Home Prices Start to Show Signs of a Turnaround
Among the strongest signs that housing could be recovering, home prices in many regions of the country are now falling at a slower rate, after two years of declines, and in some areas prices have actually risen. Karl Case, co-developer of the Standard and Poor’s/Case-Shiller Home Price Indices, said certain regions of the country now look similar to when they bottomed out in past down cycles. Among the signs of a turn in the housing market, on a year-over-year basis, the S&P/Case-Shiller 20-City Composite Index was down 15.8% in May, but on a month-over-month basis, home prices only fell 0.9%, the smallest monthly drop since September 2007. And while on a year-over-year basis all 20 metro areas surveyed reported a decline in home prices, on a month-over-month basis home prices actually increased in eight metro areas in April and in seven metro areas in May. In March, only two metro areas showed prices rising month-over-month. In addition, U.S. home sales contracts signed in June unexpectedly rose across the country to their highest level since October, according to the National Association of Realtors’ Pending Home Sales Index. “I think a lot of the increase has to do with foreclosure sales, which are selling at a quicker pace and have a faster turnaround time,” said Michelle Meyer, an economist at Lehman Brothers in New York. She said that foreclosure sales, which have dragged overall home prices down, should help shave off what is widely considered one of the top problems facing the market: an unwieldy supply of homes for sale. (www.cnbc.com)
CNBC.com (8/12/08); Reuters
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Builders Sue Banks That Pull Financing as Construction Projects Lie Unfinished
Lenders are being sued by builders who say the banks have unfairly cut off their construction financing, stopped their projects midstream and forced their companies to the brink of bankruptcy. “Lender liability lawsuits are coming. It’s only just beginning,” says Michael Hackard, a lawyer in Sacramento, Calif., who focuses on real-estate law. “There are going to be builders who argue that the lender forced me into insolvency by not acting in good faith.” Developer John Thomas says he had nearly finished building a 222-unit condominium and hotel project in Stockton, Calif., when his lender, First Banks Inc.’s Missouri-based First Bank, wouldn’t release the final $6 million from his $40 million construction loan. As a result, Thomas’s lawyer says, liens have piled up against the project, the condo units haven’t been completed and the hotel has been taken over by a receiver. “If banks want to get out of residential lending, that’s fine; let’s sit down and figure it out. But that isn’t being done. The rug is literally being pulled from under us and games are being played,” says Mick Pattinson, chief executive of builder Barratt American and a member of a group of 30 California builders who have been meeting in recent weeks to discuss ways to push back against the banks. Pattinson says Bank of America Corp. froze his $100 million credit line for seven months, while ordering a new appraisal of his properties. During that time, Pattinson says, his company paid down its credit line by $30 million, but then stopped making payments in March when he realized the bank was never going to unfreeze the loan. Pattinson says that “after seven months, this country boy figured they weren’t going to allow us to use the credit line. I said, ‘No functioning line, no interest.’” (www.wsj.com)
Wall Street Journal Online (7/23/08); Michael Corkery
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Builders Hit by Credit Crunch as Banks Tighten Cash Flow
Even though Houston’s real estate market has fared much better than other parts of the country, banks are tightening their standards across the board, said Tom Fish, vice chairman of CBRE Capital Markets in Houston. Developers in the market for a construction loan must now come to the table with more equity and a higher level of pre-sales or pre-leasing for commercial properties, analysts said. And banks are requiring developers to put up more of their personal assets. Those that are lending are doing so on a much more conservative basis and only to their best customers. Condo developers are facing particularly tough times. On Beltway 8 near Bellaire in the city’s Chinatown area, construction has ground to a halt at the site of an ambitious three-tower condo development with retail and office space catering to the Asian community. The developer, David Wu, said he had to look for new financing when he was unable to come to terms on a deal with his lender in California. The foundation on the first 23-story tower has been poured, and once new financing comes through, Wu said, it will be completed in a year. He said he’s close to getting a loan from a New York hedge fund he turned to this spring when the problems arose with his bank. (www.chron.com)
Houston Chronicle (8/16/08); Nancy Sarnoff
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Foreclosures Bring Buyers Bargains
The foreclosure crisis is clearly giving lenders a massive headache, but it is also providing once-in-a-lifetime buying opportunities for home owners and investors. The Sarasota Herald-Tribune looked at 66 of 135 foreclosure sales that Deutsche Bank has completed since January and determined that those properties sold on average for 44% less than the bank was owed by the previous owners. James Slocum, for example, bought a house in North Point for $251,900 in December 2005 and borrowed $226,700 to finance the deal. Deutsche Bank foreclosed on the loan in June 2007 and won a $246,576 judgment the following month. Deutsche Bank then sold the three-bedroom two-bath house to Matthew White in December 2007 for $138,500, or 44% less than the giant German bank was owed. (www.heraldtribune.com)
Sarasota Herald Tribune (8/18/08); Michael Braga
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Amid Market Slowdown, I’On Holds Its Own
Despite the real estate slowdown, I’On, the nationally recognized “New Urbanist” development that began construction a decade ago, continues to grow. Although about one in every eight of I’On’s roughly 680 homes is on the market, some of the sellers plan to move to roomier houses within the neighborhood. To anyone who drives through the community to marvel at its creative design, “for sale” signs prompt an immediate question of what’s causing so many people to put their homes on the block. But a closer look at the numbers shows that real estate in I’On has held its ground relatively well amid a messy overall real estate market. Home sales have cooled only slightly there, while the Charleston, S.C. region where it is located faces overall declines of 30% to 50% from the peak of the boom. Some of the empty I’On homes are newly built. Vince Graham, I’On’s developer and broker-in charge of I’On Realty, admits the community is feeling some of the effects of a nationwide real estate slump and a wobbly U.S. economy. The median sale price for the neighborhood hasn’t dropped, but Graham thinks some sellers are asking too much. He estimates that no more than 40% of the homes on the market in I’On are realistically valued, and as a result some motivated sellers are now lopping thousands of dollars off their asking prices. So far, financial hardships have not had a major impact on I’On, where the least expensive houses start in the $500,000 range, more than double the region’s median home price. As of last week, 37 homes had been sold in the neighborhood this year. (www.charleston.net)
Charleston Post and Courier (8/18/08); Katy Stech
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Home Gyms Spruce Up, Slim Down for Tighter Fits
According to the Sporting Goods Manufacturing Association, between 2000 and 2006 there was a 30% increase in the number of people exercising at home, especially among baby boomers concerned with maintaining their health. About one-third of new and potential home buyers list a home gym as essential or desirable, according to NAHB. The space falls just behind home offices and theater rooms as the most popular specialty area. Home gyms also are sprouting in spare bedrooms, multi-use family rooms and garages. A few years ago, home gyms were more focused on several single-specialty machines like the Ab Roller or the ThighMaster, says Steve Jordan, president and owner of Steven Jordan Acceleration, a fitness boutique in Los Angeles. Today’s home gym is minimalist. Cables are neatly tucked away, and machines are adjustable to fit any body type and fitness level. “The consumer realizes that exercise and movement can be done in small spaces or on equipment that has multiple uses,” says Jordan, who has designed home gyms in spaces as small as 4 by 4 feet. In today’s home-gym market, the look of the equipment is just as important as the function. Manufacturers are using what interior designer Kelli Ellis describes as “home-friendly” materials and colors, including wood grains and brushed stainless steel. The BodyCraft equipment company in Columbus, Ohio, specializes in a “platinum” line with which users can customize acrylic panels in such shades as blue and burgundy. Instead of stark, square, rectangular tubing, the company uses more pleasing oval tubing with nice bends for a softer look, says co-owner Alan Gore. (www.denverpost.com)
Denver Post (8/15/08); Sheba R. Wheeler
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