Headlines – Week of September 16, 2012

September 29, 2012

Case-Shiller News

According to Case-Shiller, U.S. home prices continued to increase in July, with its 20-city index up 1.6 percent from June and the 10-city index up 1.5 percent. The 10-city index rose to its highest level since November 2010 and the 20-city index to the highest level since October 2010. Prices rose month-over-month in all of the 20 cities.

Year-over-year, the 10-city index was up 0.6 percent, and the 20-city index rose 1.2 percent.

Existing Home Sales at Highest Level since May 2010

The National Association of Realtors recently reported that existing home sales rose 7.8 percent to 4.82 million in August, the highest level since May 2010. The median price of an existing single-family home in August was $187,400, down from $187,800 last month and up from 171,200 a year ago.

Real Estate Flipping Back in Southwest Florida

Flipping houses is back again in Southwest Florida as buying and quickly reselling homes and condominiums to pull in large profits.

According to new data released from RealtyTrac, there have been 889 properties flipped from January to June in Manatee, Sarasota and Charlotte counties. That was a 45 percent increase from the same period last year and a 97 percent increase from the same six months in 2010.

RealtyTrac categorized flips as resales within four months after the initial deal.

Buyers in this region held on to the houses for an average of 99 days and sold them for an average gain above the previous sale price of $30,975, according to a Herald-Tribune analysis of the RealtyTrac data. The highest per-county average gain was in Sarasota County, at $32,901. Charlotte County was second at $30,348. Manatee’s average was $29,676.

Florida overall saw more than 14,000 flips during the same six-month time period, a 70 percent increase since 2010. The homes were kept for an average of 103 days and the average gain was $13,240.

Dwindling Home Inventory Drive Prices Up in Naples

According to a report released by the Naples Area Board of REALTORS® (NABOR®), which tracks home listings and sales within Collier County (excluding Marco Island), the Naples area real estate median price increased a remarkable 10 percent for the 12-month period ending August 2012,

Looking at the inventory statistics it is worthy to note that in less than eight months, the area reached an overall inventory of 6,043 in August 2012 from 7,860 in January 2012. 2003 was the last time Naples saw inventory this low.

Highlights:

  • The overall median closed price increased 10      percent, from $176,000 to $194,000, for the 12-month period ending August      2012.
  • Overall pending sales increased 16 percent in      the $500,000 to $1 million category, from 939 units to 1,091 units, for      the 12-month period ending August 2012. Overall pending sales increased 10      percent in the $1 million to $2 million category, from 424 units to 466      units, for the 12-month period ending August 2012.
  • Overall inventory decreased by 13 percent, from      6,930 in August 2011 compared to 6,043 in August 2012. Pending sales with      contingent contracts are included in the overall inventory number.
  • The average DOM (Days on the Market) decreased      by six percent, from 178 days on the market in August 2011 to 167 days on      the market in August 2012.
  • Overall pending sales in the Naples coastal      area increased 10 percent from 1,779 units to 1,950 units, and closed      sales increased 9 percent, from 1,586 units to 1,732 units, for the      12-month period ending August 2012.

According many realtors, the strong numbers clearly reflect the economic model of Supply and Demand. As inventory decreases and demand for homes remains high, prices increase. The statistics from the last three months have capped off a strong summer and the Naples area is no longer as seasonal as it used to be.

Posted by Scott R. Lodde

Headlines – Week of September 9, 2012

September 20, 2012

Moderate Hotel Growth Underway

According to a new report from Lodging Econometrics (LE), moderate growth in U.S. hotel pipeline metrics has been underway for a while.

In Q2 2012, hotels under construction stood at 525 projects/66,917 rooms. LE said room counts are up from the bottom of 387 projects/49,028 rooms for the fourth consecutive quarter, signaling that the industry has entered the early stages of a new real estate growth cycle.

The annualized four-quarter trend line for construction starts is up from the bottom for the sixth consecutive quarter and is at its highest level in 10 quarters. LE suggests the uptick in construction starts is due largely to the commencement of previously stalled projects in the pipeline while developers were awaiting evidence of a sustained operating recovery.

The most significant indicator of future pipeline growth is new project announcements. At 1,180 projects/147,447 rooms, the annualized four-quarter trend line is up from the previous cyclical bottom for the third consecutive quarter and is at the highest level in six quarters.

Based on current construction trends, these pipeline metrics support LE’s initial forecast for new hotel openings in 2014 of 446 projects/48,335 rooms. This is a 31% room count increase and the first substantial upturn from the bottom of 346 projects/37,200 rooms set in 2011.

While the recovery in the U.S. lodging industry has been slower than hoped for, LE expects that both ADR and RevPAR will exceed previous cycle highs in 2013.

The firm’s expects that once the election season is over, the administration will be able to build a bi-partisan political consensus to ensure that job growth policies are at the top of the nation’s agenda.

We all know that job growth is the key to improving consumer spending, which is necessary to trigger investment by the business community. That environment will spur lodging demand and move hotel development at a faster pace.

 

RevPAR forecasts up for remainder of 2012

PKF Hospitality Research, PwC and STR all recently revised their 2012 RevPAR forecasts up for the remainder of the year compared to their mid-year forecasts.

Average daily rate has been the driver behind growing revenue per available room for the last few quarters.

New data from STR and TravelClick projects RevPAR, ADR and occupancy gains for U.S. hotels over the remainder of 2012.

For 2012, STR projects a 2.1% increase in occupancy to 61.2%, an ADR gain of 4.4% to US$106.15 and a RevPAR increase of 6.5% to US$65.01.

Supply and demand are expected to end the year with increases of 0.5% and 2.6%, respectively.

TravelClick data shows committed occupancy for August to December this year is up 5.4% and ADR is up 5%, with the growth driven by the transient segment with an occupancy increase of 5.6% and an ADR increase of 5.5% in comparison to the same time last year

In 2013, STR predicts occupancy to be virtually flat with a 0.3% increase to 61.4 percent, ADR to rise 4.6 percent to US$111.01 and RevPAR to grow 4.9% to US$68.17. Supply and demand are forecast to end 2013 with increases of 0.9% and 1.2%, respectively.

 

Hotel Real Estate Boom on Miami Beach

According to a recent article in Herald Online as well as my personal observations, there’s a major real estate boom going on in Miami Beach in small to mid-size luxury hotels that are being bought, sold, managed and renovated.

According the article, in just the last few months the following activity:

  • $85 million SLS South Beach Hotel on Collins Avenue
  • Royal Palm Hotel was sold for $130 million and is being rebranded as the James Hotel
  • Gansevoort hotel was sold and renamed The Perry and is being managed by Starwood
  • Kimpton signed a contract to manage the Surfcomber Hotel which sits at a prime location at 17th and Collins Avenue
  • The Delano hotel is for sale (although its owners still want to manage it after the sale)
  • David Edelstein, the owner of the W South Beach purchased the Raleigh hotel for $55 million

According to experts in the market, this recent activity is and indicator of the strength and demand of Miami as a destination.

Other factors contributing to the demand includes:

  1. The areas consistent placement in the top ten of varied Best Of lists,
  2. The continued allure in a competitive vacation market
  3. Ongoing infrastructure updates
  4. Sophisticated cultural, gastronomic and social options and
  5. Great weather

Renovation projects currently underway include:

  • B Hotel (the former Continental)
  • Saxony hotel
  • The historic beachfront Seville Hotel (to be branded a Marriot Editions)
  • A number of properties are also actively courting buyers – if the price is right.
  • Other luxury properties which have opened in recent years include:
  • SLS South Beach
  • Mondrian
  • W
  • Standard
  • Setai

Other properties getting significant renovation include:

  • The Betsy
  • Surfcomber
  • Fontainebleau
  • Loews

Posted by Scott R. Lodde

Headlines – Week of September 2, 2012

September 13, 2012

Fewer Mortgages in Negative Equity

CoreLogic has just released a report showing that 10.8 million, or 22.3%, of all residential properties with a mortgage were in negative equity at the end of the second quarter of 2012.

This is down from 11.4 million properties, or 23.7%, at the end of the first quarter of 2012.

An additional 2.3 million borrowers possessed less than 5 percent equity in their home, referred to as near-negative equity, at the end of the second quarter.

Approximately 600,000 borrowers reached a state of positive equity at the end of the second quarter of 2012, adding to the more than 700,000 borrowers that moved into positive equity in the first quarter of this year.

Together, negative equity and near-negative equity mortgages accounted for 27.0 percent of all residential properties with a mortgage nationwide in the second quarter, down from 28.5 percent at the end of the first quarter in 2012.

Nationally, negative equity decreased from $691 billion at the end of the first quarter in 2012 to $689 billion at the end of the second quarter, a decrease of $2 billion driven in large part by an improvement in house price levels.

Most borrowers in negative equity are continuing to pay their mortgages. The share of borrowers that were underwater and current on their payments was 84.9 percent at the end of the second quarter in 2012.

This is up from 84.8 percent at the end of the first quarter in 2012.

 

 

 

 

Highlights as of the CoreLogic Q2 2012 Report:

  • Nevada had the highest percentage of mortgaged properties in negative equity at 59 percent, followed by Florida (43 percent), Arizona (40 percent), Georgia (36 percent) and Michigan (33 percent). These top five states combined account for 34.1 percent of the total amount of negative equity in the U.S.
  • Of the total $689 billion in aggregate negative equity, first liens without home equity loans accounted for $339 billion aggregate negative equity, while first liens with home equity loans accounted for $353 billion.
  • Of the 10.8 million upside-down borrowers, 6.6 million hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $216,000, the average underwater amount is $51,000, and 18 percent of the 6.6 million are in negative equity.

Full Report

 

CRE Loan Update

According to information provided by Cushman & Wakefield, we are now halfway through the digestion period for the super-bubble of CRE loan maturities that began in 2009 and is projected to peak in 2013.

The good news is that CRE maturities decline significantly after 2013, with a smaller spike in 2016-17 comprised of 10-year deals originated in 2006 and 2007.

The bad news is that the lending volume in the securitization market has not recovered to a level sufficient to fill the refinancing gap, which means that special servicers will continue to be very busy for the next 18-24 months.

Delinquency rates for CMBS moved higher in July, with Trepp reporting that the 30+ day delinquency rate had inched up 18bps to 10.34%.

The best performing asset class is retail, where strengthening consumer spending combined with the early wash-out of the sector’s weakest tenants, has helped retail assets relative to the office and industrial sectors.

 Bank Lending Picks Up as Default Rates Drop

Another report shows the recovery in large and mid-tier banks’ commercial property balance sheets is accelerating.  Data in a report by Chandan shows the default rate on income-producing real estate mortgages fell to 3.11 percent, the lowest level since mid-year 2009.

The 34 basis point drop from the previous quarter’s 3.45 percent default rate was the largest one-quarter improvement in legacy loan performance since the peak of the financial crisis.

 

 

 

 

Posted by Scott R. Lodde

2012 US hotel demand to exceed 2007

September 6, 2012

According to a new issue of Hospitality Directions, PricewaterhouseCoopers (PwC) notes that despite persistent economic headwinds and heightened uncertainty, U.S. RevPAR recovery in 2012 is projected to remain intact, with slightly stronger gains in both demand and pricing than previously anticipated.

The firm reports that the lodging recovery is continuing into the second half of 2012, and with that, it has adjusted its revenue per available room outlook to increase 7.2 percent this year, followed by 5.6 percent in 2013.

Results for the first 18 days of August show an approximately 7.2-percent increase in RevPAR.

Macroeconomic AdvisersAugust outlook expects slower economic growth in 2012 than it previously anticipated, followed by gradual improvement in 2013, with real GDP increasing 1.8% in 2012, followed by an increase of 3.0% in 2013, measured on a fourth quarter over fourth quarter basis.

With hotels reporting a solid pace of forward bookings for the balance of the year, including a greater volume of group bookings, PwC said these results indicate momentum in travel activity and set a context for hotels to price more confidently entering the second half of 2012.

Overall, PwC expects lodging demand in 2012 to increase 3.0%, which combined with still restrained supply growth of 0.5%, is anticipated to boost occupancy levels to 61.5%, the highest since 2007.

PwC anticipates hotel occupancy will increase 2.5 percent in 2012, coupled with a 4.6-percent increase in ADR. Hotels in these segments experienced the greatest decline during the recession, but have advanced quicker than hotels in other lower-end segments in rebuilding occupancy levels. PwC expects occupancy in the luxury, upper upscale and upscale segments to meet or exceed each segment’s 2007 average.

Overall, industry RevPAR is expected to recover to $65.41 in 2012, just slightly below its prior peak of $65.54 in 2007.

Full Report – PwC Hospitality Directions US Q2

Posted by Scott R. Lodde

Headlines – Week of August 19, 2012

September 3, 2012

High-End Hotel Investment Sales Getting Hot Again

According to information provided by CoStar, hotel investment sales cooled off considerably in the first half of 2012, after trading at a blistering pace last year.

However, early third-quarter transaction activity suggests that lodging sales should finish the year on a strong note.

Total volume of sold hotel transactions valued at $25 million and above was $2.5 billion in the first six months of 2012 — well below the strong $6.4 billion recorded in the first half of 2011.

Due to a handful of hotels that sold for top dollar, sales volume has already surpassed second-quarter 2012 and about equaled first-quarter figures just a month into the third quarter. The average price per key remained strong at around $233,500 at midyear.

The uptick in sales in recent weeks come as the U.S. hotel industry heads into the Labor Day weekend, traditionally one of the busiest travel and vacation periods of the year, and reflects what lodging analysts say is the continuing and growing strength in fundamentals in spite of this year’s slow economic growth and fiscal uncertainty.

Such numbers are prompting sellers to get off the sidelines. The sales activity at the high end of the market mirrors especially strong fundamentals for luxury properties. While hotels across the spectrum are benefiting from the recovery, those in the higher-priced tiers are expected to see the strongest gains, according to PwC.

Occupancy levels at hotels in the luxury, upper-upscale and upscale segments are expected to meet or exceed each segment’s 2007 peak. Hotels in the lower-priced segments have not experienced as solid of a recovery in occupancy but are still expected to realize increased room rates as demand gradually strengthens.

Starwood has pursued an “asset-light” strategy in recent years, opting to focus on fee income from hotel operations and management. During a recent call with investors, the company laid out plans to unlock $4 billion to $5 billion in cash by selling its hotels and Bal Harbour condominium residences.

Starwood continues to bring their own hotels to market, either one at a time or all at once, depending on demand. Sources from Starwood state that their strategy is to be left with a global high-end fee business. The fee business is built on long-term contracts, low variable costs, but absent the capital needs and volatility of owned real estate.

Florida Housing Market Continues Positive Track

Pending sales, closed sales and median prices rose, while the inventory of homes and condos for sale dropped in Florida’s housing market in July, according to the latest housing data released by Florida Realtors.

According to the Realtor association, Florida’s real estate recovery is on solid ground, and since May 2011, pending sales have increased every month for both existing single-family homes and for townhome-condo properties.

In July, pending sales were up more than 42 percent for existing single-family homes and 26 percent for townhouse-condo units, compared to a year ago. Home prices are on the rise in many markets, while the inventory of homes for sale is down. Florida’s housing market is growing stronger and stronger.

Pending sales refer to contracts that are signed but not yet completed or closed; closed sales typically occur 30 to 90 days after sales contracts are written.

Statewide closed sales of existing single-family homes totaled 17,420 in July, up 9.8 percent compared to the year-ago figure, according to data from Florida Realtors Industry Data and Analysis department and vendor partner 10K Research and Marketing. The statewide median sales price for single-family existing homes last month was $148,000, up 7.8 percent from July 2011.

According to the National Association of Realtors® (NAR), the national median sales price for existing single-family homes in June 2012 was $190,100, up 8 percent from the previous year. In California, the statewide median sales price for single-family existing homes in June was $320,540; in Massachusetts, it was $325,000; in Maryland, it was $268,910; and in New York, it was $220,000.

Looking at Florida’s year-to-year comparison for sales of townhomes/condos, a total of 7,779 units sold statewide last month, up 2.8 percent from those sold in July 2011. The statewide median for townhome-condo properties was $102,000, up 10.9 percent over the previous year. NAR reported the national median existing condo price in June 2012 was $183,200.

Last month, the inventory for single-family homes stood at a 5.3-months’ supply; inventory for townhome-condo properties was at a 5.4-months’ supply, according to Florida Realtors. Industry analysts note that 5.5-months’ supply symbolizes a market balanced between buyers and sellers.

Posted by Scott R. Lodde

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