Headlines – Week of September 19, 2010

September 27, 2010

Banks Keep Failing

A recent article in the Wall Street Journal noted that 279 banks have now collapsed since Sept. 25, 2008, when Washington Mutual Inc. became the biggest bank failure on record.  The failures of the past two years shattered the pace of the prior six-year period, when only three dozen banks were taken over by the FDIC.

Other notable quotes from the article:

  • In the second quarter of this year, the FDIC increased its number of problem banks by 6% to 829.
  • Over the next decade over 5,000 could fail
  • Of the failed banks since February 2007, 75 were formed after 1999
  • Since 2008, the industry’s assets have shrunk by 4.5%.
  • The recession and collapse of the housing bubble have cut bank-industry employment by 188,000 jobs, or 8.5%, since 2007
  • Bank failures alone have cost 11,210 jobs, or 32% of the employees at failed banks
  • The FDIC is burdened with $38 billion of remnants it is trying to sell.
  • 94% of bank failures since 2008 had either residential or commercial real estate as their largest category of delinquent loans.
  • Surviving banks have raised more than $500 billion in new capital
  • Bank of America, J.P. Morgan Chase & Co. and Wells Fargo hold 33% of all U.S. deposits, up from 21% in 2006

Full Article

Housing Stuck

Another article from the Wall Street Journal states that new data suggests the sales of existing, or previously owned, homes rose 7.6% from July’s extremely low levels.  The information was taken from figures released by the National Association of Realtors.

The August figures were the lowest for any month since 1997 except for July.

While the number of unsold homes fell 0.6% in August to 3.98 million, it would still take 11.6 months at the current sales pace to clear the inventory. This is the second highest figure since the realtors’ group began tracking the data in 1999, behind July’s 12.5 months.

The debate is on among housing experts as to how far prices have to drop in order to increase the sale of the existing housing stock.

The picture varies from region to region. Home prices in several Florida and Nevada markets are likely to fall at least another 5%, while parts of Texas and Oklahoma could post modest gains over the next year, according to one expert.

Nationally, prices in July fell by 0.5% on a seasonally adjusted basis following a 1.2% decline in June.

Much of the lingering weakness in demand is linked to sluggish improvement in the job market. Some 465,000 people filed new claims for jobless benefits last week, up 12,000 from the week before, according to the Labor Department.

According to CoreLogic Inc., while 11 million borrowers are underwater, or owe more than their homes are worth, another 2.5 million will join them if prices decline just another 5%.

Full Article

UCF: Recovery to be slow, gradual

According to Sean Snaith, director of the Institute of Economic Competitiveness at the University of Central Florida, the good news is the worst recession since the Great Depression is over … the bad news is the path to recovery looks like it will be slow and gradual.

The economic downturn has vaporized trillions of dollars in wealth from home equity, stocks and retirement accounts.

According to Snaith, a V-shaped recovery, with an abrupt recession followed by just as rapid a recovery, is not in the cards and neither is the W-shaped cycle, known as the double-dip recession.

Other notable quotes from Snaith:

  • Economic impacts in Florida from the BP oil spill are likely to be much less than the worst-case projections.
  • Housing is showing some improvement in single-family existing home sales, but “prices will ultimately tell us when the market has bounced back.”
  • Commercial real estate “still has a lot to work out,” with some developers likely to have trouble paying their mortgages, which will come due for repricing. This in turn will put pressure on banks, and more failures are likely.
  • The Ocala, Florida metropolitan area is projected to be No. 1 in the state in terms of average percentage of population growth from 2010-13, with a figure of 1.4%. This is due largely to property insurance issues in coastal Florida counties.

Full Article

 Posted by Scott R. Lodde

Headlines – Week of September 12, 2010

September 25, 2010

States with Highest Foreign Buyers

A recent article in US Today lists Florida as state which attracts the largest share of U.S. home purchases by foreign buyers in 2009.

The top states according the National Association of Realtors are:

Florida – 23%

California – 13%

Texas – 11%

Arizona – 7%

According to the realtors surveyed, Arizona is attractive due to the weather but also since there is little risk of natural disasters.

California was good weather but earthquakes are a continuing threat.

While Florida has hurricanes which have increased homeowners’’ insurance, the state has a long coastline with plenty of water and great golf courses.  The state continues to get many buyers from Canada as well as Latin America.

Full Article

Where is the shadow inventory?

For more than a year everyone has been waiting for the so-called “shadow inventory” of residential real estate to appear and flood the market.  So where is it?

According to a recent article in the Wall Street Journal, this is what is happening:

• Some delinquencies have been resolved through loan modifications or people working out the problems on their own.

• Banks are getting better at managing short sales.

• Investors are aggressively buying up properties, sometimes in bulk, directly from the banks or at courthouse auctions so they don’t hit the market.

However, time is running out for lenders.  The likeliest outcome is a steady flow of foreclosures over a long timeframe that will prevent another crash in home prices.  This scenario however will lead to low or no appreciation in home prices for an extended period of time.

Full Article

Foreclosures down, but Fla. second nationally

According to the RealtyTrac, foreclosures in Florida fell in August for the fifth straight month, but the state still ranks among those with the highest foreclosure rates in the nation.

Florida ranked second behind Nevada in the percentage of housing units receiving foreclosure notices during the month, with one in every 155 homes receiving one, more than twice the national average.

Two Florida metropolitan areas – Cape Coral/Fort Myers (third) and Miami-Fort Lauderdale-Pompano Beach (fifth) ranked among the top 10 metro areas around the country in terms of the frequency of foreclosures for the month.

Nationally, default notices, auctions and bank repossessions fell 5% from August 2009 but were 4% higher than in July, a figure attributed to a convergence of factors including stepped-up bank repossessions and fewer initial default notices.

Many states, including Florida, have enacted laws or made voluntary arrangements with lenders to extend the period before which mortgage loans become delinquent in an effort to give homeowners as much help as possible to keep their properties. Sluggish home prices and a glut of inventory on the market, however, continues to put pressure on some mortgage holders who find themselves “upside down,” paying mortgages on property worth significantly less than what they paid for it.

Nationally, Nevada continued to lead all states in the percentage of homes in some state of foreclosure proceedings. One in every 84 housing units in Nevada received a foreclosure notice in August, more than four times the national average. August marked the 44th straight month Nevada held the dubious position, despite a 25% drop in foreclosure activity compared to August 2009.

Arizona, California and Idaho rounded out the top five states in the percentage of homes in foreclosure. In terms of sheer numbers, California led the national with 69,143 properties receiving a notice in August. In Florida, 56,877 homes received notices during the same period.

In all, five states, California, Florida, Michigan, Illinois and Arizona accounted for more than half of the 338,836 homes in the U.S. to fall into default.

 Posted by Scott R. Lodde

Headlines – Week of September 5, 2010

September 13, 2010

Fannie Mae Approves 123 New Florida Condos

According to a new report from CondoVultures.com, Fannie Mae has approved 123 new Florida condo projects for financing in the first eight months of 2010, a sharp reversal to 2008 when not a single project was accepted.

This is a huge deal since new condominium projects that fail to receive Fannie Mae approval are virtually locked out of conventional financing when interest rates are at record lows. A lack of available financing typically means lower prices for sellers as the only would-be buyers have all cash and demand deep discount to transact deals.

New condo project approvals for financing in 2010 have already risen by more than 40% compared to 2009 when 87 projects were deemed acceptable for mortgages by Fannie Mae. No new Florida condos were approved for financing in 2008 after 27 projects were approved in 2007, according to the report based on Fannie Mae data.

In the first half of 2010, Fannie Mae acquired or guaranteed more than $420 billion in loans. Since 2009, Fannie Mae has acquired or guaranteed more than $1.2 trillion in mortgages.

Florida’s real estate crash, which began in 2007, has made financing a serious challenge. Few lenders want to originate new mortgages as prices plummeted and foreclosure rates spiked.

Since 2007, more than 250,000 foreclosure filings secured by $62.5 billion in mortgages have been initiated in South Florida region (Miami-Dade, Broward, and Palm Beach counties) where lenders have repossessed more than 100,000 properties.

Since January 2010, Fannie Mae has attempted to reverse the financing problem by developing new “special approval” requirements specifically for Florida condominiums. The “special approval” status is for Florida condominiums only and lasts for no more than 18 months.

To implement the program, Fannie Mae created a six-member team of underwriters who are versed in the “special approval” criteria and sent them out to evaluate Florida condos. It is this team that has approved more than 120 condos in 2010.

Full Report

Mortgage Write-downs Gain Appeal for Banks

Much has been written about banks avoiding write downs of the loans on their books.  The term “extend and pretend” was coined to describe banks that extend their loans with the hope that the market will improve. Even banks that foreclosed on properties have kept them on their books, reluctant to auction them in a market where investors offer as low as 10 cents on the dollar.

According to an article in the NewsOberserver.com, some reports now indicate this appears to be changing, and it could have implications for property owners caught up in the sell-off.

As evidence, is a plan by BB&T to auction $1 billion of performing and nonperforming loans in the Southeast.

BB&T has been more aggressive of late in writing down its troubled loans and moving to rid itself of some of them. The bank’s CEO, Kelly King, has indicated the strategy will continue as long as investor appetite for the loans remains at current levels.

Other regional banks, including Pittsburgh-based PNC Financial Services Group and Birmingham, Ala.-based Regions Financial, are pursuing similar strategies.

The move to deal with troubled real estate loans is driven partly by federal regulators who have increased pressure on banks whose capital ratios fall below a certain level.

Many believe that banks are coming to terms with the fact that commercial real estate is declining in value and it’s just not coming back in the next three months or six months.

The auctions also are a sign that the gap between what the banks will take for the loans – and what investors will pay – is narrowing.

Some believe banks have reached the point where they realize they’re not going to get 80 cents on the dollar for the value of the loans they package and they are going to be looking at 35 or 40 cents on the dollar, which seems to be where these loan packages are selling.

For property owners whose loans are included in these packages, the auctions could mean trouble. If an investor buys a loan for 40 cents on the dollar, that means they can foreclose on the property, auction it off and still make a profit.

Full Article

Florida’s Red Ink Not so High

According to an article in News Service of Florida, the State of Florida’s looming budget shortfall has been sliced in half by state analysts who credit federal stimulus dollars, years of spending cuts and Indian gambling money.  However, the state still faces a $2.5 billion deficit. 

A year ago, state forecasters projected a $5.5 billion gap for 2011-12, as the remnants of the recession and a stone-cold housing market looked certain to dig deeply into state tax collections.

Amy Baker, coordinator of the Legislature’s Office of Economic and Demographic Research, conceded however, that the revised projection does not take into account the Gulf of Mexico oil spill impact on state coffers.

While the expected budget hole has diminished, the debate over how to fill it remains largely unchanged. The Legislature’s ruling Republicans have already set the stage for another round of belt-tightening – and could draw strength from the economists’ crediting reduced state spending as helping yield the improved forecast.

The state’s current $70.2 billion budget is propped up by $2.5 billion in federal stimulus dollars – the last installment of $27 billion in cash that flowed to Florida from Washington over the past three years. The latest round was enhanced by an additional $700 million in federal Medicaid money that came to Florida in August.

Posted by Scott R. Lodde

Headlines – Week of August 29, 2010

September 5, 2010

Commercial Real Estate Yields Spur Investors

According to an article in Bloomberg, yields on U.S. commercial real estate are nearing a record high compared to Treasury bonds, a signal to many investors that now is the time to buy property.

Capitalization rates, a measure of real estate yields, averaged 7.22% 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.

The current spread is 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 article points to the recent acquisition of the 33-story Wells Fargo Building in San Francisco by a group of South Korean pension fund investors as an example of how low cap rates have dropped for some high end buildings.  According to Real Capital Analytics Inc., a property research firm the office tower sold at a cap rate of about 7%.

In another transaction in New York, RXR Realty LLC bought a stake in a 22-story office building, at a cap rate of 6%.

U.S. sales of office, retail, industrial, apartment and hotel properties totaled $20.7 billion in the second quarter, up 86% from $11.1 billion a year earlier.

However, the deals were still 85% below the peak of $135.7 billion in the second quarter of 2007.

Full Article

Florida Population Grows Again

According to the latest preliminary population estimates from the University of Florida (UF), Florida’s population grew once again last year after declining for the first time since the end of World War II the year before.

The Bureau estimates that Florida added a modest 21,000 residents between 2009 and 2010, but that followed a population decline greater than 56,000 between 2008 and 2009.

Florida grew by more than 125,000 residents in every year from 1950 to 2008. In 2009 it is estimated that Florida added 21,285 residents with its total population increasing from 18,750,483 on April 1, 2009, to 18,771,768 on April 1, 2010.

Foreign immigration continues to be relatively strong, and the state also continues to have substantially more births than deaths – the drivers of Florida’s growth in the last year.

The largest population gains were in some of the biggest counties. Miami-Dade led by adding an estimated 8,253 residents, followed by Hillsborough, 6,353, and Broward, 5,834.

The county with the biggest percentage increase was Lafayette, which grew by 5.2%, but that change was largely attributed to the addition of state prison inmates. There was no pattern to which counties lost population, which were spread throughout the state and include both large urban counties and small rural counties.

The largest population decline was in Seminole County, which lost 3,659 residents, followed by Pinellas, 3,119, and Volusia, 2,055. In percentage terms, the county with the biggest decline was Glades, followed by Jackson and Holmes.

The Bureau expects Florida’s population to continue to grow slowly during the next year or two, however within the next 10 to 20 years, the state’s annual population growth could be as high as 250,000.

From 2003 to 2006, Florida’s population grew by more than 400,000 per year, and in the previous three decades increases averaged about 300,000 per year.

Between 2000 and 2010, the counties that grew the most in absolute numbers were Miami-Dade, Orange and Hillsborough. Flagler had the highest growth rate, 90.4%, followed by Sumter, 82.6%, Osceola, 59.8%, St. Johns, 50.6%, and Wakulla, 41.7%.

The population figures are interim estimates that will be replaced by numbers from the 2010 census when they become available early next year.

Full Article

Commercial Conditions Favor Business Growth

According to Lawrence Yun, National Association of Realtors (NAR) chief economist, the fallout from the recession continues to impact commercial real estate.

Vacancy rates are beginning to level off in some sectors, but rent discounts and moderate levels of landlord concessions are widespread.  As a result we are very much in a tenant’s market which is quite favorable for businesses that are considering expansion.

Looking at the overall market, vacancy rates will shift modestly in the coming year according to NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK. The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail, and multifamily markets. Historic data were provided by CBRE Econometric Advisors.

Office Markets

Vacancy rates in the office sector, with high levels of available sublease space, are expected to increase from 16.7% in the second quarter of this year to 17.0% in the second quarter of 2011, and then ease later next year. The markets with the lowest office vacancy rates in the second quarter were New York City, Honolulu and Long Island, N.Y., with vacancies around the 9 to 11% range.

Annual office rent should fall 2.7% this year and decline another 2.1% in 2011. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is projected to be a negative 13.6 million square feet this year and then a positive 22.6 million in 2011.

Industrial Markets

Industrial vacancy rates are likely to decline from 14.1% in the second quarter of 2010 to 13.7% in the second quarter of 2011, and then continue to ease modestly as the year progresses.

The areas with the lowest industrial vacancy rates in the second quarter were Los Angeles, San Francisco, and Kansas City, with vacancies ranging between 8 and 11%.

Annual industrial rent is estimated to drop 5.4% this year, and to decline another 4.7% in 2011. Net absorption of industrial space in 58 markets tracked is seen at a negative 31.7 million square feet this year and a positive 157.2 million in 2011.

Retail Markets

Retail vacancy rates should hold steady at 13.1% in both the second quarter of this year and in the second quarter of 2011, with a level pattern for most of next year.

Markets with the lowest retail vacancy rates in the second quarter include San Francisco, Honolulu, and Miami, with vacancies of 7 to 8%. Average retail rent is expected to decline 2.6% in 2010 and then flatten out, slipping 0.1% next year. Net absorption of retail space in 53 tracked markets is forecast to be a negative 2.3 million square feet this year and then a positive 6.4 million in 2011.

Multifamily Markets

The apartment rental market – multifamily housing – is benefiting from modestly higher demand. Multifamily vacancy rates are likely to decline from 6.0% in the second quarter of this year to 5.6% in the second quarter of 2011.

Areas with the lowest multifamily vacancy rates in the second quarter include San Jose, Calif.; Pittsburgh; and Philadelphia, with vacancies of less than 4%.

With additions from new construction, average rent should slip 0.6% in 2010, and then hold even in 2011. Multifamily net absorption is expected to be 105,200 units in 59 tracked metro areas this year, and another 138,000 in 2011.

Posted by Scott R. Lodde

Our Philosophy

Our philosophy revolves around a simple goal - To achieve the objectives of our clients. Our plan is to introduce the necessary talents and resources to our clients and enhance their business goals and profitability

Our Services

*Hotel Management---------------------- *Asset Management---------------------- *Advisory Services----------------------- *Distressed Property Services------------- *Insurance Claim Support Services------- *Development Services-----------------

Warning: Unknown: open(/home/content/28/4334028/tmp/sess_t5qaucdav9ecalkl6jtgv5cvg5, O_RDWR) failed: No such file or directory (2) in Unknown on line 0

Warning: Unknown: Failed to write session data (files). Please verify that the current setting of session.save_path is correct () in Unknown on line 0