Headlines – Week of October 24, 2010

October 29, 2010

Bank Failures Near Record Pace

2010’s bank closures have nearly reached a milestone. This year’s number of failed banks, 139, is now almost equal to last year’s total of 140–with more than two months left to go.

During the last great era of failed banks in 1988 and 1989, 763 banks went under compared with 280 from the beginning of 2008 to present.

However, the total assets of the ’80s failures, translated in 2005 dollars, was $309 billion. The total assets of the ‘08 and ‘09 failures was $473 billion, with many billions more to come by the end of 2010.  A large portion of these assets were a result of the WaMu, failure which had $307 billion in assets just before in was seized by the FDIC.

Jobless Rates Down in Nearly Half the States

On Friday, the U.S. Department of Labor reported that jobless rates decreased in 23 states in September, but rose in 16. In 11 states, there was no change. The national average is 9.6 percent.

Nevada retains its unwanted title as number one unemployed state, with an official rate of 14.4 percent in September. Michigan is still number two at 13 percent. Thirteen other states had rates above the national average, while North Dakota retained its place as most-employed state in the union at 3.7 percent.

Housing Recovery Predicted for Late 2012

According to a housing outlook report by The Concord Group, a real estate strategy firm based in Newport Beach, CA,  national home sales will recover by the fourth quarter of 2010, with some well positioned markets improving by late 2011 or early 2012.

The company says these markets have the strongest long-term growth potential:

  • Orange County, Calif.
  • San Jose, Calif.
  • Seattle
  • Washington, D.C.

The company’s housing demand model incorporates published employment forecasts, structural household growth, turnover, and obsolescence.

The firm predicts that development of quality new housing in core employment centers is expected to be a major opportunity and meeting the needs of baby boomers, highlighted by their transition to urban areas, should remain a focus of home builders.

Full Article

U.S. Business Travel Spending, Trips to Increase This Year

According a newly developed quarterly business travel forecast. from the NBTA Foundation, U.S. -originated business travel spending is expected to grow 3.8 percent this year compared to 2009 despite expectations that economic and business travel growth will slow through the second half of 2010,  The education and research arm of the National Business Travel Association (NBTA), found that business travel will continue to advance by 6.7 percent and 6.9 percent for 2011 and 2012, respectively.

The new report contains the first Business Travel Index (BTI), a headline measure of the current and projected level of business travel in the United States. At the last industry peak in late 2007, the NBTA BTI reached 120. Two years of the Great Recession left the BTI at 96, a decline of nearly 20 percent. The BTI has recovered to 106 currently and is projected to reach the level of the previous peak in late 2012.

The total number of U.S. business trips saw a sharp decline of 15.6 percent during the Great Recession from 511 million trips in 2007 to 431 million in 2010. The decline was driven in large part by the drop in transient business travel, comprising 60 percent of the total, as a result of tighter travel management, shortening trips, and some use of technological travel alternatives. However, through 2012, transient travel is expected to advance 31 percent as the economy continues to recover and travel restrictions are lifted.

Full Article

Posted by Scott R. Lodde

Era of Less (Reprise: Part 1)

October 28, 2010

Last week’s version of Headlines (Week of October 17, 2010) had a posting called the Era of Less.  The Era of Less refers to the title of this year’s Emerging Trends in Real Estate written by the Urban Land Institute and PricewaterhouseCoopers.

The report is based on 875 confidential interviews and surveys with industry leaders.

This week I was able to complete my review of the report … all 79 pages, and wanted to share what I feel are some of the highlights and important take-aways from the report. 

Due to the size of the report, I will cover each chapter separately in a weekly posting. 

My comments follow each of the bullets.

Chapter 1 – Entering the Era of Less

  1. “Housing … remains mired in a dead zone of reduced demand: many Americans cannot afford new homes even with record-low mortgages rates and slumping prices” – No kidding. Nothing new here except to say that the Fed’s strategy to keep interest rates lower needs to stay in place or everyone trying to hang on will have to let go creating even more of a risk to our economy.
  2. “Investment managers and real estate investment trusts (REITS) with teams to lease properties and nurse asset income streams back to hearth can bulldoze aside many operator-light opportunity-boutiques, which had depended on cap-rate compression and leverage to reap appreciation.” – Couldn’t agree more.  The next ten years will be the decade of the asset and property manager, people with true real estate skills and management know how.  Not just financial engineers.
  3. “It’s very hard to get 15 percent to 20 percent rates of return without more risk and more leverage, and you can’t succeed on a sustained basis.  What’s wrong with delivering unleveraged, high-single-digit returns or low-teens performance for conservatively financed assets?” – The answer … there is nothing wrong with this approach.  The whole world is in a “deleveraging” mode.  High single-digit returns look fabulous when 10-year T Bills are below 3%.
  4. “Homebuilding and commercial real estate construction certainly do not offer much hope for jump-starting employment or the economy in the near term. We really don’t need much of anything.” – VERY true.  The only asset class the report lists as moderately attractive is apartments and to some degree warehouse space.  Apartments, since many people are losing their homes and still need a place to live; however, once things turn around, I would not want to own apartments.  As soon as people feel secure again in their jobs, the pent-up demand will be hard on apartments.  I think most people still believe in the dream of home ownership.
  5. “Eventually population growth will absorb the overhang in housing supply, but location preferences show signs of shifting away from bigger home on the suburban fringe to infill locations closer to 24-hour markets.” – Again, I couldn’t agree more.  I already see this happening in my former home town of Boston, a very livable 24-hour city. 
  6. “In the approaching cycle, the industry can expect to see more high-rise and mid-rise apartment, as well as townhouse project, built around shopping center and commercial districts.” – I believe the recent trend of “life style centers” (a shopping center or mixed-used commercial development that combines the traditional retail functions of a shopping mall but with leisure amenities oriented towards upscale consumers) is here to stay.
  7. “Despite widespread “extend and pretend” practices to avoid taking balance-sheet losses and force foreclosures on beleaguered borrowers, sill –undercapitalized regional and local banks totter with over weightings of failed land and construction loans.” – many of the banks taking this approach will fail this year and be taken over by the FDIC while other better capitalized banks will increase their writedowns and workouts as a prelude to disposing of assets in 2011.  We are starting to see this happen as the end of 2010 approaches.
  8. “… This painful deleveraging to lower values and disposition process could take until mid-decade to complete. But with FDIC, bank and special servicer sales, substantially more properties will hit transaction markets in 2001 and 2012, allowing the market to begin clearing and prices finally to reset.” – Let’s hope they are correct on this one.  Never thought I would long for the days of the strategy imposed by the RTC during the last big real estate “depression”.
  9. “Emerging Trends interviewees voice most concern about the shell-shocked U.S. economy and wonder if recent declines foreshadow a new age of diminished global clout and an ebbing standard of living.  In these seemingly “unchartered waters”, slackened demand of real estate across all sectors (except apartments) and near-record vacancies in many market signal a long and difficult period before developers and landlords can enjoy any renewed pricing power, and one in which investors exercise little control” – How depressing. More than once in the past couple of months I’ve heard the words “new normal”.  But someone will make a lot of money in real estate during the next decade.  Remember my statement above about the decade of the asset and property manager?
  10. “But if inflation is coming, real estate is the right place to be, and it’s time to get back in the game.” – Maybe, but how many times in the past six months have you heard the word “deflation” which is NOT good for real estate.
  11. Dealmakers, sales brokers, and mortgage brokers will not be in huge demand, although hiring is bound to pick up in 2011.  Many opportunity investment managers leave the scene; they cannot wring promotes from legacy disasters, and their prospects for new investments remain limited without a bubble market and easy financing.  Banks and special servicers still have trouble “building teams of experienced workout specialists”.  – Again, this is true. The future belongs to firms well heeled with broad asset-management and service platforms.
  12. Best Bets 2011
  • “Players who fill the gap on assets with lowered cost bases can obtain excellent risk-adjusted returns up and down the capital stack, including mezzanine debt and preferred equity, if not loan-to-own opportunities. Concentrate on good assets with bad balance sheets.” – Great strategy going forward.  There will be many owners seeking new equity capital that will be put in a priority position in an attempt to save the original equity investors as legacy debt comes due.
  • ”Buy well-leased core assets, looking for 6 to 7 percent cash flows”
  • “Twenty –something echo boomers want to experience more vibrant urban areas where they can build careers, and their aging baby boomer parents look for greater convenience in downscaled lifestyles.  Driving cost and lost time make outer suburbs less economical, while the gig-house wave dissipates in the Era of Less” – Remember the comment above about Boston and other 24-hour cities?
  • “Buy land – It will not get any cheaper than it is now”
  • “Buy Select Hotels – They’re the cheapest and will come back the fastest.  Target downtown full-service hotels in major markets.  No one gets excited about high-capex resorts or limited-service brands in commodity areas.”
  • “Buy Condos and Single-Family Housing – Now is the time to buy your dream house, if you have enough cash. … Do not expect a sudden future ramp-up in prices, except in the choicest urban neighbor hoods and waterfront location.  Avoid commodity, half-finished subdivisions in the suburban outer edge and McMansions; they are so yesterday.”

Posted by Scott R. Lodde

Headlines – Week of October 17, 2010

October 25, 2010

Entering the Era of Less

Each year, the Urban Land Institute and PricewaterhouseCoopers issue a report called Emerging Trends in Real Estate.  The 2011 report is titled, Entering the Era of Less.

The report is based on 875 confidential interviews and surveys with industry leaders.

While next year will see continued thawing of lending markets, increased transaction volumes, and decent though tempered investment returns, the report’s title predicts an Era of Less.

The Era of Less offers diminished prospects for the overall U.S. economy as we dig out from our self created debt oblivion.  The report predicts a shrunken industry, lower overall performance expectations, restrained development, and crimped profits.

Real estate outlooks will be restrained by sustained high unemployment and Americans’ more austere lifestyle choices now that spending on credit has been significantly curtailed.

Living and working in the Less Era means using less space per capita. Not only is consumer binging over, but e-commerce gradually eats into the share of bricks and mortar retail. Distribution strategies change; generally reducing the need for as much warehouse space. Companies squeeze down space per employee and find productivity enhancements, not only by using smaller cubicle and office layouts, but also relying more on freelancers who can work from home and off-shoring strategies to reduce costs. Technology will also reduce the need for support personnel.

This trend for less space also extends to housing. More seniors living with their children and grandchildren as families pool resources. Many retirees will not be able to live on their own with depleted pensions and lost house values.

Young adults find fewer and less remunerative jobs opportunities as they can’t afford to get their own place. One analyst describes a return to “The Waltons” style households for many families. As a result, people will look to cut commuting, housing, and heating costs by living in smaller places closer to work. We’ll see more demand for apartments and infill housing and less for big houses in the subsurbs.

Full Article

Where Do Most People Want to Live?

If you could live in any state, except the one you live in now, what state would you choose to live in?

The firm Harris Interactive in one of their Harris Polls has asked this question every year since 1997. Over the last seven surveys, Hawaii and Florida have jockeyed for second and third places behind California, while other states have moved up and down below them

While California tops the list of most popular states to live in among Echo Boomers (now ages 18 to 33) and Gen Xers (ages 34 to 45), Hawaii is the top pick for Baby Boomers (ages 46 to 64) and Matures (ages 65 and over). Among Echo Boomers, Hawaii drops out of the top five.

Here are the top-10 states across ALL age groups:

1. California

2. Hawaii

3. Florida

4. Colorado

5. Arizona

6. North Carolina

7. Oregon

8. Texas

9. New York

10. Washington

Full Article

Alternatives to Pricey Retirement Locales

Even with their retirement nest eggs diminished by the tough economy, some retirees aren’t giving up on their dreams of living in beautiful spots. Instead, they are searching for similar but cheaper alternatives.

SmartMoney calls these locales “doppelgangers” — more affordable twins with similar climate, culture, and amenities than their better-known other half.

Here are their suggested substitutes:

● Prescott, Ariz., as an alternative to Sedona, Ariz.

● St. Augustine, Fla., instead of Sarasota, Fla.

● Chattanooga, Tenn., instead of Ashville, N.C.

● Bloomington, Ind., instead of Madison, Wis.

● Caron City, Nev., instead of Boulder, Colo.

● Auburn, Ala., instead of Pinehurst, N.C.

● Bellingham, Wash., instead of Eugene, Ore.

● San Luis Obispo, Calif., instead of Santa Barbara, Calif.

 Full Article

Posted by Scott R. Lodde

Headlines – Week of October 10, 2010

October 22, 2010

The Cost of Natural Disasters

An economist at the National Association of Realtors, recently published an article in Real Estate Insights entitled, The Economics Behind Natural Disasters.

The article provides some interesting background on the recent history of natural disasters, insurance, and looks at regional information comparing the destructive tendency of different types of disasters.

The Highlights:

  • Based upon the “Inflation Adjusted U.S. Insured Catastrophe Losses (by Cause of Loss)”, data from the Insurance Information Institute (1989-2008) hurricanes rank as the most expensive natural disasters 
Hurricanes 46.9%
Tornadoes 27.0%
Winter Storms 7.6%
Acts of Terrorism 6.9%
Geologic Events 5.9%
Wind/Hail/Flood 2.9%
Wildfires 2.4%
Others 0.5%
  • Based upon the distribution of U.S. insured Catastrophe Losses (1980-2008), Florida ranked at the top of all states
Florida 19% $57.1 billion
Louisiana 11% $33.6 billion
Texas 10% $31.2 billion
All Other States 60% $176 billion
  •  Interestingly, the coastal states are not the only states on “top” lists. Indiana was the top state for insured losses in 2006, while Tennessee, Kansas, Ohio, and Minnesota also appear.
  • The states that have the largest share of owner occupied housing that are part of the National Flood Insurance Program are:
Louisiana 36.3%
Florida 35.2%
Hawaii 19.6%
South Carolina 13.7%
Texas 11.5%
New Jersey 9.9%
Delaware 8.6%
Mississippi 8.2%
North Dakota 7.2%
Rhode Island 5.3%







Fannie, Freddie bailout to cost $154B

According to an article in USA Today, tThe government bailout of mortgage giants Fannie Mae and Freddie Mac likely will cost taxpayers $154 billion.

Together, both companies have already have received $135 billion in Treasury Department funds and would  likely draw another $19 billion by 2013 to offset losses from the mortgage crisis.

Treasury’s undersecretary for domestic finance Jeffrey Goldstein was quoted as saying, “Today’s projections show that, in the most likely economic scenario, nearly 90 percent of the losses at Fannie Mae and Freddie Mac are already behind us.”

The government took over the two finance firms in September 2008 as they teetered in the mortgage crisis. Fannie and Freddie buy mortgages from banks and other lenders. They purchased 62% of all new mortgages the first half of 2010, according to trade publication Inside Mortgage Finance.

The $154 billion estimate represents the middle ground of three possible scenarios laid out by the Federal Housing Finance Agency, which regulates Fannie and Freddie. It uses Moody’s Analytics estimates showing home prices likely will fall another 8% by the third quarter of 2011.

Under Moody’s “stronger-recovery” scenario, which assumes a smaller home price decline, the bailouts would cost $142 billion. If the economy slips back into recession, costs could climb to $259 billion.

Full Article

FDIC Aims to Shed Some Real-Estate Assets

An article in the Wall Street Journal recently disclosed that  the Federal Deposit Insurance Corp. is working on a new way to sell failed banks’ hard-to-value real-estate assets back to the private sector..

Up until now, the FDIC has mostly sold soured property loans to investors in partnerships with the agency. These arrangements enticed private investors to buy distressed real-estate assets while giving taxpayers the opportunity to make money should the assets rise in value.

Now the FDIC is looking to bundle and sell some of them as commercial mortgage-backed securities, or CMBS as that market is beginning to recover. The agency is expected to launch its first CMBS deal, expected to be backed by at least $500 million of performing commercial mortgages, by the end of this year or in January.

Since the start of the financial crisis in 2007, there have been 300 bank failures, which wiped out the deposit-insurance fund in the third quarter of last year, putting it at negative $8.2 billion. The FDIC has about $34.1 billion in assets, including those tied to real estate, held by failed banks that are available for sale.

According to the research firm Foresight Analytics, bad commercial real-estate loans, including construction loans and those backed by income-producing properties, accounted for 88% of the most recent failed banks’ nonperforming debt as of the second quarter. Commercial mortgages have been rising as “a source of distress” for banks in addition to construction and land loans.

Full Article 

Posted by Scott R. Lodde

Headlines – Week of October 3, 2010

October 13, 2010

Most and Least Promising Metros for Investors

According to an article in the Wall Street Journal, Phoenix and Naples, Fla. are no longer among the most dangerous markets for investors.

Local Market Monitor, a North Carolina firm that measures the potential for price appreciation in real estate markets with more than 200,000 residents, recently evaluated markets for conservative investors. It identified the best metros as those with signs that prices are stabilizing. It also named markets where prices are still falling as “dangerous.”

The best markets for conservative investors show signs of price stabilization; dangerous markets are those where it appears prices will fall further and probably won’t turn around soon because of poor local economies.

High-ranking areas for investor suitability are places where there’s a positive three-year home price forecast, employment is stable and only a small share of jobs are in highly volatile industries such as construction and financial services.

Here are the 10 most-promising areas for conservative investors:

1. Tulsa, Okla.

2. Oklahoma City, Okla.

3. San Diego-Carlsbad-San Marcos, Calif.

4. Albany-Schenectady-Troy, N.Y.

5. Indianapolis-Carmel, Ind.

6. El Paso, Texas

7. Winston-Salem, N.C.

8. Cincinnati-Middletown, Ohio-Ky.-Ind.

9. Worcester, Mass.

10. Louisville-Jefferson County, Ky.-Ind.

The top 10 most “dangerous” areas are:

1. Ocala, Fla.

2. Lakeland-Winter Haven, Fla.

3. Reno-Sparks, Nev.

4. Orlando-Kissimmee, Fla.

5. Deltona-Daytona Beach-Ormond Beach, Fla.

6. Port St. Lucie, Fla.

7. Las Vegas-Paradise, Nev.

8. Boise City-Nampa, Ind.

9. Prescott, Ariz.

10. Cape Coral-Fort Myers, Fla.

Full Article

Market Braces for Billions in Ballooning Mortgages

According to an article in the Boston Business Journal, the second coming of the Great Exchange, defined as the blizzard of foreclosures and fire sales that resulted from the recession of the early 1990s  never quite materialized as a result of the 2008 financial crisis.

However, many fear 2011 be the year for bargain hunters and bottom feeders and the worst is still to come.

Like their residential counterparts, commercial real estate owners capitalized on their portfolios’ inflated values and borrowed heavily to fund property acquisitions and development. Many of those mortgages are slated to balloon between now and late 2013.

The borrower’s options will be able to either modify their loan terms, sell off properties at depressed values to settle ballooning debts, or turn over the keys to lenders will depend on whether they can raise enough capital, through partnerships or direct fundraising, to offset the cost to refinance their maturing debts. One expert believes that, as of a year ago, the funding gap stood at about $400 billion.

Many argue that due to low interest rates, a recent uptick in property values and a “forgiving” environment among lenders has helped delay the day of reckoning.  Temporary loan extensions continue to be favored over more drastic actions such as foreclosures.

The so-called deep cleansing predicted for this year never materialized, despite precipitous jumps in loan defaults and foreclosures. However, much concern still abounds over the massive mortgages slated to mature in the next 16 months.

The article noted very large loans secured by prominent office buildings as examples including One Beacon St. and 116 Huntington Avenue, owned by Beacon Capital Partners, one of the market’s most active investors during the run-up to the crisis.  These two trophy properties have a combined $245 million in debt maturing next year.

In addition, 60 State Street owned by Equity Office has a $130 million loan set to mature in March 2011.

Full Article

Ethics of Strategic Default – Experts Fear for Nation’s Morals

A recent article in the Chicago Tribune explores the phenomenon of owners walking away from mortgages they can otherwise afford to pay. 

Known as a “strategic default”, it represents a calculated decision to hand over the keys to a home without making good on a loan, reasoning that it makes no sense to keep paying the monthly mortgage when the home is worth thousands of dollars less than the obligation.

As Americans continue to face issues relating to the housing crisis, financial crisis and jobs crisis, many are wondering if the residue of those realities is an ethical crisis.

There are many reasons for this trend.  Some simply need to move from an area to find work but can’t sell or rent the properties at a price nearly high enough to cover current payments.  Others say they have little choice since their bank refused to refinance the mortgage or adjust the original loan terms.

Strategic default is a symptom of a housing market that suddenly turned from “American Dream” to financial trap. Some fear the result is America losing its grip on the notion: that people should live by the slogan, “My word is my bond.”

The article quotes a recent Morgan Stanley estimate that about 18% of defaults will be strategic. In a recent Pew Research Center survey, 36% of Americans said that walking away without paying a mortgage is acceptable, at least under certain circumstances. Fifty-nine percent said the practice is unacceptable.

Many say the practice is acceptable since both Wall Street and large banks are untrustworthy and that has allayed their guilt about walking away from their mortgages.

Many point to a sense of betrayal and blame the banks for letting this happen by giving a loan to anyone if they had a pulse. Most believe their loose lending standards led to the bubble, and the regulators should have controlled the lenders.

The article points to the ultimate consequence – when bankers don’t trust people enough to pay off their loans they demand higher interest and other assurances before lending in the future.  This leads to a lending shortage, extending the housing recession and lowing prices. 

Research into strategic default conducted by the University of Chicago Booth School of Business shows what is called “the contagion effect.” –the stigma goes down once you see someone else do it.

Full Article

Foreign Buyers See Opportunity in the Housing Bust

As recent article in the Fort Myers News Press gives examples which seem to indicate the United States is in another real estate boom. The article notes a condominium complex in downtown Miami which has sold 262 of its 372 units since January.  Known as the Viceroy, almost 90%of the buyers are foreigners -and all paid cash.

The same story is playing out across Miami as individual investors from Argentina, Canada, Colombia, France, Israel, Italy, Norway and Venezuela are getting in on what they see as one of the greatest real estate fire sales in the history of the United States.

The idea is to rent out the properties and then sell them once the economy turns around.

Prices at the Viceroy are roughly 52% off the 2007 peak. Units once sold for as much $670 a square foot – today the average price is $319.

According to the article, Miami is not the only hot spot for buyers from outside the United States. Real estate brokers say they’ve seen a surge in Washington, New York, Las Vegas, Los Angeles and San Francisco. The article points to Seattle, a city where Asians are buying property sight unseen.

In Phoenix, this year there have been more buyers from Canada than from California.

For the international investor class, the United States’ bloated inventory of homes, high unemployment and weak currency make for an unusually attractive buyer’s market.

The trend is showing up in the statistics of the National Association of Realtors which released a report July stating that 28% of brokers reported they had worked with at least one international client, up from 23% a year earlier. Among those, 18% had completed at least one sale, compared with 12% in 2009.

Although they are increasing foreign buyers cannot be counted on for a housing market turnaround since they only represent around 7% of today’s total. However, in some cities such as Miami and Washington, the foreign sales are helping to stabilize the markets.

Full Article

Posted by Scott R. Lodde

Headlines – Week of September 26, 2010

October 3, 2010

States with Highest, Lowest Property Taxes

A 2009 Tax Foundation ranking shows that the 10 states with the lowest property taxes are all in the South. The homeowners there pay, on average, less than $1,000 a year in property taxes, while those in the East can pay more than six times as much.

A Tax Foundation map of states shows 16 states, highlighted in blue, where residents pay in property taxes 1.2% or greater of their home’s value. The 19 white states fall between 0.65% and 1.20%, while the 15 yellow states pay the least.

New Jersey came in first but New Hampshire, which has no state income tax, had the next-highest real estate taxes as a percentage of home values.

Louisiana had the lowest median taxes compared to property values but the second-lowest taxes compared to values are in Hawaii.

The national median for real estate taxes is 1.04 percent of a property’s value. Here’s the list of the top 10 states with the highest median real estate taxes as a percentage of median home value as well as the ranking of states with the lowest:

States with the highest taxes:

1. New Jersey (1.89 percent of property value)

2. New Hampshire (1.86 percent)

3. Texas (1.81 percent)

4. (tie) Wisconsin (1.76 percent)

4. (tie) Nebraska (1.76 percent)

6. Illinois (1.73 percent)

7. Connecticut (1.63 percent)

8. Michigan (1.62 percent)

9. Vermont (1.59 percent)

10. North Dakota (1.42 percent)

States with the lowest taxes:

1. Louisiana (0.18 percent)

2. Hawaii (0.26 percent)

3. Alabama (0.33 percent)

4. Delaware (0.43 percent)

5. West Virginia (0.49 percent)

6. South Carolina (0.50 percent)

7. (tie) Arkansas (0.52 percent)

7. (tie) Mississippi (0.52 percent)

9. New Mexico (0.55 percent)

10. Wyoming (0.58 percent)

In the survey, Florida came in 22nd, at 0.97% of the state’s median home value.

Property Taxes on Owner-Occupied Housing, by State

Home Prices Lower Next Year In Many Markets

The most recent Standard & Poor’s/Case-Shiller 20-city index increased in July from June. However, according to analysts surveyed by MacroMarkets LLC, nationally, home values are projected to fall 2.2%in the second half of the year.   And Moody’s Analytics predicts the Case-Shiller index will drop 8% within a year.

That’s because the peak homebuying season is now ending in most markets. The hardest-hit markets, already battered by foreclosures, are bracing for a bigger wave of homes sold at foreclosure or through short sales.

According to Veros, a real estate analysis company, the areas likely to endure price decreases over the next year are:

• Port St. Lucie, Fla., and Reno, Nev., where prices could fall 7% over the next year.

• Orlando and Daytona Beach, Fla., which face price drops of at least 6%.

• Las Vegas, which led all declines in the latest report, is also expected to post a 6% drop. Home values there have already tumbled 57% from their peak four years ago.

This year, about 2 million, or 41%, of the 5 million homes sold this year will be distressed sales, according to some analysts.

For next year, that figure is on pace to hit 2.4 million homes, or 45% of all sales. Distressed sales are projected to make up at least a quarter of the market for the next four years. In healthy housing markets, distressed sales typically make up only 6 to 7% of annual sales.

A much brighter outlook is forecast for some areas of the country, especially major cities that never experienced an outsized housing boom – and bust. Major cities in Texas, for example, have relatively healthy economies and low levels of foreclosures.

Dallas home prices fell only 11% from their peak in 2007 and bottomed out last year. They have since rebounded about 8%. Houston and Dallas are projected to rise about 3 to 4% over the next year.

Nationally, prices have risen nearly 7% from their April 2009 bottom. Yet they remain nearly 28% below their July 2006 peak.

Most experts predict about 5 million homes will be sold in 2010. That would be in line with 2009 and just above 2008, the worst sales performance since 1997.

July was the worst month for home sales in 15 years. August slightly better. The record number of foreclosures, job concerns and weak demand from buyers have combined to weigh down prices.

Where the Smart People Live

CNN/Money.com recently published a report on the cities with the highest number of residents with a college degree. Here are the metro areas that the most- and least-educated call home:

Metro areas with the highest percentage of residents with a college degree:

1. Washington, D.C., 47.3 percent

2. San Francisco, 43.5 percent

3. San Jose, Calif., 43.2 percent

4. (tie) Raleigh, N.C. 42.2 percent

4. (tie) Boston, 42.2 percent

6. Austin, Texas, 38.7 percent

7. (tie) Minneapolis, 37.6 percent

7. (tie) Denver, 37.6 percent

9. Seattle, 37.4 percent

10. New York, 35.6 percent

Metro areas with the lowest percentage of residents with a college degree:

1. Riverside, Calif., 19.2 percent

2. Las Vegas, 21.3 percent

3. Memphis, Tenn., 24.2 percent

4. Tampa, Fla., 24.6 percent

5. San Antonio, Texas, 24.8 percent

6. Louisville, Ky., 24.9 percent

7. New Orleans, 26.2 percent

8. Detroit, 26.3 percent

9. Orlando, Fla., 26.6 percent

10. Cleveland, 26.9 percent

Full Article

Posted by Scott R. Lodde 

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