June 26, 2012
Standard & Poor’s reported that The Case Shiller Home Price Indexes rose for the first time in eight months in April. The 10- and 20-city indexes each rose 1.3 percent to the highest levels this year. Year-over-year, the 10-city index was down 2.2 percent and the 20-city index off 1.9 percent – both improving from March.
Economists had expected the 20-city index to show a 2.3 percent year-over-year decline in April.
Shadow Inventory Fell in April 2012 to October 2008 Levels
According to a recent report by CoreLogic, current residential shadow inventory as of April 2012 fell to 1.5 million units, representing a supply of only four months. This was a 14.8 percent drop from April 2011, when shadow inventory stood at 1.8 million units, or a six-month’ supply, which is approximately the same level as the U.S. was experiencing in October 2008. Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been approximately offset by the equal volume of distressed (short and real estate owned) sales.
Highlights of the CoreLogic report:
- As of April 2012, shadow inventory fell to 1.5 million units or four-month supply and represented just over half of the 2.8 million properties currently seriously delinquent, in foreclosure or REO.
- The four-month supply of shadow inventory is at its lowest level in nearly three years. It parallels the unsold month supply of non-distressed active listings that hit a more than five-year low in April, falling to 6.5-months from a 9.1-months supply just a year ago.
- Of the 1.5 million properties currently in the shadow inventory, 720,000 units are seriously delinquent (two month supply), 410,000 are in some stage of foreclosure (1.1-month supply) and 390,000 are already in REO (1.1-month supply).
- The dollar volume of shadow inventory was $246 billion as of April 2012, down from $270 billion a year ago and a three-year low.
- Serious delinquencies, which are the main driver of the shadow inventory, declined the most in Arizona (-37.0 percent), California (-28.0 percent), Nevada (-27.4 percent), Michigan (-23.7 percent) and Minnesota (-18.1 percent).
U.S. States Forecast Highest Tax Revenue in 5 Years
According to a recent government survey, U.S. states expect to collect higher tax revenues in the coming budget year that combined would top pre-recession levels. The increase could reduce pressure on states to cut budgets and lay off workers.
A slowly healing job market and modest growth have boosted sales and income taxes, which provide nearly three-quarters of state revenue. Overall corporate income taxes are also growing.
However, many states such as California continue to struggle with budget shortfalls.
According to a twice-yearly survey by the National Governors Association and the National Association of State Budget Officers, total tax revenue is forecast to rise 4.1 percent to $690.3 billion in the 2013 budget year, It’s the third straight year of revenue growth and $10 billion more than the budget year that ended June 2008. The recession began in December 2007.
Arizona, Ohio and Michigan are anticipating some of the biggest increase in tax revenue next year.
Michigan has already benefited from higher revenues. Last year the state had its first surplus in a decade.
In Ohio, tax revenue is projected to rise to $17.6 billion next year. That’s an 8.6 percent increase from the current budget year.
Others states are seeing less improvement. Iowa, Illinois and Arkansas are among those forecasting small increases.
And even though California is forecasting much higher revenue, much of that is coming from a tax increase. The state is struggling to close a $16 billion budget deficit and is considering cutting programs.
So are many other states. Aid from the federal government is dropping and the demand for health care, education and other services is rising.
About a quarter of the expected gain in revenue comes from proposed tax hikes in 10 states. Fifteen states recommended tax cuts, though not enough to offset the proposed gains.
The gains in revenue are also uneven. Tax receipts in 23 states are projected to remain lower than they were five years ago. The forecasts are based on proposed budgets submitted by governors.
Layoffs are slowing at the state level. State governments added an average of 3,000 jobs per month in the past six months, after cutting an average of 5,200 in the preceding six months. Still, the cuts aren’t entirely over: states cut 5,000 jobs in May.
The biggest layoffs have been at the local level, particularly in public schools. Local governments rely on property taxes, which are still declining as property values fall in the wake of the housing bust.
Since August 2008, when state and local government employment peaked, local governments have cut 528,000 jobs. State governments have shed 134,000.
Posted by Scott R. Lodde
June 13, 2012
Condo-hotels Reshaping Luxury Market in Miami
During the Great Recession, South Florida was the poster boy for what goes wrong when you overdevelop; particularly as it relates to luxury real estate. In the hotel industry, the development of condo-hotels was all the rage prior to the financial collapse.
However, The Miami Herald is reporting that the “times they are a changing”, writing, “From Brickell to Miami Beach, Hollywood to Palm Beach, condominium hotels are reshaping the luxury, waterfront landscape. In the process, they’re changing the way developers, investors, hoteliers and even residents and prospective buyers view residential product offerings.”
The Herald points to the success at ONE Bal Harbour Resort Hotel & Spa, where some 40 condo-hotel units have been sold in excess of $23 million. Others also are reporting brisk new-unit sales, including The Ritz-Carlton Key Biscayne and Palm Beach, the Four Seasons, W Fort Lauderdale Beach and The Fontainebleau Towers, which built some 800 condo-hotel units. Before the recession, developers saw the condo-hotel as a new source of revenue, a chance to recoup initial investments with the sale of units even before the actual hotel opened. However, in recent times, hotels such as The Setai in New York and Trump SoHo, had and are having a tough time selling their units. In South Florida,
The Herald reports that condo-hotel sales have rebounded with the market, with purchase prices ranging from an average $450 per square foot to upward of $1,600 per square foot at high-profile branded properties. Developers still see condo-hotels as a strong business model and a win-win for many of those involved – including the local communities that enjoy new tax revenues and consumer spending.
With the sale of furnished hotel suites, the hotelier or developer ends up managing a hotel, with ongoing income generated from management of the units, food and beverage, events, and the resort and spa facilities. Hoteliers benefit from the creation of a popular new product or the planting of a national brand and sought-after offerings in a desirable market. This helps bolster room rates and occupancies.
International Sales Continue to Climb in U.S. Market
Due to low prices and the relative weakness of the dollar, international buyers continue to identify the U.S. as a desirable place to own property and make a profitable investment.
According to the National Association of Realtors® 2012 Profile of International Home Buying Activity, total residential international sales in the U.S. for the past year ending March 2012 equaled $82.5 billion, up from $66.4 billion in 2011. Total international sales were evenly split between non-resident foreigners and recent immigrants.
International buyers bought homes throughout the country, but four states accounted for 51 percent of the purchases – Florida, California, Texas and Arizona. Florida has been the fastest growing destination of choice, accounting for 26 percent of foreign purchases. California was second with 11 percent and Texas and Arizona accounted for seven percent.
Proximity to the home country, the presence of relatives and friends, the convenience of air transportation, and climate and location are all important considerations to prospective foreign buyers. Locations on the East Coast generally attract European buyers, while Asian buyers tend to purchase on the West Coast, particularly California.
Florida attracts a diverse set of international buyers including South Americans, Europeans and Canadians.
International buyers came from all over the globe, but Canada, China (The People’s Republic of China including Hong Kong), Mexico, India and the United Kingdom accounted for 55 percent of all international transactions, according to the survey. Canada and China remain the fastest-growing home countries. Canada accounted for 24 percent of international sales while China accounted for 11 percent, up from nine percent in 2011. Mexico was third with eight percent of sales and India and the U.K. both accounted for six percent.
Forty-five percent of international purchases were under $250,000. In addition, there appears to be a gradual increasing trend toward purchases in the $250,000 to $500,000 price range. In 2012, this range accounted for 30 percent of purchases, up from 28 percent in 2011. The average price paid by an international buyer was $400,000 compared to the overall U.S. average of $212,000.
Several reasons account for why the average international home price is higher than the average overall price. The international client is typically wealthier than the domestic buyer and is looking for a property in a specialized niche, for example, a larger property suitable for multi-generational living or a property that establishes the individual’s presence and standing in the community.
Many homes purchased by foreign buyers are used as a primary residence. Vacation and rental use are also major reasons for a purchase. More than half – 66 percent – of survey respondents reported international buyers purchased detached single-family homes. About half of international buyers, 52 percent, preferred to buy in a suburban area and about a quarter, 23 percent, bought in a central city/urban area.
Sixty-two percent of international purchases were all cash, which has increased since 2007. International buyers still experience many financing challenges when purchasing a home in the U.S.
Posted by Scott R. Lodde
June 5, 2012
Despite economic risks associated with a recovery and the European sovereign debt crisis, an updated lodging forecast released today by PwC US anticipates revenue per available room (“RevPAR”) recovery in 2012 to remain intact, with stronger price gains anticipated in 2013.
As the US economy has improved, travel activity in the US has continued its robust recovery. Business and leisure travel posted solid gains in the first four months of 2012, and even the group segment experienced an uptick in demand and bookings. As a result of continued recovery in demand, PwC predicts RevPAR to increase by 6.5 percent in 2012 and 5.6 percent in 2013, building on the strong 8.2 percent increase in 2011.
One potential issue in the PwC estimate is that they are based on a quarterly econometric analysis of the lodging sector using historical statistics supplied by Smith Travel Research and a macroeconomic forecast released in May from Macroeconomic Advisers, LLC, which expects moderate economic growth in 2012, followed by acceleration in the second half of 2013. Macroeconomic Advisers’ outlook expects real gross domestic product (“GDP”) to increase 2.5 percent in 2012, followed by an increase of 3.1 percent in 2013, measured on a fourth quarter over fourth quarter basis.
According to PwC, the outlook for RevPAR recovery reflects continued momentum in business travel, including gains in corporate meetings, as well as leisure travel growth that includes greater volumes of international visitors. As a result, lodging demand in 2012 is expected to increase 2.5 percent, which combined with still restrained supply growth of 0.4 percent, is expected to boost occupancy levels to 61.3 percent, the highest since 2007.
Hotels across the spectrum of price segments experienced average daily rate (“ADR”) gains in the first quarter, reflecting the breadth of the industry recovery. Looking ahead, increased confidence from occupancy gains is expected to allow hotels to raise room rates, particularly in the higher-priced segments of the industry. As a result, ADR is expected to increase by 4.3 percent in 2012 and 4.8 percent in 2013.
Posted by Scott R. Lodde