The number of closings at new downtown Miami condos has been better than many expected, a survey showed, but a big test still looms for the revitalizing urban center.
Miami's latest building boom is creating 22,000 condominium units in the city's urban core, more than double the number built in the last 40 years. But a long-standing question remains: How long will it take for all the condos to actually sell?
The answer: 70 percent have found a buyer, according to a new study by condovultures.com, a real estate consultancy. So far, 17,299 condos have been delivered with 12,169 closed at an average price of $405,966 per unit, according to the condovultures.com report. It amounts to a sales total of nearly $5 billion.
By year's end, 3,999 units are set to hit the market. Another 1,439 after that.
The sales have been better than many observers expected for a downtown area held out by some as ground zero for speculation and excess. And it underlines Miami's ongoing urban revitalization, fueled by people, builders and investors returning to the city center.
But it also comes with a big caveat: Nearly a quarter of new downtown condos produced by the boom are just being delivered and starting closings now, including many of the largest projects.
''South Florida developers have to be excited by the fact that more than two out of three downtown condo units have closed successfully,'' said Peter Zalewski, principal at condovultures.com in Bal Harbour. ``But the giants are coming.''
The massive projects include the three-tower, 1,800-unit Icon Brickell pinched between Biscayne Bay and Brickell Avenue, which starts closings this month. The 342-unit Epic, rising along the Miami River, is poised to start closings. So too, 530-unit Mint at Riverfront, 459-unit Infinity at Brickell and 346-unit Paramount Bay.
''We are bullish,'' said Miroslav Mladenovic, vice president of Cabi Development, which started closings Thursday on its 848-unit Everglades on the Bay project along Biscayne Boulevard. ``Comparable projects to ours have fared well, we don't see why we can't fare the same.''
The new batch of condos are hitting the market as credit remains tight, consumers are increasingly cash-strapped and existing home prices continue to fall due to an outsized inventory of unsold homes throughout South Florida. Sales, however, have picked up in recent months.
Zalewski's report, culled from a review of property records ending Sept. 30, covers the greater downtown area between the Julia Tuttle and Rickenbacker causeways and Interstate 95 to Biscayne Bay.
The swath of land -- which includes the Brickell, central business district and Midtown neighborhoods -- has seen more development than any corner in Florida. The area is closely watched due to its significant construction and its implications for the broader housing market, but also because policy makers and many builders view redevelopment in the urban core as a key element to the region's overall economic success.
Meanwhile, the overall downtown closings have been solid so far, Zalewski said.
''We're like in the sixth or seventh inning of this,'' said the Bal Harbour analyst. ``We had a good starting pitcher, and some decent middle relievers, now the question is if it's going to be a blown save.''
BY MATTHEW HAGGMAN
Friday, November 28, 2008
Sunday, October 5, 2008
For bailout to work, housing market needs to mend
Washington's financial bailout plan is now law. So the credit spigot will start flowing again, banks will resume lending, and an economic recovery can begin, right?
Wrong. Experts say the most important thing that needs to happen before the $700 billion bailout even has a chance of working: Home prices must stop falling. That would send a signal to banks that the worst has passed and it's safe to start doling out money again.
The problem is the lending freeze has made getting a mortgage loan tough for everyone except those with sterling credit. That means it will take several months or longer to pare down the glut of houses built when times were good — and those that have come on the market because of soaring foreclosures — before home prices start appreciating.
Housing is a critical component to the U.S. economy and by extension the availability of credit. Roughly one in eight U.S. jobs depends on housing directly or indirectly — from construction workers to bank loan officers to big brokers on Wall Street. A turnaround in housing prices would boost confidence in the wider economy and, experts hope, goad banks into lending again.
"Housing traditionally does lead the economy through a recovery. I think it's going to be critical for a sustained recovery in this cycle, too," said Gary Thayer, senior economist at Wachovia Securities.
In the meantime, people like Alicia Elliott are adjusting to a new American reality: Life without credit.
The 21-year old Morgantown, W. Va., resident just bought a used mobile home, borrowing $4,000 from friends and family because she couldn't get a bank loan.
"I tried to. Couldn't do it. It's just hard to get a loan," said Elliott, who works as a cashier at a Lowe's Cos. store.
She used to get bombarded with offers for credit cards. Now she can't even get one. "I get denied one after another after another. It doesn't matter if you have a co-signer or not," she said.
Trey Simmons, a 31-year-old barber at a Dallas hair salon, said he worries tighter lending standard will squash his goal of buying a home next year.
"Credit is a privilege everybody can't get," Simmons said. "I had credit at a young age and messed up."
He now operates on a strictly cash basis. "If I don't have it," he said, referring to cash, "I don't spend it."
The dilemma boils down to a matter of trust.
"Credit, by definition, means trust and faith, and for many reasons trust and faith have been damaged," said Sung Won Sohn, an economics professor at California State University, Channel Islands.
Sohn said the near certainty of a recession makes it too risky for the thousands of small and medium-sized banks across the country to lend to people like Elliot.
"Banks know the economy is getting worse, so ... they will keep being cautious," said Sohn, a former banking executive.
Still, the government hopes that by scooping up billions of dollars in bad mortgage debt and other toxic assets, banks eventually can clean up their shaky balance sheets, crack open the vaults and send money washing through the system again.
The rescue plan also raises the federally insured deposit limit from $100,000 to $250,000, a move that could boost banks' reserves and further grease the lending wheels.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman and a key negotiator over the past weeks, said the measure was just the beginning of a much larger task Congress will tackle next year: overhauling housing policy and financial regulation in a legislative effort comparable to the New Deal.
In the meantime, the Treasury Department is moving swiftly to get the plan started. Treasury Secretary Henry Paulson said Friday he did not wait for final approval of the measure to begin preparation. He has been lining up outside advisers as his staff works out details on a multitude of complex issues.
But several hurdles could trip up the plan. For starters, even when the Treasury starts buying bad assets, some banks may hoard the cash they receive in return until they see how the plan pans out. That has the potential to make the lending logjam worse, said Vincent R. Reinhart, former director of the Federal Reserve's monetary affairs division.
"They may sit on the sidelines and wait to see (the bailout) get some traction. The problem is if everybody sits on the sidelines, nobody gets in the game. It's a risk," he said.
It also creates a vicious cycle: No trust means no lending; tight credit means it's harder to buy a home; the more difficult it is to buy or sell a home, the further home prices will fall; and the further prices drop, the more foreclosures there will be.
U.S. home prices — down 20 percent from their peak in July 2006 — still have further to fall, and must hit bottom before demand picks up. The long-awaited bottom in prices could be a year or more away.
But Jim Gillespie, chief executive of Coldwell Banker Real Estate, said he hopes that lower prices, combined with the government's actions will jump-start stagnant demand. The federal bailout plan, he said, "will give people reassurance that mortgage money is available."
Jobs are another big concern. The stranglehold on credit has choked companies big and small that depend on regular inflows of borrowed money to pay employees and stay afloat.
The Labor Department said Friday that employers cut 159,000 jobs in September, the fastest pace of losses in more than five years. Experts say that number will grow as the effects of the credit gridlock course through the economy in coming days and weeks.
The nation's unemployment rate is now 6.1 percent, up from 4.7 percent a year ago. Over the last year, the number of unemployed people has risen by 2.2 million to 9.5 million.
The unemployment rate could rise to as high as 7.5 percent by late 2009, economists predict. If that happens, it would mark the highest since after the 1990-91 recession.
Boosting employment is critical to kick-starting lending because "if jobs are growing, then incomes are a growing, and if incomes are growing then people are consuming," Reinhart said.
Consumers and businesses have retrenched so much that some analysts fear the economy stalled or shrank in the third quarter that ended last week. The Labor Department report Friday showed wage growth for workers is slowing, meaning they'll be more hard-pressed to spend, especially for something as expensive as a home.
Many economists predict the economy will contract in the final quarter of 2008 and the first quarter of next year. That would meet the classic definition of a recession — two consecutive quarters of a shrinking economy.
One bright spot: optimism hasn't been totally squashed yet.
Morgan Cavanaugh, proprietor of Moriarty's Pub in downtown Cleveland, has been trying to sell another bar he owns to ease his workload, but the prospective buyer hasn't been able to raise the money.
Now that the bailout legislation has the green light, he's hopeful he'll get a deal done.
"It passed. Let's work something out," Cavanaugh told the man over a cell phone Friday just after the House approved the plan.
He flipped the phone shut and smiled from behind the weathered mahogany bar of his 75-year-old Irish pub.
"He's going to put the loan request in again. It's looking up," Cavanaugh said.
By STEVENSON JACOBS
Wrong. Experts say the most important thing that needs to happen before the $700 billion bailout even has a chance of working: Home prices must stop falling. That would send a signal to banks that the worst has passed and it's safe to start doling out money again.
The problem is the lending freeze has made getting a mortgage loan tough for everyone except those with sterling credit. That means it will take several months or longer to pare down the glut of houses built when times were good — and those that have come on the market because of soaring foreclosures — before home prices start appreciating.
Housing is a critical component to the U.S. economy and by extension the availability of credit. Roughly one in eight U.S. jobs depends on housing directly or indirectly — from construction workers to bank loan officers to big brokers on Wall Street. A turnaround in housing prices would boost confidence in the wider economy and, experts hope, goad banks into lending again.
"Housing traditionally does lead the economy through a recovery. I think it's going to be critical for a sustained recovery in this cycle, too," said Gary Thayer, senior economist at Wachovia Securities.
In the meantime, people like Alicia Elliott are adjusting to a new American reality: Life without credit.
The 21-year old Morgantown, W. Va., resident just bought a used mobile home, borrowing $4,000 from friends and family because she couldn't get a bank loan.
"I tried to. Couldn't do it. It's just hard to get a loan," said Elliott, who works as a cashier at a Lowe's Cos. store.
She used to get bombarded with offers for credit cards. Now she can't even get one. "I get denied one after another after another. It doesn't matter if you have a co-signer or not," she said.
Trey Simmons, a 31-year-old barber at a Dallas hair salon, said he worries tighter lending standard will squash his goal of buying a home next year.
"Credit is a privilege everybody can't get," Simmons said. "I had credit at a young age and messed up."
He now operates on a strictly cash basis. "If I don't have it," he said, referring to cash, "I don't spend it."
The dilemma boils down to a matter of trust.
"Credit, by definition, means trust and faith, and for many reasons trust and faith have been damaged," said Sung Won Sohn, an economics professor at California State University, Channel Islands.
Sohn said the near certainty of a recession makes it too risky for the thousands of small and medium-sized banks across the country to lend to people like Elliot.
"Banks know the economy is getting worse, so ... they will keep being cautious," said Sohn, a former banking executive.
Still, the government hopes that by scooping up billions of dollars in bad mortgage debt and other toxic assets, banks eventually can clean up their shaky balance sheets, crack open the vaults and send money washing through the system again.
The rescue plan also raises the federally insured deposit limit from $100,000 to $250,000, a move that could boost banks' reserves and further grease the lending wheels.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman and a key negotiator over the past weeks, said the measure was just the beginning of a much larger task Congress will tackle next year: overhauling housing policy and financial regulation in a legislative effort comparable to the New Deal.
In the meantime, the Treasury Department is moving swiftly to get the plan started. Treasury Secretary Henry Paulson said Friday he did not wait for final approval of the measure to begin preparation. He has been lining up outside advisers as his staff works out details on a multitude of complex issues.
But several hurdles could trip up the plan. For starters, even when the Treasury starts buying bad assets, some banks may hoard the cash they receive in return until they see how the plan pans out. That has the potential to make the lending logjam worse, said Vincent R. Reinhart, former director of the Federal Reserve's monetary affairs division.
"They may sit on the sidelines and wait to see (the bailout) get some traction. The problem is if everybody sits on the sidelines, nobody gets in the game. It's a risk," he said.
It also creates a vicious cycle: No trust means no lending; tight credit means it's harder to buy a home; the more difficult it is to buy or sell a home, the further home prices will fall; and the further prices drop, the more foreclosures there will be.
U.S. home prices — down 20 percent from their peak in July 2006 — still have further to fall, and must hit bottom before demand picks up. The long-awaited bottom in prices could be a year or more away.
But Jim Gillespie, chief executive of Coldwell Banker Real Estate, said he hopes that lower prices, combined with the government's actions will jump-start stagnant demand. The federal bailout plan, he said, "will give people reassurance that mortgage money is available."
Jobs are another big concern. The stranglehold on credit has choked companies big and small that depend on regular inflows of borrowed money to pay employees and stay afloat.
The Labor Department said Friday that employers cut 159,000 jobs in September, the fastest pace of losses in more than five years. Experts say that number will grow as the effects of the credit gridlock course through the economy in coming days and weeks.
The nation's unemployment rate is now 6.1 percent, up from 4.7 percent a year ago. Over the last year, the number of unemployed people has risen by 2.2 million to 9.5 million.
The unemployment rate could rise to as high as 7.5 percent by late 2009, economists predict. If that happens, it would mark the highest since after the 1990-91 recession.
Boosting employment is critical to kick-starting lending because "if jobs are growing, then incomes are a growing, and if incomes are growing then people are consuming," Reinhart said.
Consumers and businesses have retrenched so much that some analysts fear the economy stalled or shrank in the third quarter that ended last week. The Labor Department report Friday showed wage growth for workers is slowing, meaning they'll be more hard-pressed to spend, especially for something as expensive as a home.
Many economists predict the economy will contract in the final quarter of 2008 and the first quarter of next year. That would meet the classic definition of a recession — two consecutive quarters of a shrinking economy.
One bright spot: optimism hasn't been totally squashed yet.
Morgan Cavanaugh, proprietor of Moriarty's Pub in downtown Cleveland, has been trying to sell another bar he owns to ease his workload, but the prospective buyer hasn't been able to raise the money.
Now that the bailout legislation has the green light, he's hopeful he'll get a deal done.
"It passed. Let's work something out," Cavanaugh told the man over a cell phone Friday just after the House approved the plan.
He flipped the phone shut and smiled from behind the weathered mahogany bar of his 75-year-old Irish pub.
"He's going to put the loan request in again. It's looking up," Cavanaugh said.
By STEVENSON JACOBS
Friday, August 8, 2008
South Florida Houses Take Longer Than Anywhere Else in the Country to Sell
Houses in Palm Beach, Broward and Miami-Dade counties take 156 days to sell on average, longer than anywhere else in the country.
That's according to a report released this week on July sales by two national real estate firms.
Inundated with homes for sale, the tri-county region has topped the survey results since Altos Research and Real IQ started it last September.
South Florida's days-on-market barometer has increased to 154 in June from 152 in May, even though the number of houses for sale has declined slightly over the same period. There were 48,362 for sale in July, down from 48,662 in June and 48,949 in May.
Austin, Texas, was the easiest place to sell, at 78 days. Sellers in greater San Francisco needed 79 days. The report does not measure sales of condominiums.
That's according to a report released this week on July sales by two national real estate firms.
Inundated with homes for sale, the tri-county region has topped the survey results since Altos Research and Real IQ started it last September.
South Florida's days-on-market barometer has increased to 154 in June from 152 in May, even though the number of houses for sale has declined slightly over the same period. There were 48,362 for sale in July, down from 48,662 in June and 48,949 in May.
Austin, Texas, was the easiest place to sell, at 78 days. Sellers in greater San Francisco needed 79 days. The report does not measure sales of condominiums.
Saturday, June 14, 2008
Buy and Bail
A NEW TWIST ON WALKING AWAY FROM A MORTGAGE
In the hardest hit housing markets, some borrowers with a mortgage worth much more than their home are buying a second home before walking away from their primary residence - a strategy known as Buy and Bail.
How It Works: Borrowers can qualify for a second loan by proposing to rent out their existing residence to cover the second mortgage payments. Once they are approved for a loan, they walk away from the existing home instead of renting it out.
Consequences: Homeowners with a foreclosure will take a big hit to their credit and won't be able to purchase a home for five years under new Fannie Mae guidelines. Also, lenders might sue for personal assets and for fraud.
Lenders Respond: Fannie Mae says that later this month, it will release tougher loan qualification guidelines designed to ensure that individuals who plan to rent their first home after buying a second home show proof that they can make both payments.
Visit the Real Estate Open Networkers
In the hardest hit housing markets, some borrowers with a mortgage worth much more than their home are buying a second home before walking away from their primary residence - a strategy known as Buy and Bail.
How It Works: Borrowers can qualify for a second loan by proposing to rent out their existing residence to cover the second mortgage payments. Once they are approved for a loan, they walk away from the existing home instead of renting it out.
Consequences: Homeowners with a foreclosure will take a big hit to their credit and won't be able to purchase a home for five years under new Fannie Mae guidelines. Also, lenders might sue for personal assets and for fraud.
Lenders Respond: Fannie Mae says that later this month, it will release tougher loan qualification guidelines designed to ensure that individuals who plan to rent their first home after buying a second home show proof that they can make both payments.
Visit the Real Estate Open Networkers
Tuesday, June 10, 2008
Foreclosure Capital Hit With Wildfires
Stockton, California has the highest foreclosure rates per capita of any city in the United States. As if that weren't enough, four wildfires destroyed 7 houses, 20 condominium units and a small apartment building today.
Two firefighters suffered minor injuries battling the blaze. The number of people displaced is unknown at this time.
Real Estate Open Networkers
Two firefighters suffered minor injuries battling the blaze. The number of people displaced is unknown at this time.
Real Estate Open Networkers
Friday, June 6, 2008
May Foreclosure Report for Broward County
In May of 2007 there were 1299 foreclosure actions filed. This May, the court reported that 3090 foreclosure actions filed.
Miami Dade county to the south and Palm Beach county to the north were reporting similar numbers.
Saint Lucie County is being hit harder than most counties in the state.
With all these foreclosures, the real estate market is being flooded with inventory that is driving down real estate prices by the week. According to one Realtor, "50 to 75 per cent of the houses I show are short sales or foreclosures." "These type of properties are in low end housing developments as well as million dollar neighborhoods as well," he added.
Real Estate Open Networkers
Miami Dade county to the south and Palm Beach county to the north were reporting similar numbers.
Saint Lucie County is being hit harder than most counties in the state.
With all these foreclosures, the real estate market is being flooded with inventory that is driving down real estate prices by the week. According to one Realtor, "50 to 75 per cent of the houses I show are short sales or foreclosures." "These type of properties are in low end housing developments as well as million dollar neighborhoods as well," he added.
Real Estate Open Networkers
Sunday, June 1, 2008
Foreclosures Filings Jump in 2008
Real Estate filings across the nation have jump substantially in 2008.
Saturday, May 31, 2008
Fort Lauderdale and Broward County Expecting Continued Slump in Prices
According to the Sun Sentinel, the value of Broward County property dropped by more than 5 percent in the past year, one of the largest dips ever recorded and a dramatic reversal after years of double-digit gains, according to a county estimate used to set property taxes.
Preliminary figures released Thursday by Property Appraiser Lori Parrish peg the total tax value of all property in Broward at $166 billion, down about $10 billion from a year ago. The number includes the $50,000 tax exemption on residential property mandated by Amendment One, which voters approved earlier this year.
Parrish warned residents — and municipal number-crunchers — to brace for a far greater drop next year, when foreclosures and reduced real estate prices will take full effect.
Setting appraisal rates was more challenging this year because so few houses are selling, Parrish said. The assessments are done on the neighborhood level, based on home sales the prior year.
Often, entire neighborhoods had no sales, making comparisons difficult. If a neighborhood had none, Parrish's office found an analogous neighborhood, based on historical statistics, and used sales information there, she said.
Based on current figures, Parrish expects the downward trend to continue for the next 18 months. The good news is prices are starting to reach more reasonable levels, she said.
"The sales were so overinflated because of the feeding frenzy of 2005, now we're seeing things start to shake out," Parrish said. "Prices are getting back to about where they should be. Buyers are out there, they just don't want to jump in until they're sure prices have stopped dropping."
Source: John Holland and Juan Ortega | South Florida Sun-Sentinel
Preliminary figures released Thursday by Property Appraiser Lori Parrish peg the total tax value of all property in Broward at $166 billion, down about $10 billion from a year ago. The number includes the $50,000 tax exemption on residential property mandated by Amendment One, which voters approved earlier this year.
Parrish warned residents — and municipal number-crunchers — to brace for a far greater drop next year, when foreclosures and reduced real estate prices will take full effect.
Setting appraisal rates was more challenging this year because so few houses are selling, Parrish said. The assessments are done on the neighborhood level, based on home sales the prior year.
Often, entire neighborhoods had no sales, making comparisons difficult. If a neighborhood had none, Parrish's office found an analogous neighborhood, based on historical statistics, and used sales information there, she said.
Based on current figures, Parrish expects the downward trend to continue for the next 18 months. The good news is prices are starting to reach more reasonable levels, she said.
"The sales were so overinflated because of the feeding frenzy of 2005, now we're seeing things start to shake out," Parrish said. "Prices are getting back to about where they should be. Buyers are out there, they just don't want to jump in until they're sure prices have stopped dropping."
Source: John Holland and Juan Ortega | South Florida Sun-Sentinel
Saturday, May 24, 2008
Fort Lauderdale Foreclosures Triple in April
Florida has been hit harder than most states in the country with foreclosures. Broward county is one of the leading counties in Florida in this area.
The foreclosures in Broward tripled this April from the same time last year. In April of 2007 there were 1385 foreclosure actions filed. This April, the court reported that 4124 foreclosure actions filed.
Miami Dade county to the south and Palm Beach county to the north were reporting similar increases.
With all these foreclosures, the real estate market is being flooded with inventory that is driving down real estate prices by the week. According to one Realtor, "50 to 75 per cent of the houses I show are short sales or foreclosures." "These type of properties are in low end housing developments as well as million dollar neighborhoods as well," he added.
There doesn't seem to be any end in sight with foreclosures in South Florida. We have another 18-36 months with these kind of foreclosure numbers ahead of us.
The foreclosures in Broward tripled this April from the same time last year. In April of 2007 there were 1385 foreclosure actions filed. This April, the court reported that 4124 foreclosure actions filed.
Miami Dade county to the south and Palm Beach county to the north were reporting similar increases.
With all these foreclosures, the real estate market is being flooded with inventory that is driving down real estate prices by the week. According to one Realtor, "50 to 75 per cent of the houses I show are short sales or foreclosures." "These type of properties are in low end housing developments as well as million dollar neighborhoods as well," he added.
There doesn't seem to be any end in sight with foreclosures in South Florida. We have another 18-36 months with these kind of foreclosure numbers ahead of us.
Thursday, May 22, 2008
Soaring Foreclosure Numbers Mean More Prey for Vulture Funds
Banks Desperate to Unload Distressed Properties Turn to Private Equity Firms
By NED RANDOLPH
San Diego Business Journal Staff
As more homes fall into foreclosure, banks are packaging pools of foreclosed homes and wholesaling them to private equity “vulture funds” for pennies on the dollar.
While the phrase vulture fund conjures up cold-blooded opportunists, the funds are buying assets that banks are desperately trying to move off their books to free up capital.
Basically, anyone in the market with $3 million to $100 million or more to buy a block of REO, or real estate owned, properties could be called a vulture fund.
National investors such as The Blackstone Group and Lehman Bros. Inc. have reportedly purchased billions of dollars of foreclosed properties through private equity funds.
They haven’t, however, left much of a paper trail for local players who are sorting through the chatter to find legitimate deals, says Lorne Polger, managing partner of San Diego-based Pathfinder Partners LLC.
“We’ve been chasing it for six months. There’s all kinds of fluff on the Internet, but you find that it’s brokers tied to brokers,” said Polger, who says he has access to $400 million in institutional money to buy pools of REO properties.
“Unfortunately, we’ve got the money ready to go, but so far it’s a fruitless endeavor,” he said.
Plenty Of Distressed Properties
In May, foreclosed homes in San Diego County owned by lenders reached 5,463; an additional 3,413 foreclosed homes were scheduled for auction; and 12,320 homes were in default and headed to foreclosure, says Brian Yui, founder of HouseRebate.com in San Diego.
San Diego County auction sales increased by 50 percent from March to April. Statewide, auction sales of foreclosed homes averaged 1,000 a day in April — four times the rate of April 2007, according to Northern California-based ForeclosureRadar.com.
Banks amassing foreclosed properties need help moving them off their books. That’s where vulture funds assist, says Mark Goldman, a lecturer at San Diego State University and residential mortgage broker with San Diego-based Windsor Capital Mortgage Corp.
“(They) have to get that liquidity, which has been a problem in this market. So, many lenders are doing fire sales on their portfolios of mortgages,” said Goldman, whose firm is not considered a vulture fund but has funded more than $20 billion in loans, according to its Web site.
Hedge funds buying up “distressed credit” such as default mortgages attracted $8 billion in the first quarter of 2008, according to Chicago-based Hedge Fund Research Inc.
Local investor Michael Zau has been looking at packages of foreclosed homes in San Diego for months, but says the offers are overpriced.
“There was a firm in San Diego that sold a bulk package for $3 million,” he said. “I saw the package; I was looking at buying it, but I thought it was too expensive.”
The firm was selling the assets for 75 cents on the dollar, Zau says.
“There’s a pretty good chance that if you can buy in bulk, you’ll be able to get a rate of return that is desirable, but you’ve got to find the right property,” he said. “If you’re buying in bulk, it’s harder to do.”
Many properties are bought sight unseen, Zau says.
Buying In Bulk
Broker Michael Byrd with Windsor Capital Mortgage says that he’s seen a lot of pitches for bulk home sales but has yet to see offers that make sense.
“In the six months I was looking, not only was I not able to get a deal done, but I didn’t know anyone else that got a deal done,” said Byrd, who was researching packages between $5 million and $40 million for a potential buyer.
“It’s definitively seen as a big opportunity and attracting a lot of interest and capital,” said Sean O’Toole, founder of ForeclosureRadar.com in the Bay Area.
“When it comes to buying houses, cleaning them up and getting them resold or rented, it’s a lot of work,” O’Toole said. “My guess is we’ll start reading about a lot of failures as well as successes.”
Real Estate Open Networkers
By NED RANDOLPH
San Diego Business Journal Staff
As more homes fall into foreclosure, banks are packaging pools of foreclosed homes and wholesaling them to private equity “vulture funds” for pennies on the dollar.
While the phrase vulture fund conjures up cold-blooded opportunists, the funds are buying assets that banks are desperately trying to move off their books to free up capital.
Basically, anyone in the market with $3 million to $100 million or more to buy a block of REO, or real estate owned, properties could be called a vulture fund.
National investors such as The Blackstone Group and Lehman Bros. Inc. have reportedly purchased billions of dollars of foreclosed properties through private equity funds.
They haven’t, however, left much of a paper trail for local players who are sorting through the chatter to find legitimate deals, says Lorne Polger, managing partner of San Diego-based Pathfinder Partners LLC.
“We’ve been chasing it for six months. There’s all kinds of fluff on the Internet, but you find that it’s brokers tied to brokers,” said Polger, who says he has access to $400 million in institutional money to buy pools of REO properties.
“Unfortunately, we’ve got the money ready to go, but so far it’s a fruitless endeavor,” he said.
Plenty Of Distressed Properties
In May, foreclosed homes in San Diego County owned by lenders reached 5,463; an additional 3,413 foreclosed homes were scheduled for auction; and 12,320 homes were in default and headed to foreclosure, says Brian Yui, founder of HouseRebate.com in San Diego.
San Diego County auction sales increased by 50 percent from March to April. Statewide, auction sales of foreclosed homes averaged 1,000 a day in April — four times the rate of April 2007, according to Northern California-based ForeclosureRadar.com.
Banks amassing foreclosed properties need help moving them off their books. That’s where vulture funds assist, says Mark Goldman, a lecturer at San Diego State University and residential mortgage broker with San Diego-based Windsor Capital Mortgage Corp.
“(They) have to get that liquidity, which has been a problem in this market. So, many lenders are doing fire sales on their portfolios of mortgages,” said Goldman, whose firm is not considered a vulture fund but has funded more than $20 billion in loans, according to its Web site.
Hedge funds buying up “distressed credit” such as default mortgages attracted $8 billion in the first quarter of 2008, according to Chicago-based Hedge Fund Research Inc.
Local investor Michael Zau has been looking at packages of foreclosed homes in San Diego for months, but says the offers are overpriced.
“There was a firm in San Diego that sold a bulk package for $3 million,” he said. “I saw the package; I was looking at buying it, but I thought it was too expensive.”
The firm was selling the assets for 75 cents on the dollar, Zau says.
“There’s a pretty good chance that if you can buy in bulk, you’ll be able to get a rate of return that is desirable, but you’ve got to find the right property,” he said. “If you’re buying in bulk, it’s harder to do.”
Many properties are bought sight unseen, Zau says.
Buying In Bulk
Broker Michael Byrd with Windsor Capital Mortgage says that he’s seen a lot of pitches for bulk home sales but has yet to see offers that make sense.
“In the six months I was looking, not only was I not able to get a deal done, but I didn’t know anyone else that got a deal done,” said Byrd, who was researching packages between $5 million and $40 million for a potential buyer.
“It’s definitively seen as a big opportunity and attracting a lot of interest and capital,” said Sean O’Toole, founder of ForeclosureRadar.com in the Bay Area.
“When it comes to buying houses, cleaning them up and getting them resold or rented, it’s a lot of work,” O’Toole said. “My guess is we’ll start reading about a lot of failures as well as successes.”
Real Estate Open Networkers
Florida still racking up foreclosures in April
Foreclosures are back on the upswing in Florida in month-over-month data, but there is good news. The Sunshine State has been passed by Arizona in the rate of foreclosures, and now has the fourth-highest rate in the country, according to a new report from RealtyTrac.
The Irvine, Calif.-based company said Florida had 35,264 properties in some type of foreclosure in April, up 16.6 percent from March and more than 146 percent from a year ago. That is the second-highest number of total foreclosures in the nation, behind only California, and represents one home in foreclosure for every 242 homes.
Nationwide, foreclosures were up 4 percent from the previous month and 65 percent from April 2007, affecting 243,000 properties. That is the highest number of foreclosures RealtyTrac has counted since it started the report in January 2005.
"Although only about 2 percent of households nationwide are in foreclosure, these properties contribute to already bloated inventories of homes for sale and put downward pressure on home values," RealtyTrac Chief Executive Officer James J. Saccacio said in a release. "Areas of California, Florida, Nevada and Arizona continue to be particularly hard hit. Property taxes are eroding, putting municipal budgets in peril."
Vallejo, Calif., for example, had to file for bankruptcy after reporting the sixth-highest foreclosure rate in the nation, Saccacio said.
Florida and California continue to account for nine of the top 10 metropolitan areas with high foreclosure rates, with Fort Lauderdale at No. 10. Other Florida metro areas listed are Cape Coral-Fort Myers, at No. 5, and Port St. Lucie-Fort Pierce, at No. 9.
Numbers were a bit different from Foreclosures.com, which reported 44,825 households in foreclosure in April, up 2.4 percent over March, and up 22 percent since the beginning of the year. For the first four months of 2008, Florida had 162,316 filings, the most in the nation.
South Florida Business Journal
Real Estate Open Networkers
The Irvine, Calif.-based company said Florida had 35,264 properties in some type of foreclosure in April, up 16.6 percent from March and more than 146 percent from a year ago. That is the second-highest number of total foreclosures in the nation, behind only California, and represents one home in foreclosure for every 242 homes.
Nationwide, foreclosures were up 4 percent from the previous month and 65 percent from April 2007, affecting 243,000 properties. That is the highest number of foreclosures RealtyTrac has counted since it started the report in January 2005.
"Although only about 2 percent of households nationwide are in foreclosure, these properties contribute to already bloated inventories of homes for sale and put downward pressure on home values," RealtyTrac Chief Executive Officer James J. Saccacio said in a release. "Areas of California, Florida, Nevada and Arizona continue to be particularly hard hit. Property taxes are eroding, putting municipal budgets in peril."
Vallejo, Calif., for example, had to file for bankruptcy after reporting the sixth-highest foreclosure rate in the nation, Saccacio said.
Florida and California continue to account for nine of the top 10 metropolitan areas with high foreclosure rates, with Fort Lauderdale at No. 10. Other Florida metro areas listed are Cape Coral-Fort Myers, at No. 5, and Port St. Lucie-Fort Pierce, at No. 9.
Numbers were a bit different from Foreclosures.com, which reported 44,825 households in foreclosure in April, up 2.4 percent over March, and up 22 percent since the beginning of the year. For the first four months of 2008, Florida had 162,316 filings, the most in the nation.
South Florida Business Journal
Real Estate Open Networkers
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