Thursday, July 30, 2009

Sub-marketing gone wild!

Vegetarian real estate agents? Yes, in the push to find new clients, one agent in Palo Alto is reaching out to fellow veggies and vegans.
You couldn't make this stuff up. A Bay Area real-estate agent is marketing himself as a "vegetarian broker". This being his unique selling proposition, presumably he hopes to reel in like-minded veggie lovers as clients.

"Are you a vegetarian or vegan preparing to buy or sell a house? Are you dreading the thought of the contact you will be forced to have with real-estate agents, as part of the process (the same way most people dread upcoming encounters with used car salesmen)? You are not alone!" broker Daniel Berman from Pacific Century Realty writes on his website.

Berman addresses the obvious question -- what difference does it make to have a real-estate agent who is vegetarian as opposed to a meat eater -- head on. "Simply stated, it's a matter of shared values, an approach to life and a way of relating to others," he says. Adding: "If you've been a vegetarian (or vegan) for any length of time, you know what I mean."
I find this to be a noble, interesting tactic. The only problem is how to get that message to your targeted audience. Advertise at Gratitute Cafe? Possibly. But is that money well spent? That's the trade off he's willing to take, if he is advertising his veggie-ism.

Oh, and being 70% vegan myself (more for health and environmental reasons than animal-cruelty), I would never hire a vegetarian. I find milk products to have more negative health aspects than a steak. So call me, the steak-eating vegan, for all your real estate needs!

SOURCE: SFGATE

Wednesday, July 29, 2009

Credit where credit is due



Hats off to Lennar for designing a new home community in Palm Springs with modern design, hopefully beginning the decline of stucco-clad homes. The master planned community is called Escena Palm Springs.

After working for years in the East Bay with Toll Brothers, Lennar, Pulte and KB Homes, I'm excited to see a builder FINALLY building homes that look like something out of this millennium. This is actually something I would consider buying.

Next up: high density modern design. But one step at a time...

SOURCE: LENNAR

Case-Shiller numbers for May up from April

Data through May 2009, released today by Standard & Poor’s for its
S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that, although still negative, the annual rate of decline of the 10-City and 20-City Composites improved for the fourth consecutive month in 2009.

“The pace of descent in home price values appears to be slowing” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “There is a clear inflection point in the year-over-year data, due to four consecutive months of improved rates of return, after the steep decline that began in the fall
of 2005. In addition to the 10-City and 20-City Composites, 17 of the 20 metro areas also saw improvement in their annual returns compared to those of April.

“While many indicators are showing signs of life in the U.S. housing market, we should remember that on a year-over-year basis home prices are still down about 17% on average across all metro areas, so we likely do have a way to go before we see sustained home price appreciation.” Mr. Blitzer added.
The San Francisco MSA increased from 118.46 to 120.16, a 1.4% increase. This is down from 162.70 in May 2008, and well below May 2007's number of over 200.

SOURCE: S&P

Tuesday, July 28, 2009

New home sales up big; down 21% from June 2008

Sales of new homes in the United States posted their largest monthly gain in eight years in June, the government reported on Monday, a sign that the housing market is bottoming as buyers take advantage of lower prices.

The Commerce Department reported that new single-family home sales rose 11 percent in June, an increase that dwarfed economists’ expectations of a 3 percent increase. The pace of home sales rose to a seasonally adjusted rate of 384,000 a year, the highest level since November.

Despite the monthly increase, sales of new homes were still down 21 percent from June 2008, and the market is still swamped by a glut of for-sale houses and foreclosed properties.

“These are still really bad numbers,” an economist at IHS Global Insight, Patrick Newport, said. “The market just couldn’t have dropped much further.” As sales rose, median prices of new homes continued to fall, slipping to $206,200 from $232,100 in June a year ago.
SOURCE: NY TIMES

Monday, July 27, 2009

Would development fee moratorium spur growth?

Oz Erickson offers a possible solution to the grid-lock facing residential builders in San Francisco
Erickson said San Francisco should consider a three-year moratorium on development fees. “The city has to do something really really significant to jump-start residential construction,” Erickson said.
We have a call out to Chris Daly and Bevan Dufty's offices seeking comment or alternative suggestions. Will update you once we hear back.

SOURCE; BIZ JOURNALS

More appraisal woes

The good news is that sales volumes of new construction are rising; the bad news is they're doing so despite growing trouble with appraisals.

I can't seem to talk to anyone in the real estate industry on any topic without hearing something about appraisals. We've been over the new appraisal rules, requiring the fire wall between lenders and appraisers. We know the new rules are resulting in less qualified appraisers, perhaps with no knowledge of a local market, mucking up the process.

Now we're hearing from builders that appraisers are using distressed properties, that is foreclosures and short sales, as comps for new construction. In her monthly homebuilding Survey, analyst Ivy Zelman notes:

Commentary in this month’s survey was dominated by frustration with inconsistencies in the appraisal process. Survey respondents are concerned that these appraisal issues will make it difficult to stabilize home values, as appraisers are being extremely conservative using foreclosures and short sales predominantly as comps, based on fears of potential backlash or liability.

Home builders are in direct competition with foreclosures in many markets, because a lot of foreclosures are new construction.
SOURCE: CNBC

A quick barometer of where we're at...

Companies that a few months ago were too fearful even to project their future earnings are now seeing glimmers of hope in the year ahead. The rate of home sales has risen for three straight months. And the number of people drawing unemployment insurance benefits has fallen back to April levels, having receded for the third straight week.

All those recent signals sent the stock market surging Thursday as investors sensed that the recession could be in its waning days. Many suspect that even if no recovery is imminent, the steep economic decline has either already ended or will soon.

That confidence drove the stock market, as measured by the Standard & Poor's 500-stock index, up 2.3 percent Thursday -- continuing a rally that has driven the broad measure up 44 percent since March 9 and 11 percent in the past two weeks. The Dow Jones industrial average has gained 39 percent since March 9 and closed above 9000 for the first time since January. European markets rose by a similar amount on Thursday, and Asian markets opened up in early trading Friday.
SOURCE: WASHINGTON POST

Thursday, July 23, 2009

Home sales rise for 3rd consecutive month



More good news keep coming in
A real estate trade group said on Thursday that sales of previously occupied homes rose 3.6 percent from May to June, the third consecutive monthly increase.

The National Association of Realtors said that home sales rose to a seasonally adjusted annual rate of 4.89 million last month, from a downwardly revised rate of 4.72 million in May.

It was the highest level of sales since October 2008 and beat economists’ expectations. Sales had been expected to rise to an annual pace of 4.84 million units, according to Thomson Reuters.
SOURCE: NY TIMES

New details on SWL 337

The estimated $2.2-billion development proposal is for the creation of a new neighborhood, the Mission Rock District, which includes SWL 337, China Basin Park, Pier 48 and portions of Terry Francois Boulevard. The design shows SWL 337 broken into 10 city blocks built up with one million square feet office space, 240,000 square feet of retail space, 875 apartment units and open space. The plan for Pier 48 calls for 181,000 square feet of event space.

The developer team is asking for 75- and 66-year leases for SWL337 and Pier 48, the maximums allowed by state law. The Port is projected to receive base rent totaling $208 million between 2013 and 2053. Though the submittal has no specific proposal for base rent increases, the pro forma shows $254 million in “performance rent” between 2013 and 2053 roughly equal to base rent escalations every five years at the rate of inflation.

Its development proposal outlines an approximately four year period to conduct due diligence and obtain all required entitlements followed by a four-phase, 17 year site build-out commencing in 2013. The historic rehabilitation of Pier 48 is proposed to take place between 2022 and 2026.
However, the deal is not ready yet
Stern tells GlobeSt.com the exclusive negotiating agreement between the Port and the development team should be hammered out sometime this fall. The Port was not very impressed with the developer team’s initial proposal for Pier 48, which could be cut out of the agreement if a better proposal isn’t received, according to the latest staff report.

“The proposal’s treatment of Pier 48 seems to be incomplete, offering rents below current interim lease rates with major improvements at Pier 48 delayed until 2026,” states the report. “Based on the current proposal, Port staff does not believe a long-term lease is warranted at Pier 48. If the Port Commission chooses to proceed, Port staff would seek revisions to the proposal regarding Pier 48 or evaluate whether Pier 48 should be included in the scope of a long-term development agreement.”
SOURCE: GLOBE ST

Lending activity flat from April to May; originations down due to rate increases

From the Obama Administration comes a snapshot of lending in May (the most recent month for which data is available)
The overall outstanding loan balance ... was flat from April to May at the top 21 participants in the Capital Purchase Program (CPP). Total origination of new loans at the 21 surveyed institutions increased 1 percent from April to May.

In May, the 21 surveyed institutions originated approximately $277 billion in new loans. Total originations of loans by all respondents rose in four categories, specifically: mortgages, credit card loans, commercial real estate renewals and commercial real estate new commitments.

Total originations fell in the following three loan categories: home equity lines of credit, other consumer lending products, and commercial and industrial renewals, and were flat in one loan category, commercial and industrial new commitments.
And as we noted back in June
Many respondents reported high mortgage application volume through the month of May, but indicated that pipelines decreased as rates began to rise toward the end of May.
SOURCE: US TREASURY DEPT

Commercial real estate down 7.6% from April to May



According to data compiled by MIT's Center for Real Estate, their Moodys/REAL Commercial Property Price Index dropped 7.6% from April to May. This represents a 28.5% drop from May 2008, and down 34.8% from the October 2007 peak.

Transaction volumes are at the lowest point this cycle, coming in at $2.7 billion on 282 transactions, 52 which are considered "repeat-sales" transactions.

The silver lining, however, might be that this month-to-month decrease is less than April's 8.6% decline. We'll see next month whether the trend continues to improve.

SOURCE: MIT CENTER FOR REAL ESTATE

Wednesday, July 22, 2009

San Francisco to receive hundreds of millions for new developments

Bay Area government officials on Tuesday announced they received $229 million from the state to build housing near transit hubs and other developments that increase housing density.

The money will go toward transit-oriented developments in San Francisco and Hayward and “infill housing” - new housing built where housing already exists - in San Jose, San Francisco, Oakland, Hayward, Fremont, Union City, El Cerrito, Pittsburg, Sunnyvale and Santa Rosa.

“This state action bolsters efforts in our region to focus our growth and leverage our transportation investments to help the Bay Area achieve goals for compact growth, preservation of agricultural lands and open space and to help protect the climate,” said Scott Haggerty, chairman of the Metropolitan Transportation Commission and a Alameda County supervisor in a statement.

The money comes from California Proposition 1C, which was approved by voters in 2006 to promote infrastructure development and housing.
SOURCE: BIZ JOURNALS

Title insurance fees under fire

Possibly good news for consumers
The U.S. title-insurance industry faces increasing pressure from regulators to justify the fees charged to consumers for ensuring they have clear ownership of their homes.

For most people, title insurance is just another mysterious fee they must pay when they buy a home or refinance a mortgage. Unlike some of those fees, though, title charges aren’t negligible. They range from several hundred to several thousand dollars—and last year totaled more than $10 billion for the title industry. Lenders insist on the insurance to protect them against the possibility that a taxing authority, another creditor or a disgruntled heir may have a claim to the property, among other risks...

A bigger potential threat to title insurers comes from the Obama administration’s proposed Consumer Financial Protection Agency. The new regulator would oversee a wide variety of financial products, including title insurance, which is now regulated mainly at the state level. That would open the door to more federal oversight.
SOURCE: WSJ

Tuesday, July 21, 2009

San Francisco moving forward with major development projects

Despite the economy, many infrastructure and housing projects are moving forward, according to Mayor Gavin Newsom. Speaking at a breakfast last week, sponsored by the SF Business Times, the news was cautious but still ambitions
The city will start construction later this year to rebuild San Francisco General, environmental review for the second phase of construction at Hunters Point is nearly complete and the city is close to reaching an agreement with the federal government to transfer Treasure Island, Newsom said.

The mayor’s comments come as the city is struggling with rising unemployment and falling revenue. Unemployment reached 9.1 percent in May, up from 4.3 percent a year ago. The city had to close a $438 million deficit — caused in part by declining revenue — by cutting services.

Still the mayor sought to contrast San Francisco’s woes with troubles elsewhere.

“Our unemployment rate is high,” Newsom said, “but it’s among the lowest of any of the counties of California. Our bond rating is low, but it’s the highest of all these counties in California. Our vacancy rates may be high but for class A I’m glad I’m not in South San Francisco. I’m glad I’m not in San Mateo. I’m glad I’m not in Redwood City. And I’ sure as heck glad I’m not in Palo Alto or San Jose. We’re doing much better on relative terms.”
SOURCE: BIZ JOURNALS

Pacific Union sold to smaller, Marin-based firm

Pacific Union, part of GMAC, is being sold to Morgan Lane Marin, a smaller company:
Boutique real estate firm Morgan Lane Marin Inc. is swallowing its larger competitor, Pacific Union GMAC Real Estate, in an acquisition that promises to create a local brokerage powerhouse, but could also entail serious challenges in this sluggish housing climate.

The deal, for an undisclosed sum, will bring together 17 Bay Area offices and more than 430 real estate professionals, with combined sales volume projected to reach $2.2 billion this year. As recently as 2000, Pacific Union alone was boasting sales of $3.2 billion, a difference that highlights the recent fallout in the brokerage industry and strongly hints that Morgan Lane picked up its rival at a discount.

Mark McLaughlin, chief executive officer of the Marin real estate company, said he pursued the deal because it offered a chance to inject the entrepreneurial attitude of his high-end-focused firm into a dominant local brokerage. Pacific Union is among the top five regional real estate companies and also focuses on the luxury end.
SOURCE: SF CHRON

Monday, July 20, 2009

Roubini: recovery to be "very ugly"; recession over Dec 2009

Nouriel Roubini, the economist whose dire forecasts earned him the nickname "Doctor Doom", told CNBC Monday that the economic recovery is going to be "very ugly."

"The recovery is going to be subpar," Roubini said. "I see a one percent growth in the economy in the next few years. There will also be 11 percent unemployment next year and the recovery is going to be slow. It's going to feel like a recession even when it ends."

Asked about his comments in a speech last week about the recession ending in 2009, Roubini said, "I've been saying all along the recession is going to last 24 months. It started in December of 2007 and my view is that it won't be over until December of this year."
SOURCE: CNBC

Commercial mortgages falling

Commercial mortgages at U.S. banks have been failing at the fastest rate in nearly 20 years, the Wall Street Journal said, citing its own analysis.

Losses on loans used to finance commercial spaces would possibly reach about $30 billion by the end of 2009 at the current rate, the article said.
SOURCE: REUTERS VIA YAHOO

Friday, July 17, 2009

Foreclosures at record high

According to data from RealtyTrac, foreclosures have reached an all-time high:
A record 1.53 million properties were in the foreclosure process -- default notices, auction sale notices and bank repossessions -- during the first six months of 2009. That was 9% more than the previous six months and 15% more than the same period of 2008, according to a report released Thursday by RealtyTrac.

There were a total of 1.91 million filings resulting in 1 out of every 84 U.S. properties receiving at least one filing in the first half of the year. Banks repossessed 386,800 properties.

"What this means is, despite the intensity of the efforts on the part of government and lenders we don't have a handle on foreclosures yet," said Rick Sharga, a spokesman for RealtyTrac.

And, in a bad sign for a housing recovery, there was no recorded improvement in June, the last month of the cycle. More than 336,000 homes reported foreclosure filings, the fourth straight 300,000-plus month. Filings were up 33% over last June and nearly 5% compared with May.
SOURCE: CNN

Dr. Doom thinks the worst is behind us

"I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19 months into that recession. If as I predicted the recession is over by year end, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year's end."

"On one side, early exit from monetary and fiscal easing would tip the economy into a new recession as the recovery is anemic and deflationary pressures are dominant," Roubini said. "On the other side, maintaining large budget deficits and continued monetization of such deficits would eventually increase long term interest rates ... and thus would lead to a crowding out of private demand.

"While the recession will be over by the end of the year the recovery will be weak given the debt overhang in the household sector, the financial system and the corporate sector; and now there is also a massive re-leveraging of the public sector with unsustainable fiscal deficits and public debt accumulation."
SOURCE: CNBC

Monday, July 13, 2009

Sellers might still be liable for losses after short sale

Check the fine print before going ahead with a short sale:
Bank of America, which bought Countrywide in 2008, advised Lopez’ client to pursue a short-sale when he sought a plan to cut his monthly payments. Lopez says he was stunned when BofA sought a note from his client, a former contractor who now delivers pizza and drives a truck for a fish company, to help make up the gap between the mortgage balances and the short-sale price.

The rising tide of “short sales” by troubled home owners facing foreclosure is prompting lenders to become more aggressive in their attempts to pursue former homeowners for their loan losses in a short sale. In a short sale, a house is sold, with a lender’s approval, for an amount that won’t pay off the mortgages on the property.

Often, the troubled home owner assumes the loss will be eaten by the lender. But Bank of America and Chase have quietly added language in their short-sale agreements that require the borrower to sign a promissory notefor the shortfall.
SOURCE: BIZ JOURNALS

Housing bottom? An agrument for an end to declines

Larry Edelson, a macro-economist with over 30 years of successfully predicting large market movements, opines as to his thoughts on a real estate bottom (nationwide). Although much of this information will be repetitive to HighRiseSF readers (we've discussed inventories and affordability here many times) it is a concise argument worthy of debate.
"...all the evidence I see tells me real estate prices in the U.S. are now a bargain ... that we're at the bottom ... and that there will be a recovery in property prices, albeit slowly, over the next several years.

"Amongst the evidence I see ...

#1. New home inventories are now at previous recession lows. This is not to say inventories of new homes can't fall lower. But as inventories fall, so does the supply of new homes, which is generally bullish for prices. Looked at another way, the bulk of the oversupply of new homes has largely been worked off.

#2. Existing home inventories have also fallen sharply. Although they have not plunged as low as one might expect from looking at this chart, they have not only peaked, but they have fallen to an area that should find support

"The inventory of new homes has fallen well below its 40-year average, to levels that have marked previous recession lows in inventories.

"Also note that due to foreclosures, short sales, and other workouts going on in the real estate market, existing home inventory data is likely to lag the bottom in real estate prices.

#3. Anecdotal evidence points to a pickup in demand. The Pending Home Sales Index, a leading indicator and a measure of home sales that will go to contract within two months, has risen for four months straight.

"Existing home sales have also been on the rise, increasing 6.2% since the start of the year. Meanwhile, the median sales price of existing homes has jumped almost 5% in the same period.

#4. Housing affordability has come back down to the CPI inflation trend line. I find this chart especially interesting. Courtesy of Investech Research, it's a picture of housing prices vs. inflation as defined by the (conservative) Consumer Price Index since 1980.

"The median family home price has collapsed back to the growth rate of inflation, per the CPI. Put another way, the median home price is back to inflation-adjusted levels, with the majority of the price deflation behind us.

"What's more, the National Association of Realtor's Housing Affordability Index is now in record territory, indicating that housing prices are now more affordable than they've been since this index was created in 1970.

#5. On an international basis, U.S. property prices are cheaper than they've been in at least 10 years. Consider the following: The U.S. median home price has fallen 21.3% - more than $56,000 - since its peak at $262,600 in March 2007.

"In terms of the international purchasing power of the dollar, which has declined precipitously, the median price of a single-family home has fallen more than 35% to levels last seen in 1998.

"That's due to the decline in the international purchasing power of the dollar since 2001, coupled with the decline in housing prices in dollar terms.

"In my view, the decline in the value of the dollar will become an important stabilizing factor in U.S. real estate prices. It means more foreign investors should soon be investing in U.S. property, bolstering demand and even pushing up prices.
The data is well thought-out and reasoned, but there are certain factors which lead me to be more cautious. One is the supposed "ghost supply" of houses owned by banks but not coming on the market as REO's yet. The rumor is that there are hundreds of thousands, if not millions, of homes waiting for a better time to come on the market, so banks don't loose as much on the deals.

The second concern is how unemployment will factor into any further foreclosures. Will the majority of homeowners remain in their homes over the next 6-12 months, and keep current in their mortgages? With the rise in Alt-A and prime mortgages heading to foreclosure, it's a possibility we may see more declines due to increased inventory. Will this have a big impact on the San Francisco real estate market? Keep an eye on the HR departments of the largest tech companies as a leading indicator.

We'll keep you posted on how things progress.

SOURCE: BLOGGING STOCKS

Saturday, July 11, 2009

New lending guidelines hampering non-default related sales

Anecdotal story from the NY Times that relates to problem #2 on our list of 5 factors holding down the current real estate market, credit availability
Despite a good credit score, a six-figure income and an ample down payment, Dr. Komarovskaya, a recent dental school graduate, could not get a loan. Her mortgage broker told her she ran afoul of new rules requiring two years of sufficient tax returns from some home buyers, instead of only one.

“Everyone says this is a buyer’s market, but they wouldn’t let me buy,” said Dr. Komarovskaya, 30. “It’s not fair.”

Not fair, perhaps, but far from unique, brokers and agents say. The readiness of banks to sell foreclosed properties has led to rising home sales in some areas. But the traditional housing market, the one that involves willing buyers and sellers, is still dead, with transactions lower than they have been for decades.

The recession is the major reason sales are dragging, of course, but it is not the only one. As Dr. Komarovskaya found, buyers once viewed as perfectly qualified are being denied mortgages.

Brokers and bankers say that in past decades, the credit markets would almost certainly have accommodated many of these people.
The unwillingness of lenders to loan money to qualified buyers will keep the brakes on the current market. And this is only problem #2 of 5 which needs to be resolved.

We still have a long way to go...

SOURCE: NY TIMES

3rd largest REIT raising $1 billion vulture fund

Vulture funds are starting to emerge to take advantage of the current and future drops in commercial real estate
Vornado Realty Trust, the third- biggest U.S. real estate investment trust by market value, is trying to raise $1 billion to invest in real estate assets, according to a person with knowledge of the fundraising.

Property investors including REITs are raising money from stock investors and through private funds to take advantage of falling real estate prices as debt financing becomes scarce.

Vornado, which owns mainly office and retail properties, is one of about 50 REITs that raised a total of $15.7 billion from equity sales through June 26, according to the National Association of Real Estate Investment Trusts, the trade group based in Washington. Vornado completed a $741.8 million stock sale in April with proceeds earmarked for cutting debt and making acquisitions.

U.S. commercial real estate values fell almost 23 percent through March 31 from the peak in October 2007 as credit dried up, Moody’s Investors Service said May 18.
Hey Vornado, I know a few projects in San Francisco you might be interested in (i.e. Turnberry's lot on Lancing Street).

SOURCE: BLOOMBERG

Thursday, July 9, 2009

On the plus side...

The W Hotel is being sold:
Starwood Hotels & Resorts Worldwide Inc. is under contract to sell the 404-room W San Francisco hotel for $90 million or $220,000 per key, far below what luxury hotels in San Francisco were selling for in 2006. The agreement with Keck Seng Investments Ltd., which owns three other Starwood hotels and is listed on the Hong Kong stock market, calls for Starwood to retain the long-term management agreement and to continue operating the hotel under the W flag. The sale is expected to close on July 30, 2009.
Starwood, which opened the hotel amid a strong economy in 1999, says the sale price is 14 times the property’s anticipated 2009 EBITDA. Atlas Hospitality Group president Alan Reay tells GlobeSt.com that translates to a 7.1% cap rate at a time when most hotel investors are seeking a double-digit cap rate.

“Starwood is getting a very, very good cap rate based on other deals,” Reay says. “What we see is most buyers are underwriting to a 10% cap or above, so must be someone from Hong Kong that sees this as a real opportunity relative to ’06-’07 pricing.”

The value of hotels in San Francisco has fallen between 50% and 80% from their peak values in 2006 and 2007, when new or newly renovated full-service upscale properties were trading for between $360,000 and $520,000 per key.
It's good to see transactions happening.

SOURCE: GLOBE ST

Four Seasons in default

Millennium Partners this week acknowledged purposely defaulting on its two-year-old, $90-million CMBS loan for the 277-room Four Seasons San Francisco with hope of renegotiating the debt with the special servicer, LNR Property Corp., because the hotel, once valued at $135 million, is now worth less than is owed. The strategic move appears to be working for Millennium and others in California, which has industry experts expecting a lot more of it.

"What we are finding now is that--because on CMBS loans the companies cannot get any response from the master servicer--the only way of trying to renegotiate is to default because only a special servicer can modify the loan," Alan Reay, president of Irvine, CA-based Atlas Hospitality Group tells GlobeSt.com. "My prediction is you are going to see vast majority of CMBS loans in California--probably throughout country--defaulting." ...

"In order to commence discussions with the debt holders of the Four Seasons Hotel in San Francisco, Millennium Partners has strategically withheld payment of debt service," Millennium Partners said in a statement. "Conversations on restructuring the debt have begun, and Millennium Partners is hopeful that they will result in a positive outcome."
No word on whether they plan on defaulting on their latest project, the Millennium Tower at Mission and Fremont Streets

SOURCE: GLOBE ST

Commercial real estate "ticking" time bomb?

So says the Honorable Congresswoman from NY:
U.S. lawmakers rang alarm bells about the troubled commercial real estate industry, which has been walloped by the credit crunch and an implosion of property values.

"The commercial real estate time bomb is ticking," Joint Economic Committee Chairman Carolyn Maloney, D-N.Y., said in opening remarks to a hearing before her panel Thursday.

A wave of defaults of commercial real estate loans would deal a blow to the already weakened economy and banking sector. The U.S. commercial real estate market is roughly $6.7 trillion in size and is underpinned by about $3.5 trillion of debt.

A panel of witnesses painted a dire picture for lawmakers. Property values have plunged 35%-45% in many markets as transactions have slowed to a crawl, Deutsche Bank Securities Inc. (DB) mortgage analyst Richard Parkus told lawmakers.

The market won't begin to recover until 2012, or even later, he said. "We believe the bottom is several years away," he added.

Plunging property values are further hampering developers' ability to refinance their debt or loan extensions, the industry said.
SOURCE:WSJ

Commercial real estate back to 2004 prices

Ruh roh

In conjunction with MIT Center for Real Estate and Real Estate Analytics, LLC, Real Capital Analytics has launched a set of pioneering indices for tracking commercial investment property prices in the US. The CPPI indices published by Moody's are based on actual transactions of commercial real estate compiled by Real Capital Analytics.

The Moody's/REAL Commercial Property Price Indices are the first in the sector to use the repeat sale methodology. “These indices will provide a timely and accurate indication of price changes for the commercial property market as a whole and for its most important sectors,” said Moody's managing Director Tad Philipp.
SOURCE: REAL CAPITAL ANALYTICS

New projects slated for Upper Market

Not much meat to the article, but a good read to bring you up to speed on the history behind the path of development.
Approximately 10 developments are in the city's planning pipeline, proposing - among other things - to convert former gas stations into condominiums with coffee shops, stores and high-end grocery stores on the first floor.

And while most of the new construction might be slowed by the tight credit market, developers and community groups are actively negotiating the details of new buildings and the businesses they might house...

Two projects planned for the short block of Market Street between Buchanan and Dolores streets presage what the future might hold.

At Buchanan, developer Brian Spiers has received city permission to replace a closed Union 76 station with 115 glassy, modern condominiums in a nine-story building whose corner entrance will be set back several feet from the street for outdoor seating.

Just kitty-corner, the Prado development firm has proposed 80 condominiums in three interconnected structures and a ground floor Whole Foods market. The project will replace the S&C Ford dealership that closed in 2006.
SOURCE: SF CHRON

Tuesday, July 7, 2009

S&P raises default forecast

Standard & Poor's Monday boosted its expectations for losses on risky loans backing U.S. mortgage securities to as much as 40 percent, suggesting a darkened outlook for the troubled housing market.

The more dire assessment will likely "significantly impact" bonds originally carrying AAA ratings, S&P said in a report.

Increased assumptions for total losses on subprime and Alt-A residential mortgage-backed securities come amid declines in market value of the debt and a surge in the inventory of bank-owned properties, S&P said.

S&P boosted loss projections for subprime loans made at the peak of the market in 2006 and 2007 to 32 percent and 40 percent from 25 percent and 31 percent, respectively.

For 2005 loans, loss projections rose to 14 percent from 10.5 percent.

SOURCE: REUTERS VIA CNBC

Friday, July 3, 2009

Happy 4th of July

If you're in town and interested in seeing some properties this
weekend, check out SF Open Homes

See you next week.
HighRiseSF

Thursday, July 2, 2009

Unemployment up more than expected in June

Those green shoots just can't catch a break:
Employers cut a larger-than-expected 467,000 jobs in June and the unemployment rate climbed to a 26-year high of 9.5 percent. Workers also saw weekly wages fall, suggesting Americans will have little appetite to spend and the economy's road to recovery will be bumpy.

The Labor Department report, released Thursday, showed that even as the recession flashes signs of easing, companies likely will want to keep a lid on costs and be wary of hiring until they feel certain the economy is on solid ground.

June's payroll reductions were deeper than the 363,000 that economists expected and average weekly earnings dropped to the lowest level in nearly a year.
What does this have to do with real estate? Well, bad economic news should have the effect of pressuring bond rates, and by default mortgage rates, lower. HighRiseSF will, of course, have details on rates in the coming days and whether this will, in fact, impact rates. If so, it might help to bring mortgage applications back up, and with it, sales.

SOURCE: CNBC

Mortgage applications drop 18.9% in one week

Mortgage applications, a true leading indicator of real estate activity (as opposed to sales, which lags behind by 30-60 days) dropped 18.9% from week to week:

The volume of mortgage applications filed last week dropped a seasonally adjusted 18.9% from the week before, as refinancing activity plunged, the Mortgage Bankers Association reported Wednesday.

Applications for mortgages to refinance existing home loans fell 30% for the week ended June 26 -- putting the MBA survey's refinance index at its lowest level since November.

Meanwhile, the week-to-week pace of applications filed for mortgages to purchase homes was down a seasonally adjusted 4.5%.

In the week ended June 19, overall applications activity rose a seasonally adjusted 6.6% from the prior week, the MBA's data showed. The survey done by the Washington-based MBA covers about half of all U.S. retail residential mortgage applications.
Again, not news for loyal followers of HighRiseSF - this is a conversation we've been having for the past month.

Keep following for the latest in up-to-date information and its impact on real estate prices and mortgage rates.

SOURCE: MARKETWATCH

Wednesday, July 1, 2009

25% underwater? No problem!

HUD Secretary Shaun Donovan announced today that:
the Fannie and Freddie refi plan ... would now be expanded to negative 25 percent equity... [Y]our loan can be a full 25 percent more than the current value of your home, and Fannie and Freddie will gladly buy and/or back your new refi.
SOURCE: CNBC

No new highrises on the horizon for 5 years?

San Francisco's latest Catch-22: falling land prices may lead to some great deals, but little availability of capital markets means there's no money to invest:
Plummeting land values and the deep recession have taken a toll on one of San Francisco’s central business models for urban redevelopment: public-private development deals.

With many developers predicting that highrise development of any sort won’t work economically for another five years, public agencies are struggling with a development model in which private builders pay for the right to develop valuable land and, in the process, bankroll public benefits like parks, roads and affordable housing.

Until the capital markets are willing to invest in the next generation of highrise condos, hotels or office buildings, public entities like the Port of San Francisco and the city Redevelopment Agency are stuck with prime land that has little or no current value.
The plus side, if you can call it one, is that supply will be limited in the next few years, eventually leading to higher prices if demand picks up.

SOURCE: BIZ JOURNAL

Fun with affordability charts

Via CNBC comes two charts which show the level of affordability nationwide and in various markets (San Francisco is not represented but Oakland, San Diego, Los Angeles, and Sacramento are, which you can extrapolate out to cover SF):

The first chart shows the difference in renting versus owning in these markets (how much more or less you'd pay on a mortgage versus rent):



The second chart shows housing cost to income ratio. This is the ratio banks typically use when qualifying buyers. The max was supposed to be around 45%-49% but was much higher in the boom years due to programs like stated-income loans. Now, the raios are much more reasonable, and in many cases (like Sacramento) very reasonable:



The interesting part is how areas which were heavily bubble-induced (Las Vegas, Phoenix, Riverside, Oakland, etc) are under 30%. That's a major change and shows the level of affordability in these areas.

Now if only buyers didn't have to put 20% down payments, the excess inventory in the market would be absorbed faster. Just not back to 0-5% down payments. Can we agree on 10%?

SOURCE: CNBC