Entries from May 2006 ↓

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The power of the government to get whatever the hell it wants is evident in New London, Connecticut. To get a huge corporate development the created the landmark Eminent Domain case that hit the Supreme Court that essentially said landowners have no rights to their land if local law deems the government can make more money with it in another capacity.

Well, these sons of bitches in New London are now ready to take the property of Kelo and the other 5 homeowners. There new trick, if you do not take our deal, which they obviously found unsatisfactory, we will charge you back fees and rents and anything else we can and bankrupt all of you. Your government at work.

So the government of New London and the State of Connecticut has looked at these poor folks who only want to live in their homes and who trusted the Constitution of the United States to protect them against greedy corporations and governments now are facing losing everything they have and having to watch their noses rubbed into fighting a governmental body. This makes me sick to my stomach.

You have to respect a man who says “If they want to threaten us with bankruptcy and let the nation know this is the kind of people who live in New London, send that message,” he said. “All they’re doing is making us dig our heels in deeper.”

To address the impasse, the City Council voted in March to set a May 31 deadline for a settlement. On May 15 the council passed a three-part resolution to withdraw settlement incentives if agreements aren’t reached today.
The resolution would today retract the council’s offer to waive real-estate taxes, use and occupancy fees and rent paid by third-party tenants, together totaling about $1 million. Councilors also voted to instruct third-party tenants of the former property owners to pay rent to the city rather than any of the plaintiffs beginning June 1.
The council recommended that all monies offered by state-appointed mediator Robert Albright be withdrawn as of today. A March decision by state Attorney General Richard Blumenthal made state funds originally designated for improvements at Fort Trumbull available for settlements with the former owners, and the New London Development Corp., the city’s agent, voted to use up to $1.2 million for settlement purposes. via  theday.com.

I found this article on a local Massachusetts newspaper, the South Shore Insider, that has an interesting take on the real estate market south of Boston. It captures the true essence by a broker that has served as the  president of the Massachusetts Association of Realtors.

David Wluka has a brilliant line that is probably the most hones thing said in this whole process. And expectations are different too. People up until 2000 were looking at houses as an investment (where they would) retire and pay off the mortgage. The cycle of appreciation started and they started looking at it as a source of income.

Outstanding.

Why did the housing market cool down this year?

Well, you just can’t maintain an overheated market forever. There were three or four years of double-digit appreciation and it just couldn’t be maintained. It’s a natural thing, (housing) markets go up and they go down.

When you talk to people about their perception about the (housing) market, they have a short horizon. They look back three months, they look back six months. But you have to look back three to five years to understand what’s happening in the market.

And expectations are different too. People up until 2000 were looking at houses as an investment (where they would) retire and pay off the mortgage. The cycle of appreciation started and they started looking at it as a source of income.

For example, the cumulative appreciation from 1990 to 2000 was 6 percent in Massachusetts. From 2000 to 2005 it was 84 percent. The expectations of people are really up there. So (the housing market) is cooling down, but the plane is not crashing. It’s going to land. Maybe a bump or two on the way down, but the plane is going to land. via the SOUTH SHORE INSIDER

If you are looking for an area that is counter to the prevailing real estate market head to Houston. While many parts of the country are looking at home prices stagnating or depreciating from their peak prices, Houston Texas is seeing home prices accelerating and those homes at the top of the market having bidding wars.

The reason is simple, Oil. Houston is the energy capital of the country. And after the devastation wrought to New Orleans last year, many of the top energy companies have relocated to Houston and demand is far outweighing supply.

“We made an offer on one that we were really excited about, but it was priced at a point where it had four other offers in one day,” Burguieres, 32, said of a $1.5 million house in the city’s River Oaks area. “Our realtor told us it went over the asking price.”
As housing prices slow in much of the U.S., homes in River Oaks are selling faster, in larger numbers and at higher prices than a year ago. Growing demand at the top end reflects strength throughout the Houston market, which is getting a lift from soaring oil prices. The fourth-largest U.S. city is known as the world’s energy capital.
“The energy business is making a lot of people wealthy,” said Mike Inselmann, president of Houston-based researcher Metrostudy. “Business is good for those folks, and they’re spending money.”
First-quarter home sales in River Oaks rose 28 percent from a year earlier, and the value of homes sold jumped 55 percent to $32.3 million, according to local real estate firm Greenwood King Properties. The median selling price was $1.2 million, up from $940,000.  via Bloomberg.com

Cendant Corp announced today that their income will be  down from 200 to 400 million from previous projections due to the  housing slowdown. They had projected revenue of  7.3 to 7.5 billion in their real estate division but now have revised the  number down to 7.1 Billion dollars.

This is just another indicator that the real estate market is facing a slowdown. But that they are expecting sales volume of such a high number does not mean the industry is completely falling apart.

Citing “current trends and leading indicators” that point to a decline in sales of existing homes, Parsippany-based Cendant lowered revenue forecasts for its real estate division to $7.1 billion.

In earlier forecasts, Cendant projected 2006 revenue for the real estate division at $7.3 billion to $7.5 billion and EBITDA in a range of $1.09 billion to $1.14 billion.

The real estate division, which includes the Century 21 and Coldwell Banker brands, is scheduled to be spun off and renamed Realogy Corp. by the end of June as part of Cendant’s strategy to split into four companies.

The revision, Cendant said, is based on several recent reports, including a National Association of Realtors survey last week showing that sales of existing homes fell 2 percent in April as mortgage rates hit a four-year high. Cendant’s announcement comes on the heels of similar revisions by the nation’s biggest home builders.

via North Jersey Media Group.

Boston is not know for projects coming in on time and on budget. So when  the mayor, Tommy Merino proposes building a 1,000 foot tower on the site of a rundown parking garage, you really have to wonder if this is a smart business move or a boondoggle public works project that will double or triple its initial projected costs.

When you think of Boston public works construction, you think of things like the big dig that came in way over budget and many years behind schedule. For an ego project by a sitting mayor you know that this is ripe for corruption.

This isn’t going to be done with a wing and a prayer,” Stratouly said. “It will take substantial equity.”

The estimate comes as City Hall prepares to release today a formal call for proposals from developers eager to take on Menino’s challenge. The so-called request for proposals will spell out what kind of tower Boston officials are looking for on a key Financial District site now covered by a run-down, city-owned parking garage.

The document, eagerly awaited, will spell out the height, square footage and architectural expectations developers will need in drawing up their proposals.

City Hall is likely to seek a variety of uses that would include office, residential and retail, real estate executives say. However, developers interested in the site are already calculating the construction cost of building a skyscraper that could dwarf even the Hancock and the Pru.

Stratouly calculates that a 1,000 foot tower would likely contain 2 million to 3 million square feet of space, given typical tower floor-plate sizes. With downtown high-rise construction costs as high as $500 a square foot, that adds up to anywhere from $1 billion to $1.5 billion, he said  via BostonHerald.com

Renting instead of an expensive mortgage can be the smart move, and as areas in Florida are  finding out, the right move. When housing prices get beyond what the market will bare for the middle and lower middle class can afford, rental discrepancies arise.

For example, Joe Fireman can afford a 250,000 dollar home in Florida. But the homes that he likes cost 400,000 dollars. Well, he can not afford to pay rent and have the landlord make any money in this situation and the landlord who owns the 400,000 dollar home can not find anyone to rent it at the price for him to  profit. So he ends up renting to the fireman at a rate  that Joe Fireman can afford and he can at least get some income off of the  property.

Welcome to the flip side of the housing boom, where renters can afford brand-new dream homes while landlords struggle to meet their monthly mortgage payments. According to local real-estate agents, condominiums and single-family homes throughout Palm Beach County and the Treasure Coast are leasing for 30 to 50 percent less than the monthly costs, including property taxes and sky-high insurance premiums, of owning the same property.

In Riviera Beach, for instance, three-bedroom townhomes are renting for as low as $1,150 a month. Owning one would cost about $1,800 to $3,000 a month, after a 20 percent down payment.
In West Palm Beach, $400,000 townhomes are renting in the $1,500 range. Owning one would cost nearly twice that per month. In Lantana, a $450,000 three-bedroom condo with an Intracoastal view is available for $1,850 per month.
In Port St. Lucie, three-bedroom, $450,000 houses are renting for about $2,200, a third less than they would cost to own. And in Wellington, $800,000 homes that would cost nearly $6,000 per month to buy are renting for about $3,000.  via the Palm Beach Post.

The foreclosure rate in the Midwest is up significantly. This may be a harbinger of things to come as the Midwest has seen anemic property value growth in the last year. The high usage of non traditional loans such as interest only and ARMs has fueled the problem and may show the problems the coasts will face in  the next couple of years.

An analysis by property tracker Realty-Trac Incorporated that is reported in today’s Chicago Tribune shows that nearly 13-thousand-700 Illinois properties entered foreclosure during the first three months of 2006.
That’s up 32 percent from the fourth quarter of 2005, according to Realty-Trac.
The numbers appear even worse elsewhere in the Midwest. Automotive-related job losses have helped push Michigan and Ohio to foreclosure increases of 91 percent and 39 percent, respectively, compared with last year’s fourth quarter.
And Realty-Trac says foreclosures are up 38 percent nationally this quarter, and higher than any quarter of last year. via WQAD

As the coastal real estate markets have reached their pricing peak, the mainstream media has finally noticed. They are  transitioning in their coverage from  boom stories to stories of moderation. Of course, in about 6 months the  major media outlets will be making  the most  pessimistic bubble bloggers look optimistic. At that point, we probably will be very close to the bottom of the market.

In Los Angeles today, the median dream goes for 10 times the median income. That’s unsustainable no matter how creative banks are in coming up with new hybrid loans.
Mayer thinks that, with fewer people buying but plenty still hoping to cash out, prices in the most expensive markets could drop 15 percent in the next year, if mortgage rates rise another point. The forecasters at Fiserv Lending Solutions and Moody’s Economy.com, who crunched the numbers for our 12-month nationwide forecast, aren’t so pessimistic, but they’re hardly Pollyannas.
Prices will flatten in most ex-boomtowns this year, and next year will be worse, says David Stiff, Fiserv’s chief economist. “A lot of markets - particularly those where prices have increased dramatically compared with income - will see drops by late 2007,” he says.
Those declines are expected to range from a few percentage points in Boston to as much as 20 percent in Miami and Las Vegas, says Economy.com’s Mark Zandi. The more unhinged prices are from local incomes, the more likely a fall.
That doesn’t mean, however, that real estate is about to crash across the United States.
First, if you live someplace that hasn’t gone wild - think Atlanta or Philadelphia or just about anywhere in the Midwest or Texas - you’ll see slower rates of increase, but losses aren’t likely. “There are sizable parts of the nation’s housing market that will be just fine,” says Zandi.
Second, a strong economy and job growth should hasten a return to a normal housing market in which prices rise just a bit faster than inflation. Since World War II, notes Stiff, the housing market and the economy have moved largely in sync. via MONEY Magazine

Vermont is an interesting state when it comes to real estate and housing values. The state is probably the most socialistic in the country, but it is maintaining their home values because their is a failure to build affordable housing in the state.

So the state that gave us Howard Dean and a Socialistic member of Congress has a huge problem building affordable housing but has no problem building million dollar homes. Normally I do not interject politics in this site,  but it is  ironic that the failures to support the common man and creates homes only for the rich.

“So many people have reported that it’s a bubble, but it’s not a bubble,” Collins said. “What we’ve seen is that even with an increase in housing stock, demand has stayed high.”
Experts said Vermont’s housing market remains strong because of a lack of affordable housing.
The number of homes costing $500,000 to $1 million have increased while the properties in the range of $150,000 to $250,000 have stayed the same.

It’s frustrating from my standpoint,” said Robert Hill, head of the Vermont Association of Realtors. “We need housing at the other end too, but the cost of developing those units is too high for home builders.

The profit developers make on million dollar homes isn’t much different than moderately priced homes, according to Joe Sinagra of the Home Builders and Remodelers Association of Northern Vermont.

Affordable houses tend to be “easier to build” but rising land prices have made it difficult for builders to construct affordable housing.

Housing market shows signs of stabilizing - Boston.com.

The Houston Board of Realtors has started a great new program. When a realtor completes a home sale, their clients are sent  a rating form and the realtor is rated on their performance in the transaction. The combination of a public rating system for real estate professionals will allow people who are new to an area have a much better chance of finding a real estate professional that will suit your needs.

The system works like this. After a real estate agent completes a transaction, the customer is asked to fill out a questionnaire judging the level of service.
After receiving at least four surveys, agents are rated on a scale of 1 to 5. The ratings are then posted on their profiles on www.har.com.
The local real estate association, which has 23,000 members, is underwriting a portion of the fees charged to real estate agents to sign up for the service.
Steve Barnes, president of the Houston region for Coldwell Banker United, Realtors, said the company has been certifying its agents for almost a year and receiving surveys on their services.
The results?
“We found the consumer wanted more touch and communication during the process, and they wanted more follow-up after the sale,” Barnes said.
“This gave us an opportunity to work on that.” via Chron.com

A Sample of the Sellers Survey

A Sample of the Buyers Survey