the area, she says, was way below $20 million.

The top sale around Boston, says Terry Maitland of LandVest, was under $9 million this year. That's far from the $18.5 million deal he brokered a few years ago for a 13.5-acre private residence in Brookline. "It's become a buyer's market," he says.

That doesn't necessarily bode ill for 2006. Though most of the country is watching where mortgage rates are heading, and many experts predict a slowdown in the real-estate market, the super-rich don't operate the way the rest of us do. They are not hindered by high interest rates, since all-cash deals are the norm. And they don't appear to be backing off.

"There've been more double-digit sales in L.A. in the last six months than there were probably in the 18 months prior to that," says Joe Babajian, a Beverly Hills broker for Prudential. "People with money typically have a better knowledge of where the economy's going. I think that's a good indicator that the market's going to keep going."

So 2006 is looking as though it could be just as strong at the very top of the luxury real-estate market. That would certainly be the case if the rumored $105 million sale of Schlumberger heiress Adelaide de Menil's 40-acre oceanfront estate in East Hampton proves to be a reality. Another year, another record.

Click here to see the most expensive home sales in the U.S.

 

 

House passes reverse mortgage bill

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House passes reverse mortgage bill Bill would remove limits on number of HUD-insured loans Thursday, December 15, 2005 Inman News today. said Association Lenders Mortgage Reverse National the Development, Urban and Housing of Department by insured be can that mortgages reverse number on cap eliminating night last legislation passed Representatives House U.S.> The Reverse Mortgage to Help America's Seniors Act, sponsored by Reps. Michael Fitzpatrick and Jim Matheson, amends the National Housing Act by removing the existing cap of 250,000 reverse mortgages that HUD can insure at any given time, the association said. A Senate version of the bill introduced by Sen. Rick Santorum is pending approval, and both bills enjoy bi-partisan support in Congress and are endorsed by senior citizens' advocacy group AARP, according to the reverse mortgage association. "NRMLA commends Reps. Fitzpatrick and Matheson for their leadership in getting this bill through the House of Representatives," said Peter Bell, President of NRMLA, in a statement. "As the popularity of reverse mortgages continues to grow nationally, it's absolutely critical that the cap is removed to avoid a disruption in the marketplace," Bell said. During the most recent federal fiscal year ending Sept. 30, HUD insured a 43,131 reverse mortgages, a record number, for a fifth consecutive year, the association said. The federally insured Home Equity Conversion Mortgage, or reverse mortgage accounts for 90 percent of all reverse mortgages made in the U.S., according to the reverse mortgage association. When Congress created the HECM program in 1988, a cap was imposed so lawmakers could periodically monitor the program's performance and costs to the government, according to the association. Now that the program has a track record, the association believes there's no continuing need for a cap because the HECM program generates sufficient funds to cover its costs through mortgage insurance premiums paid by borrowers. A reverse mortgage is a loan that enables homeowners 62 or older to borrow against the equity in their homes, without having to sell the home, give up title, or take on new monthly mortgage payments. Loan proceeds can be used for any purpose, and taken out as a lump sum, fixed monthly payments, line of credit, or a combination. The loan amount depends on the borrower's age, current interest rates, and the value and location of the home. A reverse mortgage does not have to be repaid until the borrower moves out of the home permanently, and the repayment amount cannot exceed the value of the home. After the loan is repaid, any remaining equity is distributed to the borrower or the borrower's estate. *** Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140. Copyright 2005 Inman News

Couple Hopes Their Trade Up To a Ski Condo Will Pay Off

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Couple Hopes Their Trade Up
To a Ski Condo Will Pay Off

By Jane Hodges

The investors: Alan Horowitz, 57, is a free-lance technology writer, and his wife, Vickie, 49, is an executive assistant. They live in Salt Lake City, Utah, and have been investing in real estate for about four years. The Horowitzes currently have three investment properties, with a fourth in the works.

The property: The Horowitzes bought a 600-square-foot ski condo in Park City, Utah, in January 2002. The property is their second in Park City,which is about 45 minutes away from their hometown. The one-bedroom, one-bath unit was in good condition at the time of purchase and has a small balcony and a fireplace. While not a "ski-in, ski-out" home directly on the slopes, the condo is within walking distance to ski lifts.

The interior of the Horowitzes's condo in Park City, Utah.

Purchase price: $100,000. The Horowitzes used a 1031 tax exchange to buy the residence. They sold a Florida property and traded up to the Park City home, which they own outright. Mr. Horowitz says they were fortunate in purchasing the condo during a lull in the Park City real-estate market, which experienced a run-up in prices during the years leading up to the 2002 Winter Olympics.

Additional investment: They waited until the end of the 2002 ski season (which runs from December until mid April) before spending $5,000 on cosmetic renovations -- which included painting, and replacing bathroom fixtures, furniture, curtains and doors. Since then, they've spent about $4,000 in additional fixes and upgrades.

The strategy: The couple rents out the condo and hopes to resell it at a higher price at a later date. Property owners who bought in Park City when they did tend to bank more on real-estate appreciation than rental income to make money, Mr. Horowitz says. Ski season income can be hard to predict, varying on snowfall and vacationers' habits, he explains. The couple uses a management company to handle rentals during the ski season, the condo's peak renting period, but rent out the unit without the aid of a management company the rest of the year to cut back on costs. (The company retains 50% of the revenue in exchange for marketing, booking and cleaning the unit.)

The pitfalls: Mr. Horowitz says he and his wife generally are pleased with their investment. However, they've had some difficulty determining the best way to profit from the rental. This past ski season, they leased their home to a long-term renter for an amount that was less than what their management company might have earned them with short-term tenants. Other years, they made higher rent during ski season, but struggled to find off-season renters.

The payoff: They estimate their paper profits to be $134,400, excluding capital gains. The condo was appraised for $220,000 in November. This is how they arrived at their figure: $220,000 minus the purchase price ($100,000), plus four years of rent income ($14,400 -- after deducting property taxes and costs for the management company, homeowners' association, renovations, insurance and maintenance).

Do you think this was a good investment? Share your thoughts on this property.

-- Ms. Hodges is a free-lance writer in Seattle.

Email your comments to rjeditor@dowjones.com.

-- December 15, 2005

 

Passing On My Home

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December 13, 2005

Passing On My Home

The looming threat of a $1.5 million tax bill motivated me to action. How to keep our family home in Aspen and minimize or avoid the potential 50% estate tax on the $2.9 million property when my 78-year-old father passes?

I found the answer. But unfortunately, it looks like we lost the window of time do this estate planning strategy. For those who may benefit, here's the answer. A Qualified Personal Residence Trust, or QPRT, allows a parent to pass their house to their children without huge tax consequences. Even better-rising interest rates actually benefit these types of trusts. Even if you think today's real estate boom is over, it's likely there will be long-term gains over the next 10-15 years-which is the time period for most of these trusts.

Here's how these trusts work: A parent continues to live in the home for the length of the trust, usually set at five to 15 years. During that time, the parent is still considered the owner and can deduct mortgage interest, real estate taxes, and other qualified expenses from personal income tax. At the end of the term, the house passes to the kids and out of parent's estate, regardless of its value and accumulated appreciation. The parent can stay in the house when the trust dissolves but must pay fair market rent to his children. If the parent dies before the trust ends, the property goes back into his estate and is priced at fair market value.

I asked Blanche Lark Christerson, a managing director at Deutsche Bank Private Wealth Management in New York, to run some numbers on my dad's house. My dad's age and a five-year-trust term just don't give us much of an estate planning edge. Your dad would have gotten more bang for his buck if he had done the trust when he was younger and had a longer trust term, say 10 years or more, she told me.

Of course, that potential $1.5 million tax bite is my problem, not my father's. But still, I learned something in this process. The Week magazine featured an article about how to help your children best learn about finances. Rule Four: Use a Qualified Personal Residence Trust to pass your house on to your children. At least I can plan to do that for my own children.

01:19 PM

Estate Planning

Ward officials twice failed to find condo flaws

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Ward officials twice failed to find condo flaws

The Yomiuri Shimbun

Officials in Ota Ward, Tokyo, twice failed to detect that a condominium building in the ward designed by disgraced architect Hidetsugu Aneha was insufficiently earthquake resistant. Since Aneha has testified to having falsified the condo's construction data, enraged residents said they would hold the ward responsible.

According to Aneha's testimony during his appearance as a sworn witness before the Diet on Wednesday, the Ota Ward condo was the first structure he designed using falsified earthquake-resistance data.

The officials did not notice the falsification when they first checked Aneha's construction data and they overlooked it again when they reexamined the data following the revelation that there had been a series of falsifications.

Huser Ltd. developed the 24-apartment condominium, Grand Stage Ikegami, and Kimura Construction Co., based in Yatsushiro, Kumamoto Prefecture, built it. Aneha was responsible for the structural design, which was examined by Ota Ward officials in July 1998. The condo was completed in November 1999.

Huser revealed that the condo's earthquake-resistance strength was insufficient at the end of November.

Since the period of time the building plans for the condo had to be kept on file had expired, Ota Ward obtained structural calculation sheets from the design office and reexamined the data, concluding the building was sufficiently earthquake resistant.

Ota Ward knew Aneha had designed the condo's structure, but did not confirm that data falsification had taken place.

A board member of the condo management union, 56, said that despite officials' failure to determine whether the condo was sufficiently earthquake resistant, Aneha's remarks confirmed construction data had been fiddled.

===

Construction company searched

Citing the Building Standards Law, Construction and Transport Ministry officials Wednesday searched the head office of Kimura Construction Co. in Yatsushiro, Kumamoto Prefecture, in connection with the falsification of earthquake-resistance data.

(Dec. 15, 2005)

The Balancing Act of Today's Housing Market

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The Balancing Act of Today's Housing Market
December 2005

Homeowners and buyers have been searching for any signs that the nation's robust housing boom may be going bust - especially in light of recent reports that the market is cooling. But NAR's chief economist, David Lereah, assures us there is no reason for panic. The housing market may be slowing down, but it's still strong and healthy.

Lereah says the housing boom has peaked. "We are returning to more balanced markets between home buyers and sellers, one that places buyers on a more even footing," he says. Read on for excerpts from some of Dr. Lereah's most recent speeches and media interviews:

Balloons, not bubbles
Rather than housing bubbles, Lereah likens today's housing markets to balloons. "Balloons don't burst," he says. "You can put air in a balloon and it expands or you can take air out and it shrinks. Various metro markets got real hot over the last four years. Air went into those balloons and the prices went up. But now, air is coming out of the balloons. We're hearing a hissing sound not a pop.there's a soft landing ahead."

From sellers' markets to buyers' markets
"Sellers' markets are transitioning to buyers' markets," Lereah says. As inventories rise prices soften somewhat, many buyers get the break they've been waiting for and are able to get into the market.

More homes to choose from
"We've been waiting for inventories to go up for the last two years. Inventories are the big problem in the housing market. They've been too lean," says Lereah. "We want inventories to rise a bit so that demand and supply can get into better balance with one another. The recent boost in inventory levels means that buyers will have a wider choice available to them, and the significant price appreciation shows that demand is still there as markets continue to balance themselves."

The biggest risk
The biggest risk in the housing markets today is speculative buying, according to Lereah. It's highly concentrated in a few markets like Miami, San Diego and Washington, D.C. "If interest rates continue to rise, those speculators will sell. When these speculative purchases go on the market all at once, there could be a glut and prices could soften considerably," Lereah says.

The fundamentals of a strong housing market are still in place
Today's unprecedented housing streak rests on some real-world fundamentals, according to Lereah. He notes that jobs are plentiful, immigration is fueling demand, incomes are rising and the boomer bulge is reaching 50-60 years old - the age group that controls substantial wealth.

The housing market drives the economy
For the last four years, the housing market has been driving the economy in a big way. If the housing market slows, then the economy slows, Lereah explains, "Over the last five years, homeowners have accumulated about $4 trillion in wealth through their home equity alone. People spend from that wealth and the rest of the economy benefits. Even though they may not sell their homes, they feel richer. They also take out equity lines and spend money that way." Much of this is starting to slow down, he says.

To buy, or not to buy
Lereah advises: If you're not a homeowner and you're thinking of purchasing a home -- do it! "As a property owner, you'll benefit from equity and wealth gains over the long-term. If you expect to keep the home for at least four years, there's more risk to staying out of the market than getting in." He adds that buyers are still looking at historically low mortgage rates - even though they've risen, they're still hovering around 6.25 percent. "That's low-cost financing, and I would take advantage of it."

Learn more about NAR Chief Economist David Lereah

Developers take the required 'open space' to new heights

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Posted on Thu, Dec. 15, 2005 MIAMI Developers take the required 'open space' to new heights Many Miami high-rises have met a city requirement for 'open space' by taking it aloft. Today, the City Commission will consider closing the loophole and requiring fees from those who take the high road later. BY ANDRES VIGLUCCI aviglucci@herald.com Like every Miami building, the Club at Brickell Bay in the city's high-rise Brickell district was required to leave some open space on its property, and it did -- 14 floors up, atop the parking garage. There, developer Tibor Hollo installed a private pool deck, shaded by trees, inaccessible and invisible to all but building residents. Hollo flouted no rules. Like virtually every developer of a major high-rise in Miami for at least the past 10 years, if not longer, Hollo took advantage of a glaring loophole in the city's open-space ordinance: It doesn't mandate that the required open space be at ground level. The result, critics say, has been a proliferation of concrete canyons where sunlight barely penetrates, and a freebie for developers relieved of the responsibility of delivering an intended public benefit. They say the phenomenon has reached new heights with the downtown development boom, in particular in the Brickell district, where new skyscrapers crowd in on narrow streets, filling lots virtually end to end and obscuring views of water and sky. ''They have let people use the roofs of buildings as open space, and that's reduced it to nothing,'' said Robert McCabe, a neighborhood activist and former Miami Dade College president, who has long been critical of the practice. ``Some of these spaces are nice. But you need to have spaces that serve the public, not just the people who live in a building.'' A VOTE TODAY The Miami City Commission is now poised to bring an end to what some commissioners call an absurdity. They are expected to give final approval today to a revamped ordinance that would require the open space to be on the ground. It also provides an option many developers are likely to choose: If, as often happens, a lot is too tight or land values too high to set aside much land, developers could still hoist the required open space up in the air -- at a price. They would pay $50 into a proposed new Parks and Open Space Trust Fund for every square foot of required open space elevated above ground. The fund would be used to acquire land for new parks or public spaces, or for improvements to existing ones. The new fund would complement a proposal for sharply increased impact fees charged to developers for parks, a measure also up for final commission approval today. Although the new ordinances would not apply to buildings that have been completed or have already filed formal applications with the city, together both initiatives could still generate millions of dollars for Miami's long-underfunded parks system, among the smallest in the country for a city of its size. A review of about a half-dozen recent condo plans on file with the city show open-space requirements -- a percentage of lot area that varies by location and type of building -- running from 17,000 square feet to 78,000 square feet. That would mean substantial potential yields, as much as $850,000 to $3.5 million per project. The new open-space rules don't alter a separate ''green'' ordinance, which has always required a certain amount of landscaping at ground level, nor do they affect setback requirements. But Hollo, long one of Miami's leading residential high-rise developers, said the new ordinance would hamstring developers in Brickell and downtown Miami, where sky-high land prices would make projects financially unfeasible if developers are forced to set aside land at ground level. And making developers pay to put it elsewhere is unfair, he said. ''Such a fund could do lots of good, but it cannot be citywide,'' Hollo said. ``It's a penalty and would be a discouragement.'' CLASH OF CONCEPTS The practice of elevating required open space runs counter to city planners' drive to create an attractive, pedestrian-friendly urban landscape, said Miami Commissioner Johnny Winton, who proposed the new ordinance. Winton said he was unaware of the loophole until McCabe pointed it out to him. ''It's not rational,'' Winton said. ``It's no more public than their air-conditioning unit. The whole idea is to have a certain amount of open space available at street level that creates an ambience and makes pedestrians want to get out on the street. If you have nothing but concrete and long blank walls, nobody's going to walk.'' Yet nearly every hotel and mid- to high-rise residential building approved in the past several years has done it, from the exclusive Four Seasons and Espirito Santo Plaza towers on Brickell to smaller buildings now under construction across the city. So do massive new residential plans now under review, such as the proposed 850-foot-tall 1101 Brickell condo tower. Plans by developer Leviev Boymelgreen and architect Kobi Karp call for counting a 17th-floor pool deck in the project's required open space. But the project will also provide public plazas and broad walkways at street level, Karp said. He added that elevated amenity decks, which are usually landscaped, do have a public benefit, serving as rooftop gardens visible from surrounding towers. ''In cities such as New York, you walk out of your unit and you look up or down and see gardens up in the air,'' Karp said. There are exceptions to the trend. Projects along Biscayne Bay or the Miami River are required to set aside land for public waterfront walkways, and most thus satisfy or exceed basic open-space requirements at ground level. Others, while elevating most of their open space, provide substantially more than required. The Four Seasons, for instance, has more than 107,000 square feet of open space, or roughly three times the requirement, according to plans filed with the city. POOL ACCESS LIMITED Perhaps most controversially, the already approved Island Gardens project, a massive hotel and luxury-yacht marina on public parkland on Watson Island, will put required public spaces atop a parking garage -- but the public won't have access to an adjacent swimming pool. ''That's their idea of public open space,'' complained Nancy Liebman, president of the Urban Environment Leaque, which unsuccessfully challenged the plan. 'When we met with the developers, we asked, `Does that mean anybody can go in the pool?' No, of course not.'' Making developers put the open space at grade isn't always desirable, said Otto Boudet-Murias, the city's chief of planning and economic development. Plazas or other small urban open spaces around buildings are often unused, and 1980s-vintage condo towers along Brickell have lots of open space around them, but the general public can't use it and buildings are isolated from the street, doing nothing to enliven the neighborhood, he said. Pooling money to buy larger, well-designed and accessible open spaces will work better in the end, Boudet-Murias and Winton said. ''We can buy land and have a bigger chunk of it, and create green space along our major corridors that is truly usable,'' Winton said.

---

� 2005 Herald.com and wire service sources. All Rights Reserved.
http://www.miami.com

New Research Suggests Growth of Office Condo Market May Be Temporary Phenomenon Powered by Low Interest Rate Environment

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Press Release Source: Grubb & Ellis Company; PNC Real Estate Finance

 

New Research Suggests Growth of Office Condo Market May Be Temporary Phenomenon Powered by Low Interest Rate Environment

Wednesday December 14, 11:22 am ET 
(Grubb & Ellis Company, PNC Real Estate Finance Explore Whether Office Condos are Here to Stay or Will Be Gone Tomorrow)

NORTHBROOK, Ill., Dec. 14 /PRNewswire-FirstCall/ -- The continued low interest rate environment, business owners' desire to own versus rent and financial benefits, have revived the office condominium market. However, the jury is still out on whether the office condo market will continue to thrive long-term, according to a new report issued today by Grubb & Ellis Company (OTC Bulletin Board: GBEL - News), one of the nation's leading real estate services providers, and PNC Real Estate Finance, a member of The PNC Financial Services Group, Inc.
For the report, entitled "Office Condos: Here to Stay or Gone Tomorrow?" appraisers, developers and brokers in 41 markets throughout the U.S. were surveyed in order to understand the office condo market of today and potential for the future. The report's co-authors Robert Bach, National Director of Market Analysis for Grubb & Ellis, and Elizabeth Ptacek, Senior Analyst, Market Research at PNC Real Estate Finance, define an office condo as an office building with two or more suites that are individually owned. The owners of the individual suites own the remainder of the property in common.

"The office condo market is too new to expect a definitive conclusion, but the findings provided insight into a rapidly expanding market niche," said Bach, adding that the growth of the office condo market, which caters to small businesses, dovetails with the fact that today's fastest growing companies are small businesses.

Ptacek noted, "If one assumes that there has been a fundamental shift in the way that real estate is perceived as an investment, then office condos are likely here to stay, remaining a legitimate, if tiny, segment of the office market."

Respondents surveyed were split, with many stating that office condos have become a permanent niche in the office market and others stating that the surge in demand will be temporary. Rising interest rates was noted as the most significant risk facing office condo developers over the coming years.

    Some of the key findings include:
    -- Office condo developers are active in smaller markets where you might not expect them to be, such as Grand Rapids, Mich., and are all but missing in some much larger markets, including Los Angeles, San Francisco and Boston.  Growing markets with a high percentage of       service clients serving the local population and business base are well suited for office condos.

    -- Office condo development is linked to population growth as well as the cost of development and the strength of the residential condo market. Phoenix, with 73 office condo projects recently completed, 20 under construction and 33 planned, is the office condo capital of the nation.

    -- Over 60 percent of the brokers surveyed believed that one of the most important factors driving demand is the desire to control occupancy costs.  With financing favorable and tax benefits available to condo owners, tenants are comparing the costs of renting vs. buying, with many finding that buying is a better option.

    -- In some markets, such as Chicago, the trend has been to convert existing hard-to-lease buildings.  This may be slowing.  As leasing markets improve and sales prices continue to rise, converters may have difficulty finding properties to convert at a price that makes sense.

    -- Nearly 60 percent of brokers give future development a yellow light -  proceed with caution, while over 30 percent give development a green light.  Less than 10 percent stated that office condo development is not a good idea.

    -- In many markets, the financial returns to develop other property types, such as residential condos, is much greater than for office condos.

    -- Office condo development is becoming more widespread in mixed-used properties with office and/or retail condos created on the first or first several floors.

The researchers concluded the office condo market is a market trend that needs to be watched, stressing that office condos are a legitimate and often cost-effective option, especially for some businesses seeking to service a particular neighborhood such as medical professionals, accountants and insurance agents.

 

A complete copy of the report can be obtained online at either http://www.grubb-ellis.com or http://www.pncrealestatefinance.com .

 

PNC Real Estate Finance

PNC Real Estate Finance is a member of The PNC Financial Services Group, Inc. (NYSE: PNC - News), one of the nation's largest diversified financial services organizations providing consumer and business banking; specialized services for corporations and government entities including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.

Grubb & Ellis Company

Grubb & Ellis Company is one of the world's leading full-service commercial real estate organizations, providing a complete range of transaction, management and consulting services. By leveraging local expertise with our global reach, Grubb & Ellis offers innovative, customized solutions and seamless service to owners, corporate occupants and investors throughout the globe. For more information, visit the Company's Web site at http://www.grubb-ellis.com .

 

--------------------------------------------------------------------------------
Source: Grubb & Ellis Company; PNC Real Estate Finance

Trade Group Says Sales Of Homes Will Slip in 2006

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Trade Group Says Sales
Of Homes Will Slip in 2006

From Dow Jones Newswires

The National Association of Realtors expects sales of new and existing U.S. homes to drop to "high plateau" levels in 2006, while home prices continue to rise.

Existing-home sales, expected to rise 4.7% to a record 7.1 million this year, are projected to fall 3.7% in 2006 to 6.84 million, the second-biggest figure on record, the NAR said. The realtors' group foresees a similar trend for new homes, with sales projected to drop 4.8% next year to 1.23 million, also the second-biggest number on record.

"Home sales are coming down from a mountain peak, but they will level out at a high plateau -- a plateau that is higher than previous peaks in the housing cycle," NAR Chief Economist David Lereah said. "This transition to a more normal and balanced market is a good thing."

Housing construction is also expected to fall back after reaching this year the highest point since 1972. The NAR projects housing starts will decline 4.8% next year to 1.92 million.

Despite slowing activity, the NAR says it expects the national median home price to continue to increase next year, as it has each year since reliable record keeping began in 1968. The U.S. median price for existing homes is expected to rise 6.1% next year to $221,400 after an estimated 12.7% surge this year. The median price for new homes is projected to increase 7.3% next year to $250,100 after rising 5.5% this year.

Temporary price declines in certain areas are still possible if job markets are weak or housing is oversupplied, but the odds of home-price appreciation remain "very good," NAR President Thomas Stevens said.

Email your comments to rjeditor@dowjones.com.

-- December 14, 2005

 

Trade Group Says Sales Of Homes Will Slip in 2006

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Trade Group Says Sales
Of Homes Will Slip in 2006

From Dow Jones Newswires

The National Association of Realtors expects sales of new and existing U.S. homes to drop to "high plateau" levels in 2006, while home prices continue to rise.

Existing-home sales, expected to rise 4.7% to a record 7.1 million this year, are projected to fall 3.7% in 2006 to 6.84 million, the second-biggest figure on record, the NAR said. The realtors' group foresees a similar trend for new homes, with sales projected to drop 4.8% next year to 1.23 million, also the second-biggest number on record.

"Home sales are coming down from a mountain peak, but they will level out at a high plateau -- a plateau that is higher than previous peaks in the housing cycle," NAR Chief Economist David Lereah said. "This transition to a more normal and balanced market is a good thing."

Housing construction is also expected to fall back after reaching this year the highest point since 1972. The NAR projects housing starts will decline 4.8% next year to 1.92 million.

Despite slowing activity, the NAR says it expects the national median home price to continue to increase next year, as it has each year since reliable record keeping began in 1968. The U.S. median price for existing homes is expected to rise 6.1% next year to $221,400 after an estimated 12.7% surge this year. The median price for new homes is projected to increase 7.3% next year to $250,100 after rising 5.5% this year.

Temporary price declines in certain areas are still possible if job markets are weak or housing is oversupplied, but the odds of home-price appreciation remain "very good," NAR President Thomas Stevens said.

Email your comments to rjeditor@dowjones.com.

-- December 14, 2005

 

Federal Reserve Increases Key Interest Rate to 4.25%

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Federal Reserve Increases
Key Interest Rate to 4.25%

By Greg Ip
From The Wall Street Journal Online

The Federal Reserve raised interest rates for the 13th consecutive time Tuesday and suggested it would raise rates again, but also suggested it is less certain on its future rate actions than it has been in over a year.

The Fed, as expected, raised its target for the federal-funds rate, charged on overnight loans between banks, to 4.25% to 4%. That's its 13th consecutive quarter-percentage point increase in the rate target since June, 2004, when it stood at a 46-year low of 1%.

In the accompanying statement, the Fed said growth remained "solid", inflation excluding food and energy prices had "stayed relatively low," and inflation expectations were contained. But it also warned that the possibility of further erosion of spare productive capacity and high energy prices "have the potential to add to inflation pressures."

"Some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance," the Fed said. That sentence suggests the Fed feels it has to raise rates further. But for the first time in almost four years, it did not describe monetary policy as "accommodative."

By dropping that word, the Fed acknowledged that at 4.25%, the federal-funds rate is no longer so low that it is clearly stimulating economic activity, and may be in the range of "neutral," a level that neither stimulates nor restrains economic growth.

The changes to the language are the most significant in over a year and reflect a recognition by the Fed that it is no longer as certain of its future actions as it was for the last two years.

But by retaining the use of the word "measured," albeit in different form from the previous two years, the Fed also sought to eliminate perceptions that the end of its tightening campaign was imminent. The word "measured," which it first introduced in May of 2004, has come to mean by a quarter percentage point per meeting. Markets expect the Fed to raise the funds rate to either 4.5% by next Jan. 31, Alan Greenspan's last meeting as chairman, or 4.75% on March 28, when Ben Bernanke is scheduled to be chairman.

The economy grew at a robust 4.3% annual rate in the third quarter in spite of sustaining hits from Hurricanes Katrina and Rita and sharply higher energy prices, and appears to be growing at about 3.4% in the current quarter, according to Macroeconomic Advisers LLC, a forecasting firm. That pace is at or above the economy's long run growth rate and suggests that spare business capacity and idle labor are being used up. Fed officials say the economy may already be operating at full capacity, which gives firms and workers more leverage to raise prices and wages.

Although inflation excluding food and energy has remained at about 2% in recent months, that's still near the top of the 1% to 2% "comfort zone" that some Fed officials say they prefer. And the unemployment rate, at 5%, is down to levels some economists say represents "full employment."

Still, Fed officials are less sure of how much they will raise them. At its current level, the funds rate is far less stimulative than it was in June of 2004, when it stood at 1%. The housing market appears to have cooled in recent months which could feed back into consumer spending and slow overall economic growth. Moreover, inflation has surprised Fed officials by not rising further already, leading some to suspect there are new forces, like globalization, working to contain price pressures.

Email your comments to rjeditor@dowjones.com.

-- December 13, 2005

 

Are Mortgage Lenders on Thin Ice?

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December 13, 2005

Are Mortgage Lenders on Thin Ice?

Peter Coy

You know what gets me nervous? When people who usually say calming things seem to be getting a little nervous.

Standard & Poor's, which like BusinessWeek is owned by the McGraw-Hill Companies, has a piece in the Dec. 14 issue of CreditWeek reassuringly entitled, "Banks Facing Higher But Manageable Credit Risk Challenges." But there on the first page, S&P says:

Nevertheless, the new layering of risk in mortgage loans and the introduction of new products to higher risk profile customers is unprecedented, and these loans' credit performance is untested in weaker housing markets.

Friedman Billings Ramsey, an investment bank in Arlington, Va., has a generally more optimistic outlook. (Full disclosure: FBR's sister company, First NLC, is a leading subprime lender.)

FBR analyzes the outlook for income gains by metro area, energy costs, and the reset dates for different kinds of loans. It concludes that most subprime borrowers will be protected by various caps. "The ARMS are festooned with caps," Michael Youngblood, the author, told me this afternoon.

Youngblood concludes that no more than 20% (19.75%, to be precise) of any particular variety of prime ARM borrowers are vulnerable to shock, and those are in 78 of the nation's 331 metro areas. Youngblood says there's no regional concentration of where those vulnerable metro areas are. It amounts to a relatively small share of all loans outstanding.

Condo Hotel Development is Booming

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Condo Hotel Development is Booming Date: 2005-12-13 Industry: -Hotel- Category: Trends LE Announces '06-'07 Development Forecast for Timeshares, Condo Hotels and Hotels with Residences Lodging Econometrics (LE), the real estate authority for the lodging industry, released its first Development Forecast for three important specialty sectors of the lodging industry - Timeshare development, Condo Hotels, and for Hotels developing Private Residences. Patrick Ford, President of LE, indicated that these Pipeline Forecasts for '06, '07 and '08 and beyond predict rapid growth and will be of great interest not only to executives in the lodging industry, but also to developers, investors, lenders, and vendors who operate in the vacation resort industry or who specialize in upscale residential real estate markets. Ford continued, 'We are delighted to be compiling development activity and forecasting new supply additions for these fast-growing sectors where unit owner demand is being driven by easily-accessed lending at historically attractive rates, by thriving residential development in many urban centers and booming second-home development at high-profile resort destinations.' Timeshare and Vacation Club Industry Shows Continued Growth in '06 and '07 In 2006, 39 Timeshare projects are forecasted to open, having 3,998 dedicated Timeshare units while '07 will have 27 projects/3,699 units. The total Timeshare Pipeline currently contains 111 projects being actively pursued by developers with 15,360 units. 56 of those projects are currently Under Construction, 41 are Scheduled to Start in the Next 12 Months, and 14 are in various stages of Early Planning. 41 of the projects contain a total of 3,074 Fractional units. 63% of all Pipeline projects are for new ground-up construction, while 37% are for the unit expansion of existing Open and Operating Timeshare projects. Casino destination areas are the most popular locations for development with 4,244 units in the Pipeline, or 28% of the total. Oceanside vacation areas and theme park destinations follow, each having 17% of all Pipeline units, then mountain and ski areas with 16%. Las Vegas is the most popular market with 26% of all pipeline units, followed by Orlando with 17%. Marriott's Vacation Club has 12 company-owned projects with 2,413 units in the Pipeline, while Hilton has four projects with 1,108 units. Cendant's two brands - Worldmark and Fairfield have a combined 14 projects/1,327 units. Ford commented, 'Although the branded vacation clubs are developing most of the large projects, Timeshare is still pretty much a fragmented industry with 74 out of 111 projects in the Pipeline being constructed by smaller local and regional developers.' Condo Hotel Development is Booming In 2006, 32 projects with 4,831 Condo Hotel units are forecasted to open while 27 projects/5,025 units will open in '07. The current Construction Pipeline contains a total of 105 projects with 29,042 condo units, averaging a very high 276 units per project. 44 Condo Hotel projects are currently Under Construction, 41 are Scheduled to Start in the Next 12 Months, and 20 are in Early Planning. 75% of all projects are ground-up new construction, while 25% of the projects will convert existing guestrooms in Open and Operating Hotels to condo units. The primary purpose of each Condo Hotel project is to function as a hotel servicing regular transient guests. So, most often, unit owners are required to place their units into a hotel rental program when unoccupied, receiving a share of rental proceeds in return. Subsequently, Condo Hotels are usually Upscale, Full-service developments focused in the strongest hotel markets: either popular vacation destinations, or in large cities where suburbanites frequent hotels for business or leisure purposes. 45% of all Pipeline projects are in Oceanside locations, while 10% are near theme parks, and another 9% are at Casino destinations. Florida has the greatest development activity, with 46% of all Pipeline projects. Miami, Fort Lauderdale, West Palm Beach and Orlando are the popular locations. Ford indicated that Condo Hotels are a significant factor in the lodging industry's growth because without these products that draw such individual investor participation, large upscale hotel projects could not otherwise be conventionally financed and built so early in the industry's economic recovery. Hotel Construction with a Private Residential Component is Exploding Another proven way to build Luxury and Upscale hotels in the early stage of a recovery is to include private residences for sale in the project. In the regular Hotel Construction Pipeline, 142 projects are including some form of private residential development - condominium residences inside the hotel and/or condominiums, town houses and single-family homes adjacent to the hotel. Most all developers will choose a major upscale brand early on as it adds important cachet to the project and communicates a level of amenities and hotel services that often permits developers premium pricing greater than what comparable residential projects in the same community can command, sometimes up to 25% or more. 62% of this type of development is in urban centers or close in suburban locations of large cities where regular residential condominium construction has strong momentum. Another 20% of the development is at the country's most upscale oceanside resort destinations. Individual Project Records and Sector Forecasts will be Updated Quarterly Ford said, 'In order to compile these sector Pipelines, each developer was interviewed and an individual project record was created for every project in the Pipeline. Each record will be updated quarterly, adding new project details and revisions as they are announced; including the all-important Construction Start and Completion Dates. All New Project Announcements will be added each quarter and cancellations and postponements will be removed.' This will result in all Sector At-a-Glance 'Macro Summaries,' which detail projects and unit counts and the two-year Forecast for New Openings, being updated quarterly as well. Through the month of January, LE clients can subscribe, at special introductory prices, to any of the three 'Sector At-a-Glance Summaries' and the Individual Project Records as their needs might require. Lodging Econometrics (LE) of Portsmouth, NH is the real estate authority for the lodging industry. LE maintains over 80,000 individual database records throughout the U.S. and Canada. Records contain important project details including contact information for the Owner, Management, Developer and his project team members. Customized reports can be designed to meet a company's unique needs: Individual Database Records for project review and Summarial Reports of the various Pipelines, markets, chain scales and brands for Strategic Planning and Forecasting. To learn more about LE's products and services or to inquire about ordering a customized report, please contact LE at (603) 431-8740 ext. 25, or visit them online at www.lodging-econometrics.com. This article comes from Hotel News Resource http://www.hotelnewsresource.com The URL for this story is: http://www.hotelnewsresource.com/article20030.html

USCONDEX Condos Now Showcased on Leading British Online Real Estate Site

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December 13, 2005 01:23 PM US Eastern Timezone USCONDEX Condos Now Showcased on Leading British Online Real Estate Site MIAMI--(BUSINESS WIRE)--Dec. 13, 2005--   850,000 Monthly Web Visitors to Primelocation Now to Have Access to USCONDEX Listings; Comes at Peak Purchasing Time for International Buyers   The U.S. Condo Exchange ("USCONDEX"), http://www.uscondex.com, the online marketplace where condos can be researched, negotiated and purchased in real time 24-hours a day from anywhere in the world, today announced that its condos will now be featured on http://www.primelocation.com, the UK's leading property website. Primelocation will showcase USCONDEX listings to its 850,000 potential buyers each month, simultaneously with the condos' listings on USCONDEX. The new arrangement forges a formidable relationship for transatlantic real estate transactions online. -- In popular vacation home states such as Florida, for example, UK buyers already account for one-third of all international home sales(1). Now, with USCONDEX sellers having access to the UK's most visited real estate website, it opens up enormous opportunities for increased exposure for their condo units. The new agreement sets USCONDEX apart from traditional U.S. real estate websites which do not typically cross international borders in their reach. "Our goal is to make the U.S. condo market accessible to a worldwide audience at the click of a mouse," said Richard Swerdlow, Chief Executive Officer of the U.S. Condo Exchange. "Showcasing our condo inventory on primelocation.com is a first step in that effort, as we tap into one of the largest condo buying audiences in all of Europe." Primelocation, http://www.primelocation.com, is the leader in the mid- to high-end U.K. markets and lists more than 50% of all properties for sale in the UK as ranked by value. Originally launched five years ago by leading independent real estate agents across the UK, the online site now boasts over 1,700 leading agents who exclusively list their properties with Primelocation with some 3,500 offices, both in the UK and overseas. Listings are accepted only from estate agents, letting agents and new home developers, with USCONDEX's inclusion now expanding that list in the U.S. Through its agreement with Primelocation, USCONDEX will also be bringing even more international exposure to U.S. condos in general. -- The Primelocation site currently lists over 200,000 properties of which 50,000 are international, but U.S. inventory is limited. That will now change with the USCONDEX alliance. James Haft, Chief Financial Officer of USCONDEX, points out that foreign homebuyers also often spend more for homes than their U.S. counterparts, helping to raise the bar for values. A study by the National Association of Realtors just this past spring, for example, determined that foreigners paid a median price of $299,000 for a vacation or second home in Florida, while the median for the existing buyers in the state was more than $100,000 lower at $196,200. The numbers illustrate how luxury condo developers, brokers and owners in the U.S. may reap the best sales value through international avenues. We are also now entering the peak seasonal period for international purchases, with the winter months historically being the strongest time for such sales. As of today, http://www.primelocation.com now features up-to-date listings of an initial 500 USCONDEX client listings, with USCONDEX's entire inventory of 25,000 listings expected to be posted to Primelocation within months. "You can't beat the price," concluded Haft. "For USCONDEX's low listing fee of $149 per month or $449 until sold, you now gain access to over 1,000,000 monthly global viewers, and this audience is growing rapidly as we continue to add marketing partners." Visitors to the http://www.uscondex.com site can now view over $10 billion of available condos in Florida from the convenience of their home. Available offerings will grow to cover all the major metropolitan centers of the United States and then internationally over next 18 months. USCONDEX, which aims to be the "eBay of the condo market", is a one-stop marketplace where buyers, sellers, developers and financial intermediaries can access virtually every possible piece of data they need for informed condo decision making right online. The exchange offers buyers and brokers exhaustive research capabilities so they can make the most educated purchase possible; the service provides sellers cost-effective access to a worldwide customer base; and offers developers and financial intermediaries objective real-time data for development and underwriting decisions. USCONDEX currently features over 25,000 condo listings in the state of Florida valued at over $10 billion, with a Las Vegas rollout expected this winter followed by a nationwide rollout in key markets over the next 24 months. USCONDEX, http://www.uscondex.com, was founded by principals of Miami-based Swerdlow Group, one of the preeminent real estate development firms in the Southeastern U.S., and Pacific Alliance Limited, LLC, a New York-based merchant bank specializing in e-commerce, communications businesses, technology and emerging markets. The firm's offices are located in Miami and New York City. (1) National Association of Realtors, May 2005 study. Contacts For USCONDEX, Miami Anne Kazel-Wilcox, 561-741-1010 akazel@goldcoastcommunications.com or For Primelocation Jamie Jago, 00-44-207-228-5464 jjago@jagodean.co.uk

Terms of Use   |   � Business Wire 2005

USCONDEX Condos Now Showcased on Leading British

Brought to you by

FOR IMMEDIATE RELEASE                     

Contact: Anne Kazel-Wilcox

December 13, 2005                                                           

for USCONDEX

(561) 741-1010                      akazel@goldcoastcommunications.com

 

Jamie Jago

for Primelocation

00-44-207-228-5464

jjago@jagodean.co.uk

 

 USCONDEX Condos Now Showcased on Leading British

Online Real Estate Site

-- 850,000 Monthly Web Visitors to PrimeLocation Now to Have Access to USCONDEX Listings; Comes at Peak Purchasing Time for International Buyers --    

 

Miami, Fla. -- The U.S. Condo Exchange ("USCONDEX"), www.uscondex.com, the online marketplace where condos can be researched, negotiated and purchased in real time 24-hours a day from anywhere in the world, today announced that its condos will now be featured on www.primelocation.com, the UK's leading property website. Primelocation will showcase USCONDEX listings to its 850,000 potential buyers each month, simultaneously with the condos' listings on USCONDEX. The new arrangement forges a formidable relationship for transatlantic real estate transactions online. - In popular vacation home states such as Florida, for example, UK buyers already account for one-third of all international home sales[1]. Now, with USCONDEX sellers having access to the UK's most visited real estate website, it opens up enormous opportunities for increased exposure for their condo units. The new agreement sets USCONDEX apart from traditional U.S. real estate websites which do not typically cross international borders in their reach.      

 

"Our goal is to make the U.S. condo market accessible to a worldwide audience at the click of a mouse," said Richard Swerdlow, Chief Executive Officer of the U.S. Condo Exchange. "Showcasing our condo inventory on Primelocation.com is a first step in that effort, as we tap into one of the largest condo buying audiences in all of Europe."    

 

Primelocation, www.primelocation.com, is the leader in the mid- to high-end U.K. markets and lists more than 50% of all properties for sale in the UK as ranked by value. Originally launched five years ago by leading independent real estate agents across the UK, the online site now boasts over 1700 leading agents who exclusively list their properties with Primelocation with some 3,500 offices, both in the UK and overseas. Listings are accepted only from estate agents, letting agents and new home developers, with USCONDEX's inclusion now expanding that list in the U.S. Through its agreement with Primelocation, USCONDEX will also be bringing even more international exposure to U.S. condos in general. -- The Primelocation site currently lists over 200,000 properties of which 50,000 are international, but U.S. inventory is limited. That will now change with the USCONDEX alliance.

 

James Haft, Chief Financial Officer of USCONDEX, points out that foreign homebuyers also often spend more for homes that their U.S. counterparts, helping to raise the bar for values. A study by the National Association of Realtors just this past spring, for example, determined that foreigners paid a median price of $299,000 for a vacation or second home in Florida, while the median for the existing buyers in the state was more than $100,000 lower at $196,200. The numbers illustrate how luxury condo developers, brokers and owners in the U.S. may reap the best sales value through international avenues. We are also now entering the peak seasonal period for international purchases, with the winter months historically being the strongest time for such sales.  

 

As of today, www.primelocation.com now features up-to-date listings of an initial 500 USCONDEX client listings, with USCONDEX's entire inventory of 25,000 listings expected to be posted to Primelocation within months. "You can't beat the price," concluded Haft. "For USCONDEX's low listing fee of $149 per month or $449 until sold, you now gain access to over 1,000,000 monthly global viewers, and this audience is growing rapidly as we continue to add marketing partners."

 

Visitors to the www.uscondex.com site can now view over $10 billion of available condos in Florida from the convenience of their home. Available offerings will grow to cover all the major metropolitan centers of the United States and then internationally over next 18 months.

 

USCONDEX, which aims to be the "eBay of the condo market", is a one-stop marketplace where buyers, sellers, developers and financial intermediaries can access virtually every possible piece of data they need for informed condo decision making right online. The exchange offers buyers and brokers exhaustive research capabilities so they can make the most educated purchase possible; the service provides sellers cost-effective access to a worldwide customer base; and offers developers and financial intermediaries objective real-time data for development and underwriting decisions.  USCONDEX currently features over 25,000 condo listings in the state of Florida valued at over $10 billion, with a Las Vegas rollout expected this winter followed by a nationwide rollout in key markets over the next 24 months.   

 

USCONDEX, www.uscondex.com, was founded by principals of Miami-based Swerdlow Group, one of the preeminent real estate development firms in the Southeastern U.S., and Pacific Alliance Limited, LLC, a New York-based merchant bank specializing in e-commerce, communications businesses, technology and emerging markets. The firm's offices are located in Miami and New York City.

 

###

 

 

---

[1] National Association of Realtors, May 2005 study.

Winner of the Florida Real Estate Showcase FREE Online Advertising.

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U.S. Condo Exchange is pleased to announce the Winner of the Florida Real Estate Showcase FREE Online Advertising.

 

Winner will receive:

1 Month Bold Featured Directory Advertising and 

3 Months of Banner Advertising.

 

WINNER:

Mirta S. Bussey

Realtor Associate

International Investment Specialist

Member of Luxury Homes

 

Check back with us soon to see future contests! 

 

 

All Things Condo

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FOR IMMEDIATE RELEASE

Contact: Anne Kazel-Wilcox

November 22, 2005

Gold Coast Communications

(561) 741-1010   akazel@goldcoastcommunications.com

 

 

 "All Things Condo"

 -- New Technology Brings Condo News to One Central Place,

Personalizing the Web in a Way Never Imagined --  

 

Miami, Fla. -- The U.S. Condo Exchange ("USCONDEX") announced that in its quest to provide every conceivable type of condo information to potential buyers and sellers of condominiums, it has added RSS (Real Simple Syndication) technology to its website at www.uscondex.com. The technology, one of the hottest features overtaking the Internet lately, allows for USCONDEX to be an aggregator of "all things condo" in the news, taking condo news from around the nation and situating it in one central place for viewing at www.uscondex.com. That streaming news can then be easily added to anyone's desktop so they can have all the latest and greatest in condo news at the tip of their fingers, just one more convenience from USCONDEX as it strives to create the most informed condo marketplace possible.

 

"You're no longer chasing down information, information can now find you," explains James Haft, Chief Financial Officer of the U. S. Condo Exchange.  

 

For ease of use, USCONDEX has aggregated news by user category: Buyer, Seller, Developer, Market Headlines and USCONDEX News. That allows users to cut to the chase and personalize news they want to receive. -- Potential buyers can receive the news most applicable to their purchasing decision including mortgage financing news, inspections, insurance woes, closing advice, home improvement tips and the like; condo owners can read articles relevant to planning a sale including expert opinions on regional markets, comps, tips on showing condos, capital gains issues, etc.; and developers can examines the most pressing issues affecting their plans for construction, conversion, financing, maximizing pre- and post-construction sales and significant property transactions nationwide. Additional market headlines gauge the general climate for condos and driving economic forces, while the USCONDEX news section addresses particularly timely condo news USCONDEX thought "You would want to know!"

 

"There is so much news out there, that people could spend all day trying to sort through what is applicable to their interests. Now, USCONDEX has it all in one central place that's easily accessible and usable," added Richard Swerdlow, Chief Executive Officer of the U. S. Condo Exchange, "The market for condominiums has grown faster than the news avenues for condos, but at USCONDEX our RSS feed brings condo news to the forefront."

 

In effect, the new RSS technology reduces clutter, streamlines information, and transmits news in a cost- and time-effective manner. Together with XML technology, which facilitates the sharing of data across different systems especially those connected with the Internet, RSS is personalizing the web like never before.

   

USCONDEX, which aims to be the "eBay of the condo market", is a one-stop marketplace where buyers, sellers, developers and financial intermediaries can access virtually every possible piece of data they need for informed condo decision making right online. The exchange offers buyers and brokers exhaustive research capabilities so they can make the most educated purchase possible; the service provides sellers cost-effective access to a worldwide customer base; and offers developers and financial intermediaries objective real-time data for development and underwriting decisions.  The U.S. Condo Exchange's goal is to increase liquidity and standardization to revolutionize the $190-billion plus U.S. condo market.

 

USCONDEX, www.uscondex.com, was founded by principals of Miami-based Swerdlow Group, one of the preeminent real estate development firms in the Southeastern U.S., and Pacific Alliance Limited, LLC, a New York-based merchant bank specializing in e-commerce, communications businesses, technology and emerging markets. The firm's offices are located in Miami and New York City.

 

###

 

Anne Kazel-Wilcox
Gold Coast Communications
Ph:(561) 741-1010
Fax:(561) 741-1004
Cell:(561) 313-5612
email akazel@goldcoastcommunications.com
www.goldcoastcommunications.com

Who will pay for windows and doors that Wilma broke?

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Posted on Sun, Dec. 11, 2005 CONDOMINIUMS Who will pay for windows and doors that Wilma broke? BY DONNA GEHRKE-WHITE dgehrke@herald.com You'd think it would be an easy matter: Wilma shattered your condo windows and your association's insurance should pay to replace them. After all, a recent state law requires condominium associations to have insurance to cover such damage. Instead, some condo associations are telling owners they have to pay for their own new windows and patio doors. They point to a provision in some condos' documents that holds individual owners responsible for their windows and patio doors. The clause is common in documents for low- or mid-rise condominiums built since the 1970s -- older buildings that Wilma hit the hardest. (In most high-rises and newer buildings, the documents make the association responsible for all exterior doors and windows.) Adding to the problem: Many insurance adjustors are telling condo owners that their individual policies won't cover the window or door damage. So far, state agencies have given mixed signals over how the 2004 law should be interpreted. The Florida Division of Land Sales, Condos and Mobile Homes in the Department of Business and Professional Regulation (DBPR) maintains that generally the associations should pay for any damaged windows -- even if the cost doesn't rise to the level of the insurance premium's deductible. The association should pay out of its reserves, general fund or by enacting a special assessment ''rather than passing the expense to the individual unit owners whose units are damaged,'' DBPR spokeswoman Kristen A. Ploska said in an e-mail. Meanwhile, the state's condo ombudsman, Dr. Virgil Rizzo, agrees with many association attorneys who say the new insurance law doesn't mean an individual can't be held responsible for damage after a casualty if that's what their documents say. ''It may seem wrong or inequitable, but it is in your [documents],'' Rizzo says. However, he recommends that associations pay for the window damage -- and amend their documents. WASTING TIME Otherwise, the association may waste time and money arguing over the issue with home owners, he says. ''You want to live in peace and harmony,'' he adds. It's also a safety issue: Associations need to ensure that all the windows will protect the entire building, says engineer John Pistorino, who helped create South Florida's tougher building codes after 1992's Hurricane Andrew. If one owner installs windows incorrectly, it endangers the entire floor during another hurricane, he says. ''As we saw in Wilma, if one unit gets breached, then it affects all the units on a particular floor,'' says Pistorino, adding he saw hallway walls collapse after a condo unit was invaded by Wilma's high winds. The Legislature will attempt to resolve the issue at the session that begins in March, says state Rep. Julio Robaina, R-Miami, who has pushed for legislation on community association issues. A law that took effect in January 2004 requires condo associations to insure everything that makes up the original contents of the buildings, from ceilings to walls. (The new law does not cover cooperatives.) Keri Rayborn, an insurance consultant and lobbyist who helped write the law, says the intent was that associations would make the repairs for all items that they were required to insure, including windows and doors, after casualties like a hurricane. But last year, the long string of hurricanes began -- and so did the controversy over the windows and doors. Some boards found that their association's deductibles were so high that the board couldn't make an insurance claim. They told owners to repair their own broken windows or doors. Some boards also discovered their association documents required them to first use insurance money to pay for common elements such as roofs and air conditioning units. By the time those were paid for, there wasn't money left to fix windows in individual units. Some associations then told unit owners that their condo documents required them to pay for their own repairs. 'The boards' hands are tied,'' says attorney Donna D. Berger, who is executive director of the Community Association Leadership Lobby (CALL), started by her law firm, Becker & Poliakoff. REQUIRED TO DO ''Boards are not making arbitrary decisions. This is what they are required to do,'' she adds. ``It all depends on what the governing documents provide regarding uninsured losses and whether or not the windows constitute a part of the unit or a part of the common elements.'' Insurance adjustors have complained about the different interpretations of the new law and have asked online for advice on how to handle individual claims. A spokesman for the state's leading private insurer, State Farm, said the company is aware of the confusion. The company may elect to pay for the broken windows of individual policy holders, depending on the condominium's bylaws, says spokesman John Pisula. ''We go out and look at each one on an individual basis,'' he says. Meanwhile, some unit owners have sought help from the DBPR to make their associations pay for their window and door damage. Out of its Fort Lauderdale field office, the DBPR did ask two Palm Beach County condominium associations to replace broken windows and patio doors from last year's hurricanes. The 256-unit Water Glades condominium complex in Riviera Beach agreed to repair damaged window and door frames of a unit owner who complained to the state when the board first refused. Now the association is sending letters, urging owners to vote for an amendment to their condo documents that will make the association responsible for the frames. (The association already is responsible for the glass in the windows and doors.) ''We have to take responsibility,'' says Ned Fleming, the complex's general manager. The other, Regal Palms Condominium Association in Palm Springs, denies that the complaining owner suffered damage during last year's hurricanes. The owner, Marie Naseiro, has a nonpublished telephone number and could not be reached for comment. Nicholas Marino, the association president, says that legal documents for the 324-unit complex hold individual owners responsible for their own windows and doors. Naseiro, he says, wants to install impact-resistant windows and doors at her unit. ''She can change her windows at her expense,'' Marino adds. Now, the ongoing confusion has carried over to those trying to rebuild from Wilma. In Aventura, about 20 of 554 units at Portsview at the Waterways suffered window and patio door damage, but the board doesn't know whether to pay for repairs since the documents hold the unit owners responsible. WAITING TO HEAR For now, the board is waiting to hear how much of an insurance settlement the community will receive for Wilma's destruction. ''It's a controversial issue that needs to be resolved [by the state],'' adds board director Gilbert Schwartz. In Margate, Mildred Moskovitz is still waiting for help. She was first told the board of the Palm Lakes condominium complex would pay for her broken glass. Then the board said she and other unit owners were responsible for their own damage. But when Moskovitz tried to claim her patio door damage on her individual unit's insurance policy, her adjustor told her it was the association's responsibility. Last week, Moskovitz finally got good news: After receiving legal advice, the board agreed to pay for the damage. ''That's a relief,'' Moskovitz says. Still, her son advises, don't take any chances. He's urging her to get her own repair estimate -- in case the association doesn't come through with the repairs.

---

� 2005 Herald.com and wire service sources. All Rights Reserved.
http://www.miami.com

HOUSE COUNSEL; The ABCs of Selling a Home or Condo

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HOUSE COUNSEL; The ABCs of Selling a Home or Condo
2005-12-09
Boston Herald

By NENA GROSKIND

Q: My husband and I bought our first home five years ago - an attractive ranch, but not the house of our dreams. We'd like to sell it now and buy what we REALLY want, but don't know where to start. Could you explain the selling process?

- L.A., Brockton

A: There are three ways to sell a house:

** on your own, without a real estate broker;

** with a full-service broker, who will handle most everything in exchange for about a 5 percent commission;

** with a discount broker, who will charge less, but only do some of what a full-service broker does. (For instance, the person might include your home on the Multiple Listing Service, but won't hold open houses.)

For many sellers, which way to go generally centers on how badly the person wants to avoid paying a full-service broker's fee.

However, an equally important consideration should be your willingness - and ability - to manage some parts of the sale yourself.

Here's some advice on how to sell your home with a broker. (Next Friday, I'll talk about selling a house WITHOUT one.)

For openers, you'll need to find a good agent. I recommend you:

** Make sure the person is a "Realtor" - a member of the National Association of Realtors (not all real estate agents are Realtors).

Belonging to the Realtors association implies that the agent has a level of professional training, commitment and adherence to ethical standards that you can't otherwise assume.

** Check out the agent and/or brokerage firm with the state Board of Registration for Real Estate Brokers & Salespeople (mass.gov/dpl/ boards/re). Also check with the Better Business Bureau (bosbbb.org). Both bodies can tell you about any complaints against the agent or firm.

** Request (and check) an agent's references. Also see if any of your own friends or acquaintances have had experiences (positive or negative) with the agent or firm.

Plan to interview at least three or four agents before selecting one.

Make sure the person you choose has specific knowledge of and experience in your market area.

DON'T select the broker who proposes the highest asking price for your home.

Instead, choose the one who presents the most comprehensive and persuasive market analysis.

Additionally, ask:

** what steps, specifically, the agent plans to take to sell your home;

** where and how often the broker intends to advertise your property;

** whether the broker will list your house in the Multiple Listing Service (the answer should be yes);

** if the broker will hold one or more open houses for OTHER BROKERS, to introduce the market to your property;

** how many open houses for buyers the broker will host (and how the person will advertise these);

Once you settle on a broker, pay careful attention to terms in the listing contract the person will ask you to sign.

Make sure the deal obligates the broker to implement key components of the marketing plan he or she outlined.

The pact should allow you to terminate the deal if the broker fails to do what the plan specifies.

Also include a provision requiring the broker to report to you periodically, preferably in writing, on the marketing efforts and the response to them.

If you decide to use a discount broker, make sure you understand precisely what the broker will and won't do, and what you'll pay for the given service level.

Regardless of which kind of broker you use, don't sign an unnecessarily long listing term (usually, a 90-day agreement is good enough).

True, you want to give the agent a reasonable chance to sell your property.

But you DON'T want to lock yourself into a relationship that just isn't working.

If the home doesn't sell in 90 days, you can always extend the contract if you're satisfied with the broker's efforts.

Write Nena Groskind at housecounsel@bostonherald.com. Although Groskind is a veteran real estate journalist, she is not a lawyer. You should consult an attorney for specific legal advice.

Copyright � 2005 Earl G. Graves, Ltd. All Rights Reserved.

 

A Look at Houses in Orlando, Fla., The Top U.S. Second-Home Spot

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A Look at Houses in Orlando, Fla.,
The Top U.S. Second-Home Spot

By Lauren Baier Kim

Orlando, Fla., is the most popular second-home destination, according to the EscapeHomes Second Home Market Index, which tracks the homebuyer searches on its site. Real-estate agents in the Orlando area sold 29.3% more existing homes in October 2005 than in October 2004, with most houses selling in the $200,000 to $249,000 range, according to the Orlando Regional Realtor Association. Below are three Orlando residences that could make for vacation retreats.

• Orlando, Fla./$789,000
• Orlando, Fla./$625,000
• Rochester, N.Y./$504,900

PLACE/PRICE: Orlando, Fla./$789,000

PROPERTY TAX:* $6,500

THE PROPERTY: A heated pool and spa with views of a pond and conservation land are features of this home on .25 of an acre. The 3,425-square-foot residence has 5 bedrooms and 4 baths.

DEscriptION: The house has a wrought-iron entry gate and a covered front entrance. In the master-bedroom are a walk-in shower, large closets and a Jacuzzi tub, and the kitchen has Corian counters and a breakfast nook. The residence is in a gated community that has a clubhouse and restaurant, tennis and basketball courts and a lakeside jogging path.

NOTABLE: Central Florida Research Park, which is home to Lockheed Martin and several other high-tech companies, is a three- or four-mile drive away. As a result, professionals in high-tech fields are drawn to this area of Orlando, says listing agent Tom Wolfrey of Coldwell Banker Solomon of Orlando. Walt Disney World is 35 to 40 minutes away by car. Orlando homes comparable to this residence typically sell for $700,000 to $900,000. This house is on the lower end of the price range because it is relatively far from Walt Disney World -- homes closer to the amusement park sell at higher prices, he says.

ADDITIONAL IMAGES
Click on the thumbnails to see more images of this property:

   

Note: *Current owner's payment

Sources: Coldwell Banker Solomon, RE/MAX Properties SW, Verandah Properties

-- Ms. Kim is a senior editor at RealEstateJournal.com.

Email your comments to lauren.kim@dowjones.com.

-- December 13, 2005

 

Law would allow consumers to opt out of real estate services

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Law would allow consumers to opt out of real estate services

Virginia Realtor group says planned change 'legitimizes' limited-service Tuesday, December 13, 2005 By Glenn Roberts Jr. Inman News The Virginia Association of Realtors is pushing for new legislation that would change real estate law to provide for a special disclosure statement when consumers choose to work with a limited-service real estate agent. The legislative proposal, now in draft form, would also allow full-service real estate agents to supply information to consumers who are working with a limited-service agent on the other side of a real estate transaction. While current real estate law in Virginia bars real estate agents from engaging in an agency relationship with a client unless the agent performs a specific minimum set of duties for that client, the proposal would create a new category of agency relationship called "limited service agency." Limited-service brokers and agents typically offer consumers the option of selecting a reduced range of services in a real estate transaction in exchange for a lower cost of service - a limited-service broker may offer to list a client's property in an MLS for a flat-fee while performing no other services, for example. Existing law allows real estate agents to offer fewer services through non-agency agreements, which are now referred to as "independent contractor" relationships with real estate consumers. Agency agreements create a legal relationship between an agent and a client that is authorized by the client. While some so-called "minimum-service" restrictions approved or considered in several other states have been opposed by federal agencies, including the U.S. Department of Justice and U.S. Federal Trade Commission, the legislation that the Virginia Realtors group is seeking should actually assist companies that provide limited-service offerings to real estate consumers, said R. Scott Brunner, CEO for the Virginia Association of Realtors. Federal officials had opposed a handful of states' new real estate restrictions in a handful of states that they said would limit consumer choice and potentially lead to higher real estate prices and less competition in the real estate marketplace. Realtor associations in those states have stated that the minimum-service measures were intended to ensure that consumers receive an adequate level of service in real estate transactions, and to eliminate confusion when a limited-service company does not participate in aspects of the real estate transaction that are typically handled by a full-service real estate company. The Virginia association's proposal, meanwhile, "absolutely legitimizes the discount brokerage model that has taken such flack in other states, and gives standing to different business models under Virginia law," Brunner said. "The whole idea of this is to make sure that consumers understand what they're getting. We believe that consumers can contract for whatever service they want to," Brunner said, and to ensure that consumers know exactly what services they will receive and won't receive in a real estate transaction. The preliminary proposed text for the legislation states that a real estate licensee "may act as a limited service agent or representative only with the written consent of the agent's or representative's clients to the transaction." Also included in the preliminary bill text is a "Disclosure of Limited Service Agency or Representation" statement. The proposed statement would allow a real estate client to sign off on whether to waive services that the agent will perform. Among these services that can be waived: "seeking a property or lease at a price and with terms acceptable to the client," "presenting in a timely manner all written offers or counteroffers," "providing reasonable assistance to the client in (facilitating) settlement of a purchase contract or finalizing a lease agreement," and "disclosing to the client material facts related to the property or the transaction of which the licensee has actual knowledge." Among the other services that consumers can choose not to receive: "accounting for in a timely manner all money and property received in which the client has or may have an interest," "maintaining confidentiality of all personal and financial information received from the client during the brokerage relationship," "provide the client copies of any and all disclosures required by state or federal law, or local disclosures expressly authorized by state law," and "comply with all applicable fair housing statutes and regulations." The disclosure statement also provides that those who sign the form also acknowledge that the real estate licensee representing the other party in the real estate transaction is not legally obligated to assist with any of the duties that the consumer chooses to waive. Brunner said that a working group of association members was formed earlier this year to recommend changes to the state's agency law, and the association included representatives from several different types of real estate companies and was led by Melanie Thompson, the association's president-elect. Also, the association's lawyer, risk management specialist and lobbyist were involved in the process. The association has discussed plans for the law change with the chairperson of the state's Real Estate Board, Brunner said, though the board has not yet seen the bill in the form in which it will be introduced. Existing real estate agency law in Virginia provides that agents representing sellers, for example, must present all written offers or counteroffers to and from the seller, even when the property is already subject to a contract of sale; account for, in a timely manner, all money and property received in which the seller has or may have an interest; exercise ordinary care; and seek a sale at the price and terms agreed upon in the brokerage relationship or at a price and terms acceptable to the seller, among other duties. The preliminary bill text provides for another provision to this requirement: "Providing reasonable assistance to the seller to facilitate settlement of the purchase contract," and this requirement can be waived under the proposed limited-service agency agreement. Brunner said that the proposed legislation is expected to be introduced this week. *** Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137. Copyright 2005 Inman News

Historically Strong Home Sales Expected in 2006

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		For more information contact: Walter Molony 202/383-1177 wmolony@realtors.org Historically Strong Home Sales Expected in 2006 WASHINGTON (December 12, 2005) - The housing market for 2005 is headed for a fifth consecutive annual record, and sales activity in 2006 is expected to be the second best year in history, according to the National Association of Realtors�. David Lereah, NAR's chief economist, said that market conditions are still favorable for housing. "The slowdown amounts to a tapping of the brakes on a hot market," said Lereah. "Home sales are coming down from the mountain peak, but they will level-out at a high plateau - a plateau that is higher than previous peaks in the housing cycle. This transition to a more normal and balanced market is a good thing." The 30-year fixed-rate mortgage should trend up modestly and reach 6.6 percent during the second half of 2006. Existing-home sales, expected to rise 4.7 percent to 7.10 million this year, are likely to decline 3.7 percent in 2006 to 6.84 million. New-home sales, projected to increase 7.0 percent to 1.29 million this year, are forecast to drop 4.8 percent to 1.23 million in 2006 - also the second best on record. Total housing starts for 2005 should grow 5.8 percent to 2.06 million units, the highest since 1972, and then decline 4.8 percent to 1.92 million next year. NAR President Thomas M. Stevens from Vienna, Va., said that housing has always been the soundest investment for most families. "As the old saying goes, homeownership beats the heck out of a drawer full of rent receipts," said Stevens, senior vice president of NRT Inc. According to the Federal Reserve Survey of Consumer Finances, the median net wealth of a homeowner household is 36 times higher than a renter household. Stevens said that the national median home price has never declined since good recordkeeping began in 1968. "Although there can always be a temporary decline in a given area if jobs are weak and there is an oversupply of homes on the market, people who stay in their homes for a normal period of homeownership generally see healthy returns over time. There are no guarantees, but there are very good odds." The national median existing-home price for all housing types, which is experiencing a surge estimated at 12.7 percent to $208,800 for 2005, is expected to rise another 6.1 percent in 2006 to $221,400. The median new-home price is likely to rise 5.5 percent to $233,100 in 2005, and then grow by 7.3 percent next year to $250,100 as higher construction costs impact the market. The U.S. gross domestic product should grow 3.7 percent for 2005 and 4.1 percent next year. The unemployment rate is expected to decline to 4.9 percent by second quarter of 2006, and then stabilize. The Consumer Price Index is projected to rise 3.4 percent for 2005, and 2.9 percent next year. Inflation-adjusted disposable personal income is forecast to increase 1.4 percent in 2005 and 4.5 percent in 2006. The National Association of Realtors�, "The Voice for Real Estate," is America's largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries. # # # Existing-home sales data will be released December 29; the next forecast is scheduled for January 10; and the Pending Home Sales Index will be January 5.

Dave Collins - 2006 Housing Outlook

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Dave Collins - 2006 Housing Outlook

 

After an amazing multiyear run of record-breaking sales figures and home price growth, the nation's housing markets in the last few months began to show signs of change. Interest rates on long-term mortgages have steadily increased and many markets have reported significant increases in home inventory levels, causing a shift from a seller's market to a buyer's market. Inman News caught up with industry executives to get their take on what's happening in markets around the country, what they're predicting for 2006 and what advice they had for agents in preparing for next year.

 

Link to Video: http://www.inmanstories.com/movies/newplayer_inmannews.cfm?name=davecollins

Intrawest Corporation announces largest real estate sales launch and pre-sale success in company's history

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Intrawest Corporation announces largest real estate sales launch and pre-sale success in company's history
Monday December 12, 4:30 pm ET

- The launch of 318 residential suites in the first phase of Honua Kai generates an unprecedented $425 million in real estate sales Listed: NYSE TSX Symbols: IDR (NYSE) ITW (TSX)

VANCOUVER, Dec. 12 /PRNewswire-FirstCall/ - Intrawest Corporation, a world leader in destination resorts and adventure travel, today announced the largest real estate sales launch and pre-sale success in its history at Honua Kai on Maui's western shore - all 318 suites available in the first phase of Honua Kai were selected by Priority Reservation Holders representing gross sales of approximately $425 million.

Known as Hokulani, Honua Kai's first phase was released for sale on Friday, December 9, 2005, at a VIP Sales Selection Event attended by more than 400 people. Suites in the first release included a mix of studio, one, two and three bedrooms ranging in price from the mid $500,000's to $4.5 million. The launch sales success at Honua Kai is by far the largest in the company's history - the total gross sales generated is four times as large as any other project previously launched by Intrawest.

"Our reputation for developing luxury master-planned resorts with high quality craftsmanship and irreplaceable locations continues to drive the success of our overall real estate business," said Joe Houssian, chairman, president and chief executive officer of Intrawest Corporation. "Our Placemaking and Playground teams have done an outstanding job bringing this project to market and this hard work will allow us to move forward and create a very special place for our homeowners."

Honua Kai is situated on Ka`anapali Beach - one of West Maui's best snorkeling and dive beaches, with direct ocean and mountain views. Construction on the first phase of the luxury condo-hotel resort development is expected to begin in the first quarter of 2006 with completion estimated in late 2008.

"Our sales success on Maui speaks to the continued strong demand for vacation and second home properties in truly special locations, such as Maui," said Greg Ashley, president of Playground, Intrawest's marketing and sales division. "Properties like Honua Kai are truly 'one of a kind' and as such will continue to be in great demand by real estate buyers."

Intrawest is developing the Honua Kai resort project with a joint venture partner. Upon completion, the multi-phased development will feature 700 luxury residential condominium and townhome units with ocean and mountain views, and amenities typically associated with a luxury beach resort hotel including a spa, fitness and wellness center, restaurant, conference space, a number of elaborate pools and water features, room service and an optional rental management program.

Most buyers are long time Maui loyalists and frequent mainland visitors from British Columbia and California.

Last week, Intrawest also released 256 condominium suites in the first phase of the Village of Imagine, a village-centered resort development in Orlando, Florida. The nature of this project required a 14-day sales process and results for the launch will be available on December 22, 2005.

Honua Kai is a whole-ownership condominium resort along Ka`anapali Beach on Maui's western shore. Developed by Intrawest, the resort will reflect meticulous masterplanning with deference to the land and its Hawaiian people. Upon completion, the approximately 40-acre beachfront resort will feature 700 luxury tower residential condominiums and townhome units with ocean and mountain views, lush gardens, water-rich landscaping, several recreational pools, a luxurious spa and fitness center, a beachside restaurant and one of the island's best snorkeling and dive beaches. For more information, visit www.honuakai.com.

Intrawest Corporation (IDR:NYSE; ITW:TSX) is a world leader in destination resorts and adventure travel. The company has interests in 10 resorts at North America's most popular mountain destinations, including Whistler Blackcomb, a host venue for the 2010 Winter Olympic and Paralympic Games. Intrawest owns Canadian Mountain Holidays, the largest heli-skiing operation in the world, and an interest in Abercrombie & Kent, the world leader in luxury adventure travel. The Intrawest network also includes Sandestin Golf and Beach Resort in Florida and Club Intrawest - a private resort club with nine locations throughout North America. Intrawest develops real estate at its resorts and at other locations across North America and in Europe. Intrawest is headquartered in Vancouver, British Columbia. For more information, visit www.intrawest.com.

Statements contained in this release that are not historical facts are forward-looking statements that involve risks and uncertainties. Intrawest's actual results could differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, Intrawest's ability to implement its business strategies, seasonality, weather conditions, competition, general economic conditions, currency fluctuations and other risks detailed in the company's filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission.

For additional information, please contact Mr. John Currie, chief financial officer, at (604) 669-9777 or Mr. Tim McNulty, director, investor relations at (604) 623-6620 or at tmcnulty@intrawest.com

If you would like to receive future news releases by email, please contact investor.relations@intrawest.com

---

Source: Intrawest Corporation

Delray approves CityScape condo project

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Delray approves CityScape condo project By Dianna Smith Palm Beach Post Staff Writer Saturday, December 10, 2005 DELRAY BEACH - More housing is coming to Delray Beach. Not necessarily the affordable, workforce kind, but the kind that offers such perks as a pool, gym and barbecue area on a deck atop a three-story parking garage.  The development, called CityScape, will include 75 condominiums with prices beginning in the mid-$400,000s. Plans also include 21,000 square feet of retail space and a restaurant that Lennie Smith, vice president of operations for Porten Cos., hopes will attract people who already visit downtown Delray Beach for meals and entertainment. City officials tout Delray Beach as an urban downtown, a place where people can live and play. Developers such as Porten Cos. are attracted to Delray because the city encourages a walking environment - walk to the store, the bank, the restaurant. "We have buyers from West Palm and Boca Raton moving to Delray because they want to be part of the urban experience," Smith said. CityScape will be built on the west side of Northeast Fifth Avenue, between Northeast Third Street and Northeast Fourth Street. The vacant Scobee-Ireland Funeral Home building sits on the property, but will be demolished. Construction is expected to begin later next year. The city's community redevelopment agency gave Porten Cos. its blessing Thursday when developer Scott Porten presented his site plans to the board. The project still has to be reviewed by several city boards before going to the city commission for final approval. The company, based in Deerfield Beach, is also building City Walk, a 40-residential unit building with 16,000 square feet of retail, in the Pineapple Grove area. The project sold out within one year, the developer said. Porten is also responsible for the Estuary, a townhouse community off George Bush Boulevard. That community sold out last year. Harbour House, four luxury townhouses along the Intracoastal Waterway, is also Porten's project. Townhouse prices start out at $2.75 million, the developer said. Three of the four are still available. CRA Executive Director Diana Colonna said the pedestrian-friendly downtown definitely works for Delray Beach. "It's a huge improvement over how it was in the 1980s. There was nobody in the streets," Colonna said.

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DECEMBER 9, 2005 CONDO-HOTEL LIVING By Christopher Palmeri Checking Out -- and Into -- Condo Hotels You buy a room and building management rents it out whenever you're not around. A sound investment? Well, that remains to be seen When Keith and Kimberly Hartke heard that the Fontainebleau Resort in Miami Beach was building a new condominium tower, they were ready to buy, quickly plunking down $600,000 for a 1,000-square-foot one-bedroom unit. Keith had vacationed at the hotel as a child and returned as a newlywed with Kimberly years later. But what sold the Hartkes on investing in a property wasn't their history with the resort. It was the fact that they could rent the unit out like a hotel room when they weren't using it. "It's not just a condo at the beach," Kimberly says. "We're getting in the hotel business." The Hartkes are charter members of the latest trend to hit the hospitality industry: the condo hotel. By uniting the public's desire to invest in real estate with the travel industry's quest for new properties, the condo hotel has reinvigorated the hotel construction business and begun altering the skyline of cities such as Miami and Las Vegas. BOOMING BUSINESS.  Grand old hotels such as the Plaza in New York and the Hotel Del Coronado in San Diego are carving out pieces for small investors. Donald Trump now has six condo-hotel projects in the works in Chicago, Fort Lauderdale, Miami, Phoenix, Las Vegas, and Dubai. "Other than that we're not so busy," Trump says. All the building and converting has longtime hotel-industry watchers baffled. Is it a sign that baby boomers are once again influencing market trends, in this case seeking second "homes" that provide a vacation spot with few of the hassles of real estate ownership? Or is it another manifestation of a real estate bubble that people are willing to pay top dollar to own something as impersonal as a hotel room? "It's all the rage," says Robert Mandelbaum, director of research at hotel consultants PKF Consulting. "Everyone's asking, 'Is it a flash in the pan or something that's here to stay.'" Unlike time shares, where owners have the right to visit a property for a few weeks a year, or traditional condominiums, where individuals own the units and can do what they want with them, condo hotels are a hybrid. Investors own a specific condo and pay property taxes, insurance, and maintenance fees. Hotel management companies rent out the rooms, rotating reservations among the various units and splitting the revenue fifty-fifty with the owners. Units often come furnished and owners can't make changes to the decor or add personal items such as photos. "You wouldn't know the room is owned by somebody else," says Rick Davis, a Los Angeles attorney specializing in condo-hotel projects. CHECKING IN.  At the Fontainebleau, hotel management asks owners for notification at least 60 days in advance if the owners want to use their unit. When they do stay, owners are charged housekeeping fees that begin at $30 a day. They are also subject to 3 p.m. check-ins and 11 a.m. check-outs, just like any hotel. "You need somebody with the right mindset," says Bruce Weiner, president of Turnberry Associates, which is developing the Fontainebleau condos and others in Las Vegas and the Bahamas. "If it's somebody looking for a retirement home and socialization this is not the right product. Your next door neighbor could change every day." Developers love the concept because they can recoup much of their construction cost up front and still retain ownership of meeting facilities, restaurants, spas, and some traditional hotel rooms. Of the roughly 377,000 hotel rooms under development in the U.S., 30,500 are condo-hotel units. An additional 70,000 are private residences within hotels that are not designed to be rented out on a nightly basis, according to Lodging Econometrics, a research firm that collects hotel construction data. At the high end -- where construction costs are greater -- condo hotels are an even larger slice of the market. "There's not a luxury hotel under consideration that doesn't have a condo piece with it," says Jan Freitag, who follows the industry at Smith Travel Research. "BUYING A LIFESTYLE."  The condo-hotel concept isn't all that new, really. There was a wave of buying in the 1970s when developers sold units more like investments, often structuring them as partnerships and registering them with the U.S. Securities & Exchange Commission. Lawsuits followed when returns didn't live up to the promises. Today condo-hotel salespeople are instructed not to make specific references to room rates or occupancy levels. "Most of these deals are not priced in a way that they'll provide an immediate return on investment," says James Butler, a real estate attorney in Los Angeles. "You're buying a lifestyle and a long-term capital gain." Indeed, a condo-hotel room at the J.W. Marriott Camelback Inn in Scottsdale, Ariz., that sold for $55,000 in 1972 traded hands recently for $195,000. It's projected to generate income of $9,500 this year, after maintenance, taxes, and insurance expenses. That's not enough to cover the mortgage payments on a conventional loan, though -- and that's in a year when room rates have been robust. Last year's income was just $6,300. IN TOO DEEP?  Some major hotel operators still harbor doubts about the concept, fearing that the money pouring in from individual investors is causing projects to be launched that would not be built otherwise. Hilton Hotels (HLT ) has a handful of condo-hotel projects, mostly under its Conrad luxury brand, but the company is treading with care. "We're very selective," says Matthew Hart, Hilton's president. "You have to be very careful that the project is viable as a hotel." Already, some condo-hotel projects in the red-hot Las Vegas market have been scuttled. "Make sure the developer has a track record in the business and is not just looking to make a quick buck," advises John Burnett, president of Kor Hotel Group, which is building a $175 million condo hotel in Anguilla. ROOM WITH A VIEW.  Kimberly Hartke admits that the income from their Fontainebleau unit hasn't covered expenses, a fact she attributes to a change in management at the hotel and continued construction on the property. Still, the Washington (D.C.)-area couple has used the condo three times since taking ownership in February. They have lent the unit out to family and are using it as an employee perk for Keith's commercial real estate business. Recently they enjoyed the twinkling lights of a nighttime regatta from their 17th-floor perch. "It's just the perfect second home," Kimberly says. But smart buyers will remember that it's also getting them into the hotel business.

Recent House Price Developments; The Role of Fundamentals

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RECENT HOUSE PRICE DEVELOPMENTS: THE ROLE OF FUNDAMENTALS

Click here to read full article: http://www.oecd.org/dataoecd/41/56/35756053.pdf

Top real estate stories of 2005

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Top real estate stories of 2005 Housing market slows in second half of year; Expedia founders eye real estate for next venture Thursday, December 08, 2005 Inman News 2005 was another year of record success in real estate, though the market started to show strong signs of slowing in the second half of the year. Industry participants started thinking and planning more seriously for their approach to online customers. The anticipated entrance of e-commerce veteran Rich Barton into the real estate industry, along with real estate heavyweight Cendant announcing plans to break up its conglomerate into four individual companies, and RealEstate.com eying the real estate brokerage business were among this year's industry highlights. Several controversies also made this a memorable year, including a major antitrust lawsuit filed against the National Association for Realtors and several nationwide title insurance kickback investigations that resulted in millions of dollars being refunded to consumers. Here's a list of our picks for 2005's most memorable real estate stories: Richard Barton, Zillow Expedia founders to launch real estate company. Not much is known to date about Zillow, the latest brainchild of Expedia founder Rich Barton. But the expectation is that in a short time everyone will know who they are and not everyone will like what they're doing. The Seattle startup launched earlier this year, but hasn't officially opened its doors. What we do know is that the founders are serious, smart, have experience in shaking up industries, and are focused on some sort of online consumer model, though the company's tight-lipped approach thus far has revealed little of what that model will look like. Housing market hits major headlines. The real estate market itself was a huge story in 2005, with media headlines proclaiming a housing bubble one day and no housing bubble the next. The extraordinary run-up in home prices and proliferation of so-called exotic home loans caused many experts -- including Fed Chief Alan Greenspan -- to view the hot housing market as a potential problem. In the second half of the year, many sources started reporting increasing home inventory levels and signs that the market is softening, shifting from a seller's market to a buyer's market. Cendant splits into four separate companies. Real estate franchise giant Cendant announced in October that it will split into four companies, one each for its real estate, travel distribution, hospitality and vehicle rental businesses. Following the split, which is expected to take place in summer 2006, Richard A. Smith will become CEO of Real Estate Services for Cendant, whose brands include Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA and Sotheby's International Realty. Cendant hasn't disclosed the planned titles for each of the new companies or the new stock symbols for Wall Street trading. Real estate industry comes under fire for alleged anticompetitive practices. After a two-year investigation, the U.S. Justice Department in September filed a lawsuit against the National Association of Realtors, alleging its controversial policies for online property listings display are anticompetitive and impose restrictions on Internet brokerage companies. Trade group officials have said the policy does not discriminate against any brokerage model and NAR intends to defend its rules. The association has advised multiple listing services to hold off on adopting the new policy while the lawsuit is pending. Meanwhile, the Justice Department and the Federal Trade Commission also have targeted several states this year for proposing and passing legislation or regulatory rules that mandate a minimum level of service that brokers must perform in all home sales transactions. In addition, the federal agencies targeted rules in at least two states that prohibited consumer rebates in real estate transactions. Regulators take closer look at real estate price competition. The Government Accountability Office issued a report on real estate competition in September, concluding that the industry lacks price competition, and that the use of multiple listing services enables brokers to cooperate but may discourage them from offering discounted commission rates. In addition, the Justice Department and the Federal Trade Commission held a public workshop in October to discuss competition in the industry. National Association of Realtors officials and other industry participants say that competition is strong in the industry and point to the more than 1 million Realtors out there who compete with each other for business. Newspaper industry makes significant move into online real estate. Classified Ventures in July bought HomeGain, securing the newspaper venture's place in online real estate marketing services at a time when massive amounts of marketing dollars are migrating from print to online channels. Classified Ventures is a joint venture owned by six major media companies, including Belo Corp., Gannett Co., Knight Ridder, The McClatchy Co., Tribune Co. and The Washington Post Co. Regulators crack down on industry kickbacks. Insurance regulators in Colorado in February launched an investigation of nine Colorado title insurers for alleged kickbacks and sparked dozens of similar investigations nationwide, including Florida, Washington, California, Oklahoma, Minnesota and Washington. The companies are accused of phony reinsurance contracts between title companies and real estate brokerages, developers and lenders. Under these alleged elaborate schemes, the title insurers agreed to give about half of the premium on title insurance policies to captive reinsurance companies created by the other conspirators in exchange for volumes of business. Eminent domain ruling hits close to home. The U.S. Supreme Court in June made a controversial ruling in the eminent domain case, Kelo vs. City of New London, saying that local governments can seize individuals' homes and businesses against their will to make way for shopping malls, office buildings and other private economic development. The ruling set off a rage among the nation's homeowners and key real estate industry groups, which have since backed measures that would restrict state and local powers of eminent domain. Hurricane season devastates Gulf Coast real estate. Hurricane Katrina was the real estate story of 2005. Considered the largest natural disaster in U.S. history, the storm hit the Gulf Coast in late August, destroying some 250,000 homes in New Orleans alone. Inman News reported on the steady recovery of some of the gulf region's largest real estate brokerages. The storm was said to impact some 360,000 real estate loans, and many lenders set up some sort of relief program for affected borrowers. RealEstate.com to open brokerage. RealEstate.com, the online real estate portal owned by LendingTree, plans to enter the real estate brokerage business in select markets during the first half of 2006. The move signals the first time a major online lead generation company will participate in on-the-ground brokerage services. The company did not disclose exactly how many brokerage offices it plans to open, but said it will be a simultaneous launch in likely two or three markets in the Northwest and that the company will not compete for leads with RealEstate.com's existing broker partners. Real estate fraud high on the radar. There was no shortage of reports of real estate loan fraud in 2005, with the FBI saying this type of fraud is "pervasive and growing" in the United States, and the Mortgage Asset Research Institute - which tracks mortgage fraud - saying a growing number of incidents are being reported. Georgia, which is often noted as being among the states with the highest incidences of fraud, took action this year, passing the Georgia Residential Mortgage Fraud Act, the first law that defines the criminal offense of residential mortgage fraud. More money flows to online real estate. Private equity firm Elevation Partners in November announced a $100 million investment in online real estate marketing company Homestore, which operates home-search Web sites Realtor.com and HomeBuilder.com, among others. Also, ZipRealty and HouseValues, which each went public in 2004, continued to report increasing earnings this year. And online lead generation got a boost from giant companies like Cendant and RE/MAX announcing initiatives to provide a greater supply of listings through their Web sites. *** What's your opinion? Send your Letter to the Editor to opinion@inman.com. Copyright 2005 Inman News

Investors Start to Retreat From the Housing Market

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Investors Start to Retreat
From the Housing Market

By Ruth Simon
From The Wall Street Journal Online

Individuals are pulling back from buying homes and condos as an investment, in a move that could accelerate the cooling of the housing market.

In markets such as Las Vegas, Miami, Phoenix, San Diego and Washington, D.C., where investor activity had been heated, fewer people are competing to buy properties as an investment, real-estate brokers and housing analysts say. Some investor-owned properties are returning to the market for sale. With the pace of price appreciation slowing, some investors who were betting on quick profits are instead being squeezed.

The apparent pullback by investors is recent and is just beginning to show up in national data. Evidence of the development can also be seen in a number of markets that had until recently been a hotbed of investor activity. As speculators withdraw from the market in San Diego, for instance, the number of investors buying property has fallen by nearly half, estimates Russ Valone, president of MarketPointe Realty Advisors, which tracks the San Diego housing market.

In the Phoenix area, as many as 30% of properties for sale are currently owned by investors, says Jay Butler, director of the Arizona Real Estate Center at Arizona State University. Six months ago, most investors were buying rather than selling, he says. The shift has helped to drive up inventories of homes for sale in the Phoenix area, which climbed to 22,340 in October from 8,600 in April, according to data from the Arizona Regional Multiple Listing Service.

In the latest sign that the housing market is cooling, the National Association of Realtors said yesterday that its index of pending home sales dropped 3.2% in October. The reading is the lowest since March.

It's too early to tell just how a pullback by investors will affect the broader housing market, but their impact on the housing boom has been considerable. Investors accounted for 9.6% of mortgages used to purchase homes in the first nine months of this year, the most recent data available, up from 6.7% in 2002, according to LoanPerformance, a unit of First American Corp. But the investor share began to drop in the third quarter, the firm says. The figures don't include second homes that may also provide rental income and serve as an investment.

A softening in investor demand is likely to accentuate any slowdown in home sales, says David Berson, chief economist at mortgage giant Fannie Mae. He estimates that home sales will fall 10.4% over the next two years, largely because of a decline in investor and second-home purchases. Mr. Berson also figures that without the recent surge in these purchases, home sales would have been 7.3% lower in each of the past two years. That estimate assumes that investment properties and second homes account for 10% of total sales.

Another concern is that investors will be quicker to sell if prices soften, accentuating any downturn, particularly in areas where speculation has been most prevalent. Some of the most vulnerable markets include Daytona, Fla., Las Vegas, Phoenix and Fresno and Bakersfield, Calif., according to Credit Suisse First Boston analyst Dennis McGill.

Even if investors don't all rush for the exits at once, more investor-owned properties are likely to return to the market over the next few years. In part, that's because many investors have bought preconstruction properties that won't be ready for occupancy for another year or two.

To be sure, investor demand remains strong in some parts of the country as investors take their profits in markets that have seen double-digit gains and move into areas such as Dallas, where price gains haven't been so steep. And while it's getting tougher for speculators to make a quick buck, brokers say that opportunities remain for investors who plan to hold their properties for several years.

Earlier this year, Sandra Geary, a broker in California's Sonoma County, was running seminars that drew as many as 200 would-be investors. She's also taken California investors on out-of-state home-buying expeditions to Arizona, Idaho, Nevada and Oregon and bought more than 30 rental properties for her own portfolio. But in recent months, her investor sales have fallen more than 75%. "Now that the market is slowing down, it's scaring investors away," she says.

Some brokers are advising speculators to put away their checkbooks. "I'm telling people who want to buy new construction to flip it that the gig is up," says Frank Borges LLosa, a real-estate agent in Arlington, Va.

Last year, Mike Morgan, a real-estate broker in Stuart, Fla., set up a Web site designed to attract investors scouring the Internet for preconstruction properties. But with the market softening, Mr. Morgan has cut back on promoting his site. Now, he works only with investors seeking "buy and hold" properties. "I haven't sold an investor a property to flip since June," he says. 

Some investors also are backing out of preconstruction properties they bought. In San Diego, cancellation rates for new condominium units climbed 47% in the third quarter over the second, in part because a growing number of investors are getting cold feet, according to the Building Industry Association of San Diego County.

Cancellation rates for condo units are also rising in many other markets, including Florida and metropolitan Washington, according to the National Association of Home Builders. "It's largely because of investors" pulling back, says NAHB staff vice president for research Gopal Ahluwalia. "A whole lot of condo units are sitting empty." Whether a buyer can easily get out of a deal can depend on a number of factors, including the builder's policies and the terms of the buyer's contract.

With price appreciation slowing, it's getting tougher for investors looking to quickly flip a property to earn a return that's high enough to cover brokerage commissions, mortgage costs and other expenses. Prices for existing homes are expected to rise 12.4% this year, according to the National Association of Realtors, well above the 5.3% average annual gain since 1990.

Some investors are already getting pinched. Barry Fiske, an account manager, teamed up with a friend to buy a bungalow in the oceanside town of Hingham, Mass. The pair tore down the house and put up a three-story Victorian home that went on the market in October, priced at $889,000. After three price cuts, the asking price is now $799,000 and the opportunities to profit are "marginal," Mr. Fiske says. "We probably spent more than we originally intended to," he adds.

Robert Cayouette, a computer programmer, has put down deposits on 10 homes under construction in Florida, figuring he'd quickly flip them and make a profit of about $30,000 apiece. The first of those purchases, a three-bedroom home in Port St. Lucie, is expected to close this month. But Mr. Cayouette has learned he'll be lucky if the house fetches $285,000, or $10,000 less than his original purchase price. "I wouldn't be able to flip it if I wanted to," says Mr. Cayouette.

With home prices growing faster than rental rates, investors who decide to rent out their properties rather than sell them often can't make enough to cover mortgage payments, taxes and other costs. Arash Yazdi, an information technology consultant, decided to rent out his $465,000 townhouse in Merrifield, Va., this fall after a deal to sell the home fell through. He figures he's losing about $1,000 a month.

Email your comments to rjeditor@dowjones.com.

-- December 08, 2005

A New Way To Hedge Against Housing Declines

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A New Way To Hedge
Against Housing Declines

By Alistair Barr
From Marketwatch

Talk about well timed.

As concerns grow over a slowdown in the recently booming U.S. housing market, new financial products are becoming available that help companies, professional investors and even regular folk to hedge themselves against movements in home prices.

The Chicago Mercantile Exchange, the world's largest futures exchange, is plans to introduce new contracts in April tied to home prices in ten cities including New York, Chicago and Los Angeles.

Earlier this year, online derivatives exchange HedgeStreet introduced contracts based on the future median price of single-family homes in Chicago, Los Angeles, Miami, New York, San Diego and San Francisco, as published by the National Association of Realtors

The U.S. residential real estate market is worth almost $19 trillion, according to Federal Reserve data, making it bigger than the stock market and almost as large as the fixed income market.

But unlike equity and bond markets, until now there's been no liquid market or other efficient way to hedge the risks of movements in real estate. The lack of such tools has become more evident as the recent housing boom has pushed the industry into an even more prominent role in the U.S. economy.

The CME's contracts are mainly designed for companies whose fortunes are tied to real estate markets, such construction firms, developers, mortgage lenders and real estate investment trusts, Craig Donohue, chief executive of the exchange said.

He also expects interest from hedge funds looking to bet on the direction of house prices and said the contracts will also be available to individual investors or the 75 million or so homeowners in the U.S.

The contracts are part of a new clutch of new products that the CME hopes will help to sustain strong revenue and profit growth.

"We're hopeful that it will be a significant contributor," Donohue said. "These are large important risks that need to be hedged."

Email your comments to rjeditor@dowjones.com.

-- December 13, 2005

  

Long-term real estate rates refuse to rise

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Long-term real estate rates refuse to rise But borrowers with adjustable loans will soon feel pinch Monday, December 12, 2005 By Lou Barnes Inman News Long-term rates are stuck. After a November scare at 4.65 percent, the 10-year T-note has stayed within a whisper of 4.5 percent, which in turn has kept low-fee fixed-rate mortgages close to 6.25 percent. Short-term rates will continue their grinding rise on Tuesday when the Fed goes to 4.25 percent. "Prime" will go to 7.25 percent -- mechanically 3 percent above Fed funds. Home equity lines of credit all float with prime (big lines and good credit float slightly under prime; small and/or shaky, 1 percent or 2 percent over), as do all construction loans (rarely as little as .5 percent over prime; usually 1 percent or more over). Adjustable-rate-mortgage (ARM) indices will rise in two broad groups: quick-reacting and lagging. The 1-year T-bill index will move toward 4.5 percent this month, and one-year LIBOR close to 5 percent; the laggers, COFI and MTA (both weighted averages of rates 12 to 18 months back), will rise to roughly 3.15 percent and 3.6 percent, respectively. ARM "margins" (margin plus index equals borrower pay or accrual rate) vary by product and index, but the January payment notification for quick-reacting ARMs will say 7 percent or higher. The laggers will go to a range of 5.5 percent-6.5 percent in January, but even if the Fed stopped raising its rate on Tuesday, these lagged-index ARMs will continue to rise during 2006; by summer, all ARMs will be north of 7 percent. The Fed will not stop raising its rate on Tuesday; a move to 4.5 percent on Feb. 1 is a sure-money bet, and the Fed-funds-futures market places 4.75 percent on March 28 a 50-50 wager. The race is on. At what point will 7 percent...7.5 percent...8 percent...8.5 percent...ARM, HELOC and construction loans trip the housing market? Soon, says here. Very soon. I know that these rates are not historically high, and that fixed-rate money is still cheap, but they are double the rates prevailing a year ago. Crystal-balling aside, voices tell me that these rates are already doing significant harm. Not the voices in my head; the ones on the phone. The first-time buyer last week, a fine-credit, ICU RN, was stunned to find that an ARM would do nothing to add to her purchasing power or payment comfort. Then the spec-home builder on Wednesday...incensed that his two best banks were trying to gouge him, telling him construction money would cost 8 percent, maybe 9 percent by summer -- followed by dead silence and a dropped project when he understood that those are the real-world numbers. It was very nice of Federal Reserve Board Chairman Alan Greenspan to send all of us one last holiday card. Instead of "Best Wishes," this one has a lovely dove, its beak holding a banner reading, "Good Luck -- You'll Need It." Responding to the (excellent) questions of Jim Sexton, chairman of the House Joint Economic Committee (full text at www.house.gov/jec/), Greenspan opened by saying, "It is impossible to know with any certainty when the neutral [Fed funds] rate has been reached." I have tremendous respect and thanks for Greenspan; however, I confess some frustration that we have spent the last 18 months anticipating his announcement that the Fed had reached neutral, and would then stop hitting us. He said last year that he would know neutral "when we get there," but now says uh-uh. Greenspan then offered six separate reasons why long-term rates are lower than they should be, followed by a marvelous evasion on the predictive power of flat and inverted yield curves, and concluded with a thought on transparency of Fed policy: "Tell 'em nothin'." He won't say, but I will: for the first time in Fed history, given the refusal of long-term rates to rise, the Fed will slow the economy entirely by raising short-term rates, and nobody knows how high they may go nor how sudden the damage may be. Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com. *** What's your opinion? Send your Letter to the Editor to opinion@inman.com. Copyright 2005 Lou Barnes

Buying a Rental Property That Will Generate Cash

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Buying a Rental Property
That Will Generate Cash

By June Fletcher

Question: Three years ago, I bought eight single-family rental properties. They have appreciated, but I have negative monthly cash flow. How can I get a no- or little-money down deal on a multifamily unit with positive cash flow?

-- Hisashi Nagashima, Schaumburg, Ill.

Hisashi: Before you buy any property, ask yourself, "What's more important, appreciation or positive cash flow?" Single-family homes in the most desirable neighborhoods may appreciate quickly, but because their carrying costs are high, they rarely generate the sort of income needed for positive cash flow. Multifamily units that bring in the bucks each month are likely to be in more modest parts of town and aren't likely to show as great appreciation. You can't expect to dine on T-bone steaks when you're raising roosters.

Then, check track sales records, which you can get from the listing agent or on Web sites like Domaina.com. If appreciation is your goal, then only look at homes that have appreciated well in the past, bearing in mind that the market is cooling. If you want guaranteed positive cash flow, insist that your real-estate agent show you income-producing properties with favorable balance sheets and with established, reputable tenants. Make sure that you see the income and expense statements for these properties for at least the previous two years. Pay attention to what's been done in capital improvements, and what you can expect in terms of maintenance and repair costs, association fees and other expenses.

Most investors want positive cash flow and stable tenants, so don't rush your search. Don't believe those self-appointed gurus who say you can waltz into any town and find a terrific deal within a day without putting down any of your own money. If it were that easy, don't you think they'd be doing these deals themselves instead of traveling from one dingy hotel ballroom to the next, touting their "sure-fire" systems? (Also, remember that plenty of amateur investors have taken these get-rich-quick courses, and are already hounding the relatively few desperate sellers who are the most open to no-money-down schemes -- those going through divorce, on the brink of bankruptcy, or who inherited rental property they don't want to manage.)

Once you locate a good income-producing property, consider acquiring it through a tax-deferred IRS 1031 exchange with one of your single-family houses, using a real-estate lawyer or a certified public accountant as an intermediary. Although the process is a bit complicated and only applies to investment properties, the payoff is that you will be able to sell the single-family home to anyone you want without having to pay any capital gains tax on the appreciated value. For a thorough explanation of tax-deferred exchanges, pick up "How a Second Home Can Be Your Best Investment" by Tom Kelly and John Tuccillo (McGraw-Hill, 2004). Also, keep in mind that the positive cash flow that your properties generate is taxable, though it may be sheltered by depreciation. "Real Estate Investing from A to Z" by William H. Pivar (McGraw-Hill, 2004) explains the subject clearly.

To learn more about 1031 exchanges, read the article: "Avoid These Errors in 1031 Exchanges."

-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Her "House Talk" column appears most Fridays on RealEstateJournal.com. Email your questions about the residential real-estate market. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.

Email your comments to rjeditor@dowjones.com.

-- December 09, 2005

 

Buying a Rental Property That Will Generate Cashd

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Buying a Rental Property
That Will Generate Cash

By June Fletcher