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The Norris Group Real Estate News Roundup 7/9/10

Friday, July 9th, 2010

Sources:
http://www.nytimes.com/2010/07/09/business/economy/09rich.html?_r=2
http://blogs.wsj.com/wealth/2010/06/29/mansion-foreclosures-surge/
http://latimesblogs.latimes.com/money_co/2010/07/30year-mortgage-rate-edges-down-to-new-record-low.html
http://www.boston.com/business/articles/2010/07/09/banks_fight_changes_to_accounting_rules/
http://www.aba.com/Industry+Issues/FASB_advocacy.htm
http://www.dsnews.com/articles/fannie-mae-adopts-new-rules-for-pre-mod-income-verification-2010-06-28
http://www.lpsvcs.com/NewsRoom/IndustryData/Documents/06-2010%20Mortgage%20Monitor/LPS_Mortgage_Monitor_May_2010_Final.pdf

Today’s News Synopsis:

According to Greg Paquin, Sacramento new home sales decreased by 21.3 percent in the second quarter. Foreign home buyers purchased $66 billion of US residential property during the year ending May 2010. The VP of the Federal Reserve Bank of Cleveland believes that the high foreclosure rate is likely to continue for some time. Multiple economic statistics show that the tax credits may have simply hid an ongoing recession in real estate.

In The News:

Sacramento Bee – “New-home sales plunge in Sacramento area” (7-9-10)

“Second-quarter new-home sales in the Sacramento area fell 21.3 percent from the first quarter and by 50.1 percent from the already dismal second quarter of 2009, said Greg Paquin, a Folsom consultant who issued the sales report.”

Housing Wire – “REITs Raised $22bn for Real Estate Investments in 2010: NAREIT” (7-9-10)

“The US Real Estate Investment Trusts (REITs) raised $22bn in initial, debt and equity capital offerings in 2010, and as a whole the industry owns $500bn of commercial real estate assets, approximately 10% to 15% of total institutionally owned commercial real estate, according to a mid-year report by the National Association of REITs, NAREIT.”

Housing Wire – “International Investment in US Housing Market Rises: NAR” (7-9-10)

“Foreign home buyers — those with residency outside the US as well as recent immigrants and temporary visa holders — purchased $66bn of US residential property, or 7.27% of the market, in the year ending March 2010, according to the National Association of Realtors (NAR). Based on NAR’s existing home sales information, $907bn of residential sales occurred in the 12 months ending March 2010.”

Housing Wire – “DebtX Sees Commercial Mortgage Values Recover Slightly in May” (7-9-10)

“The aggregate value of commercial real estate (CRE) loans that collateralize commercial mortgage-backed securities (CMBS) rose to 76.6% of the original balance in May, from 76.4% in April, according to loan sale advisor DebtX. Values are up from 75.9% in March and 76.5% in February. CRE loan values are down from 77.6% in May 2009, according to DebtX.”

Housing Wire - “High Foreclosure Rate Likely to Persist, Cleveland Fed VP Says” (7-9-10)

“If past recessions are a guide, the nation’s high foreclosure rate is likely to persist, according to authors at the Federal Reserve Bank of Cleveland.”

Housing Wire – “Bank Bailout May Turn a Profit for Treasury, KB&W Report Finds” (7-9-10)

“The Capital Purchase Program, $205bn in financial firm relief funds from the Treasury’s $700bn stimulus package, the Troubled Asset Relief Program (TARP), is nearly repaid in full and likely to turn a profit, according to a report from broker/dealer investment bank Keefe, Bruyette and Woods.”

Housing Wire – “Ginnie Guarantees $33.4bn of MBS in June” (7-9-10)

“The Government National Mortgage Association — or Ginnie Mae — guaranteed more than $33.4bn of mortgage backed securities (MBS) in June.”

Inman - “Tax credits hid ongoing real estate slide?” (7-9-10)

“The economic data that did arrive confirmed a slipping recovery, but not a double-dip. The Institute for Supply Management service-sector report for June followed last week’s pattern: softer than prior month, and well below forecast (May 55.4, forecast 55, actual 53.8). New claims for unemployment insurance came down 21,000 last week to 454,000, but have been stuck in that range all year long. Mortgage refi applications have begun to rise, but purchase ones fell again, by 2 percent last week, now 42 percent below the end of April.”

Looking Back:

One year ago, the government-insured (FHA and VA loans) share of mortgage applications was 35.9 percent. The average 30-year rate dropped to 5.2 percent. UCLA economists predicted that commercial real estate demand would not return to 2006 levels until 2014. The Financial Crimes Enforcement Network reported that suspicious mortgage activities were increasing significantly.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 6/3/10

Thursday, June 3rd, 2010

Today’s News Synopsis:

Stats from Freddie Mac show the average rate for 30-year FRMs increased to 4.79 percent. Moody’s Investor Service reports commercial property values are down 42% from the peak in 2007. According to Trulia, many areas in the United States are now becoming cheaper to rent than own in. The US Department of Labor (DOL) received 10,000 fewer initial unemployment claims in the week ending May 29 than the previous week.

In The News:

Time - “The ‘Free Rent’ Approach: When Homeowners Just Stop Paying their Mortgages” (6-1-10)

“The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics”

Los Angeles Times – “A foreclosure fix” (6-2-10)

“Banks foreclosed on almost 200,000 homes in California last year, and this year’s toll is expected to be even higher. State lawmakers have tried to encourage banks to do more loan modifications that help both sides, keeping borrowers in their homes while cutting lenders’ losses. Yet homeowner advocates say a serious problem remains. Overwhelmed and disorganized, lenders continue to foreclose on borrowers who are in the process of negotiating new loan terms. At a time when the market is flooded with repossessed properties, that’s just inexcusable.”

Mortgage Bankers Association – “Mortgage Refinance Applications Increase Slightly, Purchase Applications Decline Further in Latest MBA Weekly Survey” (6-2-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending May 28, 2010.  The Market Composite Index, a measure of mortgage loan application volume, increased 0.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 0.3 percent compared with the previous week.”

NAR - “Pending Home Sales Surge Continuing” (6-2-10)

“The Pending Home Sales Index,* a forward-looking indicator, rose 6.0 percent to 110.9 based on contracts signed in April, from an upwardly revised 104.6 in March, and is 22.4 percent higher than April 2009 when it was 90.6. That follows gains of 7.1 percent in March and 8.3 percent in February.”

Orange County Register – “O.C. buyers grab 56% more new homes” (6-2-10)

“Buyers signed contracts to purchase 523 new homes in Orange County during this year’s winter quarter. That’s the highest number of sales contracts for any quarter since the spring of 2008.”

Orange County Register – “Realtors fight to expand loan protections” (6-2-10)

“At issue is a proposal that would forbid lenders from seeking unpaid portions of a refinanced mortgage after a home goes through foreclosure. Currently lenders can’t do that if the loan was issued at the time the home was purchased. In a law dating to the 1930s, the homeowner’s liability is limited to the amount the lender recovers from the property at a foreclosure sale — even if that’s less than the amount owed.”

Orange County Register – “Really? Problem banks list grows to 775″ (6-2-10)

“BAD DEBT: The FDIC’s confidential list of ‘problem’ banks grew to 775 in the first quarter, with U.S. banks collapsing amid losses on residential and commercial real estate loans. EXTEND AND PRETEND: At least 25% of commercial real estate loans are doomed to foreclosure, experts in Arizona say. Another 50% could go either way.”

Mercury News – “Mortgage rates up from yearly lows, Freddie Mac says” (6-3-10)

“Rates on 30-year fixed mortgages ticked up this week from the lowest level of the year. Freddie Mac said Thursday that the average rate rose to 4.79 percent, up from 4.78 percent last week. A year ago, the rate averaged 5.29 percent.”

Wall Street Journal – “Looking for Lending” (6-3-10)

“Compared to peak prices in October 2007, commercial property values are down 42%, according to Moody’s Investors Service Inc. Price index reports compiled by Moody’s and Real Capital Analytics Inc. show that as of March 2010, the cost of industrial and office space fell 32% in the last two years. Retail space also plummeted 28%.”

Housing Wire – “REIT Activity Picks Up in 2010 After Five Year Doldrum” (6-3-10)

“In 2005, publicly traded US REITs completed 6,351 acquisitions and 2,812 dispositions, compared to 360 acquisitions and 994 dispositions in 2009. The largest decrease in acquisitions was in the retail/other sector, which declined from 1,720 in 2005 to 65 in 2009, a decrease of 96.2%. The healthcare also saw a deep decline. In that sector, there were 103 acquisitions in 2009, compared to 402 in 2005, a drop of 74.4%.”

Housing Wire – “In Some Cities, Trulia Finds It’s Now Cheaper to Rent than Own” (6-3-10)

“The top areas where house prices worked out to be more expensive than renting were New York, Seattle, Portland, and San Francisco. Omaha, Neb., Oklahoma City, Okla., and Kansas City, Mo. also cracked the top-10 list.”

Housing Wire – “Jobless Claims Ease Ahead of May Unemployment Data” (6-3-10)

“The US Department of Labor (DOL) received 10,000 fewer initial unemployment claims in the week ending May 29 than the previous week, on a seasonally adjusted basis. The news of fewer initial claims arrives a day ahead of officially updated unemployment rate figures. Economists anticipate the fragile recovery added 55,000 jobs to private sector employment and 700,000 to total non-farm payrolls in May.”

Housing Wire – “May House Prices Show Highest Increase Since 2006″ (6-3-10)

“House prices climbed 6.8% in May 2010 from last year, the largest yearly increase since July 2006, according to a report from real estate data provider Clear Capital. In June 2009, Clear Capital reported a 19.3% drop in May house prices, a ‘far cry’ from the increase shown in this report a year later, said Alex Villacorta, senior statistician at Clear Capital. The rolling quarter-over-quarter number, which measures houses prices against those three months ago showed a 1.8% decline, an improvement from the 5% drop in April.”

Housing Wire – “Delayed Mortgage Liquidation Hikes Risk of RMBS Write-Downs” (6-3-10)

“The back-loading of defaults draws out liquidation timelines, impacting the expected losses to senior tranches of residential mortgage-backed securities (RMBS), according to Toronto-based credit rating agency DBRS. And in some cases, this raises the occurrence of write-downs by one-third, or 33%. Distressed loans move from 30 to 60 to 90-days delinquent and then follow the foreclosure timeline set forth in the appropriate state before entering REO status. Following this process, loans are liquidated from the RMBS trust.”

Housing Wire – “California Set to Vote on Foreclosure Mediation Bill” (6-3-10)

“Assembly Bill 1639 was introduced by a trio of Democratic members of the assemby — Pedro Nava (Santa Barbra), Ted Lieu (Torrance) and speaker emeritus Karen Bass (Los Angeles). If passed, the bill would establish the Facilitated Mortgage Workout (FMW) program. Through it, lenders are required to meet with borrowers to develop a modification plan before foreclosure. The loan must have originated before Jan. 1, 2009, and the home must be occupied by the borrower as a principal residence. The principal balance on the mortgage cannot exceed $729,750.”

Looking Back:

One year ago, MBA statistics showed that mortgage application volume decreased by 16 percent within one week. J.P. Morgan Chase, Goldman Sachs and American Express owed the government $38.4 billion. The FHA loan limit was raised to nearly $730,000 in Orange County, and was accepting 3.5% down on purchases.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 4/20/10

Tuesday, April 20th, 2010

Today’s News Synopsis:

According to MDA DataQuick, 81,054 Notices of Default  were recorded at county recorder offices during the January-to-March period in California . Marcus & Millichap Real Estate Investment Services claims that the gap between monthly rents and mortgage payments is at its lowest level in almost 20 years, making it easier to rent. Cushman & Wakefield estimates the commercial real estate market will take the longest to recover. HAMP completed 230,000 permanent modifications over 12 months.

In The News:

DQNews - “California Foreclosure Activity Declines Again” (4-20-10)

“A total of 81,054 Notices of Default (“NODs”) were recorded at county recorder offices during the January-to-March period. That was down 4.2 percent from 84,568 for the prior quarter, and down 40.2 percent from 135,431 in first-quarter 2009, according to San Diego-based MDA DataQuick.”

Mercury News – “New Obama mortgage plan at risk from fraud, report says” (4-20-10)

“Recent changes to the Obama administration’s mortgage assistance program may make it more vulnerable to fraud, a government watchdog says. The changes, announced last month, are intended to make it easier for struggling homeowners to avoid foreclosure. But the administration hasn’t done enough to warn the public about fraud and hasn’t included sufficient safeguards to prevent abuse, said the special inspector general for the Troubled Asset Relief Program, or TARP.”

Daily News – “Should you buy or rent a home? Cost gap narrows” (4-20-10)

“Thinking of buying a home? Consider this: The gap between monthly rents and mortgage payments is at its lowest level in almost 20 years. In some markets, the difference can be less than $100, according to a national study conducted for The Associated Press by Marcus & Millichap Real Estate Investment Services.”

Housing Wire – “Regulators Say Lehman Failure Makes Case for Financial Reform” (4-20-10)

“Driven to bankruptcy by massive downgrades of its failed subprime mortgage-related assets, now-defunct Lehman Brothers presents several lessons for lawmakers writing the policy response to ongoing financial fallout, expert witnesses told the House Financial Services Committee today. Sen. Ed Perlmutter (D-Colo.) cited a recent report on the causes of the Lehman bankruptcy, which found regulators supposedly knew of accounting gimmicks that allowed the firm the liquidity freedom to take on increasingly risky investments, but did not enforce corrective action.”

Housing Wire – “C&W: Commercial Real Estate Recovery Uneven Across US” (4-20-10)

“The national real estate market is in better shape than analysts anticipated given the largest employment declines in more than 70 years, but regional markets with the highest job losses, and the related overabundance of commercial properties vacant as businesses fail, will take longer to dig out of the recession, according to a report from Cushman & Wakefield (C&W). C&W, a real estate advising firm, said in its Economic Pulse report, that the recession did not hit all real estate markets equally.”

Housing Wire – “Financial Services Authority Begins Investigation of Goldman Sachs” (4-20-10)

“The Financial Services Authority (FSA), the market watchdog in the UK, will begin a formal enforcement investigation into Goldman Sachs (GS: 159.98 -2.05%) in the wake of the recent action by the Securities and Exchange Commission (SEC). Last week, the SEC charged Goldman for allegedly defrauding investors in a financial product tied to subprime mortgages. The SEC alleges Goldman and Fabrice Tourre, a vice president in the firm, misled and even omitted key facts about a synthetic collateralized debt obligation (CDO), ABACUS 2007-AC1.”

Housing Wire – “TARP Watchdog Says HAMP Changes Could Impede Modifications” (4-20-10)

“While foreclosures and bank repossessions rose in Q110 above year-ago levels — 16% and 35%, respectively — HAMP results in ‘very little progress’ so far, SIGTARP said, with only 230,000 permanent modifications completed over 12 months of operation (illustrated below). This represents only 8.2% of the foreclosures initiated in 2009, and fewer than only the most recent quarter’s bank repossessions.”

Bloomberg - “U.S. REITs May Raise More Than $25 Billion in 2010, NAREIT Says” (4-20-10)

“Real estate investment trusts in the U.S. may exceed the $25 billion they raised last year in share sales as an economic recovery boosts investor confidence, according to the industry’s main lobbying group. The money raised in the stock market last year principally went toward improving balance sheets after companies became too highly leveraged, said Michael Grupe, executive vice president of research at the National Association of Real Estate Investment Trusts. REITs will seek funds to acquire properties this year, he said.”

Orange County Register – “Laguna Beach homes taking 32% less time to sell” (4-20-10)

“The community’s share of its new deals in escrow involving distressed properties — foreclosures or short sales — is 8% or -21.95 percentage points vs. countrywide share. Note that this community has 1.2% of all the deals in escrow countywide — and 1.1% of all distressed deals in the works. Meanwhile, the city of Laguna Beach has 4.0% of the entire supply of resale residences that are listed for sale in Orange County.”

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The Norris Group Real Estate News Roundup 2/17/10

Wednesday, February 17th, 2010

Today’s News Synopsis:

 CBIA announced that housing affordability has decreased in 22 of California’s 28 metropolitan areas. The Commerce Department reports that housing and apartment construction increased by 2.8 percent last month. According to SFAR, there is a 3.5 month supply of housing inventory in the San Francisco market. A survey shows that large investment companies are spending more on REIT investments.

In The News:

CBIA – “California Housing Affordability Continues Slide in Fourth Quarter, CBIA Announces” (2-17-10)

“Housing affordability in California continued to fall throughout most of the state during the fourth quarter of 2009, the California Building Industry Association said today. The quarterly National Association of Home Builders/Wells Fargo Housing Opportunity Index found that homes were less affordable in 22 of the state’s 28 metro areas included in the report.”

Mortgage Bankers Association – “Mortgage Applications Decrease in Latest MBA Weekly Survey” (2-17-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending February 12, 2010.  The Market Composite Index, a measure of mortgage loan application volume, decreased 2.1 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 0.5 percent compared with the previous week.”

Los Angeles Times – “Housing construction rises 2.8 percent in Janury” (2-17-10)

“The Commerce Department said Wednesday that construction of new homes and apartments rose 2.8 percent last month to a seasonally adjusted annual rate of 591,000 units. That was better than the 580,000 annual pace that economists were forecasting.”

Housing Wire – “Continental Conflicts Arising Over Banker Pay” (2-17-10)

“The majority of banking executives oppose government intervention in setting bank compensation parameters, according to a bank executive survey conducted from Nov. 17-Dec. 3, 2009 by US audit firm Grant Thornton. The sentiment, however, is not as greatly embraced abroad. The survey found 96% of 246 respondents do not agree the government should play a role in determining compensation, while 61% do not think a requirement to evaluate compensation will reduce excessive risk-taking.”

Housing Wire – “San Francisco Inventory at 3.5 Month Supply” (2-17-10)

“Despite a lull in luxury home sales, prices are up and inventory is down in the San Francisco market, according to a joint research report released by the Rosen Consulting Group and the San Francisco Association of Realtors. The report said there is a 3.5-month supply of single-family homes on the market, down from 5.8 months in January 2009. Condo inventory was at a 4.1-month supply, down from 9.5 months in January 2009.”

Housing Wire – “FHFA Proposes New Performance Goals for Fannie, Freddie” (2-17-10)

“The FHFA required, as the first goal for single-family housing, that 27% of the total number of mortgages purchased by Fannie and Freddie be of low-income family housing. The FHFA defined low-income as not exceeding 80% of the area median income.”

Inman - “5 arguments for open houses” (2-17-10)

“Want to pick a fight in a roomful of real estate agents? Ask them whether they think open houses are worthwhile. We did the virtual equivalent of that, sending out an online request for comments from real estate agents about the effectiveness of open houses — and they responded by filling up the old inbox faster than we could clean it out. Their responses range from passionate conviction that open houses are ‘a must,’ to cynical observations that they’re of benefit to no one other than to agents who are trolling for new clients.”

Realty Times – “Investor Report: REITs” (2-17-10)

“New York and London-based research firm Preqin reports that 62 percent of the large investment companies it surveyed said they plan to buy into – or add to their holdings – of private equity REITs, or real estate investment trusts. That’s up from 45 percent in a similar survey Preqin conducted in early 2009.”

Looking Back:

One year ago, the NAHB reported that builder confidence reached an all-time low. CBIA claimed that the pace of new home sales was continuing on a decreasing trend. The California government ended 20,000 jobs. S&P estimated that commercial real estate defaults would reach 3.5 percent by the end of 2009.

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The Norris Group Real Estate News Roundup 1/26/10

Tuesday, January 26th, 2010

Today’s News Synopsis:

CBIA reports that 36,209 building permits were issued in California last year. The 30-year mortgage rate decreased by 0.4 percent in December. DBRS expects loan servicers to allow more principal reductions as more attempted modifications fail. According to RealFacts, the average  Orange County apartment rent fell 6.7% during the 4th quarter of 2009.

In The News:

CBIA - “It’s Official: California Housing Production Reached New Low in 2009″ (1-26-10)

“California homebuilders put up the lowest number of homes for a single year in 2009, beating the previous low that was set in 2008, the California Building Industry Association announced today.  CBIA said just 36,209 permits were issued statewide last year for new homes, apartments, condominiums and townhomes, down 44 percent from 2008 and down a whopping 83 percent – 176,751 units – compared to 2004, the peak of the latest cycle.”

Housing Wire – “Mortgage Insurer MGIC Loses $1.3bn in 2009″ (1-26-10)

“The Wisconsin-based mortgage insurer posted a total $1.3bn net loss in all of 2009, more than double the $525.4m net loss in all of 2008.”

Housing Wire – “Mortgage Rates Dip in December, Stay Above 5 Percent” (1-26-10)

“The average interest rate for a 30-year fixed-rate mortgage (FRM) of $417,000 or less was 5.05% in December, down from 5.09% in November. The average interest rate on 15-year, FRM of $417,000 or less was 4.54%, down from 4.63% in November.”

Housing Wire – “Going Forward, BarCap Expects Mixed Results from REITs” (1-26-10)

“Analysts at Barclays Capital (BarCap) project mixed results from the real estate investment trust (REIT) sector, as the companies begin releasing their Q409 and year-end earnings reports. On average, the analysts expect fourth quarter funds from operations per share (FFOPS) for the REIT sector to increase 6.1% year-over-year, but decline 28.1% on an operating basis, which they define as excluding non-recurring items.”

Housing Wire – “Home Prices Continue to Improve in November” (1-26-10)

“Annual home price declines were in the single digits in November 2009, as the Standard & Poor’s (S&P)/Case-Shiller home price indices continue a 10-month run of improved results. The monthly indices track existing home prices every month on a year-over-year basis in 20 markets, broken down in 10-city and 20-city composites. The 10-city composite declined 4.5% and the 20-city composite declined 5.3% in November 2009 compared to November 2008.”

Housing Wire – “DBRS Expects Re-Defaults to Drive Principal Forgiveness” (1-26-10)

“With more than half of all modified loans expected to re-default in 2010, servicers are likely to increase the use of principal forgiveness, as an option to bring these continually distressed mortgages current, rating agency DBRS said in commentary yesterday.”

Bloomberg - “Fed Weighs Interest on Reserves as New Policy Rate“ (1-26-10)

“Federal Reserve policy makers are considering adopting a new benchmark interest rate to replace the one they’ve used for the last two decades. The central bank has been unable to control the federal funds rate since the September 2008 bankruptcy of Lehman Brothers Holdings Inc., when it began flooding financial markets with $1 trillion to prevent the economy from collapsing. Officials, who began a two-day meeting at 2 p.m. today in Washington, have said they may replace or supplement the fed funds rate with interest paid on excess bank reserves.”

Orange County Register – “Lake Forest has biggest O.C. rent cuts” (1-26-10)

“The average rent in that city was $1,347 a month during the fourth quarter vs. $1,520 in the fourth quarter of 2008. That compares to an average decrease of $105 countywide, according to RealFacts. The average  Orange County apartment rent fell 6.7% to $1,473 during the final three months of last year.”

Orange County Register – “4 O.C. cities top CA. home price gains” (1-26-10)

“The overall median price in December  was $496,070, down 0.6% from November, but up 12.1% from the prior year. Sales were up 4.5% from November and up 17.9% from December 2008.”

Looking Back:

One year ago, the NAR reported that existing home sales had increased by 6.5 percent within one month. Statistics from First American Corelogic showed that home prices fell in 38 U.S. states. Banks disposed of over $1 billion in loan and construction debt within one quarter. Distressed home sales represented 50 percent of the Southern California housing market.

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The Norris Group Real Estate News Roundup 1/15/10

Friday, January 15th, 2010

Today’s News Synopsis:

Statistics from 10 primary U.S. cities show that home prices declined by 1 percent. ABA expects economic growth to increase at 3.1 percent through 2010. The U.S. Treasury Department reports that 66,465 permanent modifications were made in December.  Chris Thornberg forecasts that home prices will dip again in 2011.

In The News:

Housing Wire – “JP Morgan Says Sell Mortgage Bonds as Fed Snaps Up Record MBS” (1-15-10)

“The spread of mortgage-backed securities (MBS) bonds yields to Treasuries is tight and likely to remain tight in the near-term, but swap spreads are currently 5-10 bps too narrow to greatly entice private investors, according to a JP Morgan Securities conference call on MBS and asset-backed securities (ABS).While private investors largely hold on the buy side, the government continues to buy up agency MBS as part of its $1.25trn agency MBS-purchase program.”

Housing Wire – “House List Prices Down 1% in December: Altos” (1-15-10)

“Altos Research’s listing price index declined 1% in December and 1.4% during Q409, but for the year, the 10-city composite price index was up 5.2%, the company said, adding it projects asking prices to continue to decline during the winter 2010 months.”

Housing Wire – “ABA Expects Economic Recovery Will Fuel Job Growth in 2010″ (1-15-10)

“High unemployment and constrained consumer spending will keep the speed of recovery in check, but ABA economists indicated real gross domestic product (GDP) will grow at an annualized rate of 3.1% throughout 2010. It’s half the historic rate of GDP growth seen after previous deep recessions, leaving the unemployment rate fairly high – but below 10% – at year-end.”

Housing Wire – “HAMP Servicers Permanently Modify More Than 66,000 Mortgages” (1-15-10)

“Servicers participating in the Home Affordable Modification Program (HAMP) completed 66,465 permanent modifications through December, according to a report from the US Treasury Department. It’s more than double the 31,382 permanent modifications reported through the month of November. More than 40,000 more active modifications need only the borrowers signature to become permanent, totaling 112,521 permanent modifications approved by the servicers.”

Housing Wire – “JP Morgan Posts Q4 Profit Despite Mortgage Losses” (1-15-10)

“JP Morgan said it made approximately 600,000 mortgage modification offers to homeowners and approved 120,000 modifications during 2009.”

Housing Wire – “Treasury Raises Cap on HAMP to $35.5bn” (1-15-10)

“The US Treasury Department raised the total amount of potential capped incentive payments for the Home Affordable Modification Program (HAMP) from $27.7bn to $35.5bn, according to the latest Troubled Asset Relief Program (TARP) report.”

Bloomberg - “U.S. REITs Poised to Boost Dividends After Raising $33 Billion” (1-15-10)

“A dozen U.S. real estate investment trusts, part of an industry that raised $33 billion last year, likely will increase their next quarterly dividends. Public Storage, Annaly Capital Management Inc., and Inland Real Estate Corp. are among those that may boost payouts, data compiled by Bloomberg show. Vornado Realty Trust said this week it would resume paying its dividend fully in cash after a year of issuing it partially in stock. ”

Inman - “RPR courting MLSs” (1-15-10)

“By promising not to compete with MLSs — and allowing them an opportunity to make a quick exit from RPR if they aren’t satisfied with the results — company executives say they are out to sign up half the nation’s roughly 900 MLSs by the end of the year.”

Orange County Register – “Home sales, prices seen falling in 2011″ (1-15-10)

“Orange County-based homebuilders were told Thursday that the recession may be over, but the future for the economy and the housing industry remains uncertain. As if to underscore that point, economist Chris Thornberg released a forecast projecting that after modest gains this year, home sales and prices will dip again in 2011 because of rising foreclosures and interest rates.”

Looking Back:

One year ago, the NAR announced that sales on homes priced above $750,000 had decreased by nearly 50 percent. The rate for 30-year fixed mortgages dropped below 5 percent. The CBIA claimed that new home sales in California were “glacially slow”. Statistics from the Federal Reserve showed that jobless claims were rising.

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The Norris Group Real Estate News Roundup 1/7/10

Thursday, January 7th, 2010

Today’s News Synopsis:

Home equity delinquencies increased to 4.3 percent of all accounts. Many construction companies reported an increase in profit during the 4th quarter of 2009. REIS Inc. reports that U.S. apartment vacancies rose to 8 percent last quarter. According to Freddie Mac, mortgage rates decreased to 5.09 percent from last week.

In The News:

Housing Wire – “Lennar Posts Quarterly Profit, Expects $320M Tax Refund” (1-7-09)

“Miami-based homebuilder Lennar (LEN: 15.70 +14.60%) reported net earnings of $35.6m, $0.19 per share, for its fiscal year fourth quarter that ended Nov. 30 and said it will receive a tax refund of $320m as a result of legislation that temporarily allowed companies to recoup losses from taxes paid in profitable years.”

Housing Wire – “Invesco Mortgage Capital Planning Another Share Sale” (1-7-09)

“Seeing a growing appetite for deals from investors, Invesco Mortgage Capital (IVR: 22.37 -2.10%), a real estate investment trust (REIT), plans to offer 7m shares of its common stock for sale in order to fund the acquisition of residential and commercial mortgage-backed securities (RMBS and CMBS) and leveraged mortgage loans.”

Housing Wire – “Delinquency Grows in Home Equity Loans, Lines of Credit: ABA” (1-7-09)

“Housing-related loans continued to show stress. Home equity loan delinquencies hit another record in the quarter, jumping 29 bps to 4.3% of all accounts. Home equity lines of credit rose 20 bps to 2.12% of all accounts. Mobile home delinquencies increased to 3.63% of all accounts, from 3.53% the previous quarter.”

Housing Wire – “Beazer to Offer 18m Shares, $50m in Convertible Debt” (1-7-09)

“Beazer Homes (BZH: 5.06 +6.08%) will issue new common stock and convertible subordinate debt, the Atlanta-based homebuilder said in a pair of Securities and Exchange Commission (SEC) filings. According to the filings, Beazer will issue 18m shares of common stock and $50m in convertible subordinate debt which will convert to stock shares in 2013.”

Bloomberg - “Job Growth Erodes as Housing Bust Pushes Mobility to Record Low” (1-7-09)

“Some households are staying put because they owe more on their mortgages than their properties are worth; others have trouble selling houses in depressed areas, economists say. The S&P/Case-Shiller composite index of home prices in 20 U.S. metropolitan areas was down 29 percent in October from its July 2006 peak.”

Bloomberg - “Principal Cuts on Lender Menus as Foreclosures Rise” (1-7-09)

“While interest-rate reductions or extending loan terms reduce homeowners’ monthly payments, they don’t give much comfort to borrowers who owe more on their homes than their properties are worth. Borrowers who don’t have equity in their homes are more likely to hand over the keys when they run into trouble.”

Bloomberg - “Lennar Leads Builders Higher on Report of Unexpected Profit” (1-7-09)

“Lennar Corp. led U.S. homebuilders higher after the company reported an unexpected quarterly profit as it took advantage of a tax change in the way it accounts for land sales. A Standard & Poor’s measure of 12 home construction companies rose as much as 5.4 percent, the most since November. Lennar climbed as much as 13 percent. KB Home, M/I Homes Inc., Toll Brothers Inc. and D.R. Horton Inc. all gained.”

Bloomberg - “Mortgage Rates on 30-Year U.S. Loans Fall to 5.09%” (1-7-09)

“Mortgage rates in the U.S. fell for the first time in five weeks, lowering borrowing costs and offering a boost to potential buyers. The rate for 30-year fixed U.S. home loans fell to 5.09 percent for the week ended today from 5.14 percent, mortgage finance company Freddie Mac said. Rates hit a record low 4.71 percent the week of Dec. 3. This week’s average 15-year rate was 4.50 percent, Freddie Mac said in today’s statement. ”

Bloomberg - “Record U.S. Apartment Vacancies Force Landlords to Cut Rents” (1-7-09)

“U.S. apartment vacancies rose to a record 8 percent in the fourth quarter and rents fell the most in three decades as unemployment cut demand, according to Reis Inc.”

Looking Back:

One year ago, the Mortgage Bankers Association reported that mortgage applications were decreasing. Statistics from Default Research showed that foreclosures and defaults had significantly increased across California. Apartment rents fell and vacancy rates increased to a 4 year high. Freddie Mac reported that mortgage rates fell for the 9th week in a row.

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99-TNG Radio – Lee and Associates 12-6-08

Friday, December 5th, 2008

Paul-Earnhart

Paul Earnhart

Founding Principle of Lee and Associates

 Erik-Hernandez


Erik Hernandez

Senior Vice President of Lee and Associates

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Bruce Norris is joined this week by Paul Earnhart (Founding Principle) and Erik Hernandez (Senior Vice President) of Lee and Associates in Ontario, CA.

Lee and Associates specializes in industrial commercial real estate. Bruce asks when the commercial real estate market peaked. Paul said the peak was about the same as residential but that it became more obvious in July of 2007. This is when several partners backed out of deals and much more scrutiny started taking place.

Bruce asks Erik about financing and if commercial had its own version of stated income. Erik says Lehman was doing commercial lending as well but it wasn’t as aggressive. Paul says lenders were willing to finance on sales comparables instead of income streams. No income stream analysis was taking place but now that has changed.

The typical buyer from 2004-2006 in the commercial Inland Empire market were Asian entrepreneurs and domestic buyers for consumer services. The market has receded but some areas on the outer edges of the Inland Empire are being hit harder. No new development is taking place. Foreign investors haven’t disappeared but are slow and cautious when making decisions.

Bruce asks if commercial deals were leveraged or if they were bought cash. Erik says if it was an owner occupant (owner user) the deal would typically have 10% down and 90% would be financed. Lenders would do a first trust deed at 50% and then a second at 40% would be guaranteed by the Small Business Administration (SBA). Erik says this program is currently still around. Wells Fargo, Bank of America, and some regional banks are still active in the commercial arena since they are only 50% into a transactions. Bruce asks if the SBA is in line for the bailout.

Paul says prices are down around 15% from the peak. There are a few spots where it’s worse. For those that can’t refinance, they are letting the building go into foreclosure.

Paul says they are expecting a rough road for the coming year. Rents and values have dropped and financing is impossible for some. The SBA financing is only good up to $3 million dollars. Anything over must use conventional financing. SBA is also more conservatively underwriting their loans. SBA is paying more attention to debt-coverage ratios (DCR) as opposed to pure sale comps. DCR measures your ability to pay the property’s monthly mortgage payments from the cash generated from renting the property. SBA has not dried up so financing is still there.

Conventional financing is now limited to 65% of value. Lenders are much more cautious here. Bruce asks about mezzanine financing. Paul says it’s changed. Mezzanine financing used to be anything above 75% loan to value. Now it’s 60% loan to value. If the underlying lender will allow it, it’s much more expensive. 14-15% rates will apply and the financing will be for 3-5 years typically. The first can be around 10 years. They will want to get as much risk out of the way as possible.

If the property is very good construction and has good tenants, Cap rates are held low. Investors feel better protected here. The all cash buyers are looking for these nicer buildings. Leveraged buyers see higher cap rates. Caps rates are up 25% and Paul expects it to go up another 10%.

Bruce asks about what happens when a cap rate goes up from six to eight and what happens to the value. Paul says about a 25% in value takes place. Any new development is nearly impossible because land and construction can’t keep up with price adjustments. Bruce says similar things are happening for the residential market as properties are being bought for land value.

Bruce brings up that there is $100 billion of commercial financing that comes due in 2009. Bruce asks if Paul and Erik think it’s a problem for those hoping to refinance. Paul thinks that number is low because that number is premised on individual loans and some business have leveraged their building for lines of credit and those are coming due as well. Paul says that lenders can also make margin calls on these lines of credit. It could be a huge problem.

Bruce asks if pension funds buy real estate free and clear. Paul says that is true and pension funds don’t act as quickly and have a longer range outlook for investments. REITs are structured differently and some are fairing better than others. Bruce and Paul talk about REIT values going through the floor and if that will change how they are able to fund future projects.

There were many non recourse loans being made in commercial. Non recourse loans are now much more difficult to get.

Bruce asks about how insurance companies are involved and if they are big players in the financing of commercial real estate. Paul says they are much more risk averse and have pulled back in availability of funds.

Paul says vacancies are not out of control yet but they are starting to increase. Erik talks about vacancy (buildings with no tenants) versus availability rates. Many companies are subleasing space since down sizing is taking place. Vacancy numbers may be around 6% for the West End but availability rates are around 12%.

More coming next week and you can find Paul and Erik at lee-assoc.com.

Paul Earnhart is the founding Principle at Lee & Associates – Ontario which is one of the most successful commercial real estate teams in Southern California.

Paul has been with Lee & Associates since 1983. Paul has his Juris Doctorate from Western State University and is affilaited with the Society of Industrial and Office Realtors (SIOR), the American Industrial Real Estate Association, the Industrial Asset Management Council, State Bar Association of California, and the Board Member of the Inland Empire Economic Partnership. Paul speaks for the American Industrial Real Estate Association Annual Forecast Meeting, the Appraisal Institute Annual Real Estate Recap, and the Inland Empire Economic Partnership.

Erik Hernandez a Senior Vice President with Lee & Associates – Ontario, and a partner with TEAM EARNHART. TEAM EARNHART continues to be one of the most successful commercial real estate teams in Southern California, and has achieved regional and national recognition within Lee & Associates and the real estate community for its success. TEAM EARNHART has a combined experience of over 50 years and has completed over $3 billion worth of real estate transactions.

Specializing in industrial real estate, Erik’s specialties include active land sales and development, tenant/buyer representation, landlord representation and investment sales and analysis. Erik has been active in the commercial real estate market in the Inland Empire for over eleven years, and has been a licensed real estate agent with Lee & Associates since 2000. He is a CCIM (Certified Commercial Investment Member) candidate, expecting to complete the designation in 2006. Erik was also selected to part of NAIOP’s2006-07 Class of the Young Professionals Group.

Erik brings a unique perspective to the review and analysis of the commercial real estate market, having previously directed the market research efforts for two Lee & Associates’ offices (Ontario and Las Vegas, Nevada) from 1995 through 1999, and also directed a companywide, 10 office market research effort for a major competitor from 1999 to 2000, before returning to Lee & Associates as a sales associate and member of Team Earnhart in 2000.

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