Speculators Push Housing Rents Down
Competition for renters is intensifying in many markets where people are buying real estate as an investment and putting the properties on the rental market. In Anthem, Ariz., for example, the number of single-family homes available for rent doubled in the first quarter compared to the same period of last year, according to a local broker, and the average rents for those homes fell by 9%. In suburban Fairfield County, Conn., where it used to be rare to see a single-family home for rent, there is now a glut of properties, which has pushed rents down by about 20%. In San Diego, condominium investors are throwing in a month’s free rent, lowering their standards for acceptable renters and offering such incentives as free gym membership. The vacancy rate for one-unit rentals, which are typically owned by investors, was 9.7% in this year’s second quarter, up from 8.7% a year earlier, according to the Census Bureau, at the same time as multifamily vacancy rates were falling. Rick Murray, an analyst for Raymond James & Associates, says that there are now 1.339 million vacant single-family homes for rent, a record. This “hidden inventory” could eventually increase the number of homes for sale, he wrote. (www.realestatejournal.com)
Wall Street Journal Online (8/16/05); Ruth Simon
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Economist Sees Some Bumps Ahead on Hot Housing Road
While painting a positive picture overall for the nation’s housing market, Douglas Duncan, chief economist for the Mortgage Bankers Association, said that there could be some “tiny bubbles” in coastal markets with high price volatility, such as California; places where there are a lot of condominiums coming onto the market; and areas where there is a high degree of property flipping by investors. He estimates that only 5%-7% of current home owners face some risk from adjustable-rate mortgages, including interest-only loans. “Any time there’s a new product, there are always bugs,” he said. “Lenders already have adjusted to the new types of loans. Interest-only loans products are excellent, but they have to fit the right customer.” Because the highest delinquency rates occur three to five years after loans are written, that could mean a rise in those rates in the next few years following the huge increase in the number of loans made from 2002 to 2004, he said, but continued job growth and a strong economy would help to limit problem mortgages. “A major event that would cause mortgage rates to rise rapidly, such as the price of oil going to $100 a barrel, a significant loss of confidence in the dollar or multiple terrorist attacks in the U.S.” could derail the housing boom, he said. (www.chicagotribune.com)
Chicago Tribune (8/15/05); John Handley
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Near Nation’s Capital, a Hot Market Cools
With the number of listings up, sales down and more sellers being forced to trim their prices or offer incentives to buyers, conditions may be starting to cool in some of the nation’s red hot housing areas and shift back to markets that are more balanced between buyers and sellers. Real estate agents are saying that this could mean that prices will level off or rise more modestly in coming months, particularly at the high end of the market, where builders have added substantial supply. Real estate agents in metropolitan Washington, D.C. are wondering if there are too many high-priced properties after average home prices in the area rose 72% since 2000 to $376,000 last year and the number of homes selling above $500,000 has risen especially fast. In the city’s suburbs, inventories of homes for sale are growing fastest in northern Virginia, which had 4,843 homes listed in July, up 26% from a year earlier, according to the Northern Virginia Association of Realtors®. Even this summer, an open house in Virginia can draw as many as 60 people, said Ron Cathell, an agent with Weichert Realtors®. However, on a recent Sunday, only about 20 people showed up to view a $665,000 townhouse in Arlington. “I haven’t seen an open house this slow since 1998,” he said. (www.realestatejournal.com)
Wall Street Journal Online (8/19/05); Jessica E. Vascellaro and Kemba J. Dunham
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Getting Tough on Illegal Housing in New Jersey
Officials in New Jersey are cracking down on the illegal conversion of attics and basements into moneymaking rental apartments for minorities or recent immigrants who are desperate to find cheap housing. Local building officials claim that enforcing the law is difficult, and they often have to resort to clues for zoning law violators such as overstuffed garbage bins, multiple mailboxes and too many names and phone numbers traced to the same address. The problem has grown tremendously over the past five years, according to William Dressel, executive director of the New Jersey League of Municipalities. “It’s a major concern that towns across the state are dealing with. It affects quality of life, public health and safety. They’re all exploring various enforcement avenues to prevent it, such as stricter ordinances, tougher inspections and higher fines.” Ridgefield recently amended its residential unit ordinance to impose stiffer fines on violators, ranging from $500 to $2,000 and the possibility of imprisonment for up to 90 days. The borough is also offering a $500 reward to tipsters who lead officials to illegal units. (www.northjersey.com)
Hackensack Record (8/17/05); Deena Yellin
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Texas Legislature Takes Stand Against Kelo Decision
Texas is the third state in two months to pass a law that bars municipalities from using their powers of eminent domain to generate tax revenue through private development. Following the controversial Supreme Court decision in the case of Kelo vs. City of New London, legislators in another 31 states are crafting similar proposals. The bill was crafted to provide a safe harbor for the $650 million, 75,000-seat Dallas Cowboys stadium in Arlington. To date, agreements have been reached with 49 of 168 property owners. Deals from roughly 60% are needed to get the critical mass to break ground on the project next spring, according to Jay Doegey, the city’s attorney. The Texas eminent domain measure safeguards 11 development areas until Dec.1, including stadiums and community venue projects. (www.globest.com)
GlobeSt.com (8/18/05); Connie Gore
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Emerging Lofts Fuel Furniture Trend
In talks with manufacturers and furniture companies, Dennis Ammerman — founder and CEO of LoftWerks Inc., a residential developer in Nashville that is converting the city’s downtown Ambrose Building into 21 lofts — is creating a furniture line specifically for lofts and developing a national television show highlighting the loft lifestyle. Ammermann says his edgy furniture line will be suitable for the taller dimensions of lofts, which can have 14-high ceilings. “A regular dresser in a loft looks like it belongs to a kid,” he says. Local furniture dealers, particularly those selling contemporary lines, are benefiting from the loft trend. Almost 2,000 lofts will hit the Nashville market in the next few years. Their prices can range from the low $100,000s to $1 million, and they tend to appeal to affluent households in their 20s and 30s and empty nesters who like living close in, near restaurants and entertainment venues. (www.bizjournals.com)
Nashville Business Journal (8/515/05); Judy Sarles
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