Headlines – Week of October 14, 2012

October 25, 2012

Remodeling Boom Seen into 2013

According to a recent study published by The Harvard Joint Center for Housing Studies remodeling and home improvement activity will see strong gains over the rest of 2012 and the first half of next year.

The Center’s Leading Indicator of Remodeling Activity (LIRA) suggests a recovery in the remodeling industry is underway and there could be double digit growth in home improvement spending over the next eight months.

The study uses the Department of Commerce’s Value of Construction Put in Places series (or C-30) to project the value of residential improvements.

The Department of Commerce defines home improvements as remodeling, additions, and major replacements to owner-occupied properties after the completion of the original building. This definition include additions to existing buildings, finishing basements and attics, improvements to the exterior building or lot, and replacement of major systems and equipment such as furnaces or water heaters. It does not include spending for painting, landscaping, or routine maintenance.

The study cites strong growth in sales of existing homes and housing starts, coupled with historically low financing costs which are providing the thrust to produce a favorable outlook for home improvement spending over the coming months.”

Southwest Florida Real Estate Recovery Strengthens

According to a recent article in the Fort Myers New Press, we are on the upside of recovery. Both notable shifts in forward-looking indicators, and overall outlook from prudent real estate investors, point to very positive signs of improvement.

In Florida, and particularly here in Southwest Florida, the industrial sector of the commercial real estate market is leading the pack with newly released data showing a top-three placement for lowest industrial vacancy rates in the nation.

According to a recent Cushman and Wakefield market statistical report, the Naples metro area ranked No. 2 in the nation for the lowest industrial vacancy rates with 4.2 percent overall vacancy.

Moreover, Florida claimed three of the top 10 metro areas with the lowest industrial vacancy rates (Lakeland at No. 1, Naples at No. 2, and St. Petersburg/Clearwater at No. 7). Lee County ranked 38th on the list with a 9.3 percent vacancy rate, slightly higher than the national average of 8.7 percent vacancy.

Both nationally and statewide, prices and home sales increased year over year in August. According to the National Association of Realtors, existing home sales jumped 7.8 percent in August to the highest level in more than two years, the highest level since May of 2010 when sales were fueled by a federal home-buying tax credit.

Foreclosure activity was down sharply in Lee County according to statistics recently released by the Southwest Florida Real Estate Investors Association. In September, lenders filed 567 foreclosure lawsuits, down sharply from 765 in August and about the same as the 570 in September 2011. Decreases in foreclosure filings further constrain the amount of future inventory available to buyers paving the way for the resurgence of new construction.

 

9 States Where Foreclosures Are Dropping the Most

According to information from RealtyTrac, foreclosures are continuing to fall across the country, reaching five-year lows, but states where foreclosures don’t have to be approved by courts are posting some of the largest drops.

The following states with a “non-judicial” process reported the largest annual decreases in foreclosure activity in the third quarter:

  1. Nevada: 71 percent decrease
  2. Oregon: 63 percent
  3. Utah: 60 percent
  4. Virginia: 34 percent
  5. California: 29 percent
  6. Michigan: 28 percent
  7. Arizona: 23 percent
  8. Colorado: 21 percent
  9. Georgia: 20 percent

Florida is a judicial state in which foreclosures must be approved by the courts.

Some of the largest drops in foreclosure activity are attributed to recent laws adopted in some states such as Nevada, Oregon, and California that have added requirements for lenders to meet before they can foreclose on home owners.

 

Posted by Scott R. Lodde

Headlines – Week of September 30, 2012

October 10, 2012

Declines in Shadow Inventory Foreshadow Rise in Prices

According to the financial information services company CoreLogic, current residential shadow inventory fell to 2.3 million units as of July 2012, representing a supply of six months. The information was published in the company’s most recent Shadow Inventory report.

This was a 10.2 percent drop from July 2011, when shadow inventory stood at 2.6 million units, which is approximately the same level the country was experiencing in March 2009. Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been roughly offset by the equal volume of distressed (short and real estate owned) sales.

Highlights of the report:

  • As of July 2012, shadow inventory fell to 2.3 million units or six-months’ supply and represented just over three-fourths of the 2.7 million properties currently seriously delinquent, in foreclosure or in REO.
  • Of the 2.3 million properties currently in the shadow inventory, 1 million units are seriously delinquent (2.9 months’ supply), 900,000 are in some stage of foreclosure (2.5-months’ supply) and 345,000 are already in REO (1.0-months’ supply).
  • The dollar volume of shadow inventory was $382 billion as of July 2012, down from $397 billion a year ago and $385 billion last month.
  • Serious delinquencies, which are the main driver of the shadow inventory, declined the most from April 2012 to July 2012 in Arizona (3.2 percent), Pennsylvania (2.8 percent), New Jersey (2.3 percent), Delaware (2.2 percent) and Maine (2.2 percent).
  • As of July 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of all distressed properties in the country.

 

Population Growth Rate ‘Fueling’ South Florida’s Latest Condo Boom

According to a new report from the Federal Reserve Bank of Atlanta, a “significant” increase in the growth pace of Florida’s population is contributing to the wave of newly proposed condo units. 72 towers with 10,500 units are slated to be developed in the tricounty South Florida region of Miami-Dade, Broward, and Palm Beach.

The bank’s EconSouth Third Quarter 2012 report believes that some of the recent and projected condominium construction in Miami is a result of renewed in-migration to Florida.  After experiencing a dramatic slowdown in population growth following the recession (down to about 140 people a day), Florida is seeing significant growth again of about 700 net new residents a day.

According to the report, the resurgence in Florida’s population growth has put the state on pace to surpass 20 million people by 2014, and in the process replace New York as the third most populous state in the nation behind California and Texas,.

The big question posed by the report is whether the changes in construction financing as a result of the crash are sufficient to prevent a repeat of a similar crash.

Highlights from the report:

  • Nearly 150 cranes “filled” the South Florida skyline at the height of the last condo boom.
  • As of Sept. 30, 2012, one new condo tower has already been completed in the tricounty region and 11 other high-rises are under construction as the post-crash development era gains momentum, according to a recent report by CondoVultures.com.
  • Developers have “sold” about 18 percent of the 10,500 newly proposed condo and condo-hotel units expected to be constructed in the coastal South Florida region through the third quarter of 2012.
  • A majority of the newly proposed condo units are not expected to be completed until 2014 when the unsold developer inventory from South Florida’s last real estate boom and bust is projected to be sold, according to the Proposed Condo Projects list from the licensed Florida brokerage CVR Realty™.
  • Fueled by investors primarily from overseas, less than 3,400 new condo units remain unsold from a supply of nearly 49,000 units created since 2003 in South Florida’s seven largest coastal markets of Greater Downtown Miami, South Beach, Sunny Isles Beach, Hollywood / Hallandale Beach, Downtown Fort Lauderdale and the Beach, Boca Raton / Deerfield Beach, and Downtown West Palm Beach and Palm Beach Island as of June 30, 2012.
  • To overcome the obvious financing hurdle, most of the newly proposed projects are requiring prospective buyers to commit to deposits – to be paid in phases – of as much as 80 percent of the preconstruction contract price.  This is a dramatic change from the most recent South Florida condo boom, preconstruction buyers were generally asked for deposits of about 20 percent.  For example, a buyer may bring anywhere from 30 percent to 80 percent to the table and then pay in increments as the building moves through the development process. The developer brings 20 percent to the table.

Foreclosure Filings Spike in South Florida Region

According to a new report from CondoVultures.com, lenders initiated more than 13,200 foreclosure actions in the tricounty South Florida region in the third quarter of 2012, representing a 36 percent surge in filings on a year-over-year basis compared to the same July through September period in 2011.

For the year, lenders have filed nearly 35,700 notices of default – the first step in the repossession process – in the first nine months of 2012 in Miami-Dade, Broward, and Palm Beach counties after filing less than 24,000 actions during the same January through September period in 2011.

Despite the spike in South Florida foreclosure actions in the first nine months of this year, the 2012 total number of filings initiated in the region is down compared to the same nine-month period in previous years when nearly 49,000 actions were filed in 2010 and nearly 75,500 actions were filed in 2009, based on filings with the Clerks of the Court for each respective county.

According to the report, lenders are stepping up their foreclosure efforts South Florida some two years after the ‘robo-signer’ controversy first surfaced late in the third quarter of 2010.  

Barring some dramatic change, the peak of the foreclosure filing activity in South Florida appears to have occurred in 2009 when nearly 100,000 actions were initiated in Miami-Dade, Broward, and Palm Beach counties.

Compare this to 2012 where the South Florida region is on pace to experience more than 47,500 actions based on the filing activity in the first nine months of the year.

 Posted by Scott R. Lodde

U.S. Hotel Value Growth through 2016

October 4, 2012

HVS – U.S. Hotel Value Growth through 2016

According to the HVS 2012 U.S. Hotel Valuation Index (HVI), U.S. hotel value growth will persist through 2016, surpassing a 2006 peak of US$100,000 per room in 2013.  

The HVI tracks hotel values in 66 individual U.S. markets and the United States as a whole, examining hotel supply, demand, occupancy and average rate trends.

Increases in occupancy, average rate and demand, along with limited supply growth are expected to yield relatively strong growth in net operating income, the report said. These dynamics, along with fewer buying opportunities, will lead to a positive per room value change in the United States in 2012.

The report notes that because of the strength of demand in the meeting and group segment, per room values for the top three U.S. convention cities; Las Vegas, New Orleans and Tampa are expected to increase most this year.

Some cities which saw a recovery earlier however, will see future values decline or slow.

Examples of limited upside growth include San Francisco and Boston, as their per room values recovered in 2010 and 2011.

RevPAR Forecasts up for Remainder of 2012

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

PKF notes the main drivers continue to be favorable levels of real personal income growth.

Also noted to increase demand are travelers with increased incomes allocating more of their money to meetings and leisure travel, despite uncertainty that persists in the market.  The large degree of transient business and pent-up demand left over from the downturn is also a factor.

While RevPAR forecasts for 2012 won’t reach the 8.2-percent RevPAR growth the U.S. industry saw in 2011, the three companies are predicting increases between 6.5% – 7.2%.

Hotel demand in the last two years has been record-breaking.  Through July, the industry sold more rooms during that span than ever, almost 106,000,000.

However,  not all markets are currently benefiting from the rise in RevPAR over the past two years. The majority of gains are being found in the top 25 gateway cities and sparsely throughout secondary markets.

The experts expect more construction in 2013 as more firms get sites under control.  However, compared to historic norms construction is very low.

Posted by Scott R. Lodde

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