Evan Joseph

Prices are ’stratospheric’ at the waterside condos.

Tom Clancy has given a bit of a boost to the battered condominium market – at least in Baltimore.

The novelist this week paid $12.6 million for three condos that will be combined to create an 11,959-square-foot penthouse in the Ritz-Carlton Residences in Baltimore’s Inner Harbor, according to published reports and people familiar with the matter.

The price amounts to $1,054 per square foot. That’s a stratospheric price tag for gritty Baltimore, where average condo sales run in the range of $300 to $500 per square foot and luxury condos go for $600 to $800 per.

“I think it’s probably the largest [condo sale in Baltimore] by a long shot,” said Bob Merbler, a partner in Baltimore brokerage Yerman, Witman, Gaines & Conklin Realty LLC, who specializes in luxury-condo sales but wasn’t involved in the Clancy deal. “A few years ago, if you had a $1 million or $2 million house in Baltimore city, that raised eyebrows.”

Developer RXR Realty LLC completed construction of the 191-unit Ritz Carlton Residences last summer. Unlike other hotel-residence projects that offer both hotel rooms and for-sale condos, the Baltimore project is made up solely of for-sale condos. However, residents there do get access to hotel amenities such as concierge service, a spa and an indoor pool.

The market for luxury condos in such developments has collapsed in the past year as the recession has wiped out would-be buyers of the residences. Many such projects stalled in construction due to anemic sales. Marriott International Inc., Ritz-Carlton’s parent, disclosed in September that it no longer will build such hotel-residence projects, though it will manage and license its brands to those built by other developers.

At the Baltimore Ritz Carlton Residences, RXR has sold 23 units and has another 15 under contract, RXR Chief Executive Officer Scott Rechler said.

Let’s hear from three of the most respected gurus:

Tom Lawler, an independent economist who tracks sales from hundreds of local sources, expects a seasonally adjusted annual rate of 5.82 million units, up 4.5% from September. Ivy Zelman, CEO of Zelman & Associates, forecasts 5.72 million but says she wouldn’t be surprised by numbers in the range of 5.8 million to 5.9 million. Dan Oppenheim of Credit-Suisse is going with 5.9 million.

They could all be way off because this monthly stat is devilishly hard to predict. The seasonal adjustments are tricky, and the national NAR number doesn’t always seem to track what local multiple-listing services have reported.

In any case, the October number doesn’t tell us what’s happening in the market now. It’s based on sales that closed in October. That means most of the buyers and sellers reached agreements way back in late August or September. There’s usually a lag of at least several weeks between the agreement on a price and the closing.

Some analysts think home sales will slow in the months ahead. Though Congress expanded a tax credit for home buyers and extended it through April, many potential buyers already have taken the bait. That may have pulled forward sales that otherwise would have occurred later. What’s more, rising unemployment is making potential buyers nervous.

Please follow me for WSJ housing news on Twitter at: http://twitter.com/jamesrhagerty

RM Design Studio

A rendering of the “New American Home”

With all the talk about American preferences shifting to smaller homes, we were surprised that this year’s “New American Home” measures a whopping 6,800 square feet, much larger than the national median of 2,219 square feet. So, for that reason (and many others) it’s hardly surprising the Las Vegas address has fallen on hard times.

As we wrote in today’s WSJ, construction has been halted on the showpiece. Crafted to capture emerging trends in residential building and the shifting lifestyles of Americans, the house now symbolizes the industry’s plight:  Developer Domanico Custom Homes can’t secure financing to finish the remaining 25% of the house (the flooring, landscaping, pool), and it’s been put on the market at a fire-sale price of $1.8 million, down from $3.39 million in August.

It is well known that private builders are having trouble tapping capital. Burned lenders remain saddled with nonperforming construction loans to developers and builders, particularly in boom-to-bust markets like Las Vegas.

But this house is different. The “dream home” has long been a highlight of the International Builders’ Show, one of the nation’s biggest conventions. It houses fancy soirees - attended by the industry’s movers and shakers - and receives plenty of glowing press worldwide. Several previous houses have had multiple builders.

Problem is, this year’s sprawling home might be viewed as a vestige of the housing frenzy’s excess. It’s in a gated community. It has five bedrooms, eight bathrooms and a grandparent suite. The his-and-her closets are bigger than most New York apartments.

Sponsors donated products galore - it contains $150,000 worth of cabinets and $300,000 in windows - and it is said to trump anything seen on the popular “Extreme Makeover” television show, itself criticized as an outdated reminder of McMansions and materialism.

The National Association of Home Builders, for one, says it isn’t giving up hope that the house will land a loan and be finished in time for the confab - continuing the tradition established in 1984. But the group is growing increasingly nervous, so it is at work on a computerized virtual tour showing what it would have looked like.

We asked the NAHB - an influential trade group - why it didn’t write the builder a check to finish the job. The group didn’t want to set a precedent, according to Chief Executive Jerry Howard.

It also doesn’t want to downsize. Though, why should it? The 2011 house, set to top 8,000 square feet in Orlando, has already been sold.

Peter Rymwid

The Solaria’s glassy exterior belies a mostly-empty interior

How do you get skittish buyers to sign deals on newly constructed condos in a down market? Joseph Korff, a New York City developer thinks he has the answer: Auction.

On Sunday, 54 out of the 64 condos at Mr. Korff’s Solaria in the Bronx’s Riverdale neighborhood, hit the block in what will be New York City’s first auction of luxury high-rise apartments. Other city developers, lenders and auctioneers are watching closely, as the Solaria’s success could help determine how others try to unload their inventory during what remains an oversaturated market for high-rise new construction in the city.

“The entire city is looking at this auction on Sunday. Anyone in real estate is watching this,” says Rolan Shnayder, director of new development lending for Home Owners Mortgage, a lender to 70 new construction buildings in New York City. “If this works and [the developer] can get market-rates for these [apartments] or slightly below, other developers are going to say ‘this is a great way to get rid of real-estate quickly.’”

Throughout the five boroughs, there are 22,000 units of newly constructed high-rise apartments that have not yet hit the market, the majority of them luxury condominiums, says New York real estate appraiser Jonathan Miller, president of Miller Samuel. If those off-market units are dumped onto the market tomorrow, that’s 18-24 months of inventory at the current pace of sales, he adds.

With New York real estate prices off by 25% from their peak in summer of 2007, many developers have been slow to adapt their housing prices to the new market.  “They didn’t build in a 20-to-30 percent margin of error,” Mr. Miller said. “Instead it’s pray-and-delay.”

At the Solaria, units first hit the market as pre-construction offerings in the fall of 2006 with sales on just 10 units closing, the last in September 2008. None have closed since, but the auction has already helped build buzz.

“Before, I might have had 11 or 12 people coming through a week. Last weekend, we had a few hundred,” Mr. Korff says.

Starting bids, set at about 55% of current asking prices, range from $299,000 for a low floor one-bedroom now listed for $660,000, to $1.99 million for a five-bedroom top-floor apartment currently listed at $4.3 million. Mr. Korff, along with the auctioneer, Real Estate Disposition, LLC, has set undisclosed minimum reserve levels – winning bids that do not meet the minimum reserve could be rejected by the developer.

Local press in Riverdale took issue with the minimum reserves, claiming that opening bids could be far below what the developer will actually accept and that the developer will have its own bidders in the audience to bid up prices.

“If I were going to test the market and set reserve prices artificially high, I would be the biggest fool to offer all 54. I’d offer 10,” Mr. Korff said. As for fake bidders, “There is no shill in the room. We’re not having anybody in the audience to boost up the bids,” Mr. Korff said.

Some industry experts say regardless of the results, Sunday’s auction will be the first of many to come for high-rise developers, especially in 2010.

“The barbarians are at the gate,” said Jon Gollinger, chief executive officer of Accelerated Marketing Partners which put on 35 high-rise auctions in the last 18 months. His company is in talks with several lenders and developers in New York City and last month held what many consider a successful auction of luxury condos in Boston.

For information on the Solaria auction and list of apartments offered, visit www.auctiontoday.com.

Sotheby’s International Realty

The home in Greenwich that Tommy Hilfiger recently sold

The “New American Home” becomes a poster child for the building industry’s woes. Meanwhile, here’s a look at some high-end finished homes making news this week:

Fashion mogul Tommy Hilfiger sells his home in Greenwich, Conn., for $20 million. He first listed the four-acres estate more than a year ago for $27.9 million and cut the price earlier this year to $21.9 million. Known as Stone Hill, the eight-bedroom, nine-bathroom mansion measures 20,000 square feet. It includes a movie theater, a 2,000-bottle wine cellar, an indoor basketball court, a tennis court, a gym, a sauna, a spa-treatment room and a pool. Mr. Hilfiger paid $18 million for the newly- constructed home in 2005. (WSJ)

Thriller writer James B. Patterson lists his home in Palm Beach, Fla., for $14.95 million. The plantation-style colonial has five bedrooms, seven bathrooms and two powder rooms in 7,970 square feet. Built in 1955 and expanded in 1993, the property has a heated pool, a spa, a boat dock and 136 feet of frontage on the Intracoastal Waterway. Mr. Patterson is moving his family to a 20,505-square-foot home on two acres, also in Palm Beach. He paid $17.45 million for that property this summer. (WSJ)

The Vancouver home where the new movie “Twilight: New Moon” was filmed is on the market for $3.3 million. It has five bedrooms and four bathrooms. (CNN Money)

The heirs of a California builder list the 600-acre Middle Ranch for $28 million. Located in California’s San Fernando Valley, the property was a getaway spot of film director Cecil B. DeMille for half a century. The late Charles Pankow, who founded a Pasadena-based commercial building company, bought the estate in 1986 and turned it into an equine boarding and training complex that can house up to 400 horses. The property has 11 lighted arenas, 20 barns and pastures for horses. It also has a five-bedroom house with a wine cellar, a pool and a tennis court.  (WSJ)

Actor Robert Loggia sells his home in the Bel-Air area of Los Angeles for $2.95 million. Built in 1968 and recently remodeled, the French Country-style home measures 4,620 square feet and has five bedrooms and four bathrooms, as well as high ceilings, four fireplaces and two-story windows. The home was first listed in March with an asking price of $3.65 million. (Los Angeles Times)

Personal trainer Bob Harper of the NBC television show “The Biggest Loser” buys a home in the Hollywood Hills of Los Angeles for $2.9 million. The 2,600s-square-foot home has three bedrooms, three bathrooms and a pool. It also has canyon and ocean views. The home hit the market in April with a price tag of $3.995 million. (Los Angeles Times)

Billionaire philanthropist Ronald Lauder sells one of his Hamptons homes to his daughter Aerin for $5.256 million. Ms. Lauder, who is the senior vice president and creative director of Estee Lauder, the company her grandmother founded in 1945, was married at the 2.77-acre property in 1996. (Newsday)

Mark Fisch, a managing partner at New Jersey-based real estate firm Continental Properties, is in contract to buy a 5,000-square-foot condo in New York City’s prestigious Dakota for $11.5 million, less than half the former asking price of $24 million. The seller, businessman John Burris, first put the four-bedroom, four-bathroom condo on the market in June 2008 and then reduced the price three times. (New York Post)

Anne M. Mulcahy, the chairwoman and former chief executive of Xerox, buys a three-bedroom apartment in Manhattan’s Superior Ink condominium for $7.4 million. The 13th-floor unit has three bedrooms. (New York Times)

Over the summer, many people got excited over (very tentative) signs that the Great Housing Bust might be nearing an end. “In recent months, however, the housing news has turned less encouraging,” Mr. Hatzius says in a new report.

The plunge in housing starts reported this week was partly due to bad weather and likely overstated the pullback by home builders. “But even excluding the latest drop, the recent data have been noticeably sluggish recently,” he writes. “After a sharp upward move (at least in percentage terms!) from 479,000 in April to 590,000 in June, housing starts have at best been treading water.” Meanwhile, sales of new single-family homes “have also essentially stagnated” at an annual rate of around the 400,000 units.

Sales of previously occupied homes have remained strong. But a steep drop in mortgage applications raises questions about whether that will last. Some of the home-price indexes also have drooped lately after signs that prices were leveling out in some areas. “Our current working assumption is a 5% to 10% drop in home prices through the middle of 2010,” Mr. Hatzius says.

He also pointed to a rise in a “composite” index (cobbled together by Goldman) of vacant housing units for rent or sale as a percentage of the housing stock: “It hit 5.4% in the third quarter, the highest level on record, suggesting that excess supply remains a very serious problem for the housing market.”

Meanwhile, the backlog of homes heading for foreclosure continues to bulge, as Thursday’s report from the Mortgage Bankers Association confirmed. “Ultimately, a large share of the troubled loans are likely to end up as vacant homes on the market, which will make it harder to unwind the current excess supply quickly,” Mr. Hatzius says.

None of this means the sky is falling. Still, Mr. Hatzius concludes, “while the bottom in housing starts has very likely been seen, homebuilding is likely to provide a much smaller boost to real GDP growth in 2010 than in the recovery from prior deep recessions.  Meanwhile, house prices and credit quality look set continue to weigh on the U.S. financial system, the availability of bank credit, and ultimately the pace of the economic recovery.”

Please follow me for WSJ housing news on Twitter at: http://twitter.com/jamesrhagerty

More Homeowners Are Falling Behind (WSJ): About one in seven American households with mortgages is behind on payments or in foreclosure, up from one in 10 a year ago.

Clouds Over Dream Home (WSJ): This year’s model home from the National Association of Home Builders has become a poster child for the building industry’s woes, as construction came to a halt after a private investor pulled out.

General Growth in Mortgage Pact (WSJ): General Growth Properties said it reached a deal to restructure $9 billion in mortgages on 77 malls in hopes of removing them from bankruptcy protection by the end of the year.

Hong Kong Sets Rules on Property Marketing (WSJ): Aggressive marketing tactics for Hong Kong residential property that helped turn the 46th floor of a landmark development into the 88th floor will soon be toned down.

D.R. Horton Loss Narrows (WSJ): Home builder D.R. Horton posted a narrower loss amid year-earlier write-downs. Orders jumped 26%, but the company signaled caution on the strength of the industry.

Mortgage Rates Decline (WSJ): The 30-year mortgage rate fell to its lowest level since May.

Sam Zell

Real estate mogul Sam Zell had choice words Thursday for billionaire Wilbur Ross and all the other wannabe experts on the commercial real estate crisis.

Apparently taking issue with recent comments Mr. Ross made to the press about a huge crash hitting commercial property markets, Zell said for “all the new savants on commercial real estate (like) Wilbur Ross…I find their comments..are inversely related to our knowledge of the industry.”

Mr. Zell, who is chairman of Equity Residential, made the jibe at the Capital Markets in Real Estate Conference sponsored by the NYU Schack Institute of Real Estate. Mr. Zell, who hasn’t been hurt much in this latest downturn, is still smarting from his disastrous buyout of Tribune Co., in 2007.

Mr. Ross, who runs a turnaround firm that is a subsidiary of Invesco, could not be reached for comment.

In front of a packed room at the Waldorf Astoria, Mr. Zell pulled out his own crystal ball on commercial real estate where he was less apocalyptic than the other doomsayers, but noted continued challenges ahead. He expected that in mid-2011, building vacancies won’t be an issue, while other performance metrics such as cap rates will be more important.

Mr. Zell anticipated new development will remain contained in the foreseeable future and that institutional investors will step up to give much needed capital infusion to distressed property owners.

However, he painted a bleak picture for hoteliers. We’ll “likely to see the kind of a massacre in the hotel industry …similar to what office (property) saw in the early 1990s.”

Mr. Zell offered these parting words of advice for real estate investors: “You gotta come clean by ‘13″.

Both the current and former directors of the Federal Housing Finance Agency have told Congress over the past year that they’d like to see an independent inspector general named to their agency, which was created in July 2008 and merged two different regulatory agencies, one with oversight of Fannie and Freddie, and the other that oversaw the Federal Home Loan Banks.

The issue flared up again last week when the Huffington Post described how the former IG for one of FHFA’s predecessors had been told that he didn’t have legal authority to become the IG for the new agency. Rep. Darrell Issa, a California Republican, last week said he was ready to pull the plug on the government’s support for the mortgage giants if the agency didn’t have independent oversight.

Edward Kelley, who had been the IG for the Federal Housing Finance Board, initially assumed the role of acting IG for the new FHFA. But the agency’s lawyers ruled in September that Mr. Kelley didn’t have the authority to take the position under the law that created the new agency. That means that for most of 2009, the agency has been operating without an independent watchdog.

Both the current and former directors of the agency have signaled their desire to have an inspector general appointed and to have that office funded by Congress. Under questioning last month, the agency’s acting director, Edward DeMarco told a Senate panel that he was still waiting for the White House to appoint the position. “I’d like to be very clear. I want an inspector general,” he said. “I would like it, and I would like it now.”

Former Director James Lockhart raised the issue before a House panel in June when he said that “no appropriation has been provided” for the agency and that an inspector general had not been nominated to fill the position since the agency was created in 2008.

Mr. Kelley says he’s disappointed that the FHFA’s lawyers interpreted statutes blocking his ability to serve in an independent role, and he’s now serving as an internal auditor that is part of the agency. “Unfortunately the opinion didn’t come out the way we expected it,” Mr. Kelley said. He says the White House is currently vetting candidates for the new job. The White House is also expected to appoint a permanent successor to Mr. Lockhart.

Fear of Double Dip in Housing (WSJ): Housing starts tumbled 10.6% in October, the lowest level since April, adding to doubts about the vigor of the economic recovery.

New York Landmark Burns Its Investors (WSJ): The U.S. real estate arm of Africa Israel Investments has tentatively agreed with creditors to restructure its disastrous acquisition of the former New York Times headquarters in a deal that will wipe out $400 million in debt.

Too Tough to Save (WSJ): The U.S. government may find it much harder to bail out the commercial real-estate market.

China’s Housing Bubble Trouble (WSJ): Is there a property bubble emerging in China? As ever, getting an answer is like nailing jelly to a wall.

What’s Really Going on in Housing (WSJ Deals): To many economists, the seemingly bad news about declining construction starts has a silver lining. Fewer new homes means there will be less new supply hitting the market that is still saturated with foreclosures. But that is cold comfort to builders.

Hiring Boom in Mortgage Restructuring (WSJ): Mortgage restructuring for strapped homeowners has emerged as a rare growth area in the economy as companies in the field keep hiring.

Lower Prices, Not Tax Credit, Motivates Buyers (US News): Factors beyond a home buyer tax credit, such as attractive interest rates and falling home prices, deserve more of the credit for the market’s recent uptick.