December 27, 2011
Florida’s Housing Market Bouncing Back
According to three leading U.S. economists, despite national and global headwinds, the state’s real estate market is entering 2012 on an upward trend, according to three leading U.S. economists on Wednesday.
The economists predicting a recovery were part of a panel at the state association’s 2012 Real Estate & Economic Forecast Conference in Orlando. The panel included Florida Realtors chief economist John Tuccillo, Wells Fargo senior economist Mark Vitner and Lawrence Yun, chief economist for the National Association of Realtors.
The panelists believe the State is in a mini-recovery with sales trending up, listing inventories falling, the supply of lender-related properties stabilizing, and the start of a trend which includes multiple offers on homes in some local markets.
Many Florida markets are showing sharp drops in inventories of homes for sale – a sign that demand is picking up and prices are stabilizing.
Because of Florida’s appeal to international buyers, Yun was optimistic about the outlook for South Florida, in particular. He expects to see a gain in home prices in the Miami and Naples markets in the next 18 months. From there, the recovery is likely to roll northward to Central Florida and then North Florida.”
In October, there was a 6 percent increase in home sales in northeast Florida, when compared to 2010.
The Great $2 Trillion Global Real Estate Liquidation
According to U.S. hedge fund Fortress Investment Group, more than $2 trillion of global real estate assets is up for sale, either as a result of distress or deleveraging. The firm believes global markets are coming to grips with an historic, generational rebalancing.
This unprecedented volatility has prompted a real estate sell-off which eclipses several times over that seen after the U.S. Savings and Loans crisis from the late 1980s to mid-1990s, and the Asian currency crisis, which began in Thailand and South Korea in 1997.
The S&L crisis generated real estate sales in excess of $260 billion, while the Asian crisis by its end in 2000, prompted a circa $345 billion sell-off, according to Fortress research.
Fortress estimates that real estate asset sales, from all around the world will be several times more than the current $2 trillion it has identified, which far exceeds the total of all asset sales over the entire 20th Century.
Fortress believe calls the current situation … the Great Liquidation and coupled with what they call the Great Litigation will drive a supply-demand imbalance of distressed, illiquid assets that exceeds anything experienced before.
Stressed borrowers, whether countries, banks or real estate investors are trying to survive as long as possible before resorting to selling their assets. The inevitable, Fortress argues, can only be forestalled for so long and eventually, they state, “gravity brings everyone back to earth.”
Where the Work is Heading: 6 Top Job States
According to an article at Forbes.com, Texas is expected to add the most jobs over the next five years on a percentage basis.
Employment in Texas is expected to increase by 2.9 percent annually through 2015, or add 1.6 million new net jobs in that period, according to research from Moody’s Analytics.
Here are the states expected to grow the most with jobs in the next five years, according to Forbes:
1. Texas – Projected 5-year annual job growth: 2.9%
2. Nevada – Projected 5-year annual job growth: 2.9%
3. Arizona – Projected 5-year annual job growth: 2.8%
4. New Mexico – Projected 5-year annual job growth: 2.6%
5. North Dakota – Projected 5-year annual job growth: 2.6%
6. Utah – Projected 5-year annual job growth: 2.4%
Posted by Scott Lodde
December 19, 2011
Florida Leads U.S. in Mortgage Fraud Cases
According to industry publication Mortgage Daily, Florida retained its top ranking in the nation for mortgage fraud litigation through September as millions of dollars in bad boom-time loans continue to be discovered by law enforcement and lenders.
The report showed that Florida’s activity during the third quarter included more than $144 million in suspect loans that were questioned in court.
California ranked second on the activity index, but with more than $204 million in allegedly fraudulent loans, it came in first based on dollar amount.
Many investors continue to pressure banks to buy back mortgages that didn’t meet underwriting standards or were bogus for other reasons, such as falsification of the borrower’s income.
As an example, Bank of America bought back $2.87 billion in bad mortgages from federal mortgage backers Fannie Mae and Freddie Mac.
Nationwide, the mortgage fraud index climbed 16 percent in the third quarter, compared with the same time in 2010, with cases totaling more than $1.3 billion in questionable loans.
The five states with the worst index ranking were, in order: Florida, California, Minnesota, New York and Texas.
In Florida, the mortgage fraud index was up 45 percent compared with the previous quarter. It was 18 percent higher than in the third quarter of 2010.
A report issued by the federal Financial Crimes Enforcement Network in September that found Palm Beach County ranked sixth in the nation per capita for suspicious loan activity.
“There is a lot of fraud in South Florida, and we will see heavy enforcement in the future,” Thomas said “It’s taking a lot of time to catch up, but there are paper trails for all of this and they will eventually get to most of it.”
Investors Blamed for Bubble in Housing
According to a new federal report from Federal Reserve Bank of New York speculative real estate investors played a larger role than originally thought in driving the housing bubble that led to record foreclosures and sent economies plummeting in Nevada, California, Arizona, Florida and other states.
Researchers with the found that investors who used low-downpayment, subprime credit to purchase multiple residential properties helped inflate home prices and are largely to blame for the recession. The researchers said their findings focused on an “undocumented” dimension of the housing market crisis that had been previously overlooked as officials focused on how to contain the financial crisis, not what caused it.
More than a third of all U.S. home mortgages granted in 2006 went to people who already owned at least one house, according to the report. In Arizona, California, Florida and Nevada, where average home prices more than doubled from 2000 to 2006, investors made up nearly half of all mortgage-backed purchases during the housing bubble. Buyers owning three or more properties represented the fastest-growing segment of homeowners during that time.
Investors defaulted in large numbers after home values began to drop in 2006. They accounted for more than 25 percent of seriously delinquent mortgage balances nationwide and more than a third in Arizona, California, Florida and Nevada from 2007 to 2009.
As a result, millions of homeowners saw their home values decline so that they were worth less than the original purchase price. Foreclosures skyrocketed. Residential construction also languished, putting hundreds of construction workers in the hardest-hit states out of work.
Florida is Aging Much more Slowly
According to data released in a report by the U.S. Census Bureau, about 17.3 percent of the state’s population was 65 and older in 2010 down from 17.6 percent a decade earlier, according to a U.S. Census analysis released Wednesday. By comparison, 13 percent of the total U.S. population is now over 65, up from 12.4 percent in 2000.
As a result, some are saying it’s time for Florida to shed the “God’s waiting room” image and revive its slogan as the Fountain of Youth.
The country’s overall population has been skewing older the past 10 years in tandem with aging baby boomers. Florida can’t escape that trend, but it is aging much more slowly than practically anywhere else.
Only half-dozen states posted a drop in their percentage of older residents, with Florida showing the steepest drop.
Economists and demographers point to several reasons for the disconnect. The biggest reasons? Florida has been drawing younger workers over the past 20 years, particularly in fields like construction. Meanwhile, its inflow of retirees has slowed amid not just the housing bust but fierce competition from states like North Carolina and Georgia.
Nationally, the 65-and-up club grew by 15.1 percent between 2000 and 2010 while the total U.S. population grew 9.7 percent.
Florida still has the greatest share of population 65 and older among all states. But the gap is shrinking. No. 2 West Virginia (with 16 percent over 65) and No. 3 Maine (15.9 percent) both were among states that have been getting older the past 10 years, relatively speaking.
Numbers from the report:
17.3: Percent of Florida’s population 65 and older, the highest rate in the country.
19.8: Percentage of Clearwater residents who are 65 and older, the second-highest rate in the country among cities of 100,000 or more, trailing only Scottsdale, Ariz.
3.5: Percentage of Clearwater residents 85 and up, tied with urban Honolulu for highest in the country.
5: Number of Florida cities in the Top 10 list of those with the highest percentage of elderly residents.
1: Number of states that had fewer residents 65 and up in 2010 (Rhode Island).
Posted by Scott R. Lodde
December 8, 2011
Case-Shiller Puts Home Prices 3.9% below Last Year
Case-Shiller, recently reported that their closely watched Case-Shiller index registered a 3.9 percent decline during the third quarter of this year when compared to the same period in 2010. That represents an improvement over the 5.8 percent decline posted in the second quarter, but S&P described home prices as weakening as the third quarter came to an end. The national index rose by only 0.1 percent between the second and third quarters. Three cities posted new index lows as of the end of September – Atlanta, Las Vegas, and Phoenix.
Two other reports also show falling prices after seeing some gains in the Spring and Summer. Lender Processing Services says prices are down 3.7 percent annually in September, erasing the gains of the Spring, and they say all of the 13,500 zip codes it tracks are in the negative.
CoreLogic confirmed that prices fell 3.9 percent in October, but when you take out foreclosures and short sales (the latter when the home is sold for less than the value of the mortgage), home prices are down just 0.5 percent annually.
6 Cities Where Foreclosures are Increasing
Last week we reported on a recent study from the financial analysis firm 24/7 Wall St. which identified the housing markets expected to offer some of the biggest discounts for home buyers.
This week they report on housing markets that are still battling high numbers of foreclosures.
Using data from RealtyTrac, 27/7 Wall St found that the following cities saw the biggest increases in foreclosures – 30 percent or more – between the second and third quarters of 2011:
1. Albuquerque, NM
Quarterly increase in foreclosures: +151%
Number of foreclosures in third quarter of 2011: 1,358
Percentage that home values have dropped from peak: -14.9%
2. Boston-Cambridge-Quincy, MA
Quarterly increase in foreclosures: +67%
Number of foreclosures in third quarter of 2011: 2,003
Percentage that home values have dropped from peak: -15.8%
3. Sarasota-Bradenton-Venice, FL
Quarterly increase in foreclosures: +57%
Number of foreclosures in third quarter of 2011: 1,673
Percentage that home values have dropped from peak: -51.4%
4. Cincinnati-Middleton, Ohio-Ky.-IN
Quarterly increase in foreclosures: +55%
Number of foreclosures in third quarter of 2011: 1,956
Percentage that home values have dropped from peak: -15.9%
5. Jacksonville, FL
Quarterly increase in foreclosures: +49%
Number of foreclosures in third quarter of 2011: 2,559
Percentage that home values have dropped from peak: -39.3%
6. Palm Bay-Melbourne-Titusville, FL
Quarterly increase in foreclosures: +44%
Number of foreclosures in third quarter of 2011: 1,039
Percentage that home values have dropped from peak: -53.4%
Retiree Havens Offering Good Buys
According to a recent article in Money magazine, if you’ve got cash, pick up a future resort retreat now at a bargain price.
For example, prices for condos in Napa, Calif., and Naples, Fla., have dropped about 44 percent since the housing boom, according to Fiserv data. That mixed with historically low mortgage rates are prompting some to start picking their retirement haven.
Financial experts recommend that retirees who are considering buying a second home prior to retirement may want to consider renting it out until they’re ready to move in to offset the cost of ownership. However, if they don’t want to step into the landlord role themselves, they should expect to spend 10 percent to 15 percent of the monthly rental fee on a property manager. Also, if they’re looking at purchasing a condo, they should make sure the development allows rentals since some developments do not or have restrictions on rentals.
CMBS Delinquency Rate Retreats; Future Improvements under Pressure
According to Trepp LLC, after two consecutive months of weak delinquency reports-featuring increases that left the rate at its second highest point ever-the CMBS delinquency rate dropped sharply in November.
However, while the decrease in the CMBS delinquency rate will likely be received positively by investors, the underlying data indicates that further improvements will be hard to come by.
Overall in November, the delinquency rate for U.S. commercial real estate loans in CMBS fell 26 basis points to 9.51%. This was the second biggest drop in 2011, surpassed only by August’s 36 point drop. The rate has now fallen in four of the 11 months of 2011.
The percentage of loans seriously delinquent (60+ days delinquent, in foreclosure, REO, or non-performing balloons) is now 8.88%, down 33 basis points for the month.
Unfortunately, two specific trends will put severe upward pressure on the rate over the next few months, indicating that further improvements could be elusive.
The day of reckoning is here for the class of 2007 originated loans as the five-year balloon loans that were made at the height of the commercial real estate bubble have begun to mature.
The 2007 vintage was the weakest in terms of underwriting standards and it is widely expected that many of these loans will have trouble paying off at their balloon date. In total, about $15.5 billion of these loans will come due in 2012, with the majority reaching their balloon dates over the next six months.
Trepp said it expects that the majority of these loans will make their way to special servicing.
A gradually healing CMBS market was also expected to provide some source of funding for the CMBS loans hitting their balloon dates at one point last year. That safety valve can no longer be counted upon in the short term. Therefore, this too will provide upward pressure on the CMBS delinquency rate.
In their report Trepp notes some mitigants that could relieve some of this upward pressure, but none of them are particularly positive.
First, there could be another big wave of loan resolutions. This would reduce the pool of distressed loans (the numerator in our calculation) but it would come at the expense of additional bondholder losses.
Second, more loans could be granted extensions, but experience has shown that these are often done with hope note creation, rate relief, and/or balance forgiveness. None of those options are positive results for most investors.
By property type, industrial property loans continue to weaken while all other major property types improve.
Hotel delinquency rate dropped 184 basis points-now 12.28%;
Industrial delinquency rate jumped 61 basis points to 12.20%-threatening to pass hotels as the second worst performing property type;
Office delinquency rate dropped 19 basis points to 8.76%;
Multifamily delinquency rate dipped 55 basis points and remained the worst major property type with a rate of 16.18%; and
Retail delinquency rate tightened 9 basis points to 7.52%-still the best performing major property type.
Posted by Scott R. Lodde