Entries from April 2006 ↓

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An interesting article from the New York Times about how commercial real estate is taking off in Manhattan and the other boroughs. The demand for real estate is so high as the economy is doing very well and as they say business is good.

In fact, investors who put their money into the companies that broker deals, manage buildings and provide related services have reaped particularly rich returns.
“The real pickup has been on the transaction side — with the commercial real estate brokers,” said William L. Baldwin, a principal at Baldwin Anthony Securities of Dallas, who follows the stocks of companies in the sector.
Shares of the biggest publicly traded commercial real estate services companies, bolstered by robust earnings, outpaced most other stocks in 2005 and are trading near their 52-week highs this year.
Leading the pack is CB Richard Ellis, whose shares are up 167 percent for the 52 weeks that ended on Friday. The stock of Jones Lang LaSalle has soared 131 percent in that period, while Trammell Crow has climbed 82 percent. The stock price of Grubb & Ellis, which struggled in the early part of the decade, has gained 128 percent in the most recent 52 weeks.
By contrast, the Standard & Poor’s 500-stock index has gained 16.8 percent in the last 12 months.  via  New York Times.

With the estimated 2 trillion dollars of Adjustable Rate Mortgages coming due, a new mortgage is being slowly introduced to the market, the 50 year mortgage. By amortizing the loan out so far, they lower the rate and allow people to migrate from their ARMs that are having increased interest payments to the 50 year mortgage that provides lower payments than an equivalent 30 year mortgage.

Read the Rest at the Mortgage Bloggers.

One of the hardest hits areas in the real estate downturn is South  Florida, and the outlook does not look good for 2006 and the first half of 2007. David Lereah, chief economist for the National Association of Realtors was in Florida presenting to a real estate meeting.

“Is this a bad year? Yes,” David Lereah told more than 400 people at the Hilton-Palm Beach Airport in West Palm Beach. “Are you going to bust? No.” Lereah predicted that price increases for existing homes in South Florida, once at 25 percent and 30 percent, will fall to about 5 percent and that sales declines in many markets will continue at double-digit clips.

But with the regional economy staying strong and interest rates still affordable, the state’s housing industry should pick up in the middle of 2007, Lereah said. Particular markets may not, depending on inventory levels,” he said.

South Florida is one region where the number of homes for sale has increased substantially since last year. Listings have more than doubled in Palm Beach County, according to the Regional Multiple Listing Service. The MLS figures don’t don’t include the town of Palm Beach. via the South Florida Sun-Sentinel.

Henry Silverman, the CEO of Cendant Corporation, parent company of Century 21, Coldwell Banker, ERA Real Estate, and Southebys International Realty, makes an interesting observation on how the numbers are compiled by the National Association of Reators (NAR) for their monthly market analysis.

While the National Association of Realtors released existing-home sales data this week that showed an improving market from February to March, Silverman said he is unconvinced that the market is getting better at this time. “I’m not sure the (association) data is terribly relevant. They typically sample only 20 percent of MLSs and then they adjust those numbers with a number of variables. I think that with 30 percent of the market — as we believe we have at least on price and size in terms of dollar volume — statistically you could argue we are the market.”

He added, “So our results are more likely to be accurate as to the market than whatever (the association) is projecting or … has reported.” via Inman News

With the market in flux, and the huge discrepency in how different regions are performing, this statement by Henry Silverman makes one wonder. With a call out by such a leading figure in the real estate business, the NAR should release the whole methodology of the survey so that those interested could validate it. With the low cost distributions system of the internet, this is the best and most honest way to show that the marketplace is being reported properly.

Hat tip to one of my favorite bloggers for finding this article, the Northern New Jersey Real Estate Bubble. While passionate about his target market and the potential impact of the housing bubble hitting it, Grim also does an outstanding job of finding the meat in a story as oppose to only the sizzle. If you are not reading his blog and you are interested in real estate, you are missing out,

Curbed has an interesting post up on comparing the trends of New York City Condo Sales over the past 5 years. While the chart can be confusing, it does show a very consistent trend of pricing that varies by year and season. The 5 year cycles are interesting and shows that NYC real estate is very cyclical, and follow historic trends carefully.

Go here to view the Curbed post.

The bad news is that the housing boom in one of the hottest regions in America is over. The good news, home prices are not falling out of bed. They have stabilized with solid single digit year over year increases. The overall pricing is down since last summer, but there is not a complete meltdown of pricing as many have suggested as possible.

It was the sixth consecutive quarter of single-digit increases, and the Westchester-Putnam Multiple Listing Service proclaimed that after eight years, “The boom is over.”

“Our area has made a relatively gentle descent to a more sustainable level of sales volume and price increases,” the group said in its report on first-quarter sales. The number of houses sold was down 14 percent from a year ago and the number of available houses was up by a third.

It said that for the rest of the year, “price increases probably will level off to a percentage point or two more than underlying inflation. … In short, no more records for a while but no big trouble, either.”

The record median price for Westchester was set last summer at $711,700. In the fall, the median price was $652,250. Prices are typically highest in summer.

WCBS NEWSRADIO 880.

We have been busy on a couple of other projects and have taken our focus off of what is happening in the Eminent Domain battle going on. The states are in a battle between the reformers and those politicians with vested interests that do not want to relinquish the power over your money.

• The North Carolina Legislature looks to limit eminent domain use for private projects.
• The Pennsylvania Senate gave final legislative approval yesterday to new restrictions on the use of eminent domain for private economic development.
• Louisiana Lawmakers are wondering whether the state Constitution, rather than state statutes that are easier to amend, should be changed to prohibit government agencies from taking private property for the sake of private economic development projects.

Elliot Spitzer filed criminal charges against Louis and Michael Sandella, two New York men who defrauded mortgage companies out of millions of dollars over the past 5 years. The banking commission, Attorney Generals office, and the Organized Crime unit investigated these crimes that occurred in Brooklyn, Queens, and Suffolk Counties.

In an 83-count criminal indictment, Spitzer alleged that two New York men, brothers Louis and Michael Sandella, led a group that submitted “hundreds” of falsified residential mortgage applications from 2001 until recently.
With the help of real estate attorneys, appraisers and individuals who posed as buyers, the Sandellas would seek a loan far more than needed to purchase a property. They’d purchase the property under the name of a “straw buyer” and then pocket the difference — sometimes $100,000 or more per transaction.
Dozens of straw buyers were paid to participate — usually a few thousand dollars — by lending their names to the real estate transaction with the promise the Sandellas would keep up payments on the loan. But ultimately, Spitzer charged, the Sandella group would stop paying off the loans, leaving the straw buyers accountable for the default and the banks stuck with bad loans.
Spitzer and New York Banking Superintendent Diana Taylor declined to identify those victimized by the fraud and said it was difficult to detail the values stolen or the actual difference pocketed by the group. Spitzer only offered that the group probably stole “tens of tens of millions.”
The properties were in the Brooklyn and Queens sections of New York city and nearby Suffolk County. The indictments were unsealed in Brooklyn State Court on Tuesday.
In addition to the Sandellas, prosecutors secured indictments of Danielle Moss, Kim Moss Fontanez, Geraldine Moss, Gary Shaw and Ida D’Angelo. The seven were in custody early Tuesday afternoon and were awaiting arraignment, Spitzer said at a news conference. via  Reuters.com.

The signs of a bubble bursting are not here yet, as home sales inched up .3 percent while inventory rose to a 5.5 month supply of housing. While these numbers are much better than detractors previously thought they would be, the market looks like it will muddle through the rest of the year. As has been said before, certain pockets that had explosive growth the past couple of years will experience some pain, but overall we think that the market will flounder nationally as inventory and gains are absorbed and then be positive in 2007.

The National Association of Realtors said Tuesday that sales of existing homes edged up a tiny 0.3 percent last month to a seasonally adjusted annual rate of 6.92 million units.
The March increase followed a bigger 5.1 percent jump in February with the two months representing the first advances since five consecutive monthly declines.
The median price of a new home rose to $218,000 last month, a gain of 7.4 percent from a year ago. That price increase was far slower than the double-digit gains turned in last year as the housing boom was peaking.
Analysts said that so far this year home sales are running 4 percent below the pace set in 2005, a year in which home sales set a record for a fifth straight year. Analysts believe that rising interest rates will result in a drop in sales of existing homes of around 6 percent this year as the five-year boom in housing slows. via Yahoo! Finance.

Here is a great post on Self Storage Units by Everybody Loves Your Money. Worth a read and a laugh.

One of the many mysteries in the world is why people will pay well over $100 per month to store items that are barely worth that amount. What am I talking about? Well, public storage units, of course. Public Storage is a booming business! It never ceases to amaze me to see what people store in these units. I’m not talking about the person who rents a storage unit for a month or two while they are in the process of moving etc, I’m referring to the long term holders of these units. What on earth is in there that’s worth $1200 per year to keep it there? In many cases, I’d be willing to bet, not much. The business case for whether to store these things is simple:

Value of stuff/monthly rent=Number of months before you are wasting your money

Read the rest at Everybody Loves Your Money