Smart Real Estate News & Commentary by Chris McLaughlin April 7, 2011
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6 Cities and home price
Atlanta: The Atlanta metro area has suffered though a long period of rising foreclosures. In 2010 filings increased 22% after jumping more than 40% the year before. Home prices were dragged down about 6% in the last six months of 2010, and sellers followed suit, dropping their prices an average of 9%. Homes in Atlanta normally spend an average of 65 days on the market before getting a price cut, according to Trulia.
Seattle: Prices are going down, having fallen 5.2% in the past six months. In total, they are 28% off their peak. The economic rebound will not be able to offset the growing foreclosure problem. “There’s a 28-month shadow inventory of foreclosed and pre-foreclosure properties,” said Crellin. “That’s going to hold prices very flat.” Sellers have had to slash prices to compete. The average time on market before the first reduction is 54 days in Seattle, according to Trulia, and that first cut is about 6%.
Minneapolis
Since peak in April 2006, values have fallen 34%, with 8% of that loss coming over the past six months. Homes are now only worth 14% more than in 2000. Sellers in Minneapolis have had to rethink their expectations over the past half year. They have been waiting an average of 45 days before they cut their prices to better match the market, according to data from Trulia, and cut the price an average of 9%.
Detroit
The latest blow to the city’s pride was the Census Bureau report that its population had dropped another 25% in the last decade to 715,000. The good news for the housing market is that the auto industry has stabilized over the past year and that should spur home sales.
Phoenix
Prices have more than doubled between January 2000 and the top of the market in May 2006. Since then, they’ve dropped back nearly to their early-2000 levels, according to the S&P/Case-Shiller index. On average, according to Trulia, sellers wait about 48 days before they cut their listing prices by an average of 8%. The majority of homes then go through at least two reductions.
Tampa
The bubble popped early in Florida, triggered by problems with some of the high-risk mortgages. That sent home prices into a tailspin they have not fully recovered from. Prices here are off a total of 46% from peak. Florida’s condo market was hit harder than that for single-family homes, but even high-end houses in excellent neighborhoods have had to be priced right to sell. Sellers, though, have not been particularly quick to drop their listing prices, lasting an average of 69 days before the first reduction, according to Trulia. The cuts averaged 9%.
New unemployment claims drop by 10,000
There were 382,000 initial jobless claims filed in the week ended April 2, the Labor Department said. The figure was down from the previous week’s revised 392,000. Economists were expecting 386,000 initial claims in the latest report, according to consensus estimates gathered by Briefing.com. Initial claims filings have been on the decline for several months, raising hopes that the recovery in the job market is gaining steam. The government said last week that the U.S. economy added 216,000 jobs in March, while the unemployment rate edged down to 8.8%. In addition to the drop in initial claims, the number of Americans filing ongoing claims for unemployment benefits fell 9,000 to 3,723,000 in the week ended March 26, the most recent week available.
Olick – mortgage market choking recovery
“One piece of data does not a conclusion make…two pieces get closer. A new report on the apartment market out today from Reis, Inc. shows a big surge in net absorptions, despite very little new supply of apartment units. Apartment vacancies dropped 40 basis points to 6.2%, which is a record plunge. Rents are rising steadily, but the renters keep coming. ‘We are now seeing the results of a sharp convergence of positive factors for apartment rentals. First, as labor markets continue to improve and hiring picks up, demand for housing is increasing, particularly in the 20 to 34 year segment of the labor market,’ notes Reis’ Victor Canalog. ‘However, with the single family home sales market still on the ropes, and with deflationary expectations for home prices for at least the coming year, few of these newly hired young workers have the appetite to commit to buying a home.’ Few have the appetite, but even fewer may have the ability to buy, given today’s tight mortgage market.
Just look at piece of data #2: Weekly mortgage applications. Yes, applications to purchase a home rose 6.7%. While the current volume of these applications are still abnormally low, a jump is a good thing, especially since we haven’t seen a jump in a while, and we’re supposedly in the busy home-buying season. Unfortunately, the jump in those applications was driven by a big (10%) surge in FHA (Federal Housing Administration — which insures loans) loan applications. Why? Because FHA insurance premiums were scheduled to increase on Friday, and borrowers were likely trying to get in under the wire.
FHA-insured loans are really the only low down payment loans around today. In order to get the most favorable rates from non-FHA lenders, you’re likely going to need at least 20% down, and many buyers today simply don’t have that. FHA is also supposedly geared to borrowers with lower credit scores, although FHA has upped those minimums as well. Bottom line, while an improving jobs picture may be improving demand for housing, that demand is hamstrung by equally low confidence in home ownership and inability to obtain good financing.”
Budget proposals spark medicare debate
House Budget Chairman Paul Ryan’s proposals for overhauling the program are dramatic. Democrats claim they will dismantle it. Ryan claims they will save it. The ugly math suggests Medicare is unsustainable in its current form. Medicare is financed through a combination of payroll taxes, premiums and general revenue. The problem is that spending has been growing faster than the economy and is projected to do so indefinitely. In fact, in just the next decade the Congressional Budget Office estimates enrollment in Medicare will grow by a third and spending per enrollee will jump by 50%. Between 1975 and 2010, the number of enrollees doubled to 47 million, and the real cost per enrollee quadrupled, according to data from the Centers for Medicare and Medicaid Services, the agency that runs the program. By 2040, Medicare will cover 88 million people and the cost will be nearly three times higher than in 2010. In 1975, the program’s income from revenue and premiums covered 69% of total Medicare disbursements. In 2010, they covered 40%. By 2040, they’ll only cover 30%.
The House Republican budget resolution proposes converting Medicare from a fee-for-service program into a “premium-support” system for everyone under 55 today. When they become seniors, they would choose from a Medicare-approved list of private insurance plans and the cost of their chosen plan would be subsidized in part by the federal government. The plan would also gradually raise the Medicare eligibility age from 65 to 67 by the 2030s. The changes would reduce federal health spending commitments and make them more predictable, according to the CBO. But the agency also said “most elderly people would pay more for their health care than they would under the current Medicare system.” And they would assume greater financial risk if their health care needs turn out to be greater than expected. Robert Reischauer, president of the nonpartisan Urban Institute and a trustee of the Social Security and Medicare Trust Funds, commends Ryan for coming up with an overall debt-reduction plan that he characterized as “significant” and “serious.”
WSJ - malls vacant
Even as the economy picks up steam, many of the nation’s malls and shopping centers are suffering a hangover due to changing consumer habits and the fallout from a massive building boom. Mall vacancies hit their highest level in at least 11 years in the first quarter, new figures from real-estate research company Reis Inc. showed. In the top 80 U.S. markets, the average vacancy rate was 9.1%, up from 8.7%. The outlook is especially bad for strip malls and other neighborhood shopping centers. Their vacancy rate is expected to top 11.1% later this year, up from 10.9%, Reis predicts. That would be the highest level since 1990. In 2005, the mall-vacancy rate hit a low of 5.1%. For strip centers the boom-time low vacancy rate was 6.7% that same year. Not all retail properties have suffered as much, especially on the high end. Large, publicly traded mall owners like Simon Property Group Inc. and Taubman Centers Inc., which tend to own top-tier properties, have trimmed their vacancy rates to 7% or lower and lifted their lease rates in the past year, buoying their stock. But a broader glut has struck some of the exurbs that saw heavy housing development during the boom, where malls and strip centers built for growth that never came. More than one billion square feet of retail space was added in the 54 largest U.S. markets since the start of 2000, according to CoStar Group’s Property & Portfolio Research Inc. of Boston.
In part, the decline reflects a continued drag on spending from the recession. But many retailers that had been stalwart mall- and strip-center tenants, like Borders Group Inc. and Blockbuster Inc., have floundered. Even successful chains have closed and shrank hundreds of stores as they retrenched. Additionally, the recession appears to have speeded a shift in habits that has more Americans shopping online. Online retailing surged to 12% of the total during the holidays. “We will hit a tipping point soon, if we have not already, where online will become so mainstream that retailers will wonder what they need some of these big boxes for, when you have a retail presence in everyone’s pocket via your smart phone,” said Leon Nicholas of retail consultancy Kantar Retail. In some towns, city officials are looking for ways to revive, or even redeploy, mall space. Vacancies and falling rents have especially hurt strip centers. Some regional grocers have been clobbered by the downturn and new competition from big box stores like Wal-Mart, hurting strip centers anchored by their stores. Some landlords have hedged against the impact of online shopping by adding more tenants like restaurants, entertainment venues, fashion stores and other wares not often bought online. Longtime strip center tenants like dentists and tax preparers are even more coveted now. But many small businesses typically housed in strip centers have been particularly hurt by the weak economy. “The ongoing challenge is there is very little capital for those small businesses to expand and open new stores,” said Jim Sullivan, a retail-property analyst with Green Street Advisors. “Until that capital arrives in a meaningful way, strip-center vacancies are likely to remain stubbornly high.”
DSNews.com – west is now in double dip
New data released by Clear Capital today shows that home prices in the western part of the country are sliding again, down 4.3% over the first three months of this year. Granted housing is inherently local, but the company says, taken on the whole, the West region has now officially entered double-dip territory, with home values hitting lows not seen since 2001. Across the rest of the United States, though, the valuation firm argues that negative forecasts have been “overstated,” as prices in the South and Midwest have remained flat since the beginning of the year and prices in the Northeast have slipped just 0.5%. According to Clear Capital, data through March 2011 in the Midwest, South, and Northeast regions is “encouraging” as home prices have managed to find a bottom in the midst of ongoing foreclosure pressures and the traditionally slow winter season. “The latest data through March supports our view that many markets are continuing to see relief from the significant price declines we observed through January,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital. “Looking deeper at the disparity between the West and the other regions, we find that the rate of change in REO saturation continues to serve as a leading indicator of home prices.
For example, out of all the regions, only the West showed acceleration in its REO saturation from the previous quarter,” Villacorta explained. Clear Capital says the region’s underperformance in home prices reflects the extent distressed activity plays in western markets. Recently, distressed activity as a proportion of total sales has climbed nearly 10% since the second quarter of 2010, and now stands at 40.8% of sales, according to the company’s study. The poor showing in the West pulled home prices at the national level down 1.3% during the first quarter of this year, Clear Capital reports. But looking ahead, the company says should the traditional spring and summer buying seasons prove substantial, national home prices could reach positive quarterly gains before the end of 2011. However, Clear Capital was quick to add that distressed activity remains high and will likely void any gains in the West.
See you at the top!
Chris McLaughlin
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!
* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
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