Archive for September, 2010
Commercial real estate yields spur investors
Yields on U.S. commercial real estate are nearing a record high compared to Treasury bonds. Many investors take that as a signal to buy property. Capitalization rates, a measure of real estate yields, averaged 7.22 percent in the second quarter, as calculated by the National Council of Real Estate Investment Fiduciaries. That was 4.29 percentage points higher than the yield on 10-year government bonds as of June 30 and 4.75 percentage points higher than Treasury yields as of Aug. 31. Current returns are near the record 5.39 percentage points in the first quarter of 2009, when the U.S. was dealing with the worst economic downturn since the Great Depression. The spread shrank to less than 80 basis points when commercial real estate prices peaked in 2007. “The data indicate that real estate is poised for a rebound,” says Gerardo Lietz, who advises pension funds on property investments. Source: Bloomberg, Hui-yong Yu
Pending home sales rise
Following a sharp drop in the months immediately after expiration of the homebuyer tax credit, pending home sales have modestly risen, according to the National Association of Realtors® (NAR). The Pending Home Sales Index (PHSI), a forward-looking indicator, rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June; it’s 19.1 percent below July 2009 when it was 98.1. Pending sales data reflects contracts and not closings, which normally occur with a lag time of one or two months. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” says Lawrence Yun, NAR chief economist. “But the recovery looks to be a long process. Homebuyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.” On the other hand, homes have not been this affordable in recent memory. “Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy,” says Yun. “The loan underwriting standards are tighter, but homebuyers can improve their chances of getting a loan by staying well within their budget.” The PHSI in the Northeast rose 6.3 percent to 62.5 in July and is 21.1 percent below a year ago. In the Midwest the index increased 4.1 percent to 66.7 and is 25.7 percent below July 2009. Pending home sales in the South rose 1.2 percent to an index of 86.3, and are 15.6 percent lower than a year ago. In the West, the index jumped 11.6 percent to 95.0 and is 17.6 percent below July 2009. The national index had fallen 29.9 percent in May and another 2.8 percent in June.
Taxpayers Footing Bill for Tiger’s New Mansion?
I don't have it on my authority, but it is being reported widely and wildly that newly divorced Tiger Woods took out a $54.5 million mortgage on his Jupiter Island, Florida estate where he is currently building a mansion.
Home prices up 1% in June
U.S. home prices rose in June for the third straight month amid a burst of homebuying due to tax incentives that have since expired. The Standard & Poor’s/Case-Shiller 20-city home price index posted a 1 percent increase in June from May and was up 4.2 percent from a year ago. Home prices nationally were up 4.8 percent in the second quarter compared with the first quarter, largely due to government tax credits of up to $8,000 that caused sales to surge. Seventeen cities showed price gains on a monthly basis. Prices in Seattle and Portland (Oregon) were flat from a month ago, while prices in Las Vegas fell. Nationally, prices have risen 6 percent from their April 2009 bottom. But they remain 28 percent below their July 2006 peak. Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer.
Florida developers look to foreign investors for funds
Real-estate developer Lon Tabatchnik has ambitious plans for a $131 million, Margaritaville Resort on Hollywood beach that could create thousands of jobs. But with bank financing tight, he’s looking to a nontraditional source of funds: foreign investors who want to live in the United States. Tabatchnik and his partners are seeking approval to join a federal program that lets foreigners who invest at least $500,000 in certain job-creating ventures to obtain U.S. residency with their families. The U.S. Employment-Based visas, known as EB-5s, are gaining popularity worldwide, especially among wealthy Chinese who face a backlog to enter other U.S, residency programs and who seek to educate their children in the United States, immigration experts say. If approved as an EB-5 regional center, Tabatchnik’s group hopes to raise $75 million from 150 investors abroad, working with a Weston-based firm that would market their seaside project in China, South Korea, Venezuela, the United Kingdom and other nations. If all goes as planned, construction could begin in 2012 on the Jimmy Buffett-inspired resort with its 360 rooms, amphitheatre and other facilities, spurring 3,000 direct and indirect jobs, developers said. “And the cost of financing through an EB-5 raise is much less than traditional funding,” said Tabatchnik. Across Florida and nationwide, developers are increasingly turning to the EB-5 program to stimulate investment in projects that otherwise might be stalled in today’s slow-moving U.S. economy. Fourteen EB-5 regional centers had been approved in Florida alone, with more requests like Tabatchnik’s pending. More than 80 are authorized nationwide, said U.S. Citizenship and Immigration Services. One South Florida center already attracting EB-5 funds is the $10 million build-out of the Marina Blue condominium tower at 888 Biscayne Blvd. in Miami. Developers have raised cash from investors in China, Russia, Colombia and Venezuela to finish a retail section of the building halted during the recession, said attorneys David Hart and Eric Gould of Miami. “Venezuela is a good market for EB-5 visas, because Venezuelans are leaving their country” amid economic and political turmoil there under socialistic President Hugo Chavez, Gould said. Marketing also is under way to lure foreign investors to downtown Hollywood for an initial $120 million in projects including a boutique hotel, nearly 400 apartments and retail, said developer Charles “Chip” Abele. The U.S. government launched the EB-5 program in 1990, but few investors used it at first. Attorneys complained of hefty paperwork and bureaucratic delays in approvals. Requirements for a $1 million investment limited applicants. And at least once case of fraud kept other investors cautious. But the program has gained momentum, partly because the government let investors qualify for a resident’s “green card” with smaller outlays: $500,000 in an area deemed economically disadvantaged. It also simplified paperwork by pre-approving “regional centers” for EB-5 investment. The upshot: As developers boost marketing, the number of EB-5 visas approved is swelling. The Department of Homeland Security approved 4,218 of the investor visas in the year ended Sept. 30, roughly triple the 1,443 visas approved in fiscal 2008 and five times the 806 allocated in fiscal 2007. Some immigration critics, including as the Federation of Immigration Reform, decry the investor visa program. They say foreigners shouldn’t be able to buy their way into U.S. residency and “pay to play.” But supporters, including the Association to Invest in the USA, call the program is a “win-win,” creating U.S. jobs and aiding foreign investors who are rigorously checked before given temporary US residency in an approval process that often takes six to eight months. “The United States gets about 1 million immigrants a year. EB-5 is open to 10,000 a year, who are high net-worth individuals, generally well-educated with no criminal record,” said immigration lawyer Larry Behar of Fort Lauderdale. “Is that the kind of immigration we want? You’re darn right.” Behar has developed a specialized EB-5 unit with a staff of eight who do legal work for proposed regional centers, help market the approved centers and help foreign investors obtain the visas. He recently returned from a trip to China with the governor of Idaho to tout mining ventures in Idaho approved as an EB-5 regional center. And he’s now seeking approval for what would be the largest EB-5 regional center nationwide: a $250 million cancer treatment hospital in Brooklyn, N.Y. Not all EB-5 projects succeed, of course. In Palm Beach County, a regional center approved in 2008 has yet to attract foreign investors, partly because a proposed inland port project has stalled and competition for foreign investment soared, said immigration lawyer Al Zucaro of West Palm Beach. But developer Tabatchnik is optimistic about his Margaritaville resort, thanks to its job potential, brand name and cooperation from the city of Hollywood, which is leasing land for the venture. “Some EB-5 investors worry if they’ll meet employment requirements, but a hotel creates jobs immediately. And we’ve found,” Tabatchnik added, “some investors are more comfortable when government is involved.” Copyright © 2010, Sun Sentinel, Fort Lauderdale, Fla., Doreen Hemlock. Distributed by McClatchy-Tribune Information Services.
Florida consumer confidence up 1 point
With no clear signs that the nation is either recovering or entering another recession, Florida’s consumer confidence remained stagnant, inching up only one point to 67 in August, according to a new University of Florida survey. “Consumer confidence is entrenched at a relatively low level,” says Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “With the exception of a jump in April due almost entirely to the housing and appliance rebate programs, consumer confidence has been stuck in the upper 60s to low 70s for the past year. We are in the economic doldrums.” Two of the five components of the index increased, while one decreased and two remained unchanged. Perceptions of personal finances now compared with a year ago rose four points to 52 from a record low in July, while perceptions of personal finances a year from now rose three points to 78. “On the bright side, the oil spill has been contained and this is probably part of the reason for increased optimism about personal finances,” McCarty says. “Although the long-term effects of the spill are not yet known, there is evidence that tourists now realize that Florida beaches are, for the most part, unaffected.” Remaining unchanged were perceptions of U.S. economic conditions over the next year at 61 and perceptions of U.S. economic conditions over the next five years at 70. The only component to decline was perceptions about whether it’s a good time to buy big-ticket consumer items, which fell two points to 73. “While the mix among the five components has changed, overall consumers’ attitudes reflect other economic indicators that don’t show a clear path out of recovery or back to another recession,” McCarty says. Unemployment, the stock market and housing prices all add to the state’s economic uncertainty. Florida’s unemployment rate still remains high, having risen .1 to 11.5 percent in July, McCarty said. Also last month, the stock market fluctuated wildly, mostly downward, as unexpectedly pessimistic news about existing and new home sales rekindled fears of a double-dip recession, he says. In other bad news, housing prices fell in July to a median price of $138,000, erasing gains from the spring that were pushed up by the federal rebate program, McCarty says. However, it seems unlikely that housing prices will continue to decline in the short term. Prices over the past year have remained relatively flat, compared with the volatility over the past three years. In addition, unemployment is not rising dramatically, mortgage rates are at record lows and the containment of the oil spill means it will be less likely to affect housing prices on the Gulf. However, if unemployment starts creeping back up, there could be a problem, McCarty adds. On the positive side, inflation remains in check despite the massive infusions of capital from the stimulus and bailout packages. Taxable sales for June, the latest month for which figures are available, appear on track, and as other news such as the November elections dominates the headlines, the oil spill will become less of a factor for tourists and people who interested in moving to Florida. Nationally, consumer confidence, as measured by the University of Michigan’s index, which was released on Friday, mirrors Florida, with a one-point increase, although that index is about two points higher overall, he said. The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for August was 425 responses.
Florida Supreme Court: Amendment 3 off Nov. ballot
Amendment 3 is off the November ballot. The proposed constitutional change would have offered qualified homebuyers who had not owned a home in eight years a property tax reduction in their first year that progressively declined over time. If passed, the amendment would have also benefited commercial interests by reducing the cap on yearly taxable value increases of commercial and non-homestead properties to 5 percent, down from a 10 percent yearly cap now in place. The Tallahassee judge that removed Amendment 3 from the ballot did so because he found the wording misleading. To qualify for the property tax reduction, homebuyers had to make the purchase after Jan. 1, 2010, a fact not included in the wording voters would read in the ballot box. The judge feared some voters would approve the amendment erroneously, thinking that they would receive the new property tax break. By agreeing with the lower court decision, the Florida Supreme Court finalizes the removal. “We are, of course, disappointed that the courts removed Amendment 3 from the November ballot,” says John Sebree, Florida Realtors vice president of public policy. “However, we do see an opportunity in this. The Florida Legislature clearly favors a yearly cap on property taxes for commercial real estate, as well as a break for first-time homeowners.” Sebree says Florida Realtors will turn to lawmakers again in the 2011 session of the Florida Legislature, and believes there is a good chance of getting a stronger amendment on a future ballot. In addition, the Supreme Court struck down two other proposed amendments to the Florida Constitution, Amendment 7 and Amendment 9. Amendment 7 was an attempt to add additional standards to redistricting. Amendment 9 was the “health care freedom” amendment that would have banned a mandate that individuals purchase health insurance. The court allowed two redistricting amendments to remain on the ballot, Amendment 5 and Amendment 6.
The Home Traffic Report: This One’s Ours
Anyone who reads this blog on a regular basis knows that one of my biggest frustrations in covering the housing market is the never-ending, always constant stream of reports. They are often conflicting, usually based on different time frames and almost always nationalized and "normalized" in order to facilitate screaming headlines that yours truly then has to parse. So here's another report.
