Marriott Opens SpringHill Suites in Pigeon Forge, Tennessee

Hotel World Network

Marriott International opened the 112-suite SpringHill Suites by Marriott in Pigeon Forge, TN on Thursday, April 8, 2010.  Located at 120 Christmas Tree Lane, the SpringHill Suites Pigeon Forge will operate as a Marriott franchise, managed by Gibson Hotel Management Inc.

Located in downtown Pigeon Forge and five minutes from Dollywood Amusement Park, the SpringHill Suites Pigeon Forge offers guests convenient access to Great Smoky Mountains National Park, Incredible Christmas Place and the hundreds of other attractions in Pigeon Forge.  Rates begin at $119 per night.

“We’re delighted that the SpringHill Suites Pigeon Forge is the latest addition to our growing number of properties across the U.S.,” said Brian King, senior vice president, Select Service and Extended Stay Brand Management, Marriott International.  “The hotel’s design offers a seamless blend of style and function at an affordable price.”

The SpringHill Suites Pigeon Forge is ideal for business and leisure travelers who look for style and inspiration in their stay.  Everything from furniture to lighting is carefully selected to offer a calm and refreshing alternative for travelers. Separate living, working and sleeping spaces assure guests have flexibility and ease. The perfect place to sink into a good night’s sleep, the hotel offers luxurious bedding alongside an iHome docking station in every suite. A comfortable pullout sofa bed and lounge chair with ottoman offers additional space for relaxation or extra family members. Presenting guests with a spa-like experience, a separate bathroom and shower area, feature marble-top vanity, iridescent tile walls and creative lighting features, all of which help to reenergize and revive.  Each thoughtfully designed suite also offers a microwave, refrigerator and a 37-inch HDTV.

Property Investors Shift Focus to Europe over U.K.

Reuters

Aviva, CBRE Investors see Europe as more attractive vs UK

 

 

LONDON - Surging commercial real estate values in the UK is causing European property investors to shift their focus to the continent as they chase strong returns there, property experts told a conference on Friday.

"We are seeing much more interesting opportunities on the continent ... Pricing in the UK, while it still offers value, is less compelling than it was a year ago," Ian Gleeson, chief investment officer of CB Richard Ellis Investors, said at the London Business School's Real Estate Conference.

UK commercial property values have risen 13 percent since July 2009 as the market rebounds from a two-year downturn, although the tenant market remains weak with average rents continuing to decline.

Ben Stirling, managing director at Aviva Investors, said the firm estimates ungeared continental property returns at an aggregate 7.5 percent from 2010 to 2015, compared with its forecast for the UK of about 8.5 percent.

"On the face of it, the UK appears attractive from a returns perspective, but a lot of the value in the UK is being delivered during the course of this year and we expect the returns profile will be less compelling going forward," Stirling said.

Both firms see value in the French and German commercial property markets, while Aviva is also interested in other western European regions, such as the Nordics and Benelux.

Stirling said he was concerned about debt issues in "fringe" markets such as Spain and Ireland.

Land Securities Chief Executive Francis Salway defended the London office property market, saying prospects for the sector were strong as developers had not overbuilt as they had in the early 2000s.

"London is a global city, a lot of businesses are not serving Newcastle or Manchester, they are serving Singapore, Hong Kong, New York," he said, adding London firms have continued to plan their expansion in line with global growth.

Last November, Land Securities unveiled plans to kick-start three new developments in London's West End retail and business district this year, for delivery in 2012-2013.

Rush is on to Claim First-Time Home Buyer's Tax Credit

USA Today

 

After breaking up with her longtime boyfriend and finding a job she loves in Denver, Quinn Kelsey decided last Friday to take advantage of the home buyers' tax credit.

She found a condo she liked in her neighborhood and called a local Realtor's office to hire an agent. She got preapproved for a loan in an hour. Early this week, she put in her offer, with just one contingency: Her offer had to be accepted before the tax credit deadline Friday.

After all, it's the main reason she decided to rush and buy now. Her offer was accepted Tuesday night.

Buyers like Kelsey have been in a final sprint for the past week to meet Friday's deadline for signing purchase contracts to stay eligible for the tax credit, worth up to $8,000 for first-time home buyers and up to $6,500 for move-up buyers. Many Realtors have been busier than in months past, homes that languished on the market have suddenly gotten offers, and buyers who were sitting on the fence have quickly cobbled together offers in the nick of time.

If a binding sales contract is signed by April 30, home buyers have until June 30 to complete the purchase. The tax credit is projected to have added 2 million first-time buyers in 2009 and be adding another 900,000 in 2010, plus 1.5 million repeat buyers, according to the National Association of Realtors.

More calls, more visits

Signs of the last-minute purchase rush:

•Sheldon Good & Co., a national real estate auction, has scheduled a one-day auction of 25 residences at Market Street West — a 60-unit condo building in Willow Springs, Ill. — today to purposely allow both first-time and repeat home buyers to take advantage of the expiring tax credit.

"We're doing a selling event to take advantage of the tax credit deadline," says Craig Post, managing director of Sheldon Good.

•Fields Development Group's The Saffron in Jersey City reports it has had a high velocity of sales from home buyers looking to take advantage of the tax credit. In the past several weeks, the new collection of 76 condos has seen a rush of first-time buyers who want to benefit from the tax credit, resulting in significant buyer activity — pushing the building past the mark of 40% sold.

Homes at The Saffron are available for immediate occupancy, which allows purchasers to close in time to be eligible for the credit.

"The tax credit really made us decide to do it sooner," says Chris Seminowicz, a first-time home buyer who closed April 9 on a condo at The Saffron.

•Elika Associates, a buyers' brokerage firm in New York, is seeing a surge in calls from first-time home buyers eager to pull the trigger before Friday. In the past two months, it has been averaging dozens of inquiries a day from preapproved buyers searching for homes in the $400,000 to $700,000 range. With the deadline looming, many of these buyers are now opening up their search to fringe neighborhoods that they may have bypassed earlier.

"People need to have the contract signed, so you've definitely seen a pickup (in activity)," says Bob Walters, chief economist at Quicken Loans, where buyers are turning for preapprovals and mortgage loans. "There's been a significant influx of people trying to take advantage of this."

But there can be risks in a rush.

Buyers of Raleigh real estate may be so eager to get the tax credit that they may sign a mortgage agreement without really understanding all the terms, says Sylvia Alayon, vice president of operations at Consumer Mortgage Audit Center in Fort Lauderdale.

They may not grasp that their principal and interest payments will stay the same, but insurance and taxes will go up, for example. Or they may not understand what will happen to their loan, such as whether it will reset to higher payments, if it's not a fixed-rate loan.

"I'd be concerned about bullying tactics, such as, 'You have to do this because it's going to expire,' " Alayon says. "Unfortunately, if you're in a mad rush, you're not going to give yourself time to inspect your mortgage. My concern would only be that they wouldn't conduct due diligence."

And many buyers are in a mad scramble.

"I've sold more houses in the past 30 days than in the past five years. It is so exciting to see the multiple contracts again. It's what we Realtors live for," says Lisa Stickels in Fairfield, Iowa. "Everyone at the Century 21 where I work is falling over each other to get to the folks who are showing up by the boatload. These buyers (and) sellers know they are under the deadline to get the first-time home buyer tax credit."

Brokers also are seeing an increase in business in the past days as buyers try to get under contract in time.

"I have seen a spike this week in people scrambling to get preapproved for a mortgage so that they can get under contract by Friday. Both yesterday and today I have seen buyers trying to squeeze in before Friday," says Gary Parkes, a broker in Woodstock, Ga. "Most sellers will not entertain an offer on a home without a preapproval letter, meaning us mortgage professionals need to help these last-minute buyers."

The tax credit has already been credited with bolstering sales.

Existing-home sales rose 6.8% to a seasonally adjusted annual rate of 5.35 million units in March from February, according to the National Association of Realtors.

Last fall, before a previous tax credit expired, existing-home sales peaked at a 6.5 million annual rate, according to Moody's Economy.com. This spring, they're expected to peak at a 5.7 million rate in May.

Rising Defaults Aside, Commercial Mortgage Market Rallies

NASDAQ

 

NEW YORK -(Dow Jones)- Commercial mortgage bonds continue to find favor with investors, who see value in these securities despite forecasts that the default rate will climb above 11% this year.

Both cash bonds and the derivative index that tracks commercial mortgage bonds tightened considerably in recent weeks. The Markit CMBX 5 index for triple-A bonds, a benchmark, traded near 90 points Friday, not far from its record high of 95.31. It had been as low as 55 in 2009, when investors feared that commercial real estate would follow residential mortgages off a cliff.

Even at these levels, investors say commercial mortgage securities are cheap compared with similarly rated assets in other sectors and suggest that the level of defaults priced into the market may be higher than what is to come.

"No doubt there are a lot of defaults that are yet to come in commercial real estate, but it's not as bad as some people say," said Jeffery Elswick, managing director and director of fixed income at Frost Investment Advisors in San Antonio.

The money manager has been ramping up his purchase of cash bonds backed by commercial mortgages for his clients from the start of this year.

"If as an investor you are able to look at fundamentals for every single bond, then there are many opportunities where the market's implied defaults are higher than reality," Elswick said.

Unemployment, which is a key determinant of commercial mortgage performance, remains stubbornly high at 9.7%, suggesting that commercial real estate is likely to remain under stress. But evidence of economic recovery and investor confidence are helping this sector finally catch up with the rally in other credit markets.

Other issues remain. The second-largest whole loan in the sector, a $2.9 billion five-year loan spread across six commercial mortgage securities, was transferred to its special servicer last week. Beacon Capital is seeking to modify or restructure the loan, which matures May 2012.

The key for investors is knowing what to buy and what to avoid. Elswick and his team delve into the nitty gritty details of each loan that is pooled into a bond, and determine, on a property-by-property basis, the likelihood of default before they put their money down.

Mary MacNeill, managing director at Fitch Ratings, and her team undertook a similar exercise recently, and found that large loan defaults increased sizably in 2009. She expects that trend to continue this year.

They also found other pockets of weakness--poorly underwritten loans from 2006 to 2008, luxury hotel and retail loans--are likely to keep commercial real estate generally under stress for the rest of the year.

Citi analysts say the index could tighten another 100 basis points to get close to its historic trends, but much of the gain is likely to be restricted to the top-rated tranches.

"The credit curve will continue to steepen as the lower tranches face the very real risk of near-term credit events with interest shortfalls," Citi said.

NY’s Battery Park City, Visionaire Awarded

Epoch Times

 

NEW YORK—Awards for great urban spaces and excellence were announced at the Urban Land Institute (ULI) Real Estate Summit in Boston last Friday. Ten outstanding developments from the Americas were selected as winners of the ULI’s Awards for Excellence: The Americas Competition.

New York City’s Visionaire grabbed a spot in the top 10—the development in Battery Park City being one of several residential enterprises to make the cut. The 35-story Visionaire—combining 247 residences, an organic and local food market, and a 44,000-square foot maintenance facility—has achieved LEED-Platinum certification through the use of geothermal wells, photovoltaic solar panels, an on-site blackwater treatment plant, and a natural gas-fired microturbine.

The developers were the Albanese Organization & Starwood Capital. The Albanese Organization has been involved in several projects around Battery City, including the Solaire, the country’s first LEED-certified building.

The Visionaire and Solaire are part of a larger Battery Park development, which won the ULI’s Heritage Award.

The Battery Park City Master Plan, adopted in 1979 by developers Battery Park City Authority, has facilitated the private development of 9.3 million square feet of commercial space, 7.2 million square feet of residential space, and nearly 36 acres of open space in lower Manhattan. The park is a “model for successful large-scale planning efforts and marking a positive shift away from the urban renewal mindset of the time,” ULI’s press release said.

ULI says the Heritage Award is not an annual award, but is bestowed periodically to developments that have demonstrated industry excellence and made substantial contributions to the greater community's well-being for at least 25 years.

The only development outside of the United States to be given an Award for Excellence is a huge open-air mixed-use complex in Guadalajara, Mexico. The Andares features a 197-store shopping center, nine apartment towers, two office buildings, and a luxury hotel. It was one of the largest private investments in Mexico in 2009 and was developed by Desarrolladora Mexicana de Inmuebles S.A.
Great Urban Spaces Awarded

Detroit’s Campus Martius Park, a 2.5-acre thriving green space created from a desolate downtown parcel, has received national recognition as the first-ever winner of the ULI Amanda Burden Urban Open Space Award. The award for the park, unique in a city more often characterized by hardship than success, was based on a competition to recognize an outstanding example of a public open space that has catalyzed the transformation of the surrounding community, the ULI release said.

The park hosts an ice skating rink, moveable seating, and serves as an entertainment venue. The space attracts more than 2 million visitors year-round, and has catalyzed an estimated $700 million of adjacent development, including street level cafes, retail shops, and the new 1 million-square foot Compuware World Headquarters, ULI said.

The Urban Open Space Award was given out for the first time, after an initiative by Amanda Burden, chair of the New York City Planning Commission, director of the New York Department of City Planning, and 2009 laureate of the ULI J.C. Nichols Prize for Visionaries in Urban Development. With her $100,000 prize money from the award last year, Burden pledged to use the money for the Urban Open Space Award.

“What makes Campus Martius Park work so well is that quite simply, it’s a place where people want to spend time,” Burden said in a press release. “As a result, it’s a magnet for investment. That’s the definition of a successful urban open space.”

Campus Martius Park was chosen over 87 other entries throughout the United States.
 

Other Urban Open Space Finalists:

• Bremen Street Park, Boston, Massachusetts (Brown, Richardson & Rowe, Inc./Massport) Bremen Street Park replaced a Park ‘n Fly lot, reuniting a neighborhood in East Boston that was formerly divided by an airport and highway. The 18.5-acre rectilinear park provides significant public space accessible to mass transit in a diverse, low-income neighborhood.

• Falls Park on the Reedy, Greenville, South Carolina, (City of Greenville). Reclaimed riverfront land once used by textile mills, Falls Park on the Reedy is a 26-acre park that straddles the Reedy River in downtown Greenville. The park—responsible for accelerating private development in the city’s historic West End—features a curving pedestrian suspension bridge that overlooks the natural falls.

• Herald and Greeley Square Parks, New York, New York (34th Street Partnership) Once desolate and dangerous, Herald and Greeley Square Parks in New York City have been recently renovated, becoming a haven for the neighborhood’s residents, visitors, and workers. The well-shaded triangular pocket parks feature movable seating flanked by raised flower beds, creating protected public space in one of the busiest and most urbanized locales in the world.

• Olympic Sculpture Park, Seattle, Washington (Seattle Art Museum) The nine-acre Olympic Sculpture Park has reclaimed Seattle’s waterfront for its residents, whose access had been restricted by rail lines and a highway. The z-shaped topography rises above the existing infrastructure, providing access to a restored beach designed for ecological education and serving as a home for the Seattle Art Museum’s sculpture collection. With more than 1.5 million visitors in three years, this green space has become a vibrant, year-round gathering place.

• Schenley Plaza, Pittsburgh, Pennsylvania (Pittsburgh Parks Conservancy) Schenley Plaza has transformed an overgrown parking lot into a five-acre green space in Pittsburgh’s Oakland Civic and Cultural District. The urban square—which features a large lawn, multiple gardens, and a carousel—is designed to erase divisions in the community and improve circulation among the nearby university campuses, offices, and residential neighborhoods.

The 2010 Awards of Excellence Winners are (developers in parentheses):

• Andares, Guadalajara, Mexico (Desarrolladora Mexicana de Inmuebles S.A.) Andares, one of the largest private investments in Mexico in 2009, is an open-air mixed-use complex that features a 197-store shopping center, nine apartment towers, two office buildings, and a luxury hotel.

• Bethel Commercial Center, Chicago, Illinois (Bethel New Life) Located in a low-income neighborhood on the west side of Chicago, Bethel Commercial Center is a mixed-use transit center equipped with retail space, employment offices, a bank, and a day care center, allowing residents to drop off and pick up children and get to and from work, all without the use of a car.

• Columbia Heights, Washington, D.C. (The Government of the District of Columbia) Arising from a city-led initiative to revitalize a neighborhood destroyed in the riots following Martin Luther King Jr.’s assassination, Columbia Heights features 1.2 million square feet of new development, including more than 600 housing units, 650,000 square feet of large-format and community retail, and refurbished cultural and public spaces.

• Foundry Square, San Francisco, California (Wilson Meany Sullivan) Foundry Square is a four-building, 1.6-million-square-foot commercial development in San Francisco’s Transbay District that revitalizes an area that historically lacked pedestrian street life and significant public open space.

• LA Live, Los Angeles, California (AEG) The $2.5 billion LA Live is a 5-million-square-foot entertainment district in downtown Los Angeles, creating a 24-hour destination and sparking further private development in a formerly underdeveloped area of the city.

• Madison at 14th Apartments, Oakland, California (Affordable Housing Associates) The product of a complex and successful public-private financing scheme, Madison at 14th Apartments provides 79 affordable units for families and former foster youth in Oakland, California.

• Sundance Square, Fort Worth apartments, Texas (Sundance Square Management) The culmination of a 25-year development process, Sundance Square is a 38-block mixed-use district in the heart of Fort Worth that has used pedestrian-friendly design to regenerate the downtown and stem suburban flight.

• Thin Flats, Philadelphia, Pennsylvania (Onion Flats) Certified LEED for Homes Platinum, Thin Flats is an eight-unit infill development in north Philadelphia that uses solar hot water heating, green roofing, and rainwater harvesting to reduce energy consumption by an estimated 50 percent.

• Vancouver Convention Centre West, Vancouver, British Columbia, Canada (BC Pavilion Corporation) Knitted into the urban fabric of Vancouver’s downtown core, the 1.2-million-square-foot Vancouver Convention Centre West establishes an important link the city’s park system, connecting to the existing harbor greenbelt with a major civic plaza and a six-acre living roof—one of the largest in Canada.

• The Visionaire, New York, New York (Albanese Organization & Starwood Capital) The 35-story Visionaire—combining 247 residences, an organic and local food market, and a 44,000-square-foot maintenance facility—has achieved LEED-Platinum certification through the use of geothermal wells, photovoltaic solar panels, an on-site blackwater treatment plant, and a natural gas-fired microturbine.

Home Sales Rise More than Expected

Associated Press

Economists Predict Strong Spring for Housing Market

 

 

WASHINGTON – Home sales rose more than expected in March, reversing three months of declines, as government incentives drew in buyers and kicked off what's expected to be a strong spring selling season.

Sales of previously occupied homes rose 6.8 percent to a seasonally adjusted annual rate of 5.35 million last month, the highest level since December, the National Association of Realtors said Thursday. February's sales figures were revised downward slightly to 5.01 million.

"The spring selling season will be a success and probably the most active we're seen in years," said Stuart Hoffman, chief economist at PNC Financial Services Group.

Sales are likely to keep growing through the first half of the year as tax credits for first-time buyers and low mortgage rates fuel purchases. The average interest rates is 5.07 percent for a traditional fixed-rate mortgage, Freddie Mac said Thursday.

But doubts remain about whether the momentum will be sustained in the second half of the year when federal support is gone.

"This is a temporary surge that won't be sustained" said Paul Dales, US economist with Capital Economics. "It won't be very pretty."

Sales are now up 18 percent from their low in early 2009, but are still down 26 percent from their peak in fall 2005. March's results had been expected to rise about 5 percent to 5.28 million, according to economists surveyed by Thomson Reuters.

The results show the housing market is stabilizing after a devastating bust. But the true test will be whether the market can stand on its own after federal tax credits expire at the end of this month.

Sales rose in every region, surging more than 7 percent in the Midwest and South, 6.6 percent in the West and 6 percent in the Northeast.

"It's a very broad-based recovery," said Lawrence Yun, the Realtors' chief economist.

The median sales price was $170,700, up almost 4 percent from $164,600 a month earlier and nearly unchanged from $170,000 in March 2009.

The inventory of unsold homes on the market was up 1.5 percent at 3.6 million. That's an eight month supply at the current sales pace.

Sales nationally had declined over the winter, eroding gains made last fall and summer. The downward direction troubled economists because the government has taken unprecedented steps to support the housing sector.

For several months, home shoppers didn't feel rushed after lawmakers extended the deadline to qualify for tax incentives. The government is offering a $8,000 credit for first-time buyers and $6,500 for current homeowners willing to buy and move into another property.

But now time is running out. Buyers must sign contract offers by April 30 to qualify, and real estate agents say that's spurring sales.

"Many people who otherwise wouldn't be on the market for a home want to take advantage of these tax credits," said Kathi McLeod, sales manager for Windermere Real Estate in Boise, Idaho. "You have buyers who have been looking and looking at properties and realizing that it's almost too late, so they're really scrambling and jumping into deals."

The Realtors group is not pushing for an another extension of the tax credit. Yun said he believes there will be enough demand in the second half of the year without a government subsidy.

Still, some housing market experts predict the market will take a dramatic "double-dip" once the government's supports are gone. But others argue that there is enough pent-up demand to keep the market chugging. And prices have fallen dramatically since the boom years — as much as 50 percent in some places. So buyers can pick up bargain-priced foreclosures.

Starwood Sells Two Luxury W Hotels in Manhattan

Business Week

 

Starwood Hotels & Resorts Worldwide Inc. agreed to sell two of its W Hotels in Manhattan to St. Giles Hotels LLC, reducing the luxury brand’s current New York area locations by a third.

St. Giles, based in London, will take over operations of the W Court and the W Tuscany as of 11:59 p.m. New York time tomorrow, according to a notification on Starwood’s Web site. The hotels, both on 39th Street between Park and Lexington avenues, will no longer be affiliated with the W, White Plains, New York-based Starwood said in a separate statement.

The W brand -- started in New York City more than a decade ago -- has seen demand slump in the past year as the U.S. recession crimped travel. Starwood agreed in July to sell the W San Francisco for $90 million to Keck Seng Investments (Hong Kong) Ltd. as part of an effort to cut long-term debt, which stood at $2.96 billion as of Dec. 31.

“As part of our asset-light strategy, we are focusing on the higher growth part of our business and will continue to unlock real estate value,” K.C. Kavanagh, a Starwood spokeswoman, wrote in an e-mail. She declined to disclose the sale price of the New York properties.

The remaining W Hotels in the New York area are in Times Square, Union Square and Midtown in Manhattan, along with one across the Hudson River in Hoboken, New Jersey. Starwood, the third-largest U.S. hotel chain, plans to open a W location in downtown Manhattan in June, according to its Web site.

Luxury Slump

Revenue per available room at U.S. luxury hotels plunged 24 percent in 2009, the most of any industry segment, according to Smith Travel Research Inc. Occupancy in New York City last year slumped to 77 percent from 82 percent in 2008, while average room rates dropped 22 percent to $215.14, data from the Hendersonville, Tennessee-based research firm show.

While the W chain was Starwood’s best performer in the fourth quarter, some of the properties have struggled with the lack of demand. The brand’s revenue per available room fell 2.3 percent, compared with a 7.2 percent decline systemwide.

Last month, the W New York Union Square, named by Conde Nast Traveler as one of the world’s top 500 hotels in 2005, was put into bankruptcy by the junior lender that took over ownership of the property in December from Dubai World.

San Diego

A drop in room prices at the W Union Square has cut its net cash flow, according to data compiled by credit-rating company Realpoint LLC in Horsham, Pennsylvania.

Lenders took over the W San Diego in June after owner Sunstone Hotel Investors Inc. was unable to modify the terms of its $65 million securitized mortgage.

The brand began with one location in Manhattan in 1998 under then-chairman Barry Sternlicht. Sternlicht, who left the company in 2005, is how chief executive officer of closely held investment firm Starwood Capital Group LLC.

“New York City, the birthplace of the W brand more than 10 years ago, continues to be a priority market for the company,” Starwood said in the statement.

The sale of the Tuscany and Court locations is expected to close on April 15, Kavanagh said.

Conflicting Views on Fannie Meltdown

The Wall Street Journal

Former Fannie officers Robert Levin, left, and Daniel Mudd testify Friday.

 

 

WASHINGTON—A Congressional panel heard clashing views about what caused the failure of Fannie Mae on Friday, one that blamed the "impossible" balancing act of the company's competing missions, while a former regulator blamed management failures.

"I sought to balance the fine points of mission and business insofar as I could understand them," said ex-Fannie Chief Executive Daniel Mudd before a panel investigating the financial crisis. By September 2008, when the government took over Fannie and its smaller rival, Freddie Mac, as mounting losses threatened to wipe out thin capital reserves, "that was no longer possible...and I am sorry for that," he said.

But Armando Falcon, the former head of the company's federal regulator, said the collapse of the companies "was clearly a failure of management" and reflected a "deeply rooted...culture of arrogance and greed."

Mr. Falcon asked how a business "with the most generous government subsidies possible" could be run "into the ground."

The hearing brought forward a paradox: For years, Fannie fended off efforts to restrict its growth by arguing that it had the best risk-management tools and brightest minds. But on Friday, executives said that their business model doomed their ability to manage a national and sustained housing meltdown.

Friday's session was the last of a three-day hearing on the mortgage meltdown before the Financial Crisis Inquiry Commission, charged by Congress to examine the causes of the financial crisis. Friday's session focused exclusively on the collapse of Fannie and Freddie.

The committee's conclusions, to be delivered in a year-end report, could have far-reaching influence because while legislation to revamp financial regulation is already wending through Congress, policy makers are just now beginning to consider what should be done with Fannie and Freddie, which own or guarantee half of the nation's $11 trillion in mortgages.

So far, Fannie and Freddie have required more than $126 billion in taxpayer infusions, a number that is likely to grow as mortgage defaults rise further. One of the panel's commissioners, Douglas Holtz-Eakin, a former budget analyst, said on Friday that the collapse of Fannie and Freddie would leave taxpayers with the "single largest bill we will face in this episode."

At the hearing, commissioners honed in on why Fannie executives made their ill-fated decisions to loosen underwriting standards and increase their exposure to riskier "Alt-A" loans for borrowers with good credit but little documentation of income or assets.

Fannie and Freddie's market share fell rapidly beginning in 2003 as private nonbank lenders were fueled by Wall Street's desire to bundle and sell mortgages as securities. One internal Fannie document made public on Friday showed how executives in 2005 considered a "stay the course" strategy to try to steer the market back to traditional products such as the 30-year fixed-rate mortgage.

But executives ultimately decided that new, riskier loans were "not a fad, but a growing and permanent change" in the mortgage market that the companies couldn't ignore, Mr. Mudd said. The company opted to strike a "middle course" by trying to offer less-risky versions of Alt-A loans.

"Could we really sit out?" said Robert Levin, a 27-year Fannie veteran who retired in 2008. "That's what we were grappling with."

Fannie's Alt-A loans have performed better than loans originated by private lenders, but taxpayers will likely pay a steep price for the decision to delve into them. Alt-A loans accounted for just 9% of Fannie's loan guarantee business, but represented nearly 40% of credit losses in the fourth quarter of 2009. Nearly 23% of Alt-A loans originated by Fannie Mae in 2007 were 90 days or more delinquent at the end of 2009.

Even if Fannie hadn't stepped up its exposure to the riskier loans, "they still would have taken a huge hit," said Thomas Lawler, a former Fannie economist who retired in January 2006, in an interview. "But would it have been this big? Well, good god, no."

Commissioners also focused on the degree to which government mandates to support affordable housing were responsible for the companies' increased risk appetite. At the hearing Mr. Falcon dismissed such arguments, saying, "It was driven by a desire to once again regain their dominance in the market and to try to increase profitability towards what it had been in its hey-day." He added, "This is where they thought they had to go to achieve that.

As the housing crisis deepened in 2007 and 2008, Mr. Mudd said the company increasingly faced "horrible" choices between "unsavory alternatives." Those business decisions often pitted taking on more risks to support the housing market as private lenders withdrew against joining in the retreat and precipitating far more severe damage to the market.

While they are now wards of the state, Fannie and Freddie are playing a critical role in helping to heal housing markets and, together with the Federal Housing Administration, they enable nine in 10 new mortgages.

James Lockhart, the former federal regulator who placed the companies into conservatorship in 2008, told the panel it was unrealistic to expect policy makers to design a perfectly regulated housing-finance system. "We need to take some of this and put it back in the private sector," he said.

But Mr. Mudd, who was alternately contrite but firm, said it was unlikely that a fully privatized mortgage market could be "logistically accomplished in our lifetimes."

Foreclosures Hit the Rich and Famous

The Wall Street Journal

The rich and famous now have something in common with hundreds of thousands of middle and lower-class Americans: The bank is about to take their homes.

Houses with loans of $5 million or more will likely see a sharp rise in foreclosures this year, according to a RealtyTrac study for The Wall Street Journal.

Just this week, a Tudor mansion in Bel-Air belonging to film star Nicolas Cage was in foreclosure auction and reverted to the lender. On Wednesday, Richard Fuscone, a former top Wall Street executive, declared personal bankruptcy, forestalling a foreclosure auction that had been scheduled this week on his 14-acre Westchester mansion. Last month a Manhattan condominium owned by Italian film producer Vittorio Cecchi Gori was sold in a foreclosure auction for $33.2 million.

In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.

Economists say the super-wealthy are among the last to lose their homes in a mortgage crisis because they usually have high savings, better access to credit and other means for staving off foreclosure. But many of them work in financial services and other industries hit especially hard by the crisis, and have seen their wealth shrink in the market crash.

While the numbers are modest compared with foreclosures at other income levels, they suggest the possibility of a sudden spike in bank takeovers of the wealthiest Americans' property. Typically half the notices of sale result in homes being turned over to creditors, though the figure could be slightly lower for the richest Americans who have more financial options, according to Daren Blomquist at RealtyTrac.

Big borrowers are more likely to default than ordinary people, according to data from First American CoreLogic. Its loan database, reflecting more than 80% of the overall home-loan market, includes 1,700 loans with balances of $4 million or more. About 14.8% of those loans were 90 days or more overdue at the end of January, compared with 8.7% for all home loans tracked by First American. Sam Khater, a senior economist at First American, said the bigger borrowers may be more prone to stop making payments when they have lost all their home equity.

Mr. Fuscone, Merrill Lynch's one-time head of Latin America, put his mansion up for sale in November, asking $13.9 million. But he couldn't find a buyer.

The court had scheduled a foreclosure auction for Thursday for the 18,471-square-foot mansion—with two swimming pools, two elevators, six fireplaces, 11 bathrooms and a seven-car garage. The personal bankruptcy filed in U.S. Bankruptcy Court Wednesday temporarily freezes the foreclosure process.

Reached by phone, Mr. Fuscone declined to comment. Brokers and real estate tracking companies say that his home is one of the most expensive properties to face foreclosure proceedings yet.

The phenomenon is not limited to the New York area. Banks have taken over homes with loans of $5 million or more in Georgia, North Carolina and Colorado, RealtyTrac says.

Mr. Cage had tried to sell his 11,817-square-foot Bel-Air property for $35 million but failed to get any offers, said James Chalke, a real-estate agent who had the listing. At a foreclosure sale Wednesday, the property attracted no bids from investors and so was acquired by the foreclosing lender. Annett Wolf, a spokeswoman for Mr. Cage, said he had no comment.

A representative of Mr. Cecchi Gori, producer of more than 200 films including "Il Postino" and "Life is Beautiful," said his financial situation is improving.

In Florida's Miami-Dade County, the three largest foreclosure filings initiated against homes in the past six months involved a 4,655-square-foot home in Sunset Islands; a 8,443-square-foot house in Coral Gables; and a condo in Miami Beach, according to Peter Zalewski, a principal of Condo Vultures. All three had mortgages of $3.5 million to $4 million.

Mortgage defaults began to surge in late 2006, mostly among borrowers with subprime mortgages, those for people with weak credit records or high ratios of debt to income.

Over the next few years defaults spread rapidly to better-heeled borrowers, especially those who got loans without documenting their income. At the end of 2009, nearly eight million households, or 15% of those with mortgages, were behind on mortgage payments or in the foreclosure process.

Wealthy people have the means to stretch out the distress process, sometimes for years.

"It's very, very difficult for these people to believe they've had such a severe reversal of fortune," says Maggie Navarro, a real-estate agent in Pasadena, Calif.

Marc Carpenter, a San Diego-based foreclosure specialist, adds that while it's much harder for potential buyers to get loans, there are also fewer buyers who can pay for top-dollar properties. "The upper end is definitely a lagging indicator," he says.

In his bankruptcy filing, Mr. Fuscone provided a list of his debts, including ones to the Greenwich Country Day School, American Express, Mercedes-Benz, a local hardware store, a pet store, and Richards of Greenwich, a fine-clothing store.

"My background is in the financial-services industry and I have been personally devastated by the financial crisis which came to a head in March 2008," Mr. Fuscone said in his bankruptcy declaration. "I have been sued by Patriot National Bank" as part of a foreclosure action. "I currently have no income for the 30-day period" following his bankruptcy petition.

C.W. Kelsey, owner of Greenwich Hardware, was among the local merchants owed money by Mr. Fuscone, though he wouldn't say how much.

"Traditionally, the majority of our credit problems were contractors," he said. "Now there are people you'd never expect two or three years ago to have problems, who live in multimillion dollar homes."

How Texas Escaped the Real Estate Crisis

The Washington Post

These owners in San Antonio are in the minority in Texas. Fewer than 6 percent of the state's homeowners are in or near foreclosure.

 

It's one of the great mysteries of the mortgage crisis: Why did Texas -- Texas, of all places! -- escape the real estate bust? Only a dozen states have lower mortgage foreclosure and default rates, and all of them are rural places such as Montana and South Dakota, where they couldn't have a real estate boom if they tried.

Texas's 3.1 million mortgage borrowers are a breed of their own among big states with big cities. Fewer than 6 percent of them are in or near foreclosure, according to the Mortgage Bankers Association; the national average is nearly 10 percent. The land in Texas might look an awful lot like its Sun Belt sisters Arizona (with 13 percent of its borrowers in foreclosure) or Nevada (19 percent) -- flat and generous in letting real estate developers sprawl where they will. Texas was even the home base of two of the nation's biggest bubble-era homebuilders, Centex and D.R. Horton.

Texan subprime borrowers do especially well compared with their counterparts elsewhere. The foreclosure rate among subprime borrowers in Texas, at less than 19 percent, is the lowest of any state except Alaska. Part of the reason is that Texas didn't experience the stratospheric run-ups in home prices that other states did. On average, the home-resale prices of the 20 metro areas in the Case-Shiller Home Price Index peaked in 2006 after more than doubling since 2000. In Dallas, one of the 20 areas, they rose just 25 percent, gradually, and have barely declined.

But there is a broader secret to Texas's success, and Washington reformers ought to be paying very close attention. If there's one thing that Congress can do to help protect borrowers from the worst lending excesses that fueled the mortgage and financial crises, it's to follow the Lone Star State's lead and put the brakes on "cash-out" refinancing and home-equity lending.

A cash-out refinance is a mortgage taken out for a higher balance than the one on an existing loan, net of fees. Across the nation, cash-outs became ubiquitous during the mortgage boom, as skyrocketing house prices made it possible for homeowners, even those with bad credit, to use their home equity like an ATM. But not in Texas. There, cash-outs and home-equity loans cannot total more than 80 percent of a home's appraised value. There's a 12-day cooling-off period after an application, during which the borrower can pull out. And when a borrower refinances a mortgage, it's illegal to get even a dollar back. Texas really means it: All these protections, and more, are in the state constitution. The Texas restrictions on mortgage borrowing date from the first days of statehood in 1845, when the constitution banned home loans.

"Delinquency and foreclosure rates are significantly lower in Texas," says Scott Norman of the Texas Mortgage Bankers Association. "The 80 percent loan-to-value limit -- that's the catalyst for a lot of this."

Research from the Federal Reserve Bank of Dallas backs up Norman. Texas's low-ish unemployment rate, 8.6 percent, is a help. But so is the fact that fewer Texans took cash out of their home equity than did borrowers in any other state -- and took out less when they did. The more prevalent cash-out refinances are in a state, the more likely it is that mortgage borrowers there will run into trouble. For every 1 percentage point increase in a state's share of subprime mortgages that are cash-out refinances, the likelihood of foreclosure in that state goes up by one-third of a percent.

During the boom, cash-out refinancings were the unofficial currency of bubble states from Florida to California, beloved by mortgage brokers as a way to persuade existing homeowners to take out new loans repeatedly. As home values surged, the sales pitch was a slam-dunk: Borrowers could refinance their homes at extremely low interest rates, and based on newly reappraised property values, they could get more cash in their hands than they might earn in a year. Sure, these were teaser rates that would adjust upward after two years, but brokers routinely assured borrowers they could just refinance again before that happened.

Subprime cash-out refinancings became a standard way for borrowers drowning in credit card debt to pay it off, boost their credit scores so they could qualify in a few months to refinance into a lower-rate prime mortgage, and get a big tax deduction in the bargain. Edmund L. Andrews recounts in his underappreciated book "Busted" how he conjured $50,000 this way.

Homeowners and mortgage brokers weren't alone in their addiction to the cash that flowed from homes-as-ATMs. The entire U.S. economy was right there with them. One of Alan Greenspan's lesser-known contributions to the annals of the credit crisis was a pair of studies he co-authored for the Fed, sizing up exactly how much Americans borrowed against their home equity in the bubble and what it was they were spending their newfound (phantom) wealth on.

Greenspan estimated that four-fifths of the trifold increase in American households' mortgage debt between 1990 and 2006 resulted from "discretionary extraction of home equity." Only one-fifth resulted from the purchase of new homes. In 2005 alone, U.S. homeowners extracted more than half of $1 trillion from their real estate via home-equity loans and cash-out refinances. About $263 billion of the proceeds went to consumer spending and to pay off other debts.

As home prices skyrocketed in many markets, cash-out refinancings became standard, even in the relatively sober world of Fannie Mae and Freddie Mac. By 2006, Freddie Mac reported that 88 percent of refinance mortgages it purchased were for amounts at least 5 percent higher than borrowers' previous loan balances. Subprime lenders, in insane pursuit of risk, piled on with cash-out refinances for high-risk borrowers, often approaching the appraised value of the home.

But not in Texas. A borrower there can secure a home-equity line of credit from a bank. And she can refinance her mortgage or take out a home-equity loan. But the total amount of debt on a home cannot exceed 80 percent of its appraised value, and any proceeds cannot be used to pay off other debts.

Until 1998, Texans couldn't take out home-equity loans at all. The roots of this fierce resistance to debt's temptations go deep in Texas history. Seven years before the republic joined the Union in 1845, many homesteaders lost their property because of a bank panic and the resulting foreclosures. Drawing from Mexican codes protecting landholders, the new constitution of the state of Texas forbade lenders from peddling mortgages to homesteaders.

The home-equity restrictions have not only helped keep cash-out refinances a rare breed in Texas; other risky mortgages were scarce there, too. The home-equity borrowing restrictions helped keep home prices from overinflating, and home buyers therefore didn't need to turn to exotic mortgages with such features as 2/28 ARMs, interest-only payments, or negative amortization in order to buy a home. Even when they did, Texas law requires these risky features to be clearly disclosed. Fewer than 20 percent of Texas subprime mortgages included any of them.

That's not to say that Texas borrowers didn't get into bubble trouble. Plenty bought overpriced houses, which is why one in eight Texans now owe more than their home is worth. And it was easy enough for lenders to get around the home-equity borrowing limits by using creative appraisals that pretend a home is worth more than it really is. But the casualties are orders of magnitude less than they would have been without the home-equity limits.

Mimicking Texas would be the perfect opportunity to get our home-equity debt addiction under control and learn to live as an 80 percent nation.

Home Prices in California Show Strong, Unexpected Gains

LA Times

L.A. leads the S & P/Case-Shiller index of 20 cities with a 1.8% increase from December. The index rises 0.3% overall, its eighth monthly increase in a row. Some see recovery; others, a mixed picture.

 

A national index of home prices rose unexpectedly in January, with California cities posting strong gains, but some experts warned that the nation's struggling housing market could be headed for another fall.

The closely watched Standard & Poor's/Case-Shiller index of 20 metropolitan areas rose 0.3% from December on a seasonally adjusted basis. That marked eight consecutive months of home values improving.

The index also was down just 0.7% from the same month last year, the nearest that the year-over-year reading has come to positive territory in three years.

But expectations about housing's direction remain mixed as a series of government initiatives intended to bolster sales and stabilize values begin to expire.

Concern over a potential wave of foreclosures also remains high despite new efforts by the Obama administration to keep struggling borrowers in their homes.

"Forces that will bring home prices back down are mounting," said Patrick Newport, an economist for IHS Global Insight. "Our view is that despite this report, prices have further to fall -- about another 5%."

The Case-Shiller index, which covers three months of data, was influenced by a sales surge in November, when buyers rushed to take advantage of a federal tax credit for first-time purchases before its initial expiration.

Sales fell in December and January, even though that program was expanded and extended through April.

Though many economists expect the extended tax credit to give sales a further boost, they also expect another fall once the government incentive ends.

"It is way too early for this market to have rebounded the way it has," said Christopher Thornberg, principal of Beacon Economics.

A breakdown of the index showed mixed results, with 12 cities posting increases and the rest decreases. When left unadjusted for seasonal variations, the 20-city index fell 0.4%.

Economists surveyed by Bloomberg had expected the index to fall in January.

David M. Blitzer, chairman of S&P's index committee, said he was concerned about the slow construction of new homes, falling sales volumes and foreclosures hitting the market this year.

"We can't say we're out of the woods yet," Blitzer said.

But others saw the improvements as a sign that the economic recovery was beginning to help consumers gain confidence.

"What people are seeing in the stock market, and what people are feeling, is the beginning of a real recovery," said Karl E. Case, a professor at Wellesley College in Massachusetts and co-creator of the index.

"Now that the economy is starting to come back, I think the psychology has changed," Case said.

California cities posted solid gains, with the Los Angeles metropolitan area up 1.8% to lead the index. San Diego gained 0.9%, and San Francisco rose 0.6%.

Richard Green, director of the USC Lusk Center for Real Estate, said Southern California was showing strength because it was one of the earliest markets to get hit and is rebounding now before other areas.

"We fell first, we fell deeply and we didn't overbuild the way other parts of the country did," he said.

"And if you look at the long-term horizon, the amount of housing built relative to population was less than other places, and it is still really hard to build new houses here," he said.

That means the chances of recovering sooner are good, Green said.

Thornberg attributed the gains primarily to the federal government's programs and said most of Southern California's housing gains were a result of fewer foreclosure properties on the market.

The falling number of available foreclosures is pushing prices up on lower-end housing, though prices continue to fall in more-expensive neighborhoods.

"The bottom has been surging up," Thornberg said. "It really is about the low end."

Chicago fell the most -- 0.8%. Others losing ground included Seattle, Atlanta and Portland, Ore.

The housing market is likely to be affected soon by the expiration of certain government policies.

The Federal Reserve plans to end its $1.25-trillion mortgage-bond-purchase program Wednesday.

The program, which has kept interest rates at rock-bottom levels, has helped the Fed buy nearly all the mortgage bonds from housing finance giants Fannie Mae and Freddie Mac, replacing most private investors last year.

At the end of April, the federal tax credit program for first-time buyers and for some current homeowners is scheduled to expire. The program provided up to $8,000 to first-time buyers and up to $6,500 to certain current homeowners.

Also, the Federal Housing Administration, which has stepped up its support of low-interest mortgages for first-time buyers, has tightened its lending standards.

Many economists also remained concerned about foreclosures swamping the market in coming years as borrowers go into default, owing more on their mortgages than their homes are worth.

The Obama administration late last week unveiled measures aimed at getting lenders to reduce the principal balances on problem mortgages and refinance underwater homeowners.

Experts remain skeptical about whether the changes to the $75-billion Home Affordable Modification Program will help the program reach its goal of keeping 3 million to 4 million homes out of foreclosure through 2012.

Economy Driving U.S. Families Closer Together

Reuters

Multi-generation homes up 24 % in 2008 from 2000 - AARP

The recession slowed most homebuilding in the United States to a standstill but it has fueled demand for a special kind of housing: the granny flat.

As unemployment hovers around 10 percent and healthcare costs spiral upward, homebuyers like Stephanie Charbeneau want to cut costs by sharing shelter with her extended family.

Charbeneau, a 27-year-old court recording monitor in New Haven, Connecticut, is buying a home with her husband, their two young children and her in-laws because money is tight.

"Everything is so expensive, you need your family to help you out. Thank God that they're there to help you," she said.

The Charbeneaus and Stephanie's in-laws plan to split the mortgage on a $337,000 two-family home with an apartment her brother-in-law may rent. It is a bigger and newer house than the couple could afford on their own.

They are not alone. Almost 70 percent of Coldwell Banker Real Estate agents see economic concerns compelling more families to seek housing together in 2010, according to a January poll.

At least in the short term, multi-generational housing demand is a boon for homebuilders, architects and developers mired in the deepest housing slump since the Great Depression.

The recession is accelerating a long-standing trend. U.S. multi-generational households jumped 24 percent from 2000 to 6.2 million in 2008, or 5.3 percent of all households, according to AARP, the nonprofit organization for people 50 and over. Economics and culture were the main motivators.

A prolonged push for bigger and fewer homes "would dampen housing demand going forward and further dampen a substantial recovery in the housing market," said Nicolas Retsinas, director of Harvard's joint center for housing studies.

ONE BIGGER HAPPY FAMILY

Opportunity for homebuilders and manufacturers hurts senior housing, a business aimed at about 78 million baby-boomers, as more elderly people avoid costly managed care.

"We can't afford to put grandma in a nursing home now," said Monte Anderson, a Texas developer. He plans to include 50 apartments offering separate living quarters, called "granny flats", for an older parent or adult child in a 500-unit project south of Dallas.

In Raleigh, North Carolina, beauty salon owner Karen Bixby, her husband and 19-year-old college student daughter expect to buy a larger home, hopefully with no steps, with Karen's 84-year-old father.

"An assisted living facility in Raleigh is not an option for my dad. He didn't retire with that kind of income," she said.

Senior housing occupancy rates fell to 89 percent from a peak of 93 percent at the end of 2006 and early 2007, according to data from the National Investment Center for the Seniors Housing & Care Industry. One major operator, Sunrise Senior Living Inc, had to sell off assets and is in restructuring talks with lenders.

The expense of managed senior care in Michigan and other states is driving much of the demand for multi-generational housing, but more adult children are also bunking in with parents.

"The empty nest is a historical relic," said Stephen Reily, chief executive of VibrantNation.com, a Website aimed at women over 50 based in Louisville, Kentucky.

Two-thirds of the boomer women it polled had at least one adult child living with them, and half of those children brought their own kids along. On top of that, parents or in-laws also lived in 13 percent of these households.

COTTAGE INDUSTRY

If this trend continues, only 5.4 million new households will form over the next five years compared with the 6.9 million that more normal conditions would produce, Michael Hakim, an analyst at PPR Global, projected. That equals a loss of more than one year's average household creation, he said.

A shrinking number of households would ultimately hurt builders. But for now, the housing industry is running to meet demand for families looking to merge resources under one roof.

Homebuilders are seeing more buyers in groups that include a parent, said Toll Brothers Inc. Nevada division head Gary Mayo. Interest is up in products such as KB Home's Open Series, with up to six bedrooms, and Pulte Homes Inc's "casitas" featuring an extra bedroom, full bath and closet that can serve as living quarters.

Those who cannot afford a new home are taking on new adventures in home remodeling, said Bill Gati, an architect in New York City who helps clients convert part of their house to an apartment.

Manufacturers have responded by tweaking such tools as the grab bar in shower enclosures, which enhances access to shower and toilet, to lessen their institutional look, said Melissa Birdsong of Lowe's Companies Inc.

Wide doors and entrances without steps aid accessibility for those on wheels, be they wheelchair, walker or stroller, said Trina Summins, an Atlanta-based builder working on a home that features a ground-floor suite for parents to move into.

The goal is to share responsibilities while maintaining some boundaries.

Anderson's apartments provide separation between the generations. "I can take care of you, but I don't have to live with you," he said.

Apartment Rents Rise as Sector Stabilizes

The Wall Street Journal

Apartment rents rose during the first quarter, ending five straight quarters of declines and signaling the worst may be over for the hard-hit sector.

Nationally, the apartment vacancy rate stayed flat at 8%, the highest level since Reis Inc., a New York research firm, began its tally in 1980. Local markets, such as Houston apartments, generally followed the national lead, although there were exceptions.

Reis tracks vacancies and rents in the top 79 U.S. markets, and rents rose in 60 of them, led by Miami, Seattle and New York—all cities that have notched big rental declines in the past year.

Rents increased 1.6% in the first quarter in Miami and 0.9% in New York. The gains came during what is usually a seasonally weak period for apartments and suggested that landlords may have some momentum heading into the peak spring and summer leasing season.

"Deterioration seems not to have just been arrested but reversed," said Victor Calanog, director of research for Reis. "Several markets have bottomed and may be on track to recovery," he said.

Nationally, effective rents, which include concessions such as one month of free rent, rose 0.3% during the quarter compared with a 0.7% decline in the fourth quarter of last year and a 1.1% drop in the first quarter of 2009. Vacancies are tied to unemployment, because many would-be renters move in with family members or double up during a downturn.

"We clearly hit an inflection point in all of our markets in January and February," said Jeffrey Friedman, chief executive of Associated Estates Realty Corp., which owns and operates 12,000 units in the eastern U.S.

Renters are also staying put longer: the average renter now stays for 19 months, up from an average of 14 months, said Mr. Friedman, and despite low mortgage rates and greater home affordability, fewer renters are leaving to buy homes.

"This is the first time in many, many years that it feels like even people who could afford to buy are making the investment decision not to," Mr. Friedman said.

Difficulty in obtaining financing for new construction of Dallas apartments, meanwhile, has limited the supply of new units that will be added in the coming years. Those fundamentals have landlords and investors excited about the potential for rents to pop once the economy gathers steam.

Still, Mr. Calanog said that a "slow recovery" was likely and that landlords shouldn't expect "galloping rental growth" until the job market firms up, particularly because younger workers that are more likely to rent have borne the brunt of job losses.

Others warned that gains were fragile and that landlords could continue to offer concessions to fill units.

"Rent reductions are not over yet," said Hessam Nadji, managing director at real-estate firm Marcus & Millichap. He said he didn't expect to see sustained rental growth until the second half of the year.

Barely half of the 22,000 units in buildings that opened their doors last quarter were filled, and landlords may cut deals because they face deadlines to pay back construction loans. "That's where renters are going to find deals," Mr. Calanog said.

Portland, Ore., posted the largest rent decline, at 0.7%, followed by Las Vegas, San Diego, and Southern California's Inland Empire. Those three markets have all seen an uptick in home-buying activity, particularly among the low end from first-time buyers and investors.

South Florida, meanwhile, appears to show signs of stabilizing after a painful years-long slump prompted by heavy overbuilding. Rents gained 1.1% last quarter in Palm Beach and 0.8% in Tampa-St. Petersburg.

"That market has been so bad for so long that many people had started to forget about it," said Alexander Goldfarb, an analyst at Sandler O'Neill & Partners LP.

Biggest Annual Rent Gains

Rank	Metro Market	12-month Effective Rent Growth
1	Colorado Springs	2.5%
2	District of Columbia	2.0%
3	San Antonio apartments	1.5%
4	Dayton	1.4%
5	Little Rock	1.3%
6	Chattanooga	1.2%
7	Austin	1.0%
8	Suburban Maryland	1.0%
9	Louisville	0.8%
10	Pittsburgh	0.8%

Changes to Federal Foreclosure Program Announced

ST. PETERSBURG, Fla. (AP) — The federal government is relaxing some rules to make it easier for communities to spend money on redeveloping abandoned and foreclosed properties.

The changes, effective immediately, will allow cities, counties and states to buy properties in mortgage default and uninhabitable homes with lingering code violations through the $4 billion Neighborhood Stabilization Program.

The program was started in the midst of the nation's foreclosure crisis, but a year later about a third of more than 300 local governments that got grants have barely made a dent in them, according to a recent report from the U.S. Department of Housing and Urban Development.

Some city, state and county officials say they have had trouble spending the grant money because federal rules are confusing and cash investors have often outbid them for residential properties.

"It became clear to us that the Neighborhood Stabilization Program as originally designed was too restrictive and limited the ability of our local partners to put this funding to work quickly, Mercedes Marquez, HUD's assistant secretary for community planning and development, said in a statement. "We need to be more flexible so our local partners can respond to market conditions and reverse the effects of foreclosure in these neighborhoods as quickly as possible."

James Miller, spokesman for the Florida Department of Community Affairs, which got $91 million to distribute to 24 cities and counties, called Friday's announcement wonderful news.

"It just broadens the pool of available properties that local governments can target," he said. "This opens up more possibilities for them."

Buying a foreclosed Atlantic Beach vacation home can be complicated, and the new rules will make it easier for communities by giving them a broader pool to work from.

Now a community can buy a property that is at least 60 days delinquent on its mortgage if the owner has been notified, or if the property owner is 90 days or more delinquent on tax payments or home insurance ny.

HUD also expanded the definition of an abandoned property to include homes where no mortgage or tax payments have been made for at least 90 days or a code enforcement inspection has determined that the property is not habitable and the owner has taken no corrective action.

Raytheon Shopping for Big Texas Office Space

The Dallas News

A high-profile office tenant is shopping for a big block of space in Dallas' northern suburbs.

International defense and high-tech conglomerate Raytheon Corp. is looking for potential locations for consolidating its Dallas-area offices, real estate brokers say.

The deal would encompass several hundred thousand square feet of space and would be one of the largest in the Dallas area in the last year.

Raytheon already looked at moving into part of the former headquarters of Electronic Data Systems, which is now a unit of Hewlett-Packard. But a transaction to take over a large portion of the EDS headquarters building in the Legacy business park fell through, real estate agents familiar with the deal said.

Raytheon is now considering office locations in the Telecom Corridor, including Nortel's buildings along U.S. Highway 75 near Campbell Road.

Officials with Massachusetts-based Raytheon wouldn't confirm that the company is hunting for office space. But they didn't rule it out.

"We stay abreast of opportunities in the market," Raytheon spokesman Keith Little said. "We don't discuss specific properties that we may be considering."

Real estate brokers say the EDS headquarters and Nortel buildings are logical choices for a company that needs a big office in Dallas' northern suburbs.

Both companies have reduced the amount of space they use in the Dallas area in recent years, and Nortel is in bankruptcy.

"Yes, we have been talking to companies about the Richardson space," said Nortel spokesperson Jamie Moody. "And, just like we're selling off all our businesses, we are also selling our assets, including real estate, so that we can recover the greatest value in the interest of our creditors."

Despite a real estate downturn that has left acres of North Texas' office space sitting empty, there are few prime vacant offices as big as Raytheon would need.

"For spaces 200,000 and up, your options are fairly limited," said Greg Biggs of Cushman & Wakefield of Texas. "We are working on a transaction in North Dallas that's fairly sizable, and the amount of existing space available is fairly limited in big blocks."

Raytheon has operations in several Dallas-area locations, including on U.S. Highway 75 north of LBJ Freeway, farther north in McKinney and on Lemmon Avenue in Dallas.

Unlike in previous economic downturns, the area isn't awash in vacant Dallas apartments or office space. That's why some companies – including Pizza Hut – have recently chosen to build.

"We don't have all the see-through [empty] buildings we had here in the early 1990s," said Greg Langston, managing principal in CresaPartners' Dallas office. "One thing we didn't do is overbuild this time."