31 March 2010

Austin is Highest Rental Market in TX

Austin Business Journal

Austin is the most expensive city in Texas for paying rent and buying a home, according to a study released this week by Washington D.C.-based Center for Housing Policy.
The study “Paycheck to Paycheck" compares and ranks costs in more than 200 metro areas in the United States and ultimately concludes homeownership is still unaffordable for many workers despite low interest rates and steep drops in home prices.

Austin ranks as the 65th most expensive U.S. rental market and the 73rd most expensive homeownership market of all metro areas studied. The center studied data provided by the National Association of Home Builders, the National Association of Realtors and the U.S. Department of Housing and Urban Development.

Austin’s median home price is $176,000, unchanged from 2008, the study found. However, Austin’s ranking rose to No. 73 for 2009 compared with No. 84 in 2008.

The markets with the highest median home prices were in California: with San Francisco and San Jose leading the way, followed by Honolulu in third place, and then back to California in Santa Ana and Santa Cruz in fourth and fifth place respectively.

The typical rent for a two-bedroom home rose in 89 percent of the markets studied, with Austin’s price hitting $954 in 2009 from $912 in 2008, although Austin did fall in rankings down to 65 from 59. Once again, San Francisco was the most expensive city at $1,760.

Despite some perceptions it’s a renter’s market in the U.S., the study found that in the vast majority of metropolitan's fair market rents have held steady or increased, even occasionally surpassing monthly mortgage payments for a median-priced home.

The study also found that some occupations are more prone to being priced out of renting. Specifically, retail salespeople continue to be priced out of renting a two-bedroom apartment in every market studied. Janitors fare almost the same, being able to afford a two-bedroom apartment in only one of the 210 rental markets studied. Licensed practical nurses are unable to rent a two-bedroom apartment in 55, police officers in 12, and elementary school teachers in 11, of the markets studied.

“We must develop the common sense, cost-effective policy solutions at the state and local levels that will help ensure long-term affordability for homes and Austin apartments,” said Center for Housing Policy Chair John K. McIlwain, senior resident fellow and the J. Ronald Terwilliger chair for housing at the Urban Land Institute.

“Otherwise, our workforce will face longer commutes and higher transportation costs, leading to increased traffic congestion and adverse environmental impacts."

29 March 2010

Economy Driving U.S. Families Under One Roof


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. For more see.

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.


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 Dallas apartments 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 Jeffersonville, Indiana, beauty salon owner Karen Carden, 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.

"Assisted living 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 (SRZ.N), had to sell off assets and is in restructuring talks with lenders.

The expense of managed care 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.


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 remodeling the one they have, 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, 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.

28 March 2010

Take Two: Government Tries New Fix for Mortgage Crisis

WASHINGTON (AP) - The government's bold new plan to stem the foreclosure crisis aims to succeed where previous efforts have fallen flat. Yet just as before, the odds are long, and many struggling borrowers won't qualify.

In theory, the effort unveiled Friday would help millions of troubled homeowners who owe more on their mortgages than their homes are worth, or who are jobless and need a break on their payments.

But it depends on cooperation from investors and bankers, many of whom have been locked in disputes over whether to reduce the debt owed by homeowners.

And just like the bank bailouts, this rescue plan poses risks. If it doesn't slow the wave of foreclosures or if home prices nosedive, the tentative recovery in the housing market could fizzle.

The Obama administration says the plan will help stabilize the real estate market by keeping many borrowers out of foreclosure. If it succeeds, the plan would limit damage to the overall economy.

The new effort is designed to help two groups:

- Borrowers who owe more on their loans than their houses are worth. More than 15 million homeowners fall into this category, according to Moody's Analytics. About 10 million of them owe at least 20 percent more than their house's current value.

Their mortgage companies can cut the total amount they owe, or they can refinance into loans backed by the Federal Housing Administration. FHA will get $14 billion in incentive money from the federal bailout fund.

- Unemployed borrowers. People receiving unemployment benefits would have their mortgage payments cut to no more than 31 percent of their monthly income for three to six months.

That's intended to give homeowners more time to find a job. Once they do, they may qualify for a loan modification that would permanently reduce their payments under the administration's existing $75 billion loan modification program.

The plan aims to help 3 to 4 million borrowers avoid foreclosure - the same target the administration tried to reach with its original plan last year. Even with the changes, the effort will likely prevent no more than 1.5 million foreclosures, estimates Mark Zandi, chief economist at Moody's Analytics.

Disputes among banks and investors, who would have to approve any cuts in loan principal, could prevent the effort from stopping more foreclosures, as could another drop in home prices.

"Practically speaking, this is probably going to prevent foreclosures. But I don't think they're ever going to reach 3 to 4 million homeowners," said Chris Mayer, a real estate professor at New York's Columbia Business School. "These plans always turn out to be harder than we think."

The administration's existing program to prevent foreclosures hasn't made much of a dent in the foreclosure crisis. A lack of planning and shifting rules on who qualifies produced a huge backlog in the program, the special inspector general for the federal financial bailout fund told lawmakers this week.

Still, analysts said this effort has a better chance of success than past efforts because it would reduce principal for some struggling borrowers - a method more effective at helping homeowners than reducing interest payments or other forms of aid. Laurie Goodman, a widely followed mortgage securities analyst with Amherst Securities Group, called it "a huge step forward."

The plan comes after pressure from the administration's Democratic allies in Congress to intensify efforts to help Americans at risk of losing their homes.

The overhauled plan came together after several months of negotiations between the Treasury Department, major banks and investors in mortgage securities. A major sticking point so far has been getting everyone involved to agree on restructuring loans.

The problem is that most of the troubled mortgages aren't owned by the banks themselves. They were bundled into securities during the housing boom and sold to investors.

To reduce principal payments on those mortgages, banks often must get permission from the investors who hold the securities - and may not be willing to take less.

Banking industry officials were optimistic that investors would negotiate.

"You have two choices: Modify the mortgage and help a borrower stay in their home or possibly get nothing if they foreclose," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, an industry group.

The plan risks angering Americans like Jim Truschel, a homeowner in La Mirada, Calif., who said he was disappointed the government is spending taxpayer money on another homeowner bailout effort.

"I feel very sorry for the people that are in these situations, but they have to be somewhat to blame themselves," said Truschel, a retiree. "They should have realized that they were getting into things that they weren't going to be able to pay for."

The administration says irresponsible borrowers will not benefit. The plan will not help investors, speculators or "Americans living in million-dollar homes or defaulters on vacation homes," an administration fact sheet said.

Diana Farrell, a White House economic adviser, acknowledged the plan won't prevent many of the expected 10 to 12 million foreclosures expected over the next three years. Doing so, she said, "wouldn't be fair, it would be too expensive and we probably wouldn't succeed in any case, because many people got into homes that they simply cannot afford."

Rep. Barney Frank, chairman of the House Financial Services Committee, praised the new steps, particularly giving jobless borrowers a break on their payments for three to six months.

"The whole economy is hurt by these foreclosures," Frank said.

For taxpayers, the government's plan carries some risk. Lenders will probably sell their most troubled loans to the FHA so they can be insured against default, said Mayer of Columbia Business School. Experts have warned that the FHA faces rising losses from foreclosures and might need a bailout.

"There's more risk to taxpayers," Mayer said. "There's a big incentive for lenders to give the government the worst of their loans, the ones they fear they won't get paid back on."

One "underwater" homeowner, Joe Clarke, a police officer in Oxnard, Calif., welcomed word of the plan. He owes $390,000 on his home, which is only worth about $250,000, and he fears his adjustable-rate loan will reset to a higher rate in August.

"I've made my payments," he said. "I didn't walk away from my house. I'm just not being afforded the opportunity to refinance my home, even at the current value, without taking the principal off."

27 March 2010

BofA to Reduce Mortgage Balances

NY Times

Bank of America, under pressure to keep distressed borrowers from losing their homes, said Wednesday that it would begin forgiving some of their mortgage debt.

While limited in scope and by invitation-only, the program is a significant shift in efforts to assist the four million homeowners who are facing foreclosure. It comes as banks and the Treasury Department are under growing pressure from the Obama administration, lawmakers and community groups to stem the foreclosure tide.

With the housing market entering another period of stress, worries about foreclosure are compounded. As the volume of sales drops, prices start to slide as well. When the gap keeps increasing between the size of a mortgage and the value that the home could fetch from a buyer, owners tend to give up.

“Banks are willing to take some losses now to avoid much greater losses later if the housing market continues to spiral, and that’s a sea change from where they were a year ago,” said Howard Glaser, a housing consultant in Washington and a former H.U.D. official.

The Bank of America program is intended for owners who received loans from Countrywide Financial, the biggest and one of the most aggressive lenders during the housing boom. Bank of America bought Countrywide in 2008.

Bank of America executives said the program would work this way: A borrower owes $250,000 on a house now worth $200,000. Fifty thousand dollars of that balance would be moved into a special interest-free account.

As long as the owner continued to make payments on the $200,000, every year $10,000 in the special account would be forgiven until either the balance was zero or the housing market recovered and the borrower once again had positive equity.

“The time has come to test this sort of program,” Jack W. Schakett, who heads credit loss mitigation strategies at Bank of America, said in a briefing. “Modifications are better than foreclosure.”

That was the original notion behind the government’s modification program, which was originally touted as helping millions of borrowers but has resulted in permanently improved loans for less than 200,000. The program, which stresses reductions in interest rates, was criticized Wednesday by the special inspector general for the Troubled Asset Relief Program for over-promising and under-delivering.

25 March 2010

Rent City

NY Daily News

Rentals are the backbone of the NYC real estate market

Call it hustle, or preparation, but Citi Habitats rented over 12,900 apartments last year, more than ever before and a record for any New York City rental company. Almost 2,400 more than they rented in 2008, this increase represents what Citi Habitat’s president, Gary Malin, thought all along.

“The backbone of New York City’s real estate market is rentals,” says Malin. “Seventy-five percent of the apartment stock in New York City are rentals. Of those, 75% are studios and one-bedrooms. That’s a lot of apartments where people are moving in and out on a constant basis. It’s why rental agents love to work. If you’re good, you can make fast cash.”

Currently averaging over 850 rentals a month in what is a traditionally slow period for rentals, the company is on pace to beat last year’s mark. While industry revenue is lower than past years because sales prices are down, ­Malin points to his company’s positioning and business model as a reason for the success.

“I’ve always thought that if there was a company situated and strong enough to weather any economic time and remain the dominant rental company in the city, it was us,” he says. “Over the past few years, we proved it, and we did it by renting and selling apartments. Before any agent hits the streets, they go through a week of training. From that moment on, they are geared toward renting and selling, or doing whatever they want to be their own success.”

Some stay with rentals

“Do the math,” Malin says. “If you rent a $25,000-per-month apartment and get a month fee, standard in the industry, that’s $25,000 for not nearly the amount of work you’d have to do earn that sales commission. After closing costs and who knows how much time sitting on the market marketing the apartment, you’d have to sell a $600,000 apartment to make that.”

Malin also estimates a good 40% of renters in Manhattan are new to the city. New York’s constant draw almost makes it recession-proof, although the market crash after the fall of Lehman Brothers impacted the rental market first. Immediately, prices dropped slightly. Fast to react to avoid vacancies and decreased profits, landlords started offering concessions like one or two months free rent. What the industry refers to as “owner paid fees,” or “OP,” also became an incentive, meaning building owners paid broker fees, not the would-be tenant.

“Make no mistake about it,” says Malin. “Even though prices were slightly lower, those costs are built into the rents. Landlords also asked for longer-term leases because they were giving away free months.”

When the market didn’t stabilize in 2009, Citi Habitats still saw an increase. Malin and other real-estate leaders watched as midsize sales and rental companies such as Coldwell Banker Hunt Kennedy and J.C. DeNiro shut down. Malin closed two offices, one downtown in the ­Financial District and another on W. 57th St. He watched as 10% of around 740 agents left the firm.

“We had to trim on the office side,” he says. “Everyone did.”

Chris Shiamili, founding president and CEO of Ardor Realty Corp., which at one time had 120 agents, also saw a drop in personnel over the past year. At the same time, he saw an increase in per-agent sales volume.

“If something doesn’t kill you, it makes you stronger,” he says. “The people who stuck it out were of higher quality. This crisis was like a war for us in real estate. Everything was a struggle. Rentals are directly related to unemployment, so until the ­labor market picks up, it will stay tough. At the end of 2009, we saw a nice increase in sales.”

That increase in sales recently ended. At the same time, rentals picked up again. Shiamili, who is pursuing a doctorate in economics at New York University in his spare time, doesn’t see competition as a problem in the New York rental and sales market.
“The market is flooded with inventory on the sales and rental side,” he says, despite low vacanies. “There is no competition in the New York real estate market right now. There is more than enough business to go around.”

So why then is there still a slowdown, or more importantly, who is doing business? According to Shiamili, it’s those organizations generating the most qualified leads, and those with the best customer service and agent training programs.

Of all the companies in the rental industry, Citi Habitats says it’s as good, if not better, as anyone else. Their 12,900 rentals last year was by far the top in the industry, likely nationwide. They also sought to legitimize rentals as a bona fide business. Before Citi Habitats was founded in 1994, the rental business was dominated by local companies who developed relationships with building owners. They opened doors and collected commissions. When other companies entered the fray in the late 1980s, the business became quick and dirty, with agents falsely advertising a price of an apartment and presenting would-be renters with more expensive units when showing apartments.

The same shenanigans occur now, mostly in the Financial District where new firms pop up every day advertising on Craigslist.org. Citi Habitats vowed to stop all that. Their size and business model — rentals and sales together — keep them honest as customer service is the hallmark of their strategy. Agents who mislead clients are simply asked to leave.

“The perception on the rental side was one of basement brokerages,” says Malin. “Little places that you can’t even tell if they’re a legit business or not. Look at our offices. From the beginning we understood the importance of perception, and the reality of doing good business.”

The organization also developed a new development team strictly devoted to new-construction rentals. Led by Clifford Finn, they represent Larry Silverstein's Silver Towers, Forest City Ratner’s 80 DeKalb, and Dwell95 by Philippe Starck, three of the city’s top rental projects.

Now with 12 offices dedicated to rental and sales, the company also allows agents to develop personalities and brands. Developing “hybrid agents,” or agents who can both rent and sell apartments, Citi Habitats can be many things at once. A client can go from renting a small one-bedroom to buying a $3 million loft working with the same real estate broker.

Andreas Metzger, a top Citi agent, rented more than 160 apartments last year, grossing more than any agent in the company’s history. He has exclusives on some of the upper East Side’s top buildings. Caroline Bass focuses on customer service. At 27 years old, she has become a force from her referral business.

“Being a rental agent offers someone a chance to build a career in real estate quickly,” says Malin. “New York is made for rentals. People need, want and crave living here. In your first year, you can do 30 to 40 deals. Sales takes longer.”

Malin, who believes 2009 was the “year of the rental,” is optimistic about 2010. If his organization does near the same numbers, his firm will dominate. Shiamili, a realist, hopes to survive and grow.

“A good chunk of our customers are current tenants who at the same time negotiate with their current landlords for price reduction,” he says. “It’s all about weak consumer demand and a glut of inventory in both sales and rentals.”

22 March 2010

Credit Scores Can Drop After Receiving Loan Assistance

Yahoo Finance

Homeowners see credit scores sink after signing up for mortgage relief

Some homeowners who sign up for the government's mortgage assistance program are getting a nasty surprise: Lower credit scores.

For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points. That makes it harder to get a loan and can present a problem when applying for a new job.

Housing counselors say it's unfair, especially because the news often comes as a surprise to homeowners.

"Why should people's credit be hurt even worse when they're trying to do the right thing?" said Eileen Anderson, senior vice president at Community Development Corp. of Long Island, a housing counseling group in New York.

And many homeowners are angry that a program designed to help carries such a penalty, said Kathy Conley, a housing counselor with GreenPath Inc., a nonprofit group in Farmington Hills, Mich.

"It's a feeling of being duped," she said.

Still, the impact is far less severe than a foreclosure, where borrowers typically find their credit is in tatters for years. That's due to the cumulative impact of many months of missed payments and the foreclosure itself, which drags down a homeowner's' credit by 150 points or more on a scale of 300 to 850.

To enroll in the Obama administration's $75 billion "Making Home Affordable" program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus -- Experian, Equifax and TransUnion.

For delinquent borrowers, the damage was done when they fell behind on their loans.

But for homeowners who are having financial troubles but managing to pay their bills, a request for a loan modification is the first sign of difficulty. And that means a sharp drop in the borrower's credit score.

The credit rating industry defends the practice. People who sign up for loan modifications would not be asking for help unless they were having severe money troubles, said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade group in Washington that represents the credit bureaus.

"The consumer is going into the program because they're in a financial bind," he said. "Other lenders would need to be aware of that."

The Obama administration acknowledges that enrolling in the program can hurt credit scores. But Meg Reilly, a Treasury Department spokeswoman, said that foreclosure "brings far more serious financial consequences for borrowers and their families."

The credit score issue is an unexpected consequence of the program that has been plagued with problems and disappointing results since its launch last year. Only about 170,000 homeowners had completed the process as of February. Hundreds of thousands more are still in limbo.

Jim Owens, 46, of Harrisburg, Ore., was accepted on a trial basis for the Obama plan last year.

He and his family were in bad financial shape. They were barely able to pay the mortgage and utility bills.

The main reason: After being laid off and unemployed for six months, he took a job as maintenance director at a retirement home. But it paid only around $25,000 year, about $10,000 less than his former job in a city public works department.

He and his wife were also struggling with debt, after taking out a second mortgage four years ago to pay off debt and medical bills.

Late last year, he was searching for a used sport-utility vehicle. He got a 30-day approval for a $2,000 car loan.

But that time ran out before he found a car, so he had to reapply for the loan. He was shocked to learn that, after signing up for the Obama plan, he was denied.

"I should have been told," that this might happen, Owens said. "Without credit, you can't do a whole lot in life."

A Citi spokesman, Mark Rodgers, said the company follows the Treasury Department's guidelines for reporting to credit bureaus. "We do not determine credit scores," said Rodgers, who declined to comment on Owens' case.

The impact is worse for borrowers who enroll in the Obama program and are then ruled ineligible.

If homeowners do manage to get accepted into the Obama program and have their loans permanently modified, lenders update the credit bureaus. The new status neither hurts nor helps the borrower's credit score. Over time, they can see their score increase.

"The best way to build credit back is to continue to pay bills as agreed, to use credit wisely," said Tom Quinn, vice president of scoring solutions at Fair Issac Corp., which designed the well-known FICO score system. "As time goes on, the score gradually increases."

REIT Shopping for North Texas Medical Offices

Dallas Business Journal

Arizona-based Healthcare Trust of America was one of the country’s most active investors in 2009, spending $494M

Healthcare Trust of America Inc. is scouring North Texas for health care real estate acquisitions.

The Scottsdale, Ariz.-based real estate investment trust is looking to invest a portion of its $225 million cash reserves in the Dallas-Fort Worth medical marketplace.

The company has a portfolio of health care properties throughout the U.S., about 90% of which are medical offices and smaller hospitals, said Mark Engstrom, executive vice president for acquisitions at Healthcare Trust of America. HTA is looking to invest in health care as a defensive strategy to weather the downturn, he said.

“It doesn’t have as much of the cyclical variability as other types of real estate investments,” Engstrom said.

20 March 2010

A $63M Push to Retrofit Boston Housing

The Boston Globe

BHA project will make units energy efficient

Mayor Thomas M. Menino will announce today what is being billed as the largest energy efficiency overhaul in public housing in the nation’s history, a sweeping initiative designed to save electricity, countless gallons of water, and millions of dollars.

The $63 million renovation will target 4,300 apartments in 13 Boston Housing Authority  developments stretching from Brighton to Charlestown. Thousands of leaky toilets will be traded for low-flow models. Power-sucking lights will give way to hyperefficient LEDs and compact fluorescents. And cantankerous, big-as-a-house, oil-guzzling boilers will be upgraded to cleaner natural gas varieties that will allow residents to control their heat.

“When I was growing up, the way you used to cool the place down in the winter was opening the window,’’ said Bill McGonagle, a BHA administrator who lived in a crowded apartment in the Mary Ellen McCormack housing development in South Boston.

The project promises to do more than eliminate the one-temperature-fits-all heating systems that have forced residents to rely on alfresco thermostats. At the Lenox Street development in the South End, a dozen failing tar roofs that absorb heat like a sponge will make way for white surfaces that reflect warmth and for solar panels. On West Dedham Street at the Torre Unidad development, a newfangled cogenerator will use natural gas to heat hot water and produce enough electricity to power the equivalent of roughly 33 single-family homes.

“It’s the nation’s largest public housing energy performance contract, right here in Boston,’’ said Menino, who will announce the project at the Bromley-Heath development in Jamaica Plain, which will benefit from $11.5 million in improvements that will include new bathroom fixtures, revamped heaters, and thermostats. “I think it’s a win-win for everyone in the fact that it is energy efficient and there is no cost to taxpayers because it is paid for with savings generated by improvements.’’

The US Department of Housing and Urban Development, which covers utility costs for Boston public housing units, has agreed to continue paying the same amount for the next 20 years. The Boston Housing Authority will borrow $63 million against those future payments and use the money to pay Framingham-based energy firm Ameresco to complete the three-year project.

After the BHA repays the loan and interest over the next 20 years, taxpayers would save an estimated $7 million annually in utility costs for public housing, said David J. Anderson, an executive vice president at Ameresco.

“From a taxpayers’ perspective, we are using a utility expense that the Boston Housing Authority would have to pay if it didn’t do this project,’’ Anderson said. “So essentially what we are doing is deferring almost 30 percent of their utility expense and reinvesting it in their facilities for no additional tax dollars.’’

Buildings devour between 40 and 50 percent of the world’s energy, more than airplanes, sport utility vehicles, and other modes of transportation, according to Douglas Foy, a specialist on energy and the environment who was a Cabinet secretary in Governor Mitt Romney’s administration. Much of that energy is wasted because buildings are poorly designed and have inefficient heating and cooling systems, he said.

“So if you care about climate change, if you care about energy strategies for the country . . . the single largest opportunity to get at it is in retrofitting buildings,’’ Foy said.

For Boston, the agreement with Ameresco is an “easy way to make public housing more efficient,’’ said Seth Kaplan, a senior attorney and vice president for climate advocacy at the Conservation Law Foundation. “It’s a great example of how economics, people’s comfort, and environmental protection can all line up in the same effort.’’

A previous efficiency contract allowed the Boston Housing Authority to upgrade a hulking 1938-era boiler from the McCormack housing development recently. City officials have been seeking a similar arrangement on a much larger scale since at least 2007.

So-called energy performance contracts first came into use during the oil shortage of the late 1970s. The deals have surged in popularity in recent years as government agencies and other large institutions try to retrofit bulky buildings for today’s green world. Facilities from the US Naval Station at Guantanamo Bay to the John F. Kennedy Presidential Library on Dorchester Bay have used similar financing plans to become more energy efficient.

In public housing, there have been similar initiatives around the country, including in Chicago, which recently completed a $43 million project to modernize its units.

But none has been on the scale of the effort to be announced today in Boston, which will refurbish one-third of the city’s federally supported public housing units, local officials said. The energy upgrades are part of a larger, $238 million upgrade that McGonagle described as the “single largest capital improvement in the 75-year history of public housing in this city.’’ Funding for the overall project includes $73 million in federal stimulus money and $102 million from bonds and the agency’s capital budget.

Part of the efficiency initiative will focus on teaching residents of public housing, who do not pay utility bills, how to conserve energy.

“They need to learn,’’ said Rose Whigham, 72, who lives in the Heath development in Jamaica Plain. “They leave lights on, burn air conditioners all day, all night, instead of turning them off when they go out.’’

McGonagle tells a story about when he first moved in with his wife, who did not grow up in public housing. She spent the first part of their marriage following him around the house shutting off lights off and lowering the heat.

“I had no inkling that you had to pay for those things,’’ McGonagle said. “We have to work with residents to understand the importance of turning down the heat and turning off lights. We don’t want them heating the sidewalk.’’

17 March 2010

Hope for a Spring Housing Rebound in North Carolina

News & Observer

Lynda Franklin of Durham, left, and real estate agent Elaine Bridges sit in the media room of the model home in Cary's Hortons Creek subdivision. Franklin wants a larger house but is wary of taking on a big mortgage

Lynda Franklin has been house-hunting for about six months now, looking for a larger home with a really great mud room.

Franklin knows that interest rates are at historic lows and that prices have come down, but she's still not sure whether she should buy now or wait.

"It's kind of stressful trying to decide on this," said Franklin, who works as an office manager for an advertising company in Durham. "If I stay where I am and I lose my job, I can still be OK. If I get into a $400,000 house, I don't know."

Triangle home sales last year were the worst since 1996. But real estate agents are counting on the traditionally strong spring season to reduce the excess of houses on the market from the boom years and to solidify the recent stronger sales.

A residential real estate recovery will be vital to the Triangle's overall economic recovery, as the industry directly or indirectly supports a long list of businesses, including construction companies, furniture makers, and architecture and engineering firms.

Although the downturn here hasn't been as bad as in most regions of the country, it has put a number of companies out of business and left thousands looking for work.

Buyers such as Franklin will be crucial to any recovery. Franklin is what agents refer to as a "move-up buyer," meaning she owns a home and is considering buying one at a higher price.

Move-up buyers have been in short supply in recent years, largely because buying a new house is often predicated on the ability to sell the house the buyer owns.

This spring could be different, agents say, largely because of a confluence of factors luring buyers off the sidelines: low interest rates, plenty of discounted homes and soon-to-expire federal tax credits for both first-time home buyers and repeat buyers.

"If you have the means to buy - if you have a job and credit and the opportunity to buy - you'll never see an opportunity like this," said Carol McCormick, an agent with Allen Tate Co.

Of course, jobs and credit are two things that have become harder to find in this recession, a fact that continues to weigh down the housing market.

The state's unemployment rate was 11.1 percent in January, the highest since the state began keeping track in 1976.

In addition, backlash against the lax lending laws that led to the housing crisis means that it can be harder to get a mortgage. Potential buyers must have a good credit rating and a sizable down payment.

Foreclosures also may weigh on any recovery in certain areas of the Triangle. Foreclosure filings on Durham, Johnston, Orange and Wake county real estate totaled 1,516 through the first two months of the year, a 72 percent increase over the same period the previous year. Too many foreclosures not only add to the inventory but can also hold down home prices.

Buyers can be choosers

For sellers, the days of being able to sell your home with relatively little effort are over.

"Back in 2005 to 2007, you could have sold your house no matter what in Cary or Raleigh in a short amount of time," said Beth McKinney, who works for a Cary real estate agency.

Now, with so many more buyers than sellers, a house needs to distinguish itself from competitors, and sellers must be flexible in accommodating potential buyers.

"They have got to be staged right," McKinney said. "They have to be priced right. And they have to be available."

When Bill and Jessica Kovash prepared to put their Cary real estate on the market late last year, they knew there was no point in living in the past.

Although their 3,660-square-foot house in the Cotswold subdivision might have sold for as much as $415,000 two years ago, they listed it at $399,999.

"We have to look at what the houses in our development and the surrounding areas are priced at, and we need to price accordingly," Bill Kovash said. "We need to price aggressively but realistically."

The Kovashes also need to sell their house relatively quickly. Jessica Kovash recently took a job in Seattle, and Bill Kovash and the couple's two children hope to join her by summer.

To help improve their chances, the Kovashes followed the advice of their agent, and had their home professionally staged.

A couple from Chicago recently made an offer on the house, but the purchase is contingent on the couple selling their house in Chicago.

"We're going to keep it on the market and look for backup buyers just in case," Bill Kovash said.

Two markets

Among the legacies of the housing bust is a vast discrepancy in sales activity at different price points.

Sales of Triangle homes priced at $250,000 and below have picked up over the last nine months because of the first-time homebuyer tax credit, while sales of higher-priced homes have remained extremely sluggish.

The average sales price for a single-family home in the Triangle in 2009 was $249,568, down 11 percent from the previous year, according to Market Opportunity Research Enterprises, a Rocky Mount firm that tracks real estate and Triangle relocation services.

Sellers such as Kristi and Nathan West are finding that their home is priced just out of the market's sweet spot.

The couple is eager to move from their North Raleigh home off Perry Creek Road to a neighborhood closer to Nathan West's job in Research Triangle Park.

The Wests listed their 2,568-square-foot home last spring for $274,000, which was right at the tax value. After lots of showings but getting no offers, they pulled it off the market, cut the price, and relisted it at $255,000 around Thanksgiving.

"The first showing we had was Valentine's night," Kristi West said. "We're like, 'What's going on?' And we're priced very well."

The Wests bought their house for $257,000 four years ago and are not willing to discount further.

"We would have never guessed we would be selling our house for less than we paid for it," Kristi West said.

Among the challenges for sellers is distinguishing serious buyers from those looking for unrealistic deals.

Triangle has held up

McKinney said people who arrive in the Triangle after selling their home elsewhere at a serious loss often assume they will be able to get a similar discount here.

"Our market isn't like that," she said. "Our market is holding on and is actually stronger than anywhere else in the country."

McCormick said many of the best deals have already been snatched up.

"There is a wonderful opportunity, but a lot of the discounts have been taken," she said.

As for Lynda Franklin, she remains undecided.

She has paid off the mortgage on her house in Durham, and her agent, Elaine Bridges of Re/Max Preferred Associates in Raleigh real estate, has found her ideal house: A 3,500-square-foot model house with a fabulous mud room being offered in the Hortons Creek subdivision in Cary.

It's priced at $434,990.

"I've found the house, but it's really more house than I need," Franklin said. "But if the market comes back, it might be a great investment."

16 March 2010

Wachovia Wins $11M Judgment Against Yale-Steam Associates

Triangle Business Journal

Wachovia Corp., the No. 1 bank in Raleigh-Durham market share, has won a $10.5 million foreclosure judgment against the owner of a Homestead, Fla., trailer park who planned to build an apartment complex on the property.

The judgment was against Washington, D.C.-based Yale-Steam Associates. The developer’s 37-acre site is set for public auction on June 1.

Yale-Steam bought the mobile-home park for $13.5 million in 2006 after obtaining a $9.8 million mortgage from Wachovia. The loan had a future advance limit of up to $50 million to help pay for construction.

The company secured approval for 204 apartment units, according to county records. However, it didn’t get the advance loan, and construction never began.

Charlotte-based Wachovia filed for foreclosure in March 2009 with $9.3 million outstanding under the mortgage. Wachovia is owned by Wells Fargo & Co. of San Francisco.

Wachovia, the No. 1 bank in the Raleigh real estate market share, had $6.15 billion in Triangle-area deposits as of June 30, 2009, according to the Federal Deposit Insurance Corp.’s annual market-share ratings. Wachovia, which has more than 60 branches in the Raleigh-Durham area, was No. 1 with a market share of almost 23.82 percent, nearly double the 13.56 percent market share of No. 2 BB&T

14 March 2010

Furniture Orders Bode Well For Housing, Economy

The Wall Street Journal

Strong year-to-date orders at furniture companies Ethan Allen Interiors Inc. (ETH) and Haverty Furniture Cos. (HVT) offer the latest evidence of a turnaround in the home sector and suggest consumers are ready to make bigger purchases again.

Furniture companies and their counterparts, home-improvement retailers, had seen sales slump during the recession as customers cut back on purchases of big items. But as the economy begins to recover from its trough, people are making the purchases they had put off for the last couple of years.

The news from Ethan Allen and Haverty this week reinforces everything the sector has seen in the last few months, as furniture sales picked up just after Christmas and big-ticket home projects increased in January when home-improvement retailers started seeing increases in estimates for kitchen and bath projects, Craig Johnson, president of research firm Customer Growth Partners, said in an interview with Dow Jones.

Housing market turnover, which is starting to pick up, is driving increased sales at furniture and home remodeling companies, he said. People generally spruce up their homes either when they're about to put them on the market or when they've just moved into a new house.

General market reaction to last week's January existing home sales data from the National Association of Realtors, which showed sales fell 7.2% from a month earlier, has been negative, with analysts saying the data raises concerns about the strength of the housing market recovery. But Johnson said to get a clear picture, one has to look at the comparison to year-ago numbers, which aren't seasonally adjusted. Total existing home sales were 12% above a year earlier in January.

Ethan Allen Interiors Inc. (ETH) said Wednesday written sales, or orders, for the two months ended Feb. 28 rose 25% from a year earlier, driven by increased store traffic. Chairman and Chief Executive Farooq Kathwari said the company is optimistic about its results for the quarter ending in June--when most of those written sales will be delivered and reported as sales--though it remains cautious.

Ethan Allen's news comes just two days after another furniture company, Haverty Furniture Cos. (HVT) said total written business in the current quarter to date is up about 8% despite harsh weather in some of its key markets. The company also posted much better-than-expected fourth-quarter earnings.

Meanwhile, last week, world's biggest home improvement chain Home Depot Inc. (HD) reported stronger-than-expected sales of some big-ticket items, such as kitchen appliances, water heaters and windows. Lowe's Cos. (LOW), the second-biggest chain, said sales tied to bigger-ticket projects improved from the third quarter, though they remained lower than a year earlier. The companies were able to use promotions to ignite demand for big-ticket items like water heaters and roaster ovens, which had slumped in recent years.

That the spending on home improvement and furnishings is improving despite 10% unemployment shows people with full-time jobs are starting to spend again, and since consumer spending makes up 70% of the economy and retail accounts for 45% of consumer spending, that has implications for the broader economy as well, Johnson, of Customer Growth, said.

Wall Street Strategies analyst Brian Sozzi said the strength in furniture and home improvement segments is definitely a sign of pent-up demand, but companies also have to have the right product. Ethan Allen's name is synonymous with quality, he said, so when the company discounts, customers are interested. La-Z-Boy Inc. (LZB) has focused on its mid-priced niche and has seen good results, but a company like Furniture Brands International Inc. (FBN) has much lower prices but hasn't been doing well no matter what it's done with its prices, he said.

The furniture sector has been in the doldrums for about five years, and for 2009, it was off 20% from its peak in the fourth quarter of 2005, Johnson said. As confidence and the housing market recover, he said, the snap back in the furniture sector will likely be among the strongest because it will be coming off the deepest dip.

12 March 2010

Bank of America Aplogizes for Taking Parrot

The Wall Street Journal
BofA Believed Woman's Home Was Vacant, Padlocked It and Kept Bird Over a Week

PITTSBURGH—Bank of America Corp. apologized after its local contractor entered the home of a mortgage borrower when she was away, cut off utilities, padlocked the door and confiscated her pet parrot, Luke.

Angela Iannelli, 46 years old, alleged in a lawsuit Monday that the October incident—which separated her from her 11-year-old parrot for more than a week—caused so much "emotional distress" that she needed a prescription medication for anxiety.

suicide threats from distressed borrowers are so common that one lender, OneWest Bank Group in Pasadena, Calif., had to establish procedures for alerting the police

A Bank of America spokesman said Wednesday a bank employee erroneously believed the house was vacant and sent the contractor there with instructions to install a new lock and otherwise "secure" the property. The bank spokesman said those instructions were inappropriate because Ms. Iannelli wasn't in default and the house wasn't vacant.

Mortgage lenders have struggled in the past three years to hire and train enough people to deal with the biggest wave of foreclosures since the 1930s. Nearly eight million households and Atlantic Beach vacation homes, or 15% of those with mortgages, are behind on their payments or in the foreclosure process.

Many borrowers complain they get the runaround when they call their lenders for help, receive contradictory information from different employees and are required to repeatedly fax the same documents.

At the same time, suicide threats from distressed borrowers are so common that one lender, OneWest Bank Group in Pasadena, Calif., had to establish procedures for alerting the police. Lenders' call-center employees are under heavy pressure. "These people make $14 or $15 an hour, and we ask them to move mountains," said a OneWest executive at an industry conference last month.

In her civil suit filed in the Allegheny County Court of Common Pleas, Ms. Iannelli said a contractor hired by Bank of America entered her house about 15 miles north of Pittsburgh in mid-October when she was away. According to the suit, in an "invasion" of the home, the contractor stopped utility services, cut water lines and electrical wiring, damaged flooring and finishings, poured antifreeze into sinks and toilets, and "stole" the parrot.

Ms. Iannelli, who owns a diner and works part-time as a bartender, said Bank of America representatives weren't helpful when she called in to protest. They first denied knowing where the parrot was, and later told her she could go to the offices of the contractor, about 80 miles away, to retrieve the bird herself. Ms. Iannelli said bank representatives also told her they were "tired" of hearing from her, hung up on her and advised her to seek help from the police.

Her lawyer, Michael Rosenzweig, a partner at Edgar Snyder & Associates in Pittsburgh, said Ms. Iannelli was seeking damages of more than $50,000. The amount of any damages would be decided by a jury if the case goes to trial.

A Bank of America spokesman said the bank would "quickly review the allegations in the lawsuit, the actual events that led to them and the causes of those events, and consider any hardship that resulted."

Mr. Rosenzweig said Ms. Iannelli had missed one payment around the time of the incident but quickly caught up and was now current on her loan.

After she drove two hours to reclaim her parrot in October, the bird initially seemed nervous, Ms. Iannelli said in an interview Wednesday. "He's doing very well now," she said.

11 March 2010

Is China's Real Estate Boom a Bust?

Fortune / CNN

A Plan to Save Commercial Real Estate

Fortune Magazine

Economists have long been predicting commercial real estate could be the next day of reckoning for the financial markets, with a wave of defaults looming as billions of dollars in troubled loans come due in the coming months.

But a little-noticed bill introduced in January could help bring a new source of desperately-needed liquidity to the sector: foreign investment.

Introduced by Joseph Crowley, a six-term Democratic congressman representing parts of New York City's Queens and Bronx boroughs, the Real Estate Revitalization Act of 2010 would eliminate certain taxes that were part of the Foreign Investment Real Estate Property Tax of 1980, or FIRPTA -- which requires foreign investors to pay as much as a 55% tax on capital gains from the sale of U.S. real estate or shares in real estate investment trusts and real estate operating companies.

Repealing the tax, Crowley and the bill's supporters say, would get rid of a major impediment to foreign investment in the sector -- and could open the floodgates to new liquidity at a time when commercial real estate loan defaults pose a serious risk to the nation's fragile economic recovery.

The FIRPTA tax, the bill's supporters say, penalizes foreign investors who want to put cash into U.S. real estate because those same investors don't face such taxes when they buy into other U.S. assets, like Treasury securities, corporate equities or corporate bonds.

If a British citizen buys stock in IBM (IBM, Fortune 500) and sells stock in IBM, for instance, that person is not subject to tax in the U.S. and only pays UK-levied taxes. But if he buys and sells REIT shares, he will pay an additional tax on the sale of those shares.

Foreign investors also don't pay added taxes when they make real estate investments in other foreign markets. "London doesn't have this FIRPTA layer of tax, so comparing a London building to a [Washington] DC building -- it makes the London building more attractive, and that is enough to tilt the needle," says Laine Kenan, Atlanta-based executive director of Arcapita, a Bahrain-based global private equity firm with a large real estate investment portfolio. Currently, only about $3 billion of his firm's $10 billion in real estate exposure is in the U.S. If the tax was lifted, "it would make a difference," Kenan says.

A recession doesn't help

Investors have become particularly sensitive to the tax in the current environment, where property values, occupancies and rents have fallen, which increases risk and lowers potential returns. "We're talking about bringing in foreign investment to be on equal footing if they invest in real estate versus non real estate," says Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a real estate think tank in Washington.

Industry analysts say there is a pent-up demand from foreign investors looking for opportunistic investments. "There is a tremendous amount of foreign capital out there," says Robert O'Brien, head of the U.S. real estate practice at Deloitte LLP. Removing the tax, he says, would "level the playing field."

Currently, foreign investors make up only about 10% of the acquisitions of U.S. commercial real estate, says Dan Fasulo, managing director of Real Capital Analytics. In the UK, it represents over half of overall capital flows. "Could [removing the tax] double the amount of investment activity in the U.S.?" he says. "Sure."

The chances of its success

Just how likely the bill is to pass is still unclear. There are no vocal opponents, but it hasn't gotten much attention, either, largely due to Congress' preoccupation with the health-care agenda. "Every time we meet with a congressman, they're looking at their watch and saying they've got to go to a health-care meeting," says Arcapita's Kenan who has been a vocal supporter of the bill. The bill's authors are pushing to have it added to more timely legislation, such as the estate tax bill or the bill dealing with the expiring Bush tax cuts, both of which must be passed in 2010.

Peter Peyser, managing principal at Blank Rome Government Relations LLC, a lobbying firm in Washington, says the bill will likely need to be tacked onto a larger piece of legislation to get passed in 2010. "A small targeted provision like this one would need to be part of a larger package because it's unlikely that something like this is going to gather enough steam to get through on its own," he says.

James Stuckey, divisional dean at New York University's Schack Institute of Real Estate, concurs the bill may have a tough time gaining political momentum on its own at a time when so much focus is on healthcare.

"Obviously a lot of political energy is being used on healthcare, so it does raise legitimate questions on whether or not there will be the political will, energy and clout, particularly in a mid-term election, to start focusing on these kinds of real estate initiatives," he says.

Also, the idea of giving tax exemptions to foreign companies on real estate may be a tough sell to some congressmen and taxpayers. "You can imagine how that could be spun to the taxpayers," he says. Still, he notes that the bill's passage could bring badly-needed liquidity into the real estate sector, which would help to stabilize both real estate and the overall economy.

Stuckey believes the bill's best shot at quick passage is being tied to an existing bill that's already got political legs in Congress. "In this environment, yes, I think it would stand a greater chance being tied onto something that has a lot of political movement to it."

Who stands to benefit

If it does pass, U.S. REITs and real estate operating companies could be big winners. Many property owners, who purchased real estate at the cycle's peak in the go-go years of 2005 through 2007, are now facing debt calls at a time when property prices have fallen about 40% from their peak, and the commercial mortgage-backed securities market has dried up. Experts predict values will fall another 10% to 20% on average before the sector bottoms, with even steeper declines in weaker markets.

Approximately $1.4 trillion in U.S. real estate loans will come due between 2010 and 2014, with nearly half of those loans currently "underwater," according to a Congressional Oversight Panel report released earlier this month.

Of course, scrapping the tax would also eliminate a source of government revenue at a time when politicians are scrounging for ways to pay down the deficit. Experts estimate the cost of repealing the tax at about $8.3 billion over 10 years. But proponents argue the benefits the bill would offer the country's fragile real estate market and overall economy would more than offset the lost revenue.

"A wave of commercial real estate loan failures could threaten America's already-weakened financial system ... and... trigger economic damage that could touch the lives of nearly every American," according to the Congressional Oversight Panel report.

Still, some are doubtful removing the tax will lead to a surge in foreign investment dollars into U.S. real estate if only for one reason: The fundamentals are still weak. "Foreigners aren't any stupider than U.S. investors," says Dean Baker, co-director of the Center for Economic and Policy Research, a Washington think tank, who notes that U.S. investors who don't face the tax aren't exactly jumping into real estate these days.

"There'd be plenty of U.S. investors who'd be willing to buy the stuff -- even at higher prices if they commanded that -- but they don't," he says. "So the idea that somehow we're going to make it more conducive to foreigners and we'll get them to be suckers -- I mean, that's silly."

10 March 2010

Missed Payment Rate Jumps on Dallas-Area Commercial Property

The Dallas News

An increasing number of Dallas-area commercial properties are falling behind in their mortgage payments.

At the end of last month, the missed payment rate for Dallas-area buildings with securitized mortgages was more than 33 percent higher than the national average, according to a new report by Trepp LLC.

The New York-based analyst tracks thousands of commercial properties across the country that are financed with securitized mortgages.

More than 9 percent of Dallas-area commercial properties with securitized debt were behind in payments at the end of February, according to Trepp's report, released Wednesday. The national delinquency rate was 6.72 percent.

The Dallas-area late loan rate has increased almost 200 percent from a year ago, said Paul Mancuso, vice president of Trepp, which provides real estate data and analytics.

"Although elevated, the [Dallas] region is well below the double-digit delinquency rates experienced in troubled states such as Arizona, Nevada, Florida and Michigan," he said.

Almost 160 Dallas-area commercial and investment properties are on the list of troubled real estate deals. The debt on these properties adds up to about $1.28 billion.

Among the largest real estate deals cited in the report is the Four Seasons Resort and Club in Las Colinas, which has been posted for foreclosure.

"Excluding the delinquent $175 million loan to the Four Seasons Resort and Club, the current delinquency rate would decrease significantly to 7.9 percent," Mancuso said.

Downtown Dallas' Harwood Center office tower and the Village on the Parkway shopping center in Addison are also on Trepp's watch list.

The Dallas sector with the highest mortgage delinquency rate is hotels. Almost 17 percent of securitized hotel loans here were behind in payments at the end of February. The office building delinquency rate was just over 12 percent.

Loan data from properties with securitized debt provides an important window into the health of the commercial real estate sector.

Trepp said the nationwide increase in late loans in February was 23 basis points,. It was the smallest increase in six months, but late loans are still at an all-time high.

In 2009, the number of commercial properties posted for foreclosure in the Dallas-Fort Worth area jumped almost 27 percent.

09 March 2010

Celebrity Listings: Software Billionaire Siebel Lists Ranch for $45 Million

The Wall Street Journal

Billionaire software entrepreneur and philanthropist Tom Siebel is offering a 62,000-acre Montana cattle ranch for $45 million.

About 90 miles north of Billings, Mont., the property, N Bar Ranch, is one of the state's oldest and largest cattle ranches. N Bar, founded in 1885 and comprising grassy foothills and valleys, open meadows and aspen forests, supports 1,500 head of cattle and specializes in raising purebred Aberdeen Angus cows. The white frame buildings of the original ranch headquarters are part of the National Register for Historic Places. Crossed by several trout-filled creeks and streams, the 97-square-mile ranch includes about 51,400 deeded acres and about 10,600 acres of leased lands. There's a 2,500-square-foot farmhouse, a guest house and an airstrip.

Mr. Siebel, 57 years old, bought the property nine years ago. A former Oracle Corp. executive and onetime protégé of Oracle chief executive Larry Ellison, Mr. Siebel later founded Siebel Systems Inc., which made software that helped companies manage sales representatives and interact with customers, and sold his company to Oracle in 2006 for $5.8 billion. He is founder and chairman of the Meth Project, an anti-methamphetamine campaign. Joel Leadbetter of Hall and Hall has the listing.
Godaddy.com Founder Buys Hawaiian Home Built by Cher

Bob Parsons, the founder and CEO of Web-hosting company GoDaddy.com, paid $8.72 million for a Balinese-style house on Hawaii's Big Island that was built by Cher and went to auction last month. "We never thought in a million years that we'd end up being the buyer," says Mr. Parsons.

GoDaddy.com helps consumers register Web domain names and is also known for its racy Super Bowl TV ads. The Hawaiian property, at the Four Seasons' Hualalai resort, includes a main house flanked by four one-bedroom bungalows. Singer-actress Cher bought the 0.76-acre property in December 2004 for $2.9 million and last year began building the house but never lived in it. Concierge Auctions handled the sale along with Rob Kildow of Hualalai Realty. Though the house comes furnished, Mr. Parsons says, "I'm bringing a bigger TV."

A 52% Cut From $100 Million

Unable to sell her 300-acre English country estate in Charlottesville, Va., philanthropist Patricia Kluge is now listing the property at $48 million, 52% off the original $100 million asking price in October.

Ms. Kluge, 61 years old, is the former wife of billionaire John Kluge, founder of the Metromedia broadcast and cellphone empire. The estate, near Thomas Jefferson's Monticello, includes a 45-room neo-Georgian manse of about 23,500 square feet with eight bedrooms and 13 baths. The 1985 home also has a theater, spa and sauna. There's a pool, a log cabin, a greenhouse, three stocked ponds, a croquet lawn and several cottages for staff. The contents of the house, including antiques, art and English furniture will be auctioned by Sotheby's in June. Michael Rankin of TTR Sotheby's International Realty has the house listing.

08 March 2010

Mortgage Windfall Misses Many

The Wall Street Journal
The Federal Reserve has pushed mortgage rates to near half-century lows, but millions of U.S. homeowners haven't benefited from that because they can't—or won't—refinance.

Falling home prices have left many owners with little or no equity, making it harder to qualify for refinancing. Moreover, stricter lending standards and higher fees by banks and mortgage giants Fannie Mae and Freddie Mac and declining incomes have made it tougher and less attractive for borrowers to seek new loans.

Around 37% of all borrowers with 30-year conforming fixed-rate mortgages—who collectively hold about $1.2 trillion of home loans—have mortgage rates of 6% or higher, according to investment bank Credit Suisse. Many could reduce their rates by a full percentage point if they refinanced at current rates, about 5%. More than half could lower their rates nearly three-quarters of a percentage point, according to Credit Suisse.

New refinance applications in January stood near their lowest levels in the past year. Weekly data compiled by the Mortgage Bankers Association also show that refinance activity has been muted, considering that rates are so low. "Traditionally, these borrowers would be aggressively refinancing," said Mahesh Swaminathan, senior mortgage strategist at Credit Suisse.

One indicator of the economic impact of refinancing: Loans that refinanced in 2009 will result in $3.4 billion in savings for consumers this year, according to a report by First American CoreLogic, a research firm based in Santa Ana, Calif. That will return an additional $17.2 billion in savings to borrowers over the next five years. That's money consumers can potentially use to help spur economic recovery.

About a quarter of all mortgage holders are "underwater"—they owe more on the house than it's worth—which normally makes it impossible to get refinancing: Banks want collateral to back the value of home loans they make. The Obama administration recently extended a program intended to help underwater homeowners refinance, but few people have tapped it so far. The program has faced logistical hurdles, delays and confusion from brokers and lenders.

Some people are so far underwater, refinancing ends up being out of the question. John Albright, a retired Navy officer in Manassas, Va., hasn't been able to refinance because the value of his home has plunged. He figures its market value is now around $275,000, but he and his wife still owe more than $500,000 on their mortgage.

Their refinance application was turned down last year because they lacked equity in the home. He says his lender told him he could refinance only if he could come up with about $200,000 to pay down his mortgage. So they are stuck with an interest rate of about 6.5% at a time when his wife's income has declined. "We're going from paycheck to paycheck, but what can you do?" Mr. Albright says.

Some mortgage bankers say higher fees by lenders have undermined the effort to encourage refinancing. Fees that Fannie and Freddie began imposing in 2008, as loan delinquencies began to rise, have made it unattractive for some borrowers to refinance. For example, a borrower with 20% down and a 695 credit score seeking to refinance must pay fees equal to 1% of the loan amount. Those fees rise for borrowers with weaker credit scores, higher loan-to-value ratios, or other risk factors.

Overcorrecting for the abuses of financial institutions "has defeated the Fed's purchase program," said Alan Boyce, a mortgage-securities-market veteran. Those loan fees, he said, are partly "responsible for why there's been no refi boom."

The higher fees and tight credit standards show the tensions facing Fannie and Freddie. As the government-controlled companies try to raise revenue to offset their losses, those efforts can conflict with their basic public-policy mission: to help stabilize the housing market.

Fannie and Freddie have to strike a balance between risk and access to credit. Figuring out "where that line is involves some trade-offs," said Edward DeMarco, acting head of the Federal Housing Finance Agency, which oversees Fannie and Freddie. The last time mortgage rates were at current levels, in 2003, refinancing activity hit $2.9 trillion, according to trade publication Inside Mortgage Finance. Last year, refinance volume reached $1.2 trillion, the highest amount since 2003 but not nearly as much as expected, considering how low interest rates have fallen. Traditionally, borrowers have an incentive to refinance when they can reduce their mortgage rate by one percentage point or more.

Borrowers who are refinancing tend to be those who need it least. Fannie and Freddie refinanced 4.2 million borrowers last year. On average, borrowers who refinanced through Freddie Mac saved $2,600 annually. But the savings on the whole have gone to "very, very good credit borrowers and it really isn't going very far down the credit spectrum," said Michael Fratantoni, the head of research and economics for the MBA.

The experience of Connecticut resident Cathy Grandahl shows some of the trade-offs borrowers must grapple with in today's low-interest-rate, high-fee environment. She wanted to refinance two loans on her West Simsbury, Conn., home: a fixed-rate mortgage with a 5.75% rate and a second mortgage with an adjustable rate that she worries will rise sharply in coming years.

Refinancing would save them around $125 a month on their first mortgage while providing a fixed rate on their second loan. But extinguishing that mortgage by refinancing into one larger loan—considered a "cash-out" refinance—would trigger an additional fee.

That, plus several thousand dollars in closing costs, ultimately persuaded the couple not to refinance after all. "It's not a matter of our credit. We just can't get a good enough rate to make the refi worth it," says Ms. Grandahl, a 53-year-old land-records researcher who has three children in college.

Falling home values are one of the biggest factors raising borrowers' refinancing costs. Borrowers with less than 20% equity may have to pay for mortgage insurance.

On Monday, the Obama administration said it would extend for a year a program launched last April to help homeowners with little or no equity to refinance. That program, which had been set to expire this June, was called a "failure" last week by analysts at Barclays Capital. While the administration had said it would benefit millions, so far just 188,000 borrowers who owe between 80% and 105% of the value of their homes had refinanced through December.

Last September, it was expanded to include borrowers who owe up to 125% of their home value, but fewer than 2,000 borrowers have used that program through December.

05 March 2010

Pending Sales of Existing U.S. Homes [Probably] Rose in January; Expect Slow Climb Ahead


The number of contracts to buy previously owned U.S. homes probably rose 1 percent in January for a second month, showing the extension of a tax credit is sparking limited interest, economists said before a private report today.

The renewal of a government incentive to first-time buyers, originally due to expire at the end of November, and its expansion to include current owners has yet to lure buyers back into the market after helping boost sales in 2009. A lack of jobs and mounting foreclosures have depressed confidence, indicating housing will take time to rebound.

“The earlier surge in sales last year spurred hope of a quick housing recovery, but it now appears the recovery will be more slowly paced,” said Aaron Smith, an economist at Moody’s Economy.com in West Chester, Pennsylvania.

The National Association of Realtors is scheduled to release the report at 10 a.m. in Washington. Survey estimates ranged from a drop of 4.2 percent to an increase of 4 percent.

Other Sectors

A 10 a.m. report from the Commerce Department may show a surge in demand for commercial aircraft fueled a 1.8 percent increase in factory orders in January, the biggest gain in four months. A report on bookings for durable goods last week showed orders for capital equipment may have dropped, signaling business investment paused to start the year.

Fewer Claims

First-time filings for jobless benefits dropped by 29,000 to 469,000 last week, according to a Labor Department report today. The number of people receiving unemployment insurance decreased to the lowest level in a year, while those receiving extended benefits climbed.

The productivity of U.S. workers kept surging in the fourth quarter as companies squeezed more out of remaining employees to boost earnings, another Labor Department report showed today.

A measure of employee output per hour rose at a 6.9 percent annual rate, capping the biggest one-year gain since 2002, revised figures showed. Labor costs dropped at a 5.9 percent pace, more than anticipated, and fell 1.7 percent for all of 2009, the biggest drop since records began six decades ago.

Improvement in the labor market is needed to propel the economic recovery and stem the surge in home foreclosures that is holding down prices. Foreclosure filings rose 15 percent in January compared with a year earlier and exceeded 300,000 for the 11th straight month, RealtyTrac Inc. said Feb. 11.

Sales Slump

Reports last week showed the housing recovery may be faltering. Sales of previously owned homes unexpectedly dropped 7.2 percent in January after a record decrease a month earlier, according to the Realtors report on Feb. 26. New-home sales fell to the lowest on record, the Commerce Department said Feb. 24.

The housing market will “follow a similar pattern” to recovery as it did in the late 1980s and early 1990s, which both took “several years,” Toll Brothers Inc. Chief Executive Officer Robert Toll said in a statement Feb. 24.

The company, the largest U.S. luxury-home builder, said its orders almost doubled in the first quarter compared with a year earlier. It projected it will sell between 2,100 and 2,750 homes in fiscal 2010 at an average price of $540,000 to $560,000.

Builder Shares

Builder shares have beat the broader market so far this year after another provision in the legislation extending the tax credit allowed construction companies to use losses incurred in 2008 and 2009 to recoup taxes on profits going back as many as five years, three more years than usual. Lennar Corp., KB Home and Ryland Group Inc. are among builders that have reported quarterly profits because of the tax refunds.

The Standard & Poor’s Supercomposite Homebuilding Index has increased 12 percent this year, compared with a 0.3 percent rise in broader S&P 500.

Billionaire Warren Buffett said last week the U.S. residential real estate slump will end by about 2011.

“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote Feb. 27 in his annual letter to shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this, there will be a buyer who benefits.”

Gowanus Set for 10-12 Year Superfund Cleanup

Crain's New York Business
Ruling by EPA likely to derail development plans along the polluted Brooklyn waterway for foreseeable future; city had pushed alternative plan.

The U.S. Environmental Protection Agency announced Tuesday that it has designated Brooklyn's Gowanus Canal one of the country's most hazardous waste sites, a Superfund site. The decision was widely anticipated despite the opposition of local developers and New York City, which had its own plan to clean up the site.

“The goal is to ensure that polluters pay for clean up, not taxpayers,” said Judith Enck, regional administrator for the EPA, during a morning conference call with the press. “We concluded that there was not enough money to take the path that the city of New York and the development community had suggested.”

City officials expressed disappointment at the designation. "We had an innovative and comprehensive approach that was a faster route to a Superfund-level cleanup and would have avoided the issues associated with a Superfund listing," a spokesman for Mayor Michael Bloomberg said, noting that the city will work closely with the EPA. "Local residents and businesses raised concerns about the impact of a Superfund designation on their community, and we hope that the EPA will work with us to address those concerns as they move forward.”

The EPA received more than 1,300 comments from the public in regards to the site. After meeting with government and elected officials, members of the community, and businesses, the agency decided the best way to proceed would be to designate the Gowanus a Superfund site. According to Ms. Enck, the EPA estimates that the remediation of the canal will take between 10 to 12 years.

“Perhaps it is not fast enough for some, but it took many decades to create the level of pollution that is there,” she said. “We can give up one decade for future development of the site.”

During the call, the EPA identified 10 parties that took part in polluting the canal and would be responsible for paying for the clean up. They include National Grid (the successor company to Brooklyn Union Gas), Consolidated Edison, the city of New York, the U.S. Navy, and Chemtura Corp. The EPA did not say how much the cleanup will cost.

In December 2008, the state Department of Environmental Conservation requested that the EPA consider putting the canal on its Superfund priorities list, despite the city's own efforts to clean up and develop the area. After initial testing, the EPA decided last April that the city's plan was inadequate and said it would continue to consider the Gowanus Canal a Superfund site. Since then, a business group called Clean Gowanus Now Coalition, which opposes the Superfund designation, has been lobbying the governor's office to reverse its position and withdraw its request to the EPA. The group supports the city's plan to clean up and develop the site.

On Monday, developer Toll Brothers, a member of Clean Gowanus Now, said it would abandon its plan to develop a mixed income residential complex on the site if the canal was placed on the Superfund list. Last week, the coalition released the results of a survey which indicated that federal regulations put into place last year would make lending to homeowners within 3,000 feet of the canal impossible if Gowanus were designated a Superfund site.

The EPA argued Tuesday that it spoke to the U.S. Department of Housing and Urban Development, and said the Superfund designation does not interfere with loans insured by the Federal Housing Administration for properties within 3,000 feet of the site. “Having the Gowanus listed as a Superfund site would not prevent FHA loans from being made,” said Ms. Enck.

“We are very disappointed,” said a spokesman for Clean Gowanus Now, adding that the group will explore legal options to reverse the decision but noted that, “We have to assume the designation will stick. We think this designation will have an adverse impact on the local economy. We are going to lose billions of dollars in development and thousands of jobs.”