Headlines – Week of March 18, 2012

March 30, 2012

Florida Hotel Market Among Top in Nation

According to Marcus & Millichap’s Statewide Hotel Property Index tourism surged in Florida in 2011and the addition of 114,000 jobs in the state sparked a 12.5% jump in in-state travel. Florida ranks fifth on their list, but is separated from second place by less than two percentage points.

Miami heads the list of the top performing hotel market in the State of Florida.

The report notes a resurgence in South Florida’s cruise business, which drives more hotel traffic since travelers typically spend a day or two in a local hotel before or after the cruise. But not only do tourists flock to Miami for vacations, global businessmen are landing in Miami for business.

In the Statewide Hotel Property Index, the states are scored on year-to-date changes in room supply, room demand, ADR and RevPAR. A state with a score of more than 100 has strengthened from the corresponding year-earlier period, and a score of less than 100 signals a weaker performance. For 2011, North Dakota was the best-performing state, driven by significant gains in room demand, ADR and RevPAR.

North Dakota was bolstered by the discovery of a vast oil shale formation has attracted scores of workers. A 13.4 percent spike in statewide room demand last year fueled a 670-basis-point spike in occupancy, to 74.7 percent.

Another state with a revitalized energy sector, Texas, also placed high in the index.

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Full Report

 10 U.S. Real Estate Markets Drawing International Buyers

In a recent report Inman News reported that affluent international buyers, attracted by fire-sale prices, are snapping up real estate in some U.S. markets. Inman identifies 10 markets where public records indicate foreign buyers make up the biggest share of overall buyers.

Most of the markets are located in Florida, though areas in Nevada, Arizona, New York and Hawaii are also on the list.

The report highlights the economic and personal factors that drive foreign buyers to buy; their preferred property types; top countries of origin; how they find the real estate professionals they work with; why the selected markets appeal to them; and relevant demographic and housing-related characteristics for the markets, including share of foreign-born population, distressed property footprint, home-price trends, and vacancy rates.

Among the findings in this report:

  • Population levels in the markets range from about 600,000 in Lakeland-Winter Haven, Fla., to nearly 5.6 million in Miami-Fort Lauderdale-Pompano Beach, Fla.
  • Seven out of 10 markets had foreign-born populations above the national rate of 13.1 percent in 2010. The Miami metro had the highest share born abroad, at 39.2 percent.
  • In six of the 10 markets, area inhabitants who were foreign-born and moved from abroad accounted for a higher-than-average share of overall inhabitants who reported moving in the previous year in 2010. New York County (Manhattan) had the highest share: 7.7 percent of the people who moved in that county were both foreign-born and hailing from abroad.
  • In seven out of 10 markets, the median sales price for an existing, single-family home was lower than the national median of $163,500 in fourth-quarter 2011. In eight out of 10 markets, the median sales price for a condo was lower than the national median of $160,800 for that same quarter.
  • Condo prices fell on an annual basis in the fourth quarter in seven out of 10 markets. All seven saw their prices decline by more than the national rate of -1.7 percent.
  • Seven of the 10 markets had a higher share of distressed sales in fourth-quarter 2011 than the national rate of 23.7 percent. Eight of the 10 markets had higher foreclosure activity rates in fourth-quarter 2011 compared to the national rate.
  • Nine of the 10 markets, except for Honolulu, had higher vacancy rates in 2010 than the national rate of 13.1 percent. Cape Coral-Fort Myers, Fla., had the highest rate, at 37 percent.

The 10 markets, ranked by highest share of foreign buyers, according to public records data, are:

  1. Lakeland-Winter Haven, Fla.
  2. Cape Coral-Fort Myers, Fla. 
  3.  Orlando-Kissimmee-Sanford, Fla.
  4. North Point-Bradenton-Sarasota, Fla.
  5. Miami-Fort Lauderdale-Pompano Beach, Fla.
  6. Phoenix-Mesa-Glendale, Ariz.
  7. New York County, N.Y. (Manhattan)
  8. Honolulu, Hawaii.
  9. Tampa-St. Petersburg-Clearwater, Fla.
  10. Las Vegas-Paradise, Nev.

Full Report

U.S. Tourism Grows in 2011

U.S. Commerce Department data showing that tourism spending in the U.S. grew 8.1 percent to $1.2 trillion in 2011. The data also shows that 62.3 million foreign visitors visited the U.S. in 2011 and spent a record $153 billion. It is also estimated that the travel industry created 7.6 million jobs in 2011.

 Posted by Scott R. Lodde

Headlines – Week of March 11, 2012

March 20, 2012

Travel & Tourism Forecast to Pass 100m Jobs and $2 Trillion GDP in 2012

According to research by the World Travel & Tourism Council (WTTC), the global Travel & Tourism industry will grow by 2.8% in 2012, marginally faster than the global rate of economic growth, predicted to be 2.5%.  Travel & Tourism is set for a milestone year in 2012 as the industry’s direct contribution to the global economy is expected to pass $2 trillion in GDP and 100 million jobs.

This rate of growth means that Travel & Tourism industry is expected to directly contribute $2 trillion to the global economy and sustain some 100.3 million jobs. When the wider economic impacts of the industry are taken into account, Travel & Tourism is forecast to contribute some $6.5 trillion to the global economy and generate 260 million jobs – or 1 in 12 of all jobs on the planet.

In 2011, Travel & Tourism’s total economic contribution, taking account of its direct, indirect and induced impacts, was US$6.3 trillion in GDP, 255 million jobs, US$743 billion in investment and US$1.2 trillion in exports. This contribution represented 9% of GDP, 1 in 12 jobs, 5% of investment and 5% of exports.

Over the medium-term, the prospects of the industry are even more positive with average annual growth expected to be 4% through to 2022 by which time Travel & Tourism will employ 328 million people – or 1 in 10 of all jobs on the planet.

Other selected highlights from the research show:

  • South & Northeast Asia will be the fastest-growing regions in 2012, growing by 6.7%, driven by countries such as India and China where rising incomes will generate an increase in domestic tourism spend and a sharp upturn in capital investment, and recovery in Japan
  • After an extremely challenging 2011 when civil unrest and violence had a dramatic impact on demand for Egypt, Tunisia and Libya, North Africa is showing signs of recovery in 2012 with Travel & Tourism direct GDP growth forecast at 3.6%. Morocco (8.3%) will be the star performer of this region as negative perceptions of security continue to affect tourism in Egypt and Tunisia
  • In the Middle East, where civil unrest and violence in some countries continues, growth will be more subdued (3%), although there are stark differences at country level. Qatar will grow fastest at 13.2% while Syria will likely see another dramatic fall, estimated at 20.5%, as the political situation worsens, increasing concerns over security. It is worth noting that 14% of all international arrivals in the Middle East in 2010 were for Syria, the second most important destination in the region after Saudi Arabia
  • The mature economies of North America and Europe will continue to struggle in 2012. North America, which is saw a slight upturn in the USA’s economic situation at the end of 2011, should see growth of only 1.3% in Travel & Tourism direct GDP over the year

The prospects for Travel & Tourism growth in Europe in 2012 are precarious. Current forecasts suggest a 0.3% increase in Travel & Tourism direct GDP for the region overall, but this will be propped up by newer economies such as Poland and, of course, Russia. A decline of 0.3% is expected across the European Union. Consumer spending is set to tighten as austerity measures kick in, and there continues to be considerable uncertainty around the future of the Eurozone and peripheral economies of Greece, Spain, Italy and Portugal.

Full Report

Real Estate Market Bottom Reached in 2011

According to a national research survey shows a market recovery may be underway and the bottom may have been reached in 2011 for bargain-seeking investors.  The 2012 Cotton Report is the fourth annual survey focusing on buyer confidence and attitudes about market recovery of roughly 1,400 individuals pursuing a real estate purchase. The survey was conducted in February 2012, by Cotton & Company, an industry leader in residential real estate sales and marketing.

According the company, over the past several years, the primary market has been relatively stagnant throughout the country, and the lack of mortgage availability was outweighed by a pessimistic buyer sentiment. The 2012 data indicates that 54% of the respondents in the market are seeking a primary residence, with 67% of these buyers requiring mortgage financing.

The three-year trend of the survey reflects a more optimistic viewpoint on non-controllable political and economic factors, with a substantial increase of personal choice as the primary factor in their decision. The data also reflects a decrease in respondents who are waiting for better pricing, demonstrating the stabilization of pricing throughout many markets.

President and Founder of Cotton & Company, Stephann Cotton stated, “For those who have been waiting to make their move, trying to time the bottom of the market, they may have already missed it

The Cotton Report’s market data supports this growing perception, with a steady reduction in the number of investors actively in the market and fewer buyers expecting for further price reductions. The market statistics combined with reduced inventory levels spell good news for real estate developers with projects in the pipeline preparing to meet the pent-up demand from the market rebound.

2012 Cotton Report Findings

  • 54% of the market is seeking primary housing, rising sharply from 38% a year ago
  • 32% of the primary market is “Upsizing”, reversing the trend for smaller residences
  • 66% of vacation home buyers are moving for “Geographic Relocation”, with 68% of this market ages 45-64 years old
  • 33% must sell their current home to make a move, a reduction from 42% a year ago
  • Only 12% of survey participants state “Investment/Rental Income” as their motivation, continuing a four-year steady decline from 23% in 2009.
  • 53% of the respondents with over $100,000 household income believe we have reached the bottom of the market

Where Canadians are Buying U.S. Real Estate

According to a survey released last year by the U.S.-based National Association of Realtors (NAR), entitled Global Perspectives, for the fourth consecutive year, Canadians account for 23 percent, or the largest percentage of foreigners buying homes in the U.S. That’s up from seven per cent in 2007.

For the year ending in March 2011, foreigners bought $82 billion worth of residential real estate, up from $66 billion in 2010.

The NAR survey says Canadians flock to buying U.S. properties because U.S. homes are generally less expensive and viewed as a secure investment and the U.S. market offers rental opportunities and long-term appreciation potential.

Other factors include a strong Canadian dollar and a search for milder winters.

The strongest purchases are in Florida and Arizona. In 2010, Canadians bought about eight percent of the homes sold in Florida. For almost every week since the beginning of 2009, a Canadian buyer has purchased a home worth at least $1 million in Maricopa County, Arizona.

Other areas are also picking up. Canadian investors are jumping on properties in the Puget Sound regions of Washington State, northwest Montana, Las Vegas, Texas, Georgia, the Carolinas and Vermont. A new survey by the Bank of Montreal also supports that trend. The survey states that one in five Canadians are still considering purchasing a home in the U.S. The survey says 20 percent of British Columbia residents would consider purchasing in the U.S., Ontario coming in second at 18 per cent and Alberta in third place with 17 percent.

Full Report

Look North to Canada

Northern Exposure

 

Posted by Scott R. Lodde

PKF Projects Unprecedented Occupancy Growth

March 20, 2012

According to the March 2012 edition of Hotel Horizons®, PKF Hospitality Research, LLC (PKF-HR) the U.S. lodging industry’s fundamentals are projected to continue to be positive through 2014.

The firm forecasts that rooms revenue for U.S. hotels will rise 5.8 percent in 2012, the result of a 1.6 percent increase in occupancy and a 4.1 percent gain in average daily room rates.

Ever since the first quarter of 2010, growth in lodging demand has greatly exceeded the supply increase and the industry has seen six straight quarters of ADR growth.

According to Smith Travel Research (STR), U.S. hotels rented more guest rooms in 2011 than ever before. On a local level, PKF-HR observed new records in metro-level lodging demand in 30 of the 50 markets covered by its Hotel Horizons® forecast reports.

The positive impact of increased demand is amplified by the limited amount of new hotel supply that is expected to be built over the next five years.

According STR, the average annual change in the nation’s lodging supply from 1988 through 2011 was 2.1 percent. PKF-HR anticipates that new supply growth will remain below that level through 2016, less than 2.0 percent annually. With supply suppressed, PKF-HR forecasts annual occupancy gains through 2015. Add this to the annual occupancy increases observed in 2010 and 2011, and the industry will experience an unprecedented six-year run of occupancy growth.

STR forecasts profits to continue to grow at an average annual rate of 10.3 percent though 2014, which is a substantial increase over the long-run average of 3.9 percent.

Hotels in the upper-tier chain-scale segments (luxury, upper-upscale, and upscale) have enjoyed the greatest gains in RevPAR since the depths of the 2009 recession. Hotels in the lower-tier categories (upper-midscale, midscale, and economy) also have achieved increases in RevPAR during this same time period, but at a slower pace.

As a result, the firm is forecasting that the national occupancy level for hotels in each of the upper-tier chain-scales will exceed 70 percent through 2016.

Further enhancing the prospects for lower-tier hotels is a shift in the economic outlook. Moody’s Analytics, the basis for PKF-HR”s economic forecasts, projects continued increases in employment that eventually will benefit midscale and economy hotels.

The situation with Iran is the only foreseeable obstacle to PKF-HR”s optimistic forecasts and military hostilities are a greater concern because of the negative impact on the availability of oil and on international travel. Limits on both the availability of gas at local pumps, and transportation system disruptions impact the psyche of travelers beyond gas prices.

PKF-HR”s forecast is based upon Moody’s January 2012 economic forecast, which assumes no disruption to the supply of oil from the Middle East and that the price of oil will remain below $110 a barrel throughout 2012.

PKF believes that US hoteliers have never enjoyed such an extended period of favorable market conditions. The firm believes that we are in the midst of a six-year run during which lodging demand will outpace supply, hotel revenues will increase a cumulative 43.7 percent, and unit-level net operating income will rise 83.2 percent.

Posted by Scott R. Lodde

Headlines – Week of March 4, 2012

March 13, 2012

22.8% of Mortgages in Negative Equity

According to a recent report released by CoreLogic, 11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011. This is up from 10.7 million properties, 22.1 percent, in the third quarter of 2011.

An additional 2.5 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter. Together, negative equity and near-negative equity mortgages accounted for 27.8 percent of all residential properties with a mortgage nationwide in the fourth quarter, up from 27.1 in the previous quarter. Nationally, the total mortgage debt outstanding on properties in negative equity increased from $2.7 trillion in the third quarter to $2.8 trillion in the fourth quarter.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

Highlights from the report:

  • Nevada had the highest negative equity percentage with 61 percent of all of its mortgaged properties underwater, followed by Arizona (48 percent), Florida (44 percent), Michigan (35 percent) and Georgia (33 percent). This is the second consecutive quarter that Georgia was in the top five, surpassing California (30 percent) which previously had been in the top five since tracking began in 2009. The top five states combined have an average negative equity share of 44.3 percent, while the remaining states have a combined average negative equity share of 15.3 percent.
  • Of the 11.1 million upside-down borrowers, there are 6.7 million first liens without home equity loans. This group of borrowers has an average mortgage balance of $219,000 and is underwater by an average of $51,000 or an LTV ratio of 130 percent. For all first-lien-only borrowers negative equity share was 18 percent, while 41 percent of all first-lien-only borrowers had 80 percent LTV or higher.
  • The remaining 4.4 million upside-down borrowers had both first and second liens. Their average mortgage balance was $306,000 and they were upside down by an average of $84,000 or a combined LTV of 138 percent. The negative equity share for all first-lien borrowers with home equity loans was 39 percent, more than twice the share for all first-lien-only borrowers. Over 60 percent of borrowers with first liens and home equity loans had combined LTVs of 80 percent or higher.

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4,300 New Condo Units Remain Unsold From South Florida Boom

According to a new report from CondoVultures.com, South Florida’s seven largest coastal markets (defined as Broward, Miami-Dade and Palm Beach counties) have now sold 91 percent of the nearly 49,000 new units created during the boom that began in 2003.

Buyers paid nearly $1.8 billion for more than 4.4 million square feet of livable space between January and December of 2011 in projects located east of Interstate 95 in the coastal markets.

With the 2011 developer sales, buyers have now purchased nearly 44,350 condo units for more than $21.8 billion in South Florida’s seven largest coast markets between 2003 and 2011, according to an analysis of Clerk of the Court records.

According to the report, international investors with strong foreign currencies deserve much of the credit for the strong sales velocity – an average of more than 250 new unit transactions monthly in 2011. T

Of course, the unanswered question is whether the foreign buyers will continue to flood into South Florida given the economic dynamics now being experienced in Europe and key Latin American countries such as Argentina, Brazil, and Venezuela.

The total number of unsold new condos does not include any of the more than 8,000 units that were purchased in bulk transactions by investment groups that plan to one day resell the units at a premium.

In anticipation of the eventual sellout of the new condos created during the boom, developers are already proposing 24 new condo projects with more than 4,500 units in each of the counties of South Florida, according to CondoVultures.

During the South Florida real estate boom, developers created 148 projects with more than 34,000 units in the three Miami-Dade County markets of Greater Downtown Miami, South Beach, and Sunny Isles Beach. An additional 68 projects with more than 10,000 units were created in two Broward County markets of Hollywood / Hallandale Beach and Downtown Fort Lauderdale and the Beach. Developers created 28 projects with nearly 4,500 units in the two Palm Beach County markets of Boca Raton / Deerfield Beach and Downtown West Palm Beach and Palm Beach Island.

In the four decades prior to the boom, developers created nearly 700 condominium projects with 76,500 units in the same seven coastal markets in South Florida, according to a comprehensive study undertaken for the Condo Vultures® Official Condo Buyers Guide™ eBook series. The Greater Downtown Miami had the distinction of being the single neighborhood with the greatest number of new condos created during the boom with nearly 22,250 units. At the end of 2011, less than 1,750 units remained under the control of the original developers.

Sunny Isles Beach ranked second with nearly 6,400 new units created during the boom. As of Dec. 31, 2011, Sunny Isles Beach has about 580 unsold developer units.

The popular South Beach neighborhood of Miami Beach ranks third with nearly 5,600 new units created since 2003. At the end of the fourth quarter of 2011, South Beach had 965 unsold developer units.

Housing Affordability Index Hits Record High

According to the National Association of Realtors® (NAR), housing affordability conditions have reached the highest level since recordkeeping began in 1970.

NAR’s Housing Affordability Index rose to a record high 206.1 in January, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power.

An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent downpayment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small downpayments, the affordability levels are relatively lower.

According to the report, this latest data underscores buyer opportunities in today’s market and this is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home.

NAR projects the affordability index for all of 2012 will be at an annual high, with little movement in mortgage interest rates or home prices during the year.

Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country.

The key is access to credit.  If access improves, we should see a much more meaningful increase in home sales and broader stabilization in home prices, with modest gains in areas with stronger job growth.

Posted by Scott R. Lodde 

Headlines – Week of February 26, 2012

March 6, 2012

Buyers are looking to Purchase House No. 2

According to a 2011 survey from the National Association of Realtors (NAR), 19 percent of recent homebuyers own more than one home, up 5 percent from the previous year. And second homes aren’t just for the extremely affluent and tropically inclined, as the latest numbers show.

Vacation properties made up 27 percent of all home sales last year. And according to real estate professionals in these second-home regions, there isn’t just one type of buyer investing in these properties.

Many buyers are rushing in now because the prices have dropped so low – 40 to 50 percent less than the high times/

Data from the NAR shows that the typical vacation homebuyer in 2010 was 49 years old with a median household income of $99,500. The median price for a vacation home was around $150,000.

According the experts, many of these second-home markets fall outside of extreme metropolitan jurisdictions and into just-off-the-grid suburban areas with lush art scenes and other tourist draws.

Another facet in second-home consideration is finding a place that may eventually turn into the home proper. In fact, the NAR reports that 34 percent of vacation homebuyers said that they plan to use their property as a primary home in the future. For the prospective retirees, this is particularly common.

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Fort Myers, FL | Top-performing Real Estate Market in 2012

A recent survey study of 1,800 real estate agents by Seattle-based ActiveRain revealed that real estate agents expect that in 2012 the housing market will reach bottom and begin to rebound.

While most of the real estate agents surveyed said they expect real estate values, transactions and the local economy to stay flat or rise from 2011 levels, sixty percent anticipate the volume of real estate transactions will climb slightly.

The survey also shows that the real estate agents polled expect the Fort Myers, Fla., area; Austin, Texas; Boise, Idaho; and San Antonio to be among the top-performing 2012 real estate markets.

10 top-performing real estate markets in 2012

1. Fort Myers-Naples, Fla. 2. Austin, Texas 3. Boise, Idaho 4. San Antonio, Texas 5. Miami-Fort Lauderdale 6. Denver 7. Dallas-Fort Worth 8. Nashville, Tenn. 9. Houston, Texas 10. Salt Lake City, Utah

The agents surveyed expect Reno, Nev., to top the list of the worst-performing real estate markets in 2012. The big three: Chicago, New York and Los Angeles, make the top 10 worst list, as well.

10 real estate markets expected to perform poorly in 2012

1. Reno, Nev. 2. Sacramento, Calif. 3. Chicago 4. New York 5. Providence, R.I. 6. Springfield, Mo. 7. San Diego 8. Los Angeles 9. Cleveland 10. Philadelphia

Source: ActiveRain survey of 1,800 real estate professionals.

Buffett: ‘I’d buy up a couple hundred thousand’ homes

Warren Buffett, the billionaire investor and Berkshire Hathaway CEO, said on CNBC’s “Squawk Box” recently that he’d “buy up a couple hundred thousand” single-family homes if it was practical.

Buffett said that’s because he believes purchasing a home with ultra-low mortgage rates and holding it for the long-term has become a better investment than stocks right now.

“Housing will come back, you can be sure of that,” Buffett wrote in his annual letter to shareholders recently.

Buffett forecasts an increase in household formations, as more people who moved in with their parents or family members during the recession look to move out and get their own home soon.

“People may postpone hitching up during uncertain times, but eventually hormones take over. And while ‘doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure,” Buffett said.

Buffett said the recovery in the housing market could vary quite a bit among local housing markets, however. He did not provide a timeline of when he expected a full housing recovery, admitting that his prediction last year that a housing recovery will take shape within the year turned out to be “dead wrong.”

CNBC Transcript: Warren Buffett on Buying Houses  

Posted by Scott R. Lodde

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