To show how conflicting media stories can be, Florida recently ranked as one of the top five states for home appreciation at the same time capturing nine out of the top 10 slots on both foreclosures and delinquencies.

First, the good news.

CoreLogic reported their latest home price index (which includes distressed sales) and it shows a slight month-over-month nationwide increase of 0.6 percent in home prices from February to March. But some markets are seeing much more of a price boost this spring, including Florida, which ranked No. 5 overall for home price increases.

The company reported that this spring, the housing market was responding to an improving balance between real estate supply and demand, causing stabilization in house prices.

States with highest appreciation

According to CoreLogic, the following states had the highest appreciation in March (this includes distressed sales):

• Wyoming: +5.9%

• West Virginia: +5.3%

• Arizona: +5.1%

• North Dakota: +4.7%

• Florida: +4.5%

States with biggest depreciation Meanwhile, the states with the greatest depreciation, when also figuring in distressed sales, are:

• Delaware: -10.6%

• Illinois: -8.3%

• Alabama: -8%

• Georgia: -7.3%

• Nevada: -5.8%

Now for the bad news.

According to a national review of 366 metropolitan areas released yesterday by Foreclosure-Response.org, the greater Miami area led the nation in the percentage of homeowners that went through a foreclosure or who were more than 90 days behind on their mortgage payment.

Florida has been slow to get back on its feet because of a foreclosure process that, on average, takes more than two years to complete, according to the report.

Miami-Dade/Fort Lauderdale/Pompano Beach had the nation’s highest foreclosure rate and the highest percentage of delinquent loans in December. The Miami metropolitan area had a foreclosure rate of 18.9 percent. Add to that the percentage of mortgages more than 90 days late and the figure jumps to 23.6 percent – nearly one in four mortgages. Florida cities captured nine out of the top 10 slots on both foreclosures and delinquencies for the month. Looking at just foreclosures, Florida held the top five spots, with Miami followed by Port St. Lucie (16.7 percent), Palm Coast (16.6 percent), Tampa (15.9 percent) and Orlando (15.6 percent.)

The story noted that lenders who halted foreclosure proceedings due to the robo-signing investigations are now resuming their efforts to get rid of troubled properties. Like other large cities, Florida’s metropolitan areas have seen a steady uptick in foreclosures over the past few years.

Another major factor contributing to the backlog in Florida is that a judge must be involved in foreclosure proceedings, a requirement that has slowed the foreclosure process in Florida and other states that require judicial review.

In Florida, the average foreclosure takes more than 800 days to complete. Recent attempts to remove judges from the equation have not garnered the legislative support needed to pass.

But wait … more good news.

An annual survey of CEOs conducted by Chief Executive Group finds that Florida is the second-best U.S. state for businesses. The same survey in 2011 ranked Florida third.

According to Chief Executive, the one-level boost in Florida’s ranking results from pro-business laws enacted since Rick Scott came into office, including business tax and regulatory reforms, a 2.1 percent unemployment drop and 140,000 private sector jobs.

Texas received points for the quality of its workforce that, according to Chief Executive, is second only to Utah.

North Carolina, Tennessee, Indiana, Virginia, South Carolina, Georgia and Utah rounded out the top 10 states that are best for business. California landed at the bottom of the list.

The results are based on responses from 650 business leaders that graded states where they did business.

Posted by Scott R. Lodde

According to Trepp, loan delinquency rates for securitized loans turned sharply up in March, climbing 31 basis points to 9.68%, after reaching a 12-month low in February.

Multi-family continues to be the weakest asset class in terms of loan delinquency: the asset class’s delinquency rate spiking 74bps to 15.39%. Retail, office and industrial delinquency also climbed in March, with retail being strongest overall performer at 8.24%, up 24bps from February. Lodging was the one asset class that showed month-over-month improvement, dropping 42bps to 10.63%.

One metric some analysts have been watching closely is the rate of defaults among 5-year loans. Many of these loans were written at the top of the 2007 peak and are current but are at risk of maturity default.

Trepp reported recently that only 48% of five-year loans that matured in Q1 of 2012 were paid off at par or otherwise resolved by the servicers. That means that 52% of those recently maturing loans are currently in maturity default and, among those, roughly 50% by Trepp’s reckoning are characterized as  “performing balloon” loans. I

It is these performing balloon loans that are fueling the demand for rescue equity capital and/or loan modifications structured with the goal of giving borrowers a bit more runway to resolve their leverage challenges.

2012 Home Sales will be strong in 2012

The National Association of Realtors is predicting existing-home sales will jump 7 to 10 percent in 2012 to the highest level in five years, based on an “uneven but higher sales pattern” so far this year.

Pending home sales fell a seasonally adjusted 0.5 percent from January to February, which was up 9.2 percent from the same time a year ago according to NAR.

Last week, NAR reported a similar trend for existing-home sales, which were down 0.9 percent from January to February, but up 8.8 percent from a year ago.

The pending sales data provides a glimpse into more recent trends, because it tracks homes that were under contract in February — deals that will in most cases be finalized within one or two months.

NAR said 31 percent of Realtors experienced contract failures in February, in some cases because buyers’ mortgage applications were rejected or because appraisals came in below the negotiated price.

In the Northeast, NAR’s index slipped a seasonally adjusted 0.6 percent from January but was up 18.4 percent from a year ago.

The Midwest saw a month-over-month gain of 6.5 percent and a 19 percent gain from a year ago.

Pending home sales fell 3 percent in the South from January to February, but were up 7.8 percent from a year ago.

In the West, the index declined 2.6 percent from January to February and was 1.8 percent below the index rating in February 2011.

In its latest economic forecast, NAR predicts existing-home sales will total 4.65 million in 2012, up 9.1 percent from last year. That forecast assumes that the U.S. economy will grow at a 2.3 percent annual rate and add 2.7 million jobs this year.

Posted by Scott R. Lodde

Smithsonian Magazine recently announced their list of the top20 best small towns in America.

To help create the list, the magazine asked the geographic information systems company Esri to search its data bases for high concentrations of museums, historic sites, botanic gardens, resident orchestras, art galleries and other cultural assets common to big cities.

The focus was on towns with populations less than 25,000, so travelers could experience what might be called enlightened good times in an unhurried, charming setting.

The two Florida cities were listed in the magazine’s rankings.

Naples was ranked No. 9 on the strength of its beauty, philharmonic orchestra and an abundance of art galleries. Key West, which the magazine calls a “haven for creativity,” came in at No. 16.

The full list

1. Great Barrington, Mass.
2. Taos, N.M.
3. Red Bank, N.J.
4. Mill Valley, Calif.
5. Gig Harbor, Wash.
6. Durango, Colo.
7. Butler, Penn.
8. Marfa, Texas
9. Naples, Fla.
10. Staunton, Va.
11. Brattleboro, Vt.
12. Princeton, N.J.
13. Brunswick, Maine
14. Siloam Springs, Ark.
15. Menomonie, Wisc.
16. Key West, Fla.
17. Laguna Beach, Calif.
18. Ashland, Ore.
19. Tamarack, W.Va.
20. Oxford, Miss.

Full Article

The Early Phase of Real Estate Recovery

National Real Estate Investor considers the country to be in the early phase of a cyclical recovery.

Recently they published an article in which they stated their belief that real estate investment performance continues to display favorable conditions, a result of historically low borrowing rates and a modest inflationary outlook. Very limited new supply and rising demand is buoying real estate fundamentals for most property types.

The  vast majority of investor interest to date has been focused on top-tier assets in prime markets (New York, Boston, Washington D.C.) and is thus reflected in bifurcated cap rates, with rate compression in those select markets and assets. It is their belief that the real estate asset class can provide very attractive return opportunities relative to other alternatives.

A summary of the various property types follows.

Multifamily – As widely forecast, multifamily has been leading the recovery, exhibiting year-over-year rent growth of 4 percent to 5 percent in 2012, according to CBRE Econometric Advisors. Rent growth for multifamily is strong in virtually all markets, with half already exceeding prior peak rents.

The strongest markets include New York City, San Francisco/San Jose, Seattle, Washington, D.C., Boston and Houston, with value-add and new development emerging as popular strategies in this sector. However, with this rapid increase in new development comes a moderate risk of excessive supply in the next two to three years.

Office – Contrary to many expectations, the office sector has been second place nationally in both absorption and rent growth. Office vacancy declined from 16.5 percent in the fourth quarter of 2010 to 16.0 percent in the fourth quarter 2011, and rents increased by 3.0 percent during 2011, according to CBRE.

High-tech, energy and professional and business services markets such as Austin, San Francisco/San Jose, Seattle, Houston and New York City outperformed, while markets with high levels of federal, state and local government employment remained weak.

Industrial - The industrial sector has shown strong improvement, with six consecutive quarters of positive net absorption (162 million sq. ft.) and vacancy declining from 14.3 percent in the fourth quarter 2010 to 13.6 percent in the fourth quarter of 2011, according to CBRE.

Port markets posted the greatest absorption, including the Inland Empire, Oakland, Houston and Miami, as well as select inland markets, including Dallas, Atlanta and Central Pennsylvania. Large warehouse properties (defined as those greater than 400,000 sq. ft.) saw the greatest space demand to date, with opportunities present in build-to-suit and speculative development in select markets. Overall, industrial rent growth continues to lag, but growth is generally forecast in 2012 as long as demand continues to grow and landlord concessions decline.

Retail – Retail absorption nationally turned slightly positive in 2011, marking the first year of positive net absorption since 2007. Despite the positive absorption, vacancy remained unchanged at 11 percent as a result of an equal amount of new deliveries.

Following three years of rent declines, retail effective rents were unchanged in 2011. Retail is a divided sector, despite relatively robust consumer spending over the past six months: Necessity and high-end retailers are doing well, while middle retailers are being squeezed. We do not anticipate any meaningful rent growth until late 2012. We also anticipate construction to be minimal, holding vacancy in check.

Hotel – The hotel sector has had continued solid operating performance, with growth in revenue per available room of 7 percent in 2011, enhanced by robust corporate travel. While a weak economic recovery and high fuel prices remain risks to room demand in 2012, muted supply growth may provide a boost to occupancy.

U.S. Home Prices at a Glance

According to the real estate data firms CoreLogic and Trulia, U.S. home prices rose slightly in February and March in some major metro areas,. Price gains have occurred in many hard-hit areas, such as Miami and Phoenix, while losses have been reported in cities ranging from Las Vegas to Seattle to Wilmington, Del.

Six out of the top metro areas are in Florida.

Here’s a look at some of the cities with the sharpest home price gains and losses over the past year, according to Trulia:

Best metro areas year-over-year change

1. Cape Coral-Fort Myers, Fla.: 14.8%
2. Miami: 14.1%
3. Phoenix: 13.2%
4. Pittsburgh: 9.2%
5. Little Rock, Ark.: 6.7%
6. Orlando: 6.3%
7. North Port-Bradenton-Sarasota, Fla.: 6.2%
8. Palm Bay-Melbourne-Titusville, Fla.: 6.1%
9. West Palm Beach, Fla.: 5.8%
10. Warren-Troy-Farmington Hills, Mich.: 5.6%

Worst metro areas year-over-year change

1. Tacoma, Wash.: -11.9%
2. Seattle: -9.1%
3. Sacramento, Calif.: -8.3%
4. Las Vegas: -7.7%
5. Wilmington, Del.: -7.7%
6. Columbia, S.C.: -7.3%
7. Cleveland: -6.9%
8. Fresno, Calif.: -6.8%
9. Milwaukee: -6.7%
10. Allentown, Pa.: -6.7%

Posted by Scott R. Lodde

CoreLogic recently released a new monthly economic publication called the CoreLogic MarketPulse report. The MarketPulse provides monthly insight into the current and future health of the U.S. economic climate with particular focus on housing and mortgage metrics.

Highlights from the April MarketPulse report:

• “Now is a good time to buy,” with housing affordability at its highest level ever (as of February 2012), and shows many of the key housing metrics are holding steady through the typically slow winter season.
• Reports the single-family rental market is strong and vibrant with high and stable rents, low months’ supply and a healthy pace of signed rental leasings. The report reveals what markets offer the best return for single-family rental investors.
• Shows capitalization rates for single-family rental properties in 26 geographically diverse markets. Capitalization rates are the most common metric for determining the profitability of an investment property.
• Provides a chart of the rent-to-mortgage ratio for Miami, Fla. The chart indicates the point in time when it became cheaper to buy than to rent, providing insight to investors buying and holding rental properties, as well as to new first-time home buyers.

Full Report

Foreclosures Expected to Surge

Even as real estate sales are picking up across most of the country, a recent report indicates that many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.

Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.

Many industry guru’s are projecting that 2012 will be a bigger year for foreclosures than 2010 and that 2011 an anomaly due to the “robo-signing” scandal which prompted banks to hold back on new foreclosures pending a settlement.

The group watchdog group 4closurefraud.org, uncovered the “robo-signing” scandal and believes there was a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash.

Although foreclosure starts were 50 percent or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo’s rose 68 percent, and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold – 251 starts vs. 37 in the same period in 2011.

According to Moody’s Analytics, sales of repossessed properties probably will rise 25 percent this year from 1 million in 2011.

Prices for the foreclosed homes could drop as much as 10 percent because they deteriorated as they were held in reserve during the investigations by state officials resolved in February, according RealtyTrac. That month, 43 percent of foreclosures were delinquent for two or more years, from a 21 percent share in 2010, according to Lender Processing Services.

Real estate company Zillow expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.

As Home Rents Head Higher, Owning Regains Its Appeal

A recent article in the Wall Street Journal, indicates that climbing rents for apartments are combining with a continued decline in home prices to push home buyers into finally taking the plunge.

As the rental market heats up, rising rents and slumping home prices with interest rates at near record lows are boosting demand for homes at entry-level prices.

According to a survey by Reis Inc., average apartment rents rose by 2.7% last year while the national vacancy rate dropped below 5% for the first time since 2001.

The largest rent increases came in San Francisco and San Jose, Calif., which saw increases of 5.9% and 4.9%, respectively. Even Las Vegas saw average rent rise 1.8% from a year earlier.

The firm Zelman & Associates believes 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year as the equation of renting versus owning is becoming much more favorable for owning.

According to Deutsche Bank, the cost to rent an apartment has been about 10% lower than the after-tax cost of owning a home. That rental discount began to fall in 2010 and disappeared entirely last year.  By the end of 2011, their research found that the cost to rent an apartment was about 15% higher than the cost to own a home.

To be sure, not all markets have seen the same development. In Orange County, Calif., and New York City, where home prices are extremely high, renting is still cheaper. But even in New York, real-estate agents say sales of small studio and one-bedroom apartments are brisk because renters don’t want to pay such high amounts to rent.

The National Association of Realtors trade group shows that the number of homes purchased by investors rose 65% during 2011 to 1.2 million, representing 27% of all sales.

Full Article

Posted by Scott R. Lodde

According to National Association of Realtors® data, bargain prices in American real estate are luring foreign buyers and Florida continues to be the most popular destination.

More than half of international sales in 2011 (58%) came from four states alone: Florida (31%), California (12%), Texas (9%), and Arizona (6%), according to the data.

In a blog post last week, I noted that Inman News recently identified the markets where foreign buyers make up the biggest share of homebuyers.

Here are the top markets:

• Lakeland-Winter Haven, Fla.
• Cape Coral-Fort Myers, Fla.
• Orlando-Kissimmee-Sanford, Fla.
• North Point-Bradenton-Sarasota, Fla.
• Miami-Fort Lauderdale-Pompano Beach, Fla.
• Phoenix-Mesa-Glendale, Ariz.
• New York County, N.Y. (Manhattan)
• Honolulu

Have Home Prices Finally Reached Bottom?

We are constantly being asked the question, “Has the real estate market hit bottom yet?”.

In the SW Florida market, our answer recently has been YES.

And now, according to a Bank of America Merrill Lynch forecast recently released, our answer has some validity.

In the fall, many analysts had predicted home prices would drop by 8 percent from the second quarter of 2011 through the first quarter of 2013.  Now they’re revising that forecast, realizing the housing market is stabilizing faster than they originally thought.

They now predict that prices will remain flat for the next two years, as the excess foreclosure inventory is absorbed. They then expect to see a pickup in home prices by 2014.

And in the long-term, they see a big rise in housing prices. From 2012 through 2020, analysts forecast a cumulative growth of 42 percent in home prices (at 4 percent on an annualized basis).

The Merrill Lynch data is also supported by sales figures based the 0.7 percent documentary stamp tax on deeds collected by the State of Florida.  ”Doc stamps,” as they are commonly known, are collected on total prices of newly sold and conveyed property.

Real estate sales totaled $1.05 billion for the year’s (2012) initial two months in Sarasota, Manatee and Charlotte counties, a 20 percent jump compared with $874 million during the same period of 2011, county records show.

Many believe the increased sales represent the resumption of the flow of retirees that are attracted to Southwest Florida.

The jump in sales represents yet another indication that Southwest Florida’s real estate recovery has caught up to, or even surpassed, the state’s. Until now, many parts of the state have experienced a better economic resurgence than Southwest Florida, where traditionally high unemployment and home foreclosures have hampered growth.

Real estate sales were even larger in the state’s top metropolitan areas. Total real estate sales in Miami-Dade County topped $3 billion, a 27 percent increase, while sales in Hillsborough County eclipsed $1 billion, for a 30 percent increase.

In the last 12 months, real estate sales in Sarasota County were $3.6 billion, up nearly a third from the low point of 2009, but still far from the $10 billion peak of 2006.

Full Article

Investment, Vacation Home Sales up in 2011

According to the National Association of Realtors® (NAR), sales of investment and vacation homes jumped in 2011, with the combined market share rising to the highest level since 2005.

NAR’s 2012 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions in 2011, shows investment-home sales surged 64.5 percent to 1.23 million last year from 749,000 in 2010. Vacation-home sales rose 7.0 percent to 502,000 in 2011 from 469,000 in 2010. Owner-occupied purchases fell 15.5 percent to 2.78 million.

Vacation-home sales accounted for 11 percent of all transactions last year, up from 10 percent in 2010, while the portion of investment sales jumped to 27 percent in 2011 from 17 percent in 2010.

NAR Chief Economist Lawrence Yun said the shift in investment buyer patterns in 2011 shows the market, for the large part, is able to absorb foreclosures hitting the market.

All-cash purchases have become fairly common in the investment- and vacation-home market during recent years: 49 percent of investment buyers paid cash in 2011, as did 42 percent of vacation-home buyers. Half of all investment home purchases in 2011 were distressed homes, as were 39 percent of vacation homes.

The median investment-home price was $100,000 in 2011, up 6.4 percent from $94,000 in 2010, while the median vacation-home price was $121,300, down 19.1 percent from $150,000 in 2010.

Investment-home buyers in 2011 had a median age of 50, earned $86,100 and bought a home that was relatively close to their primary residence – a median distance of 25 miles, although 30 percent were more than 100 miles away.

The typical investment buyer plans to hold the property for a median of 5 years, down from 10 years for buyers in 2010.

The typical vacation-home buyer was 50 years old, had a median household income of $88,600 and purchased a property that was a median distance of 305 miles from the primary residence; 35 percent of vacation homes were within 100 miles and 37 percent were more than 500 miles. Buyers plan to own their recreational property for a median of 10 years.

Lifestyle factors have consistently been the primary motivation for vacation-home buyers, while the desire for rental income drives investment purchases. Vacation homes purchased last year were more likely to be in suburban or rural areas; investment homes were concentrated in suburban locations.

Eighty-two percent of vacation-home buyers said the primary reason for buying was to use the property themselves for vacations, or as a family retreat. Thirty percent plan to use the property as a primary residence in the future, and only 22 percent plan to rent to others.

Half of investment buyers said they purchased primarily to generate rental income, and 34 percent wanted to diversify their investments or saw a good investment opportunity.

Forty-two percent of vacation homes purchased last year were in the South, 30 percent in the West, 15 percent in the Northeast and 12 percent in the Midwest; 1 percent were located outside of the U.S.

Forty-four percent of investment properties were in the South, 23 percent in the West, 17 percent in the Midwest and 15 percent in the Northeast.

Eight out of 10 second-home buyers said it was a good time to buy. Nearly half of investment buyers said they were likely to purchase another property within two years, as did one-third of vacation-home buyers.

Currently, 42.1 million people in the U.S. are ages 50-59 – a group that has dominated second-home sales since the middle part of the past decade and established records. An additional 43.5 million people are 40-49 years old, while another 40.2 million are 30-39.

NAR believes that given that the number of people who are in their 40s is somewhat larger than the 50-somethings, the long-term demographic demand for purchasing vacation homes is favorable because these younger households are likely to enter the market as their desire for these kinds of properties grows, and individual circumstances allow.

NAR’s analysis of U.S. Census Bureau data shows there are 8.0 million vacation homes and 42.8 million investment units in the U.S., compared with 75.3 million owner-occupied homes.

NAR’s 2012 Investment and Vacation Home Buyers Survey, conducted in March 2012, includes answers from 2,241 usable responses about home purchases during 2011. The survey controlled for age and income, based on information from the larger 2011 NAR Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.

Posted by Scott R. Lodde

According to Marcus & Millichap’s Statewide Hotel Property Index tourism surged in Florida in 2011and the addition of 114,000 jobs in the state sparked a 12.5% jump in in-state travel. Florida ranks fifth on their list, but is separated from second place by less than two percentage points.

Miami heads the list of the top performing hotel market in the State of Florida.

The report notes a resurgence in South Florida’s cruise business, which drives more hotel traffic since travelers typically spend a day or two in a local hotel before or after the cruise. But not only do tourists flock to Miami for vacations, global businessmen are landing in Miami for business.

In the Statewide Hotel Property Index, the states are scored on year-to-date changes in room supply, room demand, ADR and RevPAR. A state with a score of more than 100 has strengthened from the corresponding year-earlier period, and a score of less than 100 signals a weaker performance. For 2011, North Dakota was the best-performing state, driven by significant gains in room demand, ADR and RevPAR.

North Dakota was bolstered by the discovery of a vast oil shale formation has attracted scores of workers. A 13.4 percent spike in statewide room demand last year fueled a 670-basis-point spike in occupancy, to 74.7 percent.

Another state with a revitalized energy sector, Texas, also placed high in the index.

Click to enlarge

Full Report

 10 U.S. Real Estate Markets Drawing International Buyers

In a recent report Inman News reported that affluent international buyers, attracted by fire-sale prices, are snapping up real estate in some U.S. markets. Inman identifies 10 markets where public records indicate foreign buyers make up the biggest share of overall buyers.

Most of the markets are located in Florida, though areas in Nevada, Arizona, New York and Hawaii are also on the list.

The report highlights the economic and personal factors that drive foreign buyers to buy; their preferred property types; top countries of origin; how they find the real estate professionals they work with; why the selected markets appeal to them; and relevant demographic and housing-related characteristics for the markets, including share of foreign-born population, distressed property footprint, home-price trends, and vacancy rates.

Among the findings in this report:

• Population levels in the markets range from about 600,000 in Lakeland-Winter Haven, Fla., to nearly 5.6 million in Miami-Fort Lauderdale-Pompano Beach, Fla.
• Seven out of 10 markets had foreign-born populations above the national rate of 13.1 percent in 2010. The Miami metro had the highest share born abroad, at 39.2 percent.
• In six of the 10 markets, area inhabitants who were foreign-born and moved from abroad accounted for a higher-than-average share of overall inhabitants who reported moving in the previous year in 2010. New York County (Manhattan) had the highest share: 7.7 percent of the people who moved in that county were both foreign-born and hailing from abroad.
• In seven out of 10 markets, the median sales price for an existing, single-family home was lower than the national median of $163,500 in fourth-quarter 2011. In eight out of 10 markets, the median sales price for a condo was lower than the national median of $160,800 for that same quarter.
• Condo prices fell on an annual basis in the fourth quarter in seven out of 10 markets. All seven saw their prices decline by more than the national rate of -1.7 percent.
• Seven of the 10 markets had a higher share of distressed sales in fourth-quarter 2011 than the national rate of 23.7 percent. Eight of the 10 markets had higher foreclosure activity rates in fourth-quarter 2011 compared to the national rate.
• Nine of the 10 markets, except for Honolulu, had higher vacancy rates in 2010 than the national rate of 13.1 percent. Cape Coral-Fort Myers, Fla., had the highest rate, at 37 percent.

The 10 markets, ranked by highest share of foreign buyers, according to public records data, are:

1. Lakeland-Winter Haven, Fla.
2. Cape Coral-Fort Myers, Fla. 
3.  Orlando-Kissimmee-Sanford, Fla.
4. North Point-Bradenton-Sarasota, Fla.
5. Miami-Fort Lauderdale-Pompano Beach, Fla.
6. Phoenix-Mesa-Glendale, Ariz.
7. New York County, N.Y. (Manhattan)
8. Honolulu, Hawaii.
9. Tampa-St. Petersburg-Clearwater, Fla.
10. Las Vegas-Paradise, Nev.

Full Report

U.S. Tourism Grows in 2011

U.S. Commerce Department data showing that tourism spending in the U.S. grew 8.1 percent to $1.2 trillion in 2011. The data also shows that 62.3 million foreign visitors visited the U.S. in 2011 and spent a record $153 billion. It is also estimated that the travel industry created 7.6 million jobs in 2011.

 Posted by Scott R. Lodde

According to research by the World Travel & Tourism Council (WTTC), the global Travel & Tourism industry will grow by 2.8% in 2012, marginally faster than the global rate of economic growth, predicted to be 2.5%.  Travel & Tourism is set for a milestone year in 2012 as the industry’s direct contribution to the global economy is expected to pass $2 trillion in GDP and 100 million jobs.

This rate of growth means that Travel & Tourism industry is expected to directly contribute $2 trillion to the global economy and sustain some 100.3 million jobs. When the wider economic impacts of the industry are taken into account, Travel & Tourism is forecast to contribute some $6.5 trillion to the global economy and generate 260 million jobs – or 1 in 12 of all jobs on the planet.

In 2011, Travel & Tourism’s total economic contribution, taking account of its direct, indirect and induced impacts, was US$6.3 trillion in GDP, 255 million jobs, US$743 billion in investment and US$1.2 trillion in exports. This contribution represented 9% of GDP, 1 in 12 jobs, 5% of investment and 5% of exports.

Over the medium-term, the prospects of the industry are even more positive with average annual growth expected to be 4% through to 2022 by which time Travel & Tourism will employ 328 million people – or 1 in 10 of all jobs on the planet.

Other selected highlights from the research show:

• South & Northeast Asia will be the fastest-growing regions in 2012, growing by 6.7%, driven by countries such as India and China where rising incomes will generate an increase in domestic tourism spend and a sharp upturn in capital investment, and recovery in Japan
• After an extremely challenging 2011 when civil unrest and violence had a dramatic impact on demand for Egypt, Tunisia and Libya, North Africa is showing signs of recovery in 2012 with Travel & Tourism direct GDP growth forecast at 3.6%. Morocco (8.3%) will be the star performer of this region as negative perceptions of security continue to affect tourism in Egypt and Tunisia
• In the Middle East, where civil unrest and violence in some countries continues, growth will be more subdued (3%), although there are stark differences at country level. Qatar will grow fastest at 13.2% while Syria will likely see another dramatic fall, estimated at 20.5%, as the political situation worsens, increasing concerns over security. It is worth noting that 14% of all international arrivals in the Middle East in 2010 were for Syria, the second most important destination in the region after Saudi Arabia
• The mature economies of North America and Europe will continue to struggle in 2012. North America, which is saw a slight upturn in the USA’s economic situation at the end of 2011, should see growth of only 1.3% in Travel & Tourism direct GDP over the year

The prospects for Travel & Tourism growth in Europe in 2012 are precarious. Current forecasts suggest a 0.3% increase in Travel & Tourism direct GDP for the region overall, but this will be propped up by newer economies such as Poland and, of course, Russia. A decline of 0.3% is expected across the European Union. Consumer spending is set to tighten as austerity measures kick in, and there continues to be considerable uncertainty around the future of the Eurozone and peripheral economies of Greece, Spain, Italy and Portugal.

Full Report

Real Estate Market Bottom Reached in 2011

According to a national research survey shows a market recovery may be underway and the bottom may have been reached in 2011 for bargain-seeking investors.  The 2012 Cotton Report is the fourth annual survey focusing on buyer confidence and attitudes about market recovery of roughly 1,400 individuals pursuing a real estate purchase. The survey was conducted in February 2012, by Cotton & Company, an industry leader in residential real estate sales and marketing.

According the company, over the past several years, the primary market has been relatively stagnant throughout the country, and the lack of mortgage availability was outweighed by a pessimistic buyer sentiment. The 2012 data indicates that 54% of the respondents in the market are seeking a primary residence, with 67% of these buyers requiring mortgage financing.

The three-year trend of the survey reflects a more optimistic viewpoint on non-controllable political and economic factors, with a substantial increase of personal choice as the primary factor in their decision. The data also reflects a decrease in respondents who are waiting for better pricing, demonstrating the stabilization of pricing throughout many markets.

President and Founder of Cotton & Company, Stephann Cotton stated, “For those who have been waiting to make their move, trying to time the bottom of the market, they may have already missed it

The Cotton Report’s market data supports this growing perception, with a steady reduction in the number of investors actively in the market and fewer buyers expecting for further price reductions. The market statistics combined with reduced inventory levels spell good news for real estate developers with projects in the pipeline preparing to meet the pent-up demand from the market rebound.

2012 Cotton Report Findings

• 54% of the market is seeking primary housing, rising sharply from 38% a year ago
• 32% of the primary market is “Upsizing”, reversing the trend for smaller residences
• 66% of vacation home buyers are moving for “Geographic Relocation”, with 68% of this market ages 45-64 years old
• 33% must sell their current home to make a move, a reduction from 42% a year ago
• Only 12% of survey participants state “Investment/Rental Income” as their motivation, continuing a four-year steady decline from 23% in 2009.
• 53% of the respondents with over $100,000 household income believe we have reached the bottom of the market

Where Canadians are Buying U.S. Real Estate

According to a survey released last year by the U.S.-based National Association of Realtors (NAR), entitled Global Perspectives, for the fourth consecutive year, Canadians account for 23 percent, or the largest percentage of foreigners buying homes in the U.S. That’s up from seven per cent in 2007.

For the year ending in March 2011, foreigners bought $82 billion worth of residential real estate, up from $66 billion in 2010.

The NAR survey says Canadians flock to buying U.S. properties because U.S. homes are generally less expensive and viewed as a secure investment and the U.S. market offers rental opportunities and long-term appreciation potential.

Other factors include a strong Canadian dollar and a search for milder winters.

The strongest purchases are in Florida and Arizona. In 2010, Canadians bought about eight percent of the homes sold in Florida. For almost every week since the beginning of 2009, a Canadian buyer has purchased a home worth at least $1 million in Maricopa County, Arizona.

Other areas are also picking up. Canadian investors are jumping on properties in the Puget Sound regions of Washington State, northwest Montana, Las Vegas, Texas, Georgia, the Carolinas and Vermont. A new survey by the Bank of Montreal also supports that trend. The survey states that one in five Canadians are still considering purchasing a home in the U.S. The survey says 20 percent of British Columbia residents would consider purchasing in the U.S., Ontario coming in second at 18 per cent and Alberta in third place with 17 percent.

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Look North to Canada

Northern Exposure

Posted by Scott R. Lodde

The firm forecasts that rooms revenue for U.S. hotels will rise 5.8 percent in 2012, the result of a 1.6 percent increase in occupancy and a 4.1 percent gain in average daily room rates.

Ever since the first quarter of 2010, growth in lodging demand has greatly exceeded the supply increase and the industry has seen six straight quarters of ADR growth.

According to Smith Travel Research (STR), U.S. hotels rented more guest rooms in 2011 than ever before. On a local level, PKF-HR observed new records in metro-level lodging demand in 30 of the 50 markets covered by its Hotel Horizons® forecast reports.

The positive impact of increased demand is amplified by the limited amount of new hotel supply that is expected to be built over the next five years.

According STR, the average annual change in the nation’s lodging supply from 1988 through 2011 was 2.1 percent. PKF-HR anticipates that new supply growth will remain below that level through 2016, less than 2.0 percent annually. With supply suppressed, PKF-HR forecasts annual occupancy gains through 2015. Add this to the annual occupancy increases observed in 2010 and 2011, and the industry will experience an unprecedented six-year run of occupancy growth.

STR forecasts profits to continue to grow at an average annual rate of 10.3 percent though 2014, which is a substantial increase over the long-run average of 3.9 percent.

Hotels in the upper-tier chain-scale segments (luxury, upper-upscale, and upscale) have enjoyed the greatest gains in RevPAR since the depths of the 2009 recession. Hotels in the lower-tier categories (upper-midscale, midscale, and economy) also have achieved increases in RevPAR during this same time period, but at a slower pace.

As a result, the firm is forecasting that the national occupancy level for hotels in each of the upper-tier chain-scales will exceed 70 percent through 2016.

Further enhancing the prospects for lower-tier hotels is a shift in the economic outlook. Moody’s Analytics, the basis for PKF-HR”s economic forecasts, projects continued increases in employment that eventually will benefit midscale and economy hotels.

The situation with Iran is the only foreseeable obstacle to PKF-HR”s optimistic forecasts and military hostilities are a greater concern because of the negative impact on the availability of oil and on international travel. Limits on both the availability of gas at local pumps, and transportation system disruptions impact the psyche of travelers beyond gas prices.

PKF-HR”s forecast is based upon Moody’s January 2012 economic forecast, which assumes no disruption to the supply of oil from the Middle East and that the price of oil will remain below $110 a barrel throughout 2012.

PKF believes that US hoteliers have never enjoyed such an extended period of favorable market conditions. The firm believes that we are in the midst of a six-year run during which lodging demand will outpace supply, hotel revenues will increase a cumulative 43.7 percent, and unit-level net operating income will rise 83.2 percent.

Posted by Scott R. Lodde

According to a recent report released by CoreLogic, 11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011. This is up from 10.7 million properties, 22.1 percent, in the third quarter of 2011.

An additional 2.5 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter. Together, negative equity and near-negative equity mortgages accounted for 27.8 percent of all residential properties with a mortgage nationwide in the fourth quarter, up from 27.1 in the previous quarter. Nationally, the total mortgage debt outstanding on properties in negative equity increased from $2.7 trillion in the third quarter to $2.8 trillion in the fourth quarter.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

Highlights from the report:

• Nevada had the highest negative equity percentage with 61 percent of all of its mortgaged properties underwater, followed by Arizona (48 percent), Florida (44 percent), Michigan (35 percent) and Georgia (33 percent). This is the second consecutive quarter that Georgia was in the top five, surpassing California (30 percent) which previously had been in the top five since tracking began in 2009. The top five states combined have an average negative equity share of 44.3 percent, while the remaining states have a combined average negative equity share of 15.3 percent.
• Of the 11.1 million upside-down borrowers, there are 6.7 million first liens without home equity loans. This group of borrowers has an average mortgage balance of $219,000 and is underwater by an average of $51,000 or an LTV ratio of 130 percent. For all first-lien-only borrowers negative equity share was 18 percent, while 41 percent of all first-lien-only borrowers had 80 percent LTV or higher.
• The remaining 4.4 million upside-down borrowers had both first and second liens. Their average mortgage balance was $306,000 and they were upside down by an average of $84,000 or a combined LTV of 138 percent. The negative equity share for all first-lien borrowers with home equity loans was 39 percent, more than twice the share for all first-lien-only borrowers. Over 60 percent of borrowers with first liens and home equity loans had combined LTVs of 80 percent or higher.

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4,300 New Condo Units Remain Unsold From South Florida Boom

According to a new report from CondoVultures.com, South Florida’s seven largest coastal markets (defined as Broward, Miami-Dade and Palm Beach counties) have now sold 91 percent of the nearly 49,000 new units created during the boom that began in 2003.

Buyers paid nearly $1.8 billion for more than 4.4 million square feet of livable space between January and December of 2011 in projects located east of Interstate 95 in the coastal markets.

With the 2011 developer sales, buyers have now purchased nearly 44,350 condo units for more than $21.8 billion in South Florida’s seven largest coast markets between 2003 and 2011, according to an analysis of Clerk of the Court records.

According to the report, international investors with strong foreign currencies deserve much of the credit for the strong sales velocity – an average of more than 250 new unit transactions monthly in 2011. T

Of course, the unanswered question is whether the foreign buyers will continue to flood into South Florida given the economic dynamics now being experienced in Europe and key Latin American countries such as Argentina, Brazil, and Venezuela.

The total number of unsold new condos does not include any of the more than 8,000 units that were purchased in bulk transactions by investment groups that plan to one day resell the units at a premium.

In anticipation of the eventual sellout of the new condos created during the boom, developers are already proposing 24 new condo projects with more than 4,500 units in each of the counties of South Florida, according to CondoVultures.

During the South Florida real estate boom, developers created 148 projects with more than 34,000 units in the three Miami-Dade County markets of Greater Downtown Miami, South Beach, and Sunny Isles Beach. An additional 68 projects with more than 10,000 units were created in two Broward County markets of Hollywood / Hallandale Beach and Downtown Fort Lauderdale and the Beach. Developers created 28 projects with nearly 4,500 units in the two Palm Beach County markets of Boca Raton / Deerfield Beach and Downtown West Palm Beach and Palm Beach Island.

In the four decades prior to the boom, developers created nearly 700 condominium projects with 76,500 units in the same seven coastal markets in South Florida, according to a comprehensive study undertaken for the Condo Vultures® Official Condo Buyers Guide™ eBook series. The Greater Downtown Miami had the distinction of being the single neighborhood with the greatest number of new condos created during the boom with nearly 22,250 units. At the end of 2011, less than 1,750 units remained under the control of the original developers.

Sunny Isles Beach ranked second with nearly 6,400 new units created during the boom. As of Dec. 31, 2011, Sunny Isles Beach has about 580 unsold developer units.

The popular South Beach neighborhood of Miami Beach ranks third with nearly 5,600 new units created since 2003. At the end of the fourth quarter of 2011, South Beach had 965 unsold developer units.

Housing Affordability Index Hits Record High

According to the National Association of Realtors® (NAR), housing affordability conditions have reached the highest level since recordkeeping began in 1970.

NAR’s Housing Affordability Index rose to a record high 206.1 in January, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power.

An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent downpayment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small downpayments, the affordability levels are relatively lower.

According to the report, this latest data underscores buyer opportunities in today’s market and this is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home.

NAR projects the affordability index for all of 2012 will be at an annual high, with little movement in mortgage interest rates or home prices during the year.

Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country.

The key is access to credit.  If access improves, we should see a much more meaningful increase in home sales and broader stabilization in home prices, with modest gains in areas with stronger job growth.

Posted by Scott R. Lodde 

According to a 2011 survey from the National Association of Realtors (NAR), 19 percent of recent homebuyers own more than one home, up 5 percent from the previous year. And second homes aren’t just for the extremely affluent and tropically inclined, as the latest numbers show.

Vacation properties made up 27 percent of all home sales last year. And according to real estate professionals in these second-home regions, there isn’t just one type of buyer investing in these properties.

Many buyers are rushing in now because the prices have dropped so low – 40 to 50 percent less than the high times/

Data from the NAR shows that the typical vacation homebuyer in 2010 was 49 years old with a median household income of $99,500. The median price for a vacation home was around $150,000.

According the experts, many of these second-home markets fall outside of extreme metropolitan jurisdictions and into just-off-the-grid suburban areas with lush art scenes and other tourist draws.

Another facet in second-home consideration is finding a place that may eventually turn into the home proper. In fact, the NAR reports that 34 percent of vacation homebuyers said that they plan to use their property as a primary home in the future. For the prospective retirees, this is particularly common.

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Fort Myers, FL | Top-performing Real Estate Market in 2012

A recent survey study of 1,800 real estate agents by Seattle-based ActiveRain revealed that real estate agents expect that in 2012 the housing market will reach bottom and begin to rebound.

While most of the real estate agents surveyed said they expect real estate values, transactions and the local economy to stay flat or rise from 2011 levels, sixty percent anticipate the volume of real estate transactions will climb slightly.

The survey also shows that the real estate agents polled expect the Fort Myers, Fla., area; Austin, Texas; Boise, Idaho; and San Antonio to be among the top-performing 2012 real estate markets.

10 top-performing real estate markets in 2012

1. Fort Myers-Naples, Fla. 2. Austin, Texas 3. Boise, Idaho 4. San Antonio, Texas 5. Miami-Fort Lauderdale 6. Denver 7. Dallas-Fort Worth 8. Nashville, Tenn. 9. Houston, Texas 10. Salt Lake City, Utah

The agents surveyed expect Reno, Nev., to top the list of the worst-performing real estate markets in 2012. The big three: Chicago, New York and Los Angeles, make the top 10 worst list, as well.

10 real estate markets expected to perform poorly in 2012

1. Reno, Nev. 2. Sacramento, Calif. 3. Chicago 4. New York 5. Providence, R.I. 6. Springfield, Mo. 7. San Diego 8. Los Angeles 9. Cleveland 10. Philadelphia

Source: ActiveRain survey of 1,800 real estate professionals.

Buffett: ‘I’d buy up a couple hundred thousand’ homes

Warren Buffett, the billionaire investor and Berkshire Hathaway CEO, said on CNBC’s “Squawk Box” recently that he’d “buy up a couple hundred thousand” single-family homes if it was practical.

Buffett said that’s because he believes purchasing a home with ultra-low mortgage rates and holding it for the long-term has become a better investment than stocks right now.

“Housing will come back, you can be sure of that,” Buffett wrote in his annual letter to shareholders recently.

Buffett forecasts an increase in household formations, as more people who moved in with their parents or family members during the recession look to move out and get their own home soon.

“People may postpone hitching up during uncertain times, but eventually hormones take over. And while ‘doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure,” Buffett said.

Buffett said the recovery in the housing market could vary quite a bit among local housing markets, however. He did not provide a timeline of when he expected a full housing recovery, admitting that his prediction last year that a housing recovery will take shape within the year turned out to be “dead wrong.”

CNBC Transcript: Warren Buffett on Buying Houses  

Posted by Scott R. Lodde