Headlines – Week of July 4, 2010
July 12, 2010
Most Affordable Popular Retirement Locations
According to an article published by U.S News and World Report, the real estate downturn has turned some very popular retirement destinations into bargains.
To determine where the prices are most attractive, the article examined data provided by Onboard Informatics and sought out places with a low cost of living and reasonable housing prices that still offered access to the services and amenities that people should look for in an ideal retirement spot. They examined price-to-income data for 384 metropolitan statistical areas which expresses the relationship between owner income and home values.
Each city on the list has high-quality healthcare and elder-care facilities, as well as an abundance of educational and cultural events.
Florida had two areas to make the top of the list.
Here are 10 retirement locations where homes are most affordable by this measure:
- Bend, Ore.
- Napa, Calif.
- Fort Myers, Fla.
- Fayetteville, Ark.
- Las Vegas
- Sante Fe, N.M.
- Punta Gorda, Fla.
- Phoenix, AZ
- Santa Cruz, Calif.
- Burlington, Vt.
The Commercial Real Estate Slaughter of 2010? (from The Investor’s Business Daily)
According an article in the Investor’s Business Daily, Inc., the default rate for commercial real estate loans packaged within mortgage-backed securities (Fitch ratings) hit 8% in the first quarter of 2010, up from 6.6% in December.
There have now been $31 billion of commercial mortgage-backed securities (CMBS) defaults over the last 39 months.
Shopping centers, apartments, hotels and offices make up the lion’s share of struggling properties, and default rates are highest in Texas, Florida, Arizona, and California. The data will get a lot worse before it gets better according to many experts.
Commercial real estate analysts suggest that defaults will continue unabated for the foreseeable future and Fitch predicts that the rate will exceed 11% by the end of this year.
Many banks that have troubled loans on their books don’t want to foreclose on properties or sell loans because they may not have the capital to cover the loss they’d have to recognize. And special servicers overseeing troubled loans hesitate for the same reasons.
Government policies are allowing lenders to avoid writing down bad commercial property loans. However, real estate investors lacking the cash flow to service their debt will at some point collapse. And for those wishing to hold on, credit markets remain challenging for those simply looking to refinance.
$30 billion dollars has been raised since the beginning of 2009 in order to invest in distressed commercial real estate, and many of those investors expect that future investor demand should put a floor under the commercial real estate market.
These opportunistic investors are hoping to buy distressed real estate for pennies on the dollar and charge lower rents vs. competitors stuck with heftier debt service.
For now however, this new money on the sidelines and appears to be in no hurry to buy. Many are predicting that more distressed assets would come to market in 12 to 18 months, amid a sluggish recovery and lackluster job growth.
And there continues to remain a significant bid-ask gap between existing owners and the potential new owners or lenders. Deteriorating property fundamentals will make it more difficult for lenders to continue their extend-and-pretend policies and may provide more deals before the end of the year.
Rents Rise as Apartment Vacancies Fall (from the Wall Street Journal)
Finally some good news for one sector of the real estate industry.
According to an article published in the Wall Street Journal, apartment vacancies were down and rents were up last month as people got tired of living in their parents’ basements and rented a place of their own.
Nationally, the apartment vacancy rate was 7.8% at the end of June, according to research firm Reis Inc., down from 8% in the first quarter.
Rents gained by 0.7% during the seasonally strong April-to-June period, the biggest quarterly gain in two years, led by improvements in Long Island, N.Y.; San Jose, Calif.; Boston and Seattle.
The apartment sector could benefit from some current trends.
First, mortgage lending standards are much tighter today than at any point in the past decade, which should keep more renters from leaving to buy homes.
Second, the lack of financing for new apartment construction over the past two years has constrained the pipeline of new supply that should hit the market in the next two years. The apartment sector, which added between 100,000 and 150,000 units annually over the past decade, is on pace to deliver just 60,000 units in 2011 and 2012 according to the article.
Posted by Scott R. Lodde