Most American homeowners expect home values to keep rising and don't believe that gains in their own homes have affected how they spend, a recent study found.
That conflicts with Federal Reserve Chairman Alan Greenspan's recent research, which found that consumers have become very dependent on borrowing against their homes to fuel their spending -- and that a rise in mortgage rates may crimp expenditures.
Still, only 10% of homeowners polled said they believe that rising real-estate values had affected their spending, according to a survey of 1,001 consumers conducted this month by Royal Bank of Canada's RBC Capital Markets unit.
Some 85% of homeowners surveyed said they had experienced real-estate gains in the past three years, and more than 70% saw gains of more than 10% in that period, the study found. But more than half of those surveyed said they firmly disagreed with the idea that their spending had changed, even though half of all respondents had extracted equity from their homes through refinancing, home-equity loans or lines of credit.
"These findings raise the question of whether people spend more freely than they otherwise would because of their real-estate gains, and they simply don't recognize it," said Scot Ciccarelli, a managing director at RBC Capital Markets. "If that's the case, a simple slowing of real-estate gains, not just a fall in housing prices, could have a significant adverse impact on spending patterns."
Almost 60% of homeowners polled by RBC said they expect their home values to rise by at least 5% annually in the next several years, and a quarter of those respondents anticipate annualized gains of 10% or more in the next few years. Only 3% said they expect their home prices to decline in the same period.
Rising gas and energy prices, however, are having an effect already, with 60% of respondents saying those costs were causing them to pull back their spending.
RBC conducted the survey with assistance from InsightExpress, an online market-research firm based in Stamford, Conn., during the week of Sept. 19. The sample was spread across geography, gender and income brackets, to make it representative of the general U.S. population. The survey's margin of error was plus or minus 3%.
Friday, September 30, 2005
Tuesday, September 27, 2005
Flipping your investment.The Do`s and Dont`s
During the past six months I have received numerous questions in regards to "Flipping" a property. Here is a question that was submitted to me last week.There are Pro`s and Con`s to Flipping a property. Like any investment there is always risk involved. In some cases selling a property immediately after you close can be very profitable and in others it maybe wise to wait six months to one year before you sell. The following question was sent to me last week.
Question: We recently purchased a home in Sunrise priced below market. My wife and I attempted to sell it right after closing. I received an offer in 7 days and accepted it. The money was placed in escrow. The buyer did the required inspections and the Bank sent out the appraiser.Three weeks later I was informed by both my Realtor and the Title company telling us we couldn't sell my house right away and that I have to wait three months before putting it back into the market. Is this accurate? The contract was cancelled and I need to know if my Realtor is correct.
Answer: As far as I know, there is no law or regulation that prevents anyone from purchasing a house one day and selling it the next, a process also known as "flipping."Although many lenders today will not give the Buyer a loan. Normally, I would suggest to the seller to wait the 90 days from the day you close. Fannie Mae is really cracking down on "Flipping" on this type of investing Peter Konsoulas from Homebanc recently explained to me. Mr. Konsoulas went on to add "In many instances Banks are shying away from certain types of loans and investments.They fear that too many investors are purchasing properties with the sole intention of "Flipping".
In the last year I have encountered many builders who have added clauses in their sales contracts that prohibit buyers from putting their homes back on the market for a period of time after closing -- usually a year. The real issue here is whether such clauses are enforceable I have yet to find a case or lawsuit where the builder was actually able to enforce that rule.Again, it`s wise to understand what your signing prior to purchasing a preconstruction property.
If you purchased a new house, your agent should have at least warned you what may happen. When going to List a property for an investor I explain it`s easier to hold the property and resell it within 90-180 days. Banks will look at the sale with less caution. I would like to know the exact reason why your Realtor is unable to assist you and give you the proper answer as to "Why you had to cancel the contract rather than having the Buyers agree to a later closing date". The only thing I`m wondering was did you purchase a property that didn`t have clear title?
My philoshopy is that you should purchase an investment property with the complete understanding that you should hold it for at least six months. Selling a home in a shorter period of time in most cases doesn't do as well. In our opinion using this stratergy is the safest approach to use when investing.
In today`s housing market most people purchase a house to make it their home. They reside there for five to seven years on average. Flippers have a much shorter time frame, usually less than two years and often much shorter. They may or may not live in it themselves, and they may or may not rent it to others. They may make only cosmetic repairs or they might perform a complete overhaul.
About the only thing they have in common is that they typically want to get in and get out, making a substantial return on their money in the process. And that kind of flipping is very much a legitimate form of investment, even if it is sometimes highly speculative.It`s always wise to consult a Realtor or an attorney who have knowledge of the Real Estate market, before "JUMPING IN", to an investment that may not be suitable for you!
Question: We recently purchased a home in Sunrise priced below market. My wife and I attempted to sell it right after closing. I received an offer in 7 days and accepted it. The money was placed in escrow. The buyer did the required inspections and the Bank sent out the appraiser.Three weeks later I was informed by both my Realtor and the Title company telling us we couldn't sell my house right away and that I have to wait three months before putting it back into the market. Is this accurate? The contract was cancelled and I need to know if my Realtor is correct.
Answer: As far as I know, there is no law or regulation that prevents anyone from purchasing a house one day and selling it the next, a process also known as "flipping."Although many lenders today will not give the Buyer a loan. Normally, I would suggest to the seller to wait the 90 days from the day you close. Fannie Mae is really cracking down on "Flipping" on this type of investing Peter Konsoulas from Homebanc recently explained to me. Mr. Konsoulas went on to add "In many instances Banks are shying away from certain types of loans and investments.They fear that too many investors are purchasing properties with the sole intention of "Flipping".
In the last year I have encountered many builders who have added clauses in their sales contracts that prohibit buyers from putting their homes back on the market for a period of time after closing -- usually a year. The real issue here is whether such clauses are enforceable I have yet to find a case or lawsuit where the builder was actually able to enforce that rule.Again, it`s wise to understand what your signing prior to purchasing a preconstruction property.
If you purchased a new house, your agent should have at least warned you what may happen. When going to List a property for an investor I explain it`s easier to hold the property and resell it within 90-180 days. Banks will look at the sale with less caution. I would like to know the exact reason why your Realtor is unable to assist you and give you the proper answer as to "Why you had to cancel the contract rather than having the Buyers agree to a later closing date". The only thing I`m wondering was did you purchase a property that didn`t have clear title?
My philoshopy is that you should purchase an investment property with the complete understanding that you should hold it for at least six months. Selling a home in a shorter period of time in most cases doesn't do as well. In our opinion using this stratergy is the safest approach to use when investing.
In today`s housing market most people purchase a house to make it their home. They reside there for five to seven years on average. Flippers have a much shorter time frame, usually less than two years and often much shorter. They may or may not live in it themselves, and they may or may not rent it to others. They may make only cosmetic repairs or they might perform a complete overhaul.
About the only thing they have in common is that they typically want to get in and get out, making a substantial return on their money in the process. And that kind of flipping is very much a legitimate form of investment, even if it is sometimes highly speculative.It`s always wise to consult a Realtor or an attorney who have knowledge of the Real Estate market, before "JUMPING IN", to an investment that may not be suitable for you!
Collier County Homes continue to surge!
The median price of an existing Collier County home reached an all-time high of a half-million dollars in August — a 26 percent increase from a year ago and the highest in Florida."I don't know if it's good or bad," real estate agent Bruce Babcock of John R. Wood Inc. Realtors said wryly. "I'm worried it'll eliminate a lot of buyers, that's all. I know we're the gem of Florida but it's getting too pricey. I'm afraid there'll be some kind of adjustment."Nationally, sales of existing homes unexpectedly surged to the second-highest level on record and prices reached an all-time high in August, spurred by job growth and interest rates within a percentage point of historic lows. The median price rose 15.8 percent to a record $220,000 and the supply of homes for sale rose from the previous month.
Prices in August for Lee and Charlotte weren't available for the monthly report issued Monday by the Florida Association of Realtors. The prices are based on data provided by local boards of Realtors. In July, the median price in Lee was $287,500 and in Charlotte it was $236,600.In Collier County, the median price — half the sales for more and half for less — was $500,800, up from $397,300 in August 2004. In July 2005, the median price was $490,400.
The next priciest areas in the state were West Palm Beach/Boca Raton at $391,600 and Fort Lauderdale at $385,600.In Collier, "There's almost nothing under $300,000 and even under $400,000," said Babcock — who last month listed and sold a beachfront house on Gordon Drive in Naples for $24.8 million, the second highest ever paid for a home in Southwest Florida.To get under $500,000 for a typical three-bedroom, two-bath house, he said, "If you were lucky, you could probably find one in Naples Park, although they've gone up to $500,000 on most of them" in the North Naples neighborhood.
More likely, he said, the prospective home buyer would have to head east to communities such as Laurel Lakes on Immokalee Road, two miles east of Interstate 75.
Prices in August for Lee and Charlotte weren't available for the monthly report issued Monday by the Florida Association of Realtors. The prices are based on data provided by local boards of Realtors. In July, the median price in Lee was $287,500 and in Charlotte it was $236,600.In Collier County, the median price — half the sales for more and half for less — was $500,800, up from $397,300 in August 2004. In July 2005, the median price was $490,400.
The next priciest areas in the state were West Palm Beach/Boca Raton at $391,600 and Fort Lauderdale at $385,600.In Collier, "There's almost nothing under $300,000 and even under $400,000," said Babcock — who last month listed and sold a beachfront house on Gordon Drive in Naples for $24.8 million, the second highest ever paid for a home in Southwest Florida.To get under $500,000 for a typical three-bedroom, two-bath house, he said, "If you were lucky, you could probably find one in Naples Park, although they've gone up to $500,000 on most of them" in the North Naples neighborhood.
More likely, he said, the prospective home buyer would have to head east to communities such as Laurel Lakes on Immokalee Road, two miles east of Interstate 75.
Monday, September 26, 2005
Orlando: Investors realize a $10,000 gain in one weekend!
Dear Fellow Investors,
I`m very happy to report that those of our clients who purchased with us in Southern Pines located in Orlando were able to realize an average gain of over $10,000 in a single weekend!
During the past 3 months many of you have received our correspondence about this Preconstruction community. We notified you about this opportunity in Wintergarden before it was ever released to the general public! As we explained this location was in huge demand! The area has everything that we look for, great schools, near malls, and excellent shopping within a 5 mile radius.
We mentioned that other investors would be purchasing these units as well! I felt the demand would be very high from people who understand the preconstruction market. It`s good to see that others agreed! Demand for good area`s will tend to continue to be solid investments now and it the future!
During those 3 months the Builder sent out an original price list that we felt the actual prices would increase as we neared the launch date.
Some of our clients called or emailed us explaining that they would only purchase a unit if it was the original pricing the builder indicated. I realize that many times as investors, we set a price in our head as to what we believe we should pay for a property and not pay a penny higher! In many instances this is a very reasonable approach to investing.
As it turned out the Builder did increase pricing when they realized that they had over 1000 people eager to purchase 280 units that they planned to sell!
For those who decided to attend they witnessed for themselves exactly how "Supply and Demand" work! Over the course of two days the builder was able to sell 270 units!
Investing in the preconstruction market today is much more difficult than it was last year or the year before and we can expect the same to be true next year! There are always obstacles thrown in our way, if investing was easy everyone would be doing it!
It does take some risk and patience. Our group of Realtors are trained to make sure that in every step of the way, we`re there for you! We have a full time staff member who continuously stays in contact with the builders and their representatives to find out what is transpiring in the market!
The builders and their marketing department don`t deal with every Realtor the same way. Our Group travels each week throughout The State looking at new communities. Our job is to make sure that before we send out an email announcing a new community that we`ve done the Due Diligence thereby, making sure that our clients our in a position to earn a profit! That has and will always remain our goal!
Our responsibility is to you our loyal clients. Many other realtors attempt to do what we`re doing. They send out emails telling you about a new community without actually ever visiting the area or knowing the surrounding area! Quite frankly, they don`t have the manpower or staff to accomplish what we do. It`s important to us that when you purchase from our group, in return we`re there to assist you in renting or selling your unit for maximum profits! When you decide to sell your property our Total Commission on both sides of the transaction is 3%. If you decide to rent your unit we`ll rent it, make sure to locate a qualified tenant and not Charge you a commission!This is our way of saying Thank You for selecting us and having the confidence in using us!
If you`d like to further discuss your investment requirements, or would like information on Upcoming Communities, please feel free to contact our office anytime! We love what we do and it`s our pleasure working with you!
Sincerely,
Scott Daniels
The Scott Daniels Real Estate Group.
Re/Max Partners
954-680-4404
www.preconstructioninflorida.com
I`m very happy to report that those of our clients who purchased with us in Southern Pines located in Orlando were able to realize an average gain of over $10,000 in a single weekend!
During the past 3 months many of you have received our correspondence about this Preconstruction community. We notified you about this opportunity in Wintergarden before it was ever released to the general public! As we explained this location was in huge demand! The area has everything that we look for, great schools, near malls, and excellent shopping within a 5 mile radius.
We mentioned that other investors would be purchasing these units as well! I felt the demand would be very high from people who understand the preconstruction market. It`s good to see that others agreed! Demand for good area`s will tend to continue to be solid investments now and it the future!
During those 3 months the Builder sent out an original price list that we felt the actual prices would increase as we neared the launch date.
Some of our clients called or emailed us explaining that they would only purchase a unit if it was the original pricing the builder indicated. I realize that many times as investors, we set a price in our head as to what we believe we should pay for a property and not pay a penny higher! In many instances this is a very reasonable approach to investing.
As it turned out the Builder did increase pricing when they realized that they had over 1000 people eager to purchase 280 units that they planned to sell!
For those who decided to attend they witnessed for themselves exactly how "Supply and Demand" work! Over the course of two days the builder was able to sell 270 units!
Investing in the preconstruction market today is much more difficult than it was last year or the year before and we can expect the same to be true next year! There are always obstacles thrown in our way, if investing was easy everyone would be doing it!
It does take some risk and patience. Our group of Realtors are trained to make sure that in every step of the way, we`re there for you! We have a full time staff member who continuously stays in contact with the builders and their representatives to find out what is transpiring in the market!
The builders and their marketing department don`t deal with every Realtor the same way. Our Group travels each week throughout The State looking at new communities. Our job is to make sure that before we send out an email announcing a new community that we`ve done the Due Diligence thereby, making sure that our clients our in a position to earn a profit! That has and will always remain our goal!
Our responsibility is to you our loyal clients. Many other realtors attempt to do what we`re doing. They send out emails telling you about a new community without actually ever visiting the area or knowing the surrounding area! Quite frankly, they don`t have the manpower or staff to accomplish what we do. It`s important to us that when you purchase from our group, in return we`re there to assist you in renting or selling your unit for maximum profits! When you decide to sell your property our Total Commission on both sides of the transaction is 3%. If you decide to rent your unit we`ll rent it, make sure to locate a qualified tenant and not Charge you a commission!This is our way of saying Thank You for selecting us and having the confidence in using us!
If you`d like to further discuss your investment requirements, or would like information on Upcoming Communities, please feel free to contact our office anytime! We love what we do and it`s our pleasure working with you!
Sincerely,
Scott Daniels
The Scott Daniels Real Estate Group.
Re/Max Partners
954-680-4404
www.preconstructioninflorida.com
Saturday, September 24, 2005
New Miramar Townhomes set to open!
MIRAMAR· A new gated development that would eventually bring 240 townhouses and villas to a section of central Miramar won tentative approval on Wednesday.Miami-based Southern Homes wants to build a community called Village Walk on 18 acres off Pembroke Road between Douglas and Palm avenues.
The first phase of the project would consist of 41 townhouses, a clubhouse, tot lot and swimming pool. The second phase, which requires a separate land use amendment, would contain 52 townhouses and 147 two-story villas.The prices for the townhouses and villas are expected to start at about $299,000.
The first phase of the project would consist of 41 townhouses, a clubhouse, tot lot and swimming pool. The second phase, which requires a separate land use amendment, would contain 52 townhouses and 147 two-story villas.The prices for the townhouses and villas are expected to start at about $299,000.
Friday, September 23, 2005
Salt Water lots in SouthWest Florida in huge demand!
The supply of vacant land for sale along salt water in Cape Coral, Fort Myers and Bonita Springs is drying up and for many, the price is out of reach.Where once there was plenty to pick from in the 1980s and 1990s and prices under $20,000, only 5 percent of the saltwater lots remain for sale in Cape Coral.And there are no more bargains in Lee County. The cheapest is $300,000, with the most expensive lots scattered across Naples in the multimillions.
Realtors couldn't say what percentage of the lots in all of Southwest Florida are on the water, but the ones remaining form a very small part of their lot inventory.When there is a limited supply and a high demand, prices head toward the moon.
These vacant lots are coveted because of the value of salt water to boaters, who like the easy access to the Caloosahatchee River, back bays and the Gulf of Mexico.Low mortgage rates, desire for retirement homes and a search for profitable investments also make saltwater-access lots attractive.How attractive? A saltwater-access lot on Sutphin Drive in Fort Myers shot up from a sale of $319,900 in 2003 to $1,295,000 in 2005. That's a 305 percent increase in two years.
"There are only so many lots available and anything you can buy now will be money in the bank," said H. Scott Marinelli a Realtor with Gulfstream Realty & Development Inc. in Cape Coral. "One thing that will always be in demand is waterfront property."
When high-tech stocks lost their luster around 2000 and the stock market took another hit with the terrorist attacks of Sept. 11, 2001, investors began to look at real estate as a good move. Prices rose.
A saltwater-access lot on Bayshore Road in North Fort Myers sold for $100,000 in 2000. By the time 2005 rolled around, it sold for $750,000.Dave Foster, regional manager for the Investment Exchange Group in Cape Coral, said there are those who think that other real-estate investments are peaking and are coming back to Gulf-access waterfront property.
"Those people see waterfront property as more stable and as possibly longer term investments," Foster said. "Sometimes they hold onto it for their retirement or for their children."There is also the attraction of having a home with a boat out back that sometimes lures people to inhabit their investments."Investors made money when they bought four or five years ago at $35,000 for a lot and can sell for 10 times than today," said Roy Barker, owner of Dockside Tropical Property. "What we are seeing now is people buying to live here and less investment and flipping property. The Gulf-access lots are desirable."
Baby boomers either retiring or considering retiring with pensions and inheritances became interested in real estate about five years ago and the boom was on."We bought a lot to maybe build a house and retire in," said Cape Coral resident and architect David Mathew, 62. "We thought we could always sell it, but then we liked it in Cape Coral so much we moved here and I got a job."Cape Coral features the most Gulf-access lots because of its approximately 200 miles of saltwater canals. The saltwater-canal lot prices range from about $300,000 to $1 million, depending on proximity to the Gulf, canal width and the view, Marinelli said."I think we are in a traditionally slow period for sales because of summer," Marinelli said. "I think the market for canal-front property will continue once the season picks up again."Of its 12,958 parcels on saltwater canals, Cape Coral offers 704 lots for sale, said Century 21 Sunbelt Realtor Ken Worthington. The majority sit in the city's northwest section.
The Fort Myers area — including the cities of Fort Myers and North Fort Myers and the south Fort Myers area — offers 34 Gulf-access lots for sale. The prices for those lots are also not for the faint-hearted buyer.The average price for a lot in Fort Myers is $505,000, said Brett Ellis a partner in the RE/MAX Realty Group in Fort Myers.
A sampling of lot prices from real estate agents shows that the farther a buyer heads south, the higher the price for water-access land.Bonita Springs' David Critzer, a Realtor with Coldwell Banker, said the 20 to 30 direct-water- access lots in his area for sale average about $2.5 million.Naples holds the ceiling with a double lot offered at $29.5 million in the city's Port Royal development, said Charles Hummel, a Realtor with Century 21 in that city.
Prices near Naples for Gulf-water lots start at $675,000. It is not unusual to see prices of $1.2 million or even $8 million, he said.Naples Multiple Listing Service, a compilation service used by real estate agents, has a tally of vacant lots standing at about 30.
A few real estate agents said they thought only the upper-end real estate spender might be left in the market."The average buyer might not want to get involved," said Jeff Miloff, a partner in Miloff Aubuchon Realty Group in Cape Coral. "But I don't think the market will slow down. We are still cheaper than other places in Florida on the water."Lots with ocean access either on a bay or a canal can cost $500,000 to $1 million, Lucy Charles, a broker with a Century 21 office in Miami, said. She said lots are hard to find and the price depends on location and proximity to the sea.
It could pay people to sell those expensive lots, pocket the difference and buy in Lee County.People in Naples and Bonita are doing just that, Worthington said. He said he thought Cape Coral and the area not only have much to offer for the price but that prices will follow the trend of Naples and the water lots will be golden.
But no matter what the market does, everyone agrees Cape Coral and their respective areas would remain very attractive to buyers. People love the water and the boating and fishing opportunities provided by Gulf access."We had a manatee and her calves visit our dock," Cape Coral's Jeannine Mathew said. "We go out on the water nearly every weekend."Mathew's husband David enjoys fishing and having the grandchildren over.
"They catch fish right off our dock," Mathew said. "I have to go out to the Gulf."
Realtors couldn't say what percentage of the lots in all of Southwest Florida are on the water, but the ones remaining form a very small part of their lot inventory.When there is a limited supply and a high demand, prices head toward the moon.
These vacant lots are coveted because of the value of salt water to boaters, who like the easy access to the Caloosahatchee River, back bays and the Gulf of Mexico.Low mortgage rates, desire for retirement homes and a search for profitable investments also make saltwater-access lots attractive.How attractive? A saltwater-access lot on Sutphin Drive in Fort Myers shot up from a sale of $319,900 in 2003 to $1,295,000 in 2005. That's a 305 percent increase in two years.
"There are only so many lots available and anything you can buy now will be money in the bank," said H. Scott Marinelli a Realtor with Gulfstream Realty & Development Inc. in Cape Coral. "One thing that will always be in demand is waterfront property."
When high-tech stocks lost their luster around 2000 and the stock market took another hit with the terrorist attacks of Sept. 11, 2001, investors began to look at real estate as a good move. Prices rose.
A saltwater-access lot on Bayshore Road in North Fort Myers sold for $100,000 in 2000. By the time 2005 rolled around, it sold for $750,000.Dave Foster, regional manager for the Investment Exchange Group in Cape Coral, said there are those who think that other real-estate investments are peaking and are coming back to Gulf-access waterfront property.
"Those people see waterfront property as more stable and as possibly longer term investments," Foster said. "Sometimes they hold onto it for their retirement or for their children."There is also the attraction of having a home with a boat out back that sometimes lures people to inhabit their investments."Investors made money when they bought four or five years ago at $35,000 for a lot and can sell for 10 times than today," said Roy Barker, owner of Dockside Tropical Property. "What we are seeing now is people buying to live here and less investment and flipping property. The Gulf-access lots are desirable."
Baby boomers either retiring or considering retiring with pensions and inheritances became interested in real estate about five years ago and the boom was on."We bought a lot to maybe build a house and retire in," said Cape Coral resident and architect David Mathew, 62. "We thought we could always sell it, but then we liked it in Cape Coral so much we moved here and I got a job."Cape Coral features the most Gulf-access lots because of its approximately 200 miles of saltwater canals. The saltwater-canal lot prices range from about $300,000 to $1 million, depending on proximity to the Gulf, canal width and the view, Marinelli said."I think we are in a traditionally slow period for sales because of summer," Marinelli said. "I think the market for canal-front property will continue once the season picks up again."Of its 12,958 parcels on saltwater canals, Cape Coral offers 704 lots for sale, said Century 21 Sunbelt Realtor Ken Worthington. The majority sit in the city's northwest section.
The Fort Myers area — including the cities of Fort Myers and North Fort Myers and the south Fort Myers area — offers 34 Gulf-access lots for sale. The prices for those lots are also not for the faint-hearted buyer.The average price for a lot in Fort Myers is $505,000, said Brett Ellis a partner in the RE/MAX Realty Group in Fort Myers.
A sampling of lot prices from real estate agents shows that the farther a buyer heads south, the higher the price for water-access land.Bonita Springs' David Critzer, a Realtor with Coldwell Banker, said the 20 to 30 direct-water- access lots in his area for sale average about $2.5 million.Naples holds the ceiling with a double lot offered at $29.5 million in the city's Port Royal development, said Charles Hummel, a Realtor with Century 21 in that city.
Prices near Naples for Gulf-water lots start at $675,000. It is not unusual to see prices of $1.2 million or even $8 million, he said.Naples Multiple Listing Service, a compilation service used by real estate agents, has a tally of vacant lots standing at about 30.
A few real estate agents said they thought only the upper-end real estate spender might be left in the market."The average buyer might not want to get involved," said Jeff Miloff, a partner in Miloff Aubuchon Realty Group in Cape Coral. "But I don't think the market will slow down. We are still cheaper than other places in Florida on the water."Lots with ocean access either on a bay or a canal can cost $500,000 to $1 million, Lucy Charles, a broker with a Century 21 office in Miami, said. She said lots are hard to find and the price depends on location and proximity to the sea.
It could pay people to sell those expensive lots, pocket the difference and buy in Lee County.People in Naples and Bonita are doing just that, Worthington said. He said he thought Cape Coral and the area not only have much to offer for the price but that prices will follow the trend of Naples and the water lots will be golden.
But no matter what the market does, everyone agrees Cape Coral and their respective areas would remain very attractive to buyers. People love the water and the boating and fishing opportunities provided by Gulf access."We had a manatee and her calves visit our dock," Cape Coral's Jeannine Mathew said. "We go out on the water nearly every weekend."Mathew's husband David enjoys fishing and having the grandchildren over.
"They catch fish right off our dock," Mathew said. "I have to go out to the Gulf."
Wednesday, September 21, 2005
Investors search for Bargains In New Orleans.
As thousands of people left New Orleans in the face of Hurricane Katrina and vowed never to return, Ryan Dougherty started looking for a home there.
The 32-year-old Charleston, S.C., entrepreneur, who has been investing in homes since he was 18, specializes in buying bargain-price historic homes in need of repair in places hard-hit by disaster. He doesn't sell them, but renovates and holds them for the long term for their equity value as the cities recover. "It may take years, but they always bounce back," he says.
For instance, his first purchase, for about $650,000, was a classic shotgun-style home in a Charleston neighborhood ravaged by hurricane Hugo in 1989; as the city cleaned up, it almost doubled in value. The pre-War New York condominium he bought for $240,000 in 2001, shortly after 9/11 caused a temporary dip in home prices, has tripled in value. Now he's advertising on the Internet for another home in New Orleans that he can fix up and add to his portfolio. He hopes to find a place that's selling for at least 30% off of its pre-Katrina value. "In chaos, there is opportunity," he says.
For the battered residents along the Gulf Coast, the chaos caused by flooding, looting and desperate bids for rescue is subsiding -- but now a different form of confusion is taking its place: a frenzy of real-estate deals.
Premium Prices
In places slammed directly by the storm, such as New Orleans and coastal Mississippi and Alabama, speculators are trying to grab damaged homes at discounts while owners of intact homes are listing their properties at premium prices; in Baton Rouge, La., crowded with evacuees, nearly any house that comes on the market disappears instantly in a bidding war.
Some real estate in the hardest-hit areas affected by Hurricane Katrina is attracting money from speculators who think prices for quality properties will rise. Among the hurricane-damaged properties was Charnley House of Ocean Springs, Miss.
At the storm's center, where condos were crushed, houses were flooded, and homes everywhere badly damaged or destroyed, rebuilding is the top priority. According to the National Association of Realtors, about 80% of the homes in the flooded city of New Orleans will have to be rebuilt. On the Mississippi coast, at least 1,187 homes have been destroyed and 7,286 severely damaged, according to the Mississippi Emergency Management Agency. Many more in New Orleans may be torn down or require rebuilding.
The Intact Homes
What the cameras didn't capture, however, are the homes that survived the storm almost completely unscathed, like Adam Rothlein's three-bedroom Victorian home in New Orleans' Garden District.
Mr. Rothlein, who owns a music-video production company, escaped to Colorado before the storm hit. Friends confirmed that his house escaped damage, but after seeing television reports of the storm's devastation of the rest of the city, he has no desire to return. So he put his house up for sale on the Internet for $695,000. Mr. Rothlein says he's had lots of inquiries, even though no one will be allowed back into the city to tour the home until next week.
Mr. Rothlein's house might not appeal to bargain-hunting speculators looking for a fix-up deal because he's already fixed it up. He bought the home for $345,000 only a year ago, and put in about $100,000 in renovations, including new kitchen appliances, bathroom fixtures, and floors. Before Katrina hit, he would have put the house on the market in the mid-$500,000s, but now, given the shortage of undamaged homes, he figures it will be worth much more to a local family who doesn't want to scramble to find home-improvement contractors in a recovering disaster zone. How much more, however, is only a guess. "Nobody really knows what prices here will be," he says.
Benefits of U.S. Funds
Meanwhile, out-of-town speculators are mobbing New Orleans real-estate broker Todd La Valla, ready to do deals as soon as flooded title companies are back in business. He expects annual home price appreciation, which averaged in the 6% to 8% range before the storm, to double over the next year. Scarce supply is only one reason, he says; another is that private investment and federal funds promised to the area will upgrade the current housing stock -- much of which had fallen into "genteel neglect," he says -- and spur massive amounts of new construction. "I think many areas of the city are going to come back stronger than they were before," he says.
Speculators are also swarming other areas hard-hit by the storm along the Mississippi coastline. Ray Gonzales, Jr., principal broker at Century 21 Williams & Associates in Gulfport, Miss., says that investors make up about 40% to 45% of his firm's buyers, about double the number before the storm, and prices already have jumped 10% -- much like they did following Hurricane Camille, which devastated the area in 1969. Since the storm, all of his firm's undamaged and salvageable inventory -- including whatever was left standing of the luxury high-rise buildings that were under construction along the beach -- went under contract, and some buyers are now going door-to-door trying to make deals. He predicts the median home price, which was $127,400 before the storm, is now more than $160,000 and will go up more in the next few months. Bridget Ferrucci, another Gulfport agent, says speculators are tying up the phone lines at her office, many saying "we'll buy anything, fix it up, and resell it."
Beyond the region hit hardest by the hurricane, real-estate prices also are booming. Swollen from evacuees from Katrina, with a population nearly triple the 350,000 residents who lived there pre-Katrina, Baton Rouge has become a boomtown almost overnight. The Greater Baton Rouge Association of Realtors says median prices, which were about $140,000 before the storm, have risen between 20% and 30% over the last week.
Tenant Evictions
Many are trying to cash in while demand is most desperate. Maria Yiannopoulos, who mans the local FEMA legal help line, says that in the last two days, 80 calls have come in from tenants that have been evicted on a few days notice, so landlords can sell their homes at inflated prices. Indeed, Ms. Yiannopoulos says her father in Baton Rouge has been besieged with offers to buy his modest home for as much as $500,000 -- "far more" than its pre-Katrina value. "Real estate is just being gobbled up here," she says.
Demand is so pressing, even people in the far outskirts of the city are feeling it. Before Katrina hit, Susan Durham had been trying to sell her four-bedroom stucco home in Prairieville, La., about 17 miles from downtown Baton Rouge, for $329,000. She took it off the market immediately after the storm when her daughter and some friends needed temporary shelter, but has now put it back on for $339,000. "The market here is crazy," says Mrs. Durham, an artist. "Everything is topsy-turvy."
Although they know they aren't going to get any bargains in a boomtown, speculators are still nosing around. Vinu Zacahriah, a New York computer consultant, flew to Baton Rouge last weekend. But he found the city so crowded with evacuees and other investors, he couldn't even get a hotel room, and had to stay in Yazoo City, Miss., a four-hour drive away. When he saw how few homes and condos were available for sale and how high prices had climbed, he switched gears and started searching for raw land. He found some for about $30,000 an acre, which he plans to buy, subdivide, and sell to builders whom he expects to soon flock to the area. "There will be demand for homes for years to come," he says.
The 32-year-old Charleston, S.C., entrepreneur, who has been investing in homes since he was 18, specializes in buying bargain-price historic homes in need of repair in places hard-hit by disaster. He doesn't sell them, but renovates and holds them for the long term for their equity value as the cities recover. "It may take years, but they always bounce back," he says.
For instance, his first purchase, for about $650,000, was a classic shotgun-style home in a Charleston neighborhood ravaged by hurricane Hugo in 1989; as the city cleaned up, it almost doubled in value. The pre-War New York condominium he bought for $240,000 in 2001, shortly after 9/11 caused a temporary dip in home prices, has tripled in value. Now he's advertising on the Internet for another home in New Orleans that he can fix up and add to his portfolio. He hopes to find a place that's selling for at least 30% off of its pre-Katrina value. "In chaos, there is opportunity," he says.
For the battered residents along the Gulf Coast, the chaos caused by flooding, looting and desperate bids for rescue is subsiding -- but now a different form of confusion is taking its place: a frenzy of real-estate deals.
Premium Prices
In places slammed directly by the storm, such as New Orleans and coastal Mississippi and Alabama, speculators are trying to grab damaged homes at discounts while owners of intact homes are listing their properties at premium prices; in Baton Rouge, La., crowded with evacuees, nearly any house that comes on the market disappears instantly in a bidding war.
Some real estate in the hardest-hit areas affected by Hurricane Katrina is attracting money from speculators who think prices for quality properties will rise. Among the hurricane-damaged properties was Charnley House of Ocean Springs, Miss.
At the storm's center, where condos were crushed, houses were flooded, and homes everywhere badly damaged or destroyed, rebuilding is the top priority. According to the National Association of Realtors, about 80% of the homes in the flooded city of New Orleans will have to be rebuilt. On the Mississippi coast, at least 1,187 homes have been destroyed and 7,286 severely damaged, according to the Mississippi Emergency Management Agency. Many more in New Orleans may be torn down or require rebuilding.
The Intact Homes
What the cameras didn't capture, however, are the homes that survived the storm almost completely unscathed, like Adam Rothlein's three-bedroom Victorian home in New Orleans' Garden District.
Mr. Rothlein, who owns a music-video production company, escaped to Colorado before the storm hit. Friends confirmed that his house escaped damage, but after seeing television reports of the storm's devastation of the rest of the city, he has no desire to return. So he put his house up for sale on the Internet for $695,000. Mr. Rothlein says he's had lots of inquiries, even though no one will be allowed back into the city to tour the home until next week.
Mr. Rothlein's house might not appeal to bargain-hunting speculators looking for a fix-up deal because he's already fixed it up. He bought the home for $345,000 only a year ago, and put in about $100,000 in renovations, including new kitchen appliances, bathroom fixtures, and floors. Before Katrina hit, he would have put the house on the market in the mid-$500,000s, but now, given the shortage of undamaged homes, he figures it will be worth much more to a local family who doesn't want to scramble to find home-improvement contractors in a recovering disaster zone. How much more, however, is only a guess. "Nobody really knows what prices here will be," he says.
Benefits of U.S. Funds
Meanwhile, out-of-town speculators are mobbing New Orleans real-estate broker Todd La Valla, ready to do deals as soon as flooded title companies are back in business. He expects annual home price appreciation, which averaged in the 6% to 8% range before the storm, to double over the next year. Scarce supply is only one reason, he says; another is that private investment and federal funds promised to the area will upgrade the current housing stock -- much of which had fallen into "genteel neglect," he says -- and spur massive amounts of new construction. "I think many areas of the city are going to come back stronger than they were before," he says.
Speculators are also swarming other areas hard-hit by the storm along the Mississippi coastline. Ray Gonzales, Jr., principal broker at Century 21 Williams & Associates in Gulfport, Miss., says that investors make up about 40% to 45% of his firm's buyers, about double the number before the storm, and prices already have jumped 10% -- much like they did following Hurricane Camille, which devastated the area in 1969. Since the storm, all of his firm's undamaged and salvageable inventory -- including whatever was left standing of the luxury high-rise buildings that were under construction along the beach -- went under contract, and some buyers are now going door-to-door trying to make deals. He predicts the median home price, which was $127,400 before the storm, is now more than $160,000 and will go up more in the next few months. Bridget Ferrucci, another Gulfport agent, says speculators are tying up the phone lines at her office, many saying "we'll buy anything, fix it up, and resell it."
Beyond the region hit hardest by the hurricane, real-estate prices also are booming. Swollen from evacuees from Katrina, with a population nearly triple the 350,000 residents who lived there pre-Katrina, Baton Rouge has become a boomtown almost overnight. The Greater Baton Rouge Association of Realtors says median prices, which were about $140,000 before the storm, have risen between 20% and 30% over the last week.
Tenant Evictions
Many are trying to cash in while demand is most desperate. Maria Yiannopoulos, who mans the local FEMA legal help line, says that in the last two days, 80 calls have come in from tenants that have been evicted on a few days notice, so landlords can sell their homes at inflated prices. Indeed, Ms. Yiannopoulos says her father in Baton Rouge has been besieged with offers to buy his modest home for as much as $500,000 -- "far more" than its pre-Katrina value. "Real estate is just being gobbled up here," she says.
Demand is so pressing, even people in the far outskirts of the city are feeling it. Before Katrina hit, Susan Durham had been trying to sell her four-bedroom stucco home in Prairieville, La., about 17 miles from downtown Baton Rouge, for $329,000. She took it off the market immediately after the storm when her daughter and some friends needed temporary shelter, but has now put it back on for $339,000. "The market here is crazy," says Mrs. Durham, an artist. "Everything is topsy-turvy."
Although they know they aren't going to get any bargains in a boomtown, speculators are still nosing around. Vinu Zacahriah, a New York computer consultant, flew to Baton Rouge last weekend. But he found the city so crowded with evacuees and other investors, he couldn't even get a hotel room, and had to stay in Yazoo City, Miss., a four-hour drive away. When he saw how few homes and condos were available for sale and how high prices had climbed, he switched gears and started searching for raw land. He found some for about $30,000 an acre, which he plans to buy, subdivide, and sell to builders whom he expects to soon flock to the area. "There will be demand for homes for years to come," he says.
Tuesday, September 20, 2005
Freddie Mac speaks about ARM`s.
Freddie Mac's chief operating officer on Monday said some new loans such as adjustable-rate mortgages that have prompted concern about a housing bubble appear safer than more traditional mortgage loans, Reuters reported.
Eugene McQuade, speaking at a Bank of America conference in San Francisco, said government-sponsored enterprise Freddie Mac is not too heavily exposed to adjustable-rate mortgages, or ARMs, which can offer borrowers lower rates early, but higher rates later, reports said.
He also downplayed potential concern about loans where borrowers pay only the interest due, known as interest-only loans, or less than the interest due, known as "negative amortization" loans because principal amounts due increase, reports said.
"On the (interest-only) and the (negative amortization), on the stuff that we have seen come through us, the credit quality is actually higher than on the 15- and 30-year fixed," said the COO of the No. 2 U.S. mortgage financier.
As of the end of June, 59 percent of McLean, Va.-based Freddie Mac's $1.3 trillion loan portfolio was in 30-year fixed-rate mortgages and 27 percent was in 15-year fixed-rate mortgages. One percent was in interest-only loans and another 10 percent was in various adjustable-rate mortgages.
Newer-style loans have allowed thousands of home buyers to cut initial monthly payments, letting them buy more expensive homes and, some say, drive up prices.
Separately, McQuade said Freddie Mac will see "some impact" to third-quarter results from Hurricane Katrina, but the company is "very well positioned" to handle it, Reuters reported. He said less than one quarter of one percent of Freddie Mac's guaranteed mortgages are in the three hardest-hit parishes in the New Orleans area, reports said.
***
Eugene McQuade, speaking at a Bank of America conference in San Francisco, said government-sponsored enterprise Freddie Mac is not too heavily exposed to adjustable-rate mortgages, or ARMs, which can offer borrowers lower rates early, but higher rates later, reports said.
He also downplayed potential concern about loans where borrowers pay only the interest due, known as interest-only loans, or less than the interest due, known as "negative amortization" loans because principal amounts due increase, reports said.
"On the (interest-only) and the (negative amortization), on the stuff that we have seen come through us, the credit quality is actually higher than on the 15- and 30-year fixed," said the COO of the No. 2 U.S. mortgage financier.
As of the end of June, 59 percent of McLean, Va.-based Freddie Mac's $1.3 trillion loan portfolio was in 30-year fixed-rate mortgages and 27 percent was in 15-year fixed-rate mortgages. One percent was in interest-only loans and another 10 percent was in various adjustable-rate mortgages.
Newer-style loans have allowed thousands of home buyers to cut initial monthly payments, letting them buy more expensive homes and, some say, drive up prices.
Separately, McQuade said Freddie Mac will see "some impact" to third-quarter results from Hurricane Katrina, but the company is "very well positioned" to handle it, Reuters reported. He said less than one quarter of one percent of Freddie Mac's guaranteed mortgages are in the three hardest-hit parishes in the New Orleans area, reports said.
***
Monday, September 19, 2005
Landlord hits paydirt!
LULING, La. -- His office is a bar called the Sailfish and the communications system is a pair of balky cellphones, but Jay Roberts strains their batteries to the limit running his impromptu commercial real-estate business.
The phone rings and it's a man representing the Veterans Administration inquiring about the empty Kmart in this boomtown community about 30 miles west of New Orleans. The caller's got 200 workers who need office space.
Too late. That building, outfitted with 46 miles of telephone wire and bursting with desks, now houses 500 State Farm claims adjusters, with room for 400 more. It was leased for a year at $25,000 a month even before the power came back on. "Randy, yeah baby, the Kmart's gone," Mr. Roberts, clad in a T-shirt and tight shorts, yells into the phone. "I got an old Burger King building if you could use that."
The storm has changed practically everything in southeast Louisiana, including the commercial real-estate market. Baton Rouge has been overwhelmed by evacuees and now hosts companies that were flooded out in New Orleans and Jefferson parishes, some 80 miles away.
Jay Roberts in his bar and restaurant the sailfish in Luling, Louisiana. Jay also owns the adjoining Super 8 Motel and nearby commercial properties.
But for those businesses integral to the cleanup, such as power, insurance and engineering companies, towns closer to the devastation are the hottest properties around. In the early days of Katrina's aftermath, there was nowhere nearer to the action than Luling, which got raked by the western edge of the storm but is largely intact. Even before the streets were clear, logistics teams were combing over the place, snapping up every vacant hotel room and office they could find.
Few have benefited more from this than Mr. Roberts, who has lived in Luling all of his life and assembled a modest real-estate empire even as the town itself struggled. Powerfully built and high-school educated, the 46-year-old Mr. Roberts is a sewer-pipe suppler by vocation. He built a small hotel 2½ years ago. A few months later, he took a flyer on a semiabandoned strip mall with a dead Kmart, picking up the property at a sheriff's sale for $1.5 million, or $3 a square foot.
The Burger King came last year, when a regional operator unloaded about 40 restaurants in the area. Mr. Roberts paid $350,000 for that property. "In my opinion, the prices I paid were strictly the land value, with the buildings and signs thrown in for free," Mr. Roberts said. He predicts the 900-square-foot Burger King will begin life anew as a small office, citing a number of unsolicited offers he's already received.
In Luling, the real-estate mantra of location, location, location is proving true once again. As a staging area for disaster work, Luling, with a permanent population of about 6,000, is close to the ideal. It boasts one of the few working ATMs in the immediate area, has electricity, plenty of gasoline stations and a functioning Super Wal-Mart. Sitting fast on the west bank of the Mississippi River, prestorm Luling had been known primarily for its bulk cargo wharf and for a 1976 ferry crash that killed 78 passengers.
Its commercial district is little more than a few-miles-long strip of hotels and fast-food joints, many down at the heels. That's changing. "By quirk of fate, we're going to reap a lot of economic benefits out of this storm," said Joel Chaisson II, a local state senator and silent partner in some of Mr. Roberts's real-estate ventures.
To underscore that prediction, Mr. Roberts barks out an order to his administrative assistant, who is standing at the far end of the Sailfish Food & Spirits. "Get a sign made up for that empty Burger King out there -- for sale or lease. And get me a sign for my hotel that says, 'No vacancy -- long-term lease.' "
The Sailfish, Mr. Roberts's smallest property, opened in January and may also be his most lucrative, at least indirectly. Even with the power off, the place remained open and Mr. Roberts did his best to make the clientele comfortable, doling out warm beers to hurricane survivors and even smashing in the bar's cigarette machine so stressed evacuees could indulge.
As the days passed, Mr. Roberts snagged provisions from a shuttered local grocery owned by an uncle of a survivor. Mr. Roberts is the landlord of the Sailfish, not its operator, but he keeps a close eye on the kitchen, often whipping up menu items himself, including the huge pots of white beans he began making after the hurricane in a big propane-fired cooker out back. The food was free in those days, though Mr. Roberts repeatedly admonished patrons to generously tip the overwhelmed staff.
The fare became more elaborate after the power returned, like the recent gumbo he oversaw, a dark, savory concoction that drew raves. As with almost everything else, his culinary skills are self-taught. "I've never followed a recipe in my life," Mr. Roberts says.
Mr. Roberts's largess and ingenuity paid off: Sitting in a sea of storm-shuttered fast-food franchises, the Sailfish became the only place for folks to congregate over drinks and food, the preferred milieu for a Louisiana business deal. The Sailfish also became the only reliable place to see Mr. Roberts, as well as the state senator who provides introductions, the parish president (who can issue business permits) and the local judge (who operates a hotel outside the parish).
Two days before Katrina hit, Joe Green, an assistant manager for administrative services for State Farm Insurance in Tulsa, Okla., was watching a weather report when it became apparent he and his nine-man crew were about to enter a race toward the storm. Mr. Green's job is to set up the company's catastrophe, or "cat," office near the epicenter of major disasters. Mr. Green drove for three days, splitting the team in half to scour Louisiana and Mississippi on a desperate search for office space and hotel rooms.
At almost every turn, the team found itself competing with nimble electric company crews, who were after the same commodity. Mr. Green blew into the Sailfish the day after the storm, having been directed there by the local Wal-Mart manager. Mr. Roberts was inside and the negotiations began. The Kmart went for $25,000 a month, plus an upgraded climate system, for which State Farm is paying.
Mr. Green initially got beat on the 30 hotel rooms that Mr. Roberts owns next door to the Sailfish. But after working a complicated swap involving the sprucing up of an independent motel down the street, Mr. Roberts managed to pawn the power crews off to his competitor, taking the more lucrative State Farm deal.
The independent hotelier ended up with steam-cleaned carpets, new linens and a clientele that pays twice the normal $30 nightly rate. Mr. Roberts in turn, inked a one-year State Farm deal: all the rooms at $89 a night -- a premium over the $49 rate the hotel usually commands. "Jay's the ultimate landlord: He helps me with everything and he's indispensable in a town like this," Mr. Green says.
The phone rings and it's a man representing the Veterans Administration inquiring about the empty Kmart in this boomtown community about 30 miles west of New Orleans. The caller's got 200 workers who need office space.
Too late. That building, outfitted with 46 miles of telephone wire and bursting with desks, now houses 500 State Farm claims adjusters, with room for 400 more. It was leased for a year at $25,000 a month even before the power came back on. "Randy, yeah baby, the Kmart's gone," Mr. Roberts, clad in a T-shirt and tight shorts, yells into the phone. "I got an old Burger King building if you could use that."
The storm has changed practically everything in southeast Louisiana, including the commercial real-estate market. Baton Rouge has been overwhelmed by evacuees and now hosts companies that were flooded out in New Orleans and Jefferson parishes, some 80 miles away.
Jay Roberts in his bar and restaurant the sailfish in Luling, Louisiana. Jay also owns the adjoining Super 8 Motel and nearby commercial properties.
But for those businesses integral to the cleanup, such as power, insurance and engineering companies, towns closer to the devastation are the hottest properties around. In the early days of Katrina's aftermath, there was nowhere nearer to the action than Luling, which got raked by the western edge of the storm but is largely intact. Even before the streets were clear, logistics teams were combing over the place, snapping up every vacant hotel room and office they could find.
Few have benefited more from this than Mr. Roberts, who has lived in Luling all of his life and assembled a modest real-estate empire even as the town itself struggled. Powerfully built and high-school educated, the 46-year-old Mr. Roberts is a sewer-pipe suppler by vocation. He built a small hotel 2½ years ago. A few months later, he took a flyer on a semiabandoned strip mall with a dead Kmart, picking up the property at a sheriff's sale for $1.5 million, or $3 a square foot.
The Burger King came last year, when a regional operator unloaded about 40 restaurants in the area. Mr. Roberts paid $350,000 for that property. "In my opinion, the prices I paid were strictly the land value, with the buildings and signs thrown in for free," Mr. Roberts said. He predicts the 900-square-foot Burger King will begin life anew as a small office, citing a number of unsolicited offers he's already received.
In Luling, the real-estate mantra of location, location, location is proving true once again. As a staging area for disaster work, Luling, with a permanent population of about 6,000, is close to the ideal. It boasts one of the few working ATMs in the immediate area, has electricity, plenty of gasoline stations and a functioning Super Wal-Mart. Sitting fast on the west bank of the Mississippi River, prestorm Luling had been known primarily for its bulk cargo wharf and for a 1976 ferry crash that killed 78 passengers.
Its commercial district is little more than a few-miles-long strip of hotels and fast-food joints, many down at the heels. That's changing. "By quirk of fate, we're going to reap a lot of economic benefits out of this storm," said Joel Chaisson II, a local state senator and silent partner in some of Mr. Roberts's real-estate ventures.
To underscore that prediction, Mr. Roberts barks out an order to his administrative assistant, who is standing at the far end of the Sailfish Food & Spirits. "Get a sign made up for that empty Burger King out there -- for sale or lease. And get me a sign for my hotel that says, 'No vacancy -- long-term lease.' "
The Sailfish, Mr. Roberts's smallest property, opened in January and may also be his most lucrative, at least indirectly. Even with the power off, the place remained open and Mr. Roberts did his best to make the clientele comfortable, doling out warm beers to hurricane survivors and even smashing in the bar's cigarette machine so stressed evacuees could indulge.
As the days passed, Mr. Roberts snagged provisions from a shuttered local grocery owned by an uncle of a survivor. Mr. Roberts is the landlord of the Sailfish, not its operator, but he keeps a close eye on the kitchen, often whipping up menu items himself, including the huge pots of white beans he began making after the hurricane in a big propane-fired cooker out back. The food was free in those days, though Mr. Roberts repeatedly admonished patrons to generously tip the overwhelmed staff.
The fare became more elaborate after the power returned, like the recent gumbo he oversaw, a dark, savory concoction that drew raves. As with almost everything else, his culinary skills are self-taught. "I've never followed a recipe in my life," Mr. Roberts says.
Mr. Roberts's largess and ingenuity paid off: Sitting in a sea of storm-shuttered fast-food franchises, the Sailfish became the only place for folks to congregate over drinks and food, the preferred milieu for a Louisiana business deal. The Sailfish also became the only reliable place to see Mr. Roberts, as well as the state senator who provides introductions, the parish president (who can issue business permits) and the local judge (who operates a hotel outside the parish).
Two days before Katrina hit, Joe Green, an assistant manager for administrative services for State Farm Insurance in Tulsa, Okla., was watching a weather report when it became apparent he and his nine-man crew were about to enter a race toward the storm. Mr. Green's job is to set up the company's catastrophe, or "cat," office near the epicenter of major disasters. Mr. Green drove for three days, splitting the team in half to scour Louisiana and Mississippi on a desperate search for office space and hotel rooms.
At almost every turn, the team found itself competing with nimble electric company crews, who were after the same commodity. Mr. Green blew into the Sailfish the day after the storm, having been directed there by the local Wal-Mart manager. Mr. Roberts was inside and the negotiations began. The Kmart went for $25,000 a month, plus an upgraded climate system, for which State Farm is paying.
Mr. Green initially got beat on the 30 hotel rooms that Mr. Roberts owns next door to the Sailfish. But after working a complicated swap involving the sprucing up of an independent motel down the street, Mr. Roberts managed to pawn the power crews off to his competitor, taking the more lucrative State Farm deal.
The independent hotelier ended up with steam-cleaned carpets, new linens and a clientele that pays twice the normal $30 nightly rate. Mr. Roberts in turn, inked a one-year State Farm deal: all the rooms at $89 a night -- a premium over the $49 rate the hotel usually commands. "Jay's the ultimate landlord: He helps me with everything and he's indispensable in a town like this," Mr. Green says.
Home price spike with shortage of supplies!
Home price spike with shortage of supplies!
Demand on building materials, labor from Katrina will impact area.Hang on for the shock.Home prices, already on a steep upward curve, are set to be hit with market forces beyond Southwest Florida's breakneck population growth.Rebuilding from Hurricane Katrina will add unprecedented demand to a building industry on overdrive to begin with.
Last month there were 2,000 building permits issued in unincorporated Lee County, yet another new record."It's absolutely going to impact the working people in Lee County," said Michael Reitmann, executive vice president of the Lee Building Industries Association. "People forget about the average person who works in the professions, I'm talking about building trades people, teachers, who can't afford a house. Katrina will cause a dramatic impact on the price of what's called an affordable house that's already $250,000 in Lehigh."
How much more are houses and materials going to cost?Even the smart guys with economics degrees in the industry can't say for sure. It's too early. The devastated regions are just beginning cleanup. Rebuilding will trail from six months to two years.And the breadth of the damage is beyond historical experience.
In August, annualized housing starts in the nation were 1.4 million, a record."Let's say we have about 200,000 homes or so destroyed. Say half are replaced over the next year. That means a 7 to 10 percent increase in building permits. If all of them are replaced, it's an increase of 14 to 20 percent," said Peter Stewart, president of Forest2Market Inc., a lumber pricing service based in North Carolina.
"We're looking, in the face of a restricted supply situation, at a tremendous demand situation. A demand shock of 10 percent is so unprecedented, nobody has a forecast long waits for materials for contractors. Roofing material has to be ordered up to nine months in advance, Reitmann said. Cement, too, is readily available only to big buyers.
Katrina will complicate supply lines and labor markets further, for a myriad of reasons. Fuel costs will raise transportation expense. Increases in oil affect the price of all petroleum products.
Frank Jenkins, president of Bonita Springs-based Harbourside Custom Homes, said labor shortages and demands problems still will decrease demand for new homes.
"The people are going to keep coming, but it'll take longer to finish their projects," he said.And it's not just material. The cost of people to work construction is going to head upward as well. Incentives for workers and companies to aid in Katrina recovery that President Bush hinted at Thursday will draw materials and skilled labor to Louisiana and Mississippi.
"If you pay more and the federal government is going to give incentives . . . people are going to go there. It's a natural phenomenon," Reitmann said.For the moment, building materials at retail and for some building suppliers are available and prices have stabilized, though at historic high levels.Chuck Walls, a salesman and buyer with Dixie Plywood & Lumber Co. of Fort Lauderdale, supplies builders in Southwest Florida. There's been one Katrina shock, he said, when consumers bought in anticipation of the hurricane.
"Prices at the mill level have all gone up quite a bit, because of people all buying at the same time," Walls said.Jenkins said Katrina hasn't impacted his business yet, but he expects problems in the near future. "I haven't seen it just yet, but it's coming," he said. "We all know it's just a matter of time."
Getting material to Southwest Florida is tougher."Where Katrina hit, that is a supply route. The port, the highway," Walls said. "Trucking was already brutal. We're anticipating trucking will become more of an issue."It's the things you don't think of that may trip up the process and lead to delays and cost increases never imagined.
Like septic tanks.Reitmann said more than half of the single-family home permits issued last month include a septic tank for waste treatment.
Builders dig a bed for the tank laterals to run and they must be lined with regulated aggregate sand. It's a component part of cement."Those are in short supply. All those things are going to add to housing costs," Reitmann said. "When you dig out a bed for the drain field, you have to have sand. The reason we've become so aware of it is because they just don't have the sand available."
Demand on building materials, labor from Katrina will impact area.Hang on for the shock.Home prices, already on a steep upward curve, are set to be hit with market forces beyond Southwest Florida's breakneck population growth.Rebuilding from Hurricane Katrina will add unprecedented demand to a building industry on overdrive to begin with.
Last month there were 2,000 building permits issued in unincorporated Lee County, yet another new record."It's absolutely going to impact the working people in Lee County," said Michael Reitmann, executive vice president of the Lee Building Industries Association. "People forget about the average person who works in the professions, I'm talking about building trades people, teachers, who can't afford a house. Katrina will cause a dramatic impact on the price of what's called an affordable house that's already $250,000 in Lehigh."
How much more are houses and materials going to cost?Even the smart guys with economics degrees in the industry can't say for sure. It's too early. The devastated regions are just beginning cleanup. Rebuilding will trail from six months to two years.And the breadth of the damage is beyond historical experience.
In August, annualized housing starts in the nation were 1.4 million, a record."Let's say we have about 200,000 homes or so destroyed. Say half are replaced over the next year. That means a 7 to 10 percent increase in building permits. If all of them are replaced, it's an increase of 14 to 20 percent," said Peter Stewart, president of Forest2Market Inc., a lumber pricing service based in North Carolina.
"We're looking, in the face of a restricted supply situation, at a tremendous demand situation. A demand shock of 10 percent is so unprecedented, nobody has a forecast long waits for materials for contractors. Roofing material has to be ordered up to nine months in advance, Reitmann said. Cement, too, is readily available only to big buyers.
Katrina will complicate supply lines and labor markets further, for a myriad of reasons. Fuel costs will raise transportation expense. Increases in oil affect the price of all petroleum products.
Frank Jenkins, president of Bonita Springs-based Harbourside Custom Homes, said labor shortages and demands problems still will decrease demand for new homes.
"The people are going to keep coming, but it'll take longer to finish their projects," he said.And it's not just material. The cost of people to work construction is going to head upward as well. Incentives for workers and companies to aid in Katrina recovery that President Bush hinted at Thursday will draw materials and skilled labor to Louisiana and Mississippi.
"If you pay more and the federal government is going to give incentives . . . people are going to go there. It's a natural phenomenon," Reitmann said.For the moment, building materials at retail and for some building suppliers are available and prices have stabilized, though at historic high levels.Chuck Walls, a salesman and buyer with Dixie Plywood & Lumber Co. of Fort Lauderdale, supplies builders in Southwest Florida. There's been one Katrina shock, he said, when consumers bought in anticipation of the hurricane.
"Prices at the mill level have all gone up quite a bit, because of people all buying at the same time," Walls said.Jenkins said Katrina hasn't impacted his business yet, but he expects problems in the near future. "I haven't seen it just yet, but it's coming," he said. "We all know it's just a matter of time."
Getting material to Southwest Florida is tougher."Where Katrina hit, that is a supply route. The port, the highway," Walls said. "Trucking was already brutal. We're anticipating trucking will become more of an issue."It's the things you don't think of that may trip up the process and lead to delays and cost increases never imagined.
Like septic tanks.Reitmann said more than half of the single-family home permits issued last month include a septic tank for waste treatment.
Builders dig a bed for the tank laterals to run and they must be lined with regulated aggregate sand. It's a component part of cement."Those are in short supply. All those things are going to add to housing costs," Reitmann said. "When you dig out a bed for the drain field, you have to have sand. The reason we've become so aware of it is because they just don't have the sand available."
Sunday, September 18, 2005
Building Permits in Lee County still Surging!
Once again, building permit volume in Lee County and Cape Coral surged in August, breaking new records. How long can this building explosion continue? It would seem that this pace will be difficult to maintain with the scarcity of labor and building materials and their rising costs, as well as soaring land values and interest rates beginning to climb. Historical permitting trends would lead us to believe that the permit boom is close to hitting its crest.But, to my surprise, Southwest Florida is experiencing some new and interesting trends regarding building permits. Demand remains strong because of changing demographics. Lee County is seeing a surge in second home buying being fueled by not only baby boomers but also a tremendous transfer of generational wealth (inheritance) and, currently, fewer places for the recipients of this newfound wealth to invest their money.Primary home buyers are also still flocking into Lee County. But it is a more affluent buyer profile than we have seen in the past, and the buyers are able to absorb the higher price points. This is due to several factors. First, the obvious wave of baby boomers with higher incomes and increased wealth. Second, the traditional Midwest and Northeast buyers are now joined by buyers from as far away as California and as close as Naples and the east coast of Florida. They are seeking a cash-out of more expensive housing in their current markets while real estate is hot, and a buy in this market at a lower price point while still maintaining a good quality of life.
Investment money continues to fuel our permit volume as well. Even with higher costs and interest rates making it more difficult for a potential tenant's rent to cover the monthly expense of the landlord, investors are banking on value appreciation instead of cash flow.Lee County has reached a critical mass population threshold, which perpetuates additional growth. With this critical mass in a desirable secondary market such as Lee County, we are now on the radar screen of major retailers and other businesses looking to move into the marketplace. This, in turn, attracts capital to our real estate market in the form of new residents and investors.
Global instability continues to attract new residents seeking a safer and higher quality of life in Southwest Florida. This also offers real estate investors a perceived safe haven for their investment capital in a growth market.While all the above is known, the unknowns are: How long can we break permit records with labor and material shortages accompanied by price escalation, a dwindling supply of undeveloped land and a rising interest rate environment? Will the investor market change as economic factors force a cooling off?The wave of wealthier primary and second home buyers has a lot of steam left. But we face a challenge of attracting a work force to service the population growth, when half of that work force can no longer afford to purchase a home in Lee County.
Investment money continues to fuel our permit volume as well. Even with higher costs and interest rates making it more difficult for a potential tenant's rent to cover the monthly expense of the landlord, investors are banking on value appreciation instead of cash flow.Lee County has reached a critical mass population threshold, which perpetuates additional growth. With this critical mass in a desirable secondary market such as Lee County, we are now on the radar screen of major retailers and other businesses looking to move into the marketplace. This, in turn, attracts capital to our real estate market in the form of new residents and investors.
Global instability continues to attract new residents seeking a safer and higher quality of life in Southwest Florida. This also offers real estate investors a perceived safe haven for their investment capital in a growth market.While all the above is known, the unknowns are: How long can we break permit records with labor and material shortages accompanied by price escalation, a dwindling supply of undeveloped land and a rising interest rate environment? Will the investor market change as economic factors force a cooling off?The wave of wealthier primary and second home buyers has a lot of steam left. But we face a challenge of attracting a work force to service the population growth, when half of that work force can no longer afford to purchase a home in Lee County.
Saturday, September 17, 2005
Amateur "flippers" in the real-estate market have more to worry about than a bubble
Amateur "flippers" in the real-estate market have more to worry about than a bubble. Many of them could be facing an income-tax audit -- and higher tax bills than expected.
The popularity of so-called flip deals has made section 1031 of the Internal Revenue Code popular with real-estate speculators. In a 1031 exchange -- also known as a "like-kind" exchange -- a person who sells a business or investment property can defer capital-gains taxes by immediately rolling the gains into a similar piece of property.
The trouble, tax experts say, is that people don't understand the rules. Many trust the advice of real-estate brokers, who often aren't well versed in tax law. Some amateurs are buying and selling properties too quickly, running the risk that the Internal Revenue Service may deem the transactions a person's trade or business, with gains taxed as ordinary income and subject to self-employment taxes.
Flipping's attractions are undeniable: A study released this week by First American Real Estate Solutions, an Anaheim, Calif., data provider, found that the practice can reap big returns. The study looked at sales in three hot markets -- Las Vegas, Miami, and Orange County, Calif. -- between 1999 and June 2005 and found that the annualized rate of return for three-to-six-month flips was usually 20% to 40% or more above the market appreciation rate.
Condos under construction in Miami, an area where flipping is widely practiced.
While flip sales didn't dominate the market in any of the three counties First American studied, they did account for as much as half of all sales within particular ZIP codes. In the Las Vegas area, properties turned over within two years accounted for 52.3% of total sales in ZIP code 89119 and for 45.7% of total sales in ZIP code 89147 during the first half of this year. And in the Miami area's ZIP code 33150, flip sales accounted for 41.7% of total sales last year and 43.6% of total sales in the first half of this year.
Novice real-estate speculators who attempt to flip properties should make sure they understand the rules before they are ensnared in an audit, or forced to pay more than they bargained for come tax season. The best way to avoid a problem is to consult a CPA or tax attorney before beginning the real-estate transaction, as mistakes can be costly.
"The IRS hasn't looked at the like-kind exchange before," says Eric Kea, a tax partner in the real-estate practice at BDO Seidman in New York. "We're assuming they're going to, seeing what the market is."
An IRS spokesman wouldn't speculate on whether the IRS will investigate or conduct more audits of like-kind exchanges. In general, the agency dedicates more resources if there are concerns of noncompliance in a particular area, the spokesman said.
In a like-kind exchange, if you replace a property used for business or investment with a similar property, no gain or loss is recognized at that time. Most people do a "deferred" like-kind exchange, where a seller has 45 days to identify a replacement property and 180 days to close on the new asset.
The big mistake for novices, tax experts say, occurs when the seller takes possession of the cash proceeds of the sale. Under IRS rules, the money must be placed in escrow or held by a qualified intermediary (such as a trust company) until the replacement property is acquired. "If you take possession, you are essentially disallowed the use of 1031," says Lonnie Davis, a certified public accountant and director of CBIZ Accounting, Tax & Advisory Services in Plymouth Meeting, Pa.
To avoid taxes, you have to roll the proceeds into a similar property, which generally would be a business property or raw or developed land. You can't swap an investment property for a personal asset, such as a primary residence or a vacation home, Mr. Davis says.
In a like-kind transaction, real estate must be exchanged for real estate, a rule that sometimes trips up clients who have set up a single entity to hold property and shield them from liability. Often, experts recommend that clients liquidate the entity a day before the real-estate transaction so the swap qualifies for 1031 treatment.
Apart from problems with the like-kind exchanges, there are other common mistakes that amateur investors make. One is not holding the property long enough. You must keep the investment for at least a year before selling to qualify for the preferential 15% capital-gains tax rate. If you sell before a year, the gain is subject to the highest income-tax rate of 35%.
You can avoid the capital-gains tax altogether if you own and use the home as your primary residence for two years. Gains of as much as $250,000 for an individual and $500,000 for a married couple filing jointly are excluded. The two years doesn't necessarily have to be continuous, as long as you have used it as a primary residence for a total of two years within a five-year period, ending on the date you sell the property.
The popularity of so-called flip deals has made section 1031 of the Internal Revenue Code popular with real-estate speculators. In a 1031 exchange -- also known as a "like-kind" exchange -- a person who sells a business or investment property can defer capital-gains taxes by immediately rolling the gains into a similar piece of property.
The trouble, tax experts say, is that people don't understand the rules. Many trust the advice of real-estate brokers, who often aren't well versed in tax law. Some amateurs are buying and selling properties too quickly, running the risk that the Internal Revenue Service may deem the transactions a person's trade or business, with gains taxed as ordinary income and subject to self-employment taxes.
Flipping's attractions are undeniable: A study released this week by First American Real Estate Solutions, an Anaheim, Calif., data provider, found that the practice can reap big returns. The study looked at sales in three hot markets -- Las Vegas, Miami, and Orange County, Calif. -- between 1999 and June 2005 and found that the annualized rate of return for three-to-six-month flips was usually 20% to 40% or more above the market appreciation rate.
Condos under construction in Miami, an area where flipping is widely practiced.
While flip sales didn't dominate the market in any of the three counties First American studied, they did account for as much as half of all sales within particular ZIP codes. In the Las Vegas area, properties turned over within two years accounted for 52.3% of total sales in ZIP code 89119 and for 45.7% of total sales in ZIP code 89147 during the first half of this year. And in the Miami area's ZIP code 33150, flip sales accounted for 41.7% of total sales last year and 43.6% of total sales in the first half of this year.
Novice real-estate speculators who attempt to flip properties should make sure they understand the rules before they are ensnared in an audit, or forced to pay more than they bargained for come tax season. The best way to avoid a problem is to consult a CPA or tax attorney before beginning the real-estate transaction, as mistakes can be costly.
"The IRS hasn't looked at the like-kind exchange before," says Eric Kea, a tax partner in the real-estate practice at BDO Seidman in New York. "We're assuming they're going to, seeing what the market is."
An IRS spokesman wouldn't speculate on whether the IRS will investigate or conduct more audits of like-kind exchanges. In general, the agency dedicates more resources if there are concerns of noncompliance in a particular area, the spokesman said.
In a like-kind exchange, if you replace a property used for business or investment with a similar property, no gain or loss is recognized at that time. Most people do a "deferred" like-kind exchange, where a seller has 45 days to identify a replacement property and 180 days to close on the new asset.
The big mistake for novices, tax experts say, occurs when the seller takes possession of the cash proceeds of the sale. Under IRS rules, the money must be placed in escrow or held by a qualified intermediary (such as a trust company) until the replacement property is acquired. "If you take possession, you are essentially disallowed the use of 1031," says Lonnie Davis, a certified public accountant and director of CBIZ Accounting, Tax & Advisory Services in Plymouth Meeting, Pa.
To avoid taxes, you have to roll the proceeds into a similar property, which generally would be a business property or raw or developed land. You can't swap an investment property for a personal asset, such as a primary residence or a vacation home, Mr. Davis says.
In a like-kind transaction, real estate must be exchanged for real estate, a rule that sometimes trips up clients who have set up a single entity to hold property and shield them from liability. Often, experts recommend that clients liquidate the entity a day before the real-estate transaction so the swap qualifies for 1031 treatment.
Apart from problems with the like-kind exchanges, there are other common mistakes that amateur investors make. One is not holding the property long enough. You must keep the investment for at least a year before selling to qualify for the preferential 15% capital-gains tax rate. If you sell before a year, the gain is subject to the highest income-tax rate of 35%.
You can avoid the capital-gains tax altogether if you own and use the home as your primary residence for two years. Gains of as much as $250,000 for an individual and $500,000 for a married couple filing jointly are excluded. The two years doesn't necessarily have to be continuous, as long as you have used it as a primary residence for a total of two years within a five-year period, ending on the date you sell the property.
Thursday, September 15, 2005
Fed`s May Not Raise Rates After all!
The Fed's dilemma is this: Katrina may have slowed consumer spending, and another rate hike could compound that. However, Katrina's spike in oil and gasoline prices also poses an inflationary risk that is usually countered through hikes in the lending rate.
In addition, there's another wrinkle: If the Fed doesn't take a breather next week, it could be seen as insensitive at best, cruel at worst.
"Politically, I wouldn't raise rates on the 20th. Raising rates when you are trying to recover from a disaster like this is sending the wrong message," said David Wyss, chief economist for Standard & Poor's in New York.
Working in favor of a pause, the Labor Department's consumer-price index for August, released Thursday, showed prices rising just .05 percent for consumer goods, below forecasts. Core inflation - excluding volatile food and energy price - remained at .01 percent, where it has been since May. This suggests higher energy prices are not stoking inflation, reducing the pressure on the Fed to raise interest rates in response.
Since June 2004, Greenspan has been raising the federal funds rate - the overnight rate banks charge each other - at what he calls a "measured pace." The quarter-point hikes are intended to contain inflation without squashing economic growth. The Fed's rate hikes generally point the way for bank rates on consumer loans and adjustable-rate mortgages.
Had Hurricane Katrina not struck the Gulf Coast on Aug. 29, an 11th consecutive rise in interest rates would have been a foregone conclusion, even though pre-Katrina data for August wholesale prices showed that rising energy costs were not spilling over to inflate the broader economy. The Fed is trying to make sure inflation does not ignite by acting ahead of its resurgence, and has made clear that it doesn't think rates are high enough yet to ensure that.
Still, Katrina and her subsequent energy shock introduced a measure of doubt about the strength of the U.S. economy, and left uncertain whether an 11th consecutive rate hike is coming.
"If my decision were based solely on economic considerations, I would tighten again. I think the economy won't be derailed by this," said Mark Zandi, chief economist for Economy.com, a forecasting group in West Chester, Pa. "I think the economy is firm, and they (Fed governors) can send a signal that things are as they were."
But, acknowledged Zandi, "there are political considerations and they may overwhelm the economic ones."
A pause by the Fed makes sense now, said Peter Morici, a University of Maryland business professor who's a Fed watcher.
"Taken together, prospects for a reversal of recent energy price increases and the absence of other fundamental inflationary pressures indicates inflation provides no significant justification for raising interest rates further at this time," he said.
In addition, there's another wrinkle: If the Fed doesn't take a breather next week, it could be seen as insensitive at best, cruel at worst.
"Politically, I wouldn't raise rates on the 20th. Raising rates when you are trying to recover from a disaster like this is sending the wrong message," said David Wyss, chief economist for Standard & Poor's in New York.
Working in favor of a pause, the Labor Department's consumer-price index for August, released Thursday, showed prices rising just .05 percent for consumer goods, below forecasts. Core inflation - excluding volatile food and energy price - remained at .01 percent, where it has been since May. This suggests higher energy prices are not stoking inflation, reducing the pressure on the Fed to raise interest rates in response.
Since June 2004, Greenspan has been raising the federal funds rate - the overnight rate banks charge each other - at what he calls a "measured pace." The quarter-point hikes are intended to contain inflation without squashing economic growth. The Fed's rate hikes generally point the way for bank rates on consumer loans and adjustable-rate mortgages.
Had Hurricane Katrina not struck the Gulf Coast on Aug. 29, an 11th consecutive rise in interest rates would have been a foregone conclusion, even though pre-Katrina data for August wholesale prices showed that rising energy costs were not spilling over to inflate the broader economy. The Fed is trying to make sure inflation does not ignite by acting ahead of its resurgence, and has made clear that it doesn't think rates are high enough yet to ensure that.
Still, Katrina and her subsequent energy shock introduced a measure of doubt about the strength of the U.S. economy, and left uncertain whether an 11th consecutive rate hike is coming.
"If my decision were based solely on economic considerations, I would tighten again. I think the economy won't be derailed by this," said Mark Zandi, chief economist for Economy.com, a forecasting group in West Chester, Pa. "I think the economy is firm, and they (Fed governors) can send a signal that things are as they were."
But, acknowledged Zandi, "there are political considerations and they may overwhelm the economic ones."
A pause by the Fed makes sense now, said Peter Morici, a University of Maryland business professor who's a Fed watcher.
"Taken together, prospects for a reversal of recent energy price increases and the absence of other fundamental inflationary pressures indicates inflation provides no significant justification for raising interest rates further at this time," he said.
Wednesday, September 14, 2005
Adjustment in our Investing!
As investors we make adjustments in our strategies The Pre-Construction market because of Hurricane Katrina will see tremendous increases in prices. Builders have already started to increase pricing at a rate that doesn't make it very attractive to Investors like ourselves!
We`re not interested at this moment to allow a Builder to hold our deposit money for over a year and in some cases two years and not be able to complete the community at the original pricing that we thought we were investing in.
We feel that the materials needed to build will continue to increase at an alarming rate!
Builders will pass on the costs to the Buyers. They`re placing in their contracts "ESCALATION CLAUSES" that gives them the right to raise initial pricing as much as 50% from our original purchase price. Too Risky for my taste and I`m sure yours!
Therefore, I`ve been concentrating on Condo Conversions instead. The reason is very simple. The conversions that we look at are located in excellent area`s. The properties are Never Older than 4 years old! There are no Investor Restrictions and we mainly will hold for 1 year!
The average profit we make on a conversion is $25,0000-$30,000. As you realize this is a great ROI on our investment!
If you`d like more information on Condo Conversions in Tampa, Orlando,Jacksonville, Ft. Myers, Cape Coral and Naples. Please let us know.
We`re not interested at this moment to allow a Builder to hold our deposit money for over a year and in some cases two years and not be able to complete the community at the original pricing that we thought we were investing in.
We feel that the materials needed to build will continue to increase at an alarming rate!
Builders will pass on the costs to the Buyers. They`re placing in their contracts "ESCALATION CLAUSES" that gives them the right to raise initial pricing as much as 50% from our original purchase price. Too Risky for my taste and I`m sure yours!
Therefore, I`ve been concentrating on Condo Conversions instead. The reason is very simple. The conversions that we look at are located in excellent area`s. The properties are Never Older than 4 years old! There are no Investor Restrictions and we mainly will hold for 1 year!
The average profit we make on a conversion is $25,0000-$30,000. As you realize this is a great ROI on our investment!
If you`d like more information on Condo Conversions in Tampa, Orlando,Jacksonville, Ft. Myers, Cape Coral and Naples. Please let us know.
Katrina`s effect will offer Lower Interest Rates!
The direct housing needs for evacuees of Hurricane Katrina and lower interest rates that will soften its economic hit mean there will be long-term consequences for housing as well as the overall economy, according to the National Association of Realtors®. David Lereah, NAR’s chief economist, said shortages of building materials, made worse by the need to rebuild in areas hit by Katrina, will increase construction costs. “Given the general tight inventory of homes available for sale across the country, rebuilding in the region of the Gulf Coast will place additional pressure on overall home prices,” Lereah said. “As displaced residents try to get back on their feet in new locations, home sales have spiked—along with rental demand—in regions surrounding the disaster zone.” Existing-home sales are expected to increase 3.4 percent to 7.02 million this year, while new-home sales are forecast to rise 6.7 percent to 1.28 million for 2005 – both would be records. Last month, the totals were projected to be 6.98 million and 1.26 million respectively. Total housing starts—single-family and multifamily—should grow by 4.8 percent to 2.04 million units this year, the highest since 1973; single-family starts are expected at a record of 1.69 million. “Mortgage interest rates will rise more slowly as a result of post-storm economic conditions to accommodate the losses of homes, jobs and businesses,” Lereah said. “The lower level of borrowing costs will provide additional lift to home sales in other regions. Demand will continue to outstrip supply in most areas, which will keep pressure on home prices.” Total housing, commercial and public property losses by Katrina are in the range of $100 billion. The 30-year fixed-rate mortgage is forecast to rise more slowly, reaching 5.9 percent in the fourth quarter, and 6.7 percent by the end of 2006. The national median existing-home price for all housing types is projected to rise 10.8 percent in 2005 to $205,100. With a greater concentration of construction in lower cost areas, the median new-home price should increase 3.8 percent to $229,300 this year before rising at a faster clip of 6.2 percent in 2006. NAR President Al Mansell of Salt Lake City said the association is focused on people displaced by the storm. “The Realtors Relief Foundation is providing emergency relief for hurricane victims,” he said. “Working with our state and local associations, this is helping to provide immediate shelter needs and essential supplies. We connect very strongly with these needs because 28,000 of our own members have their lost homes and businesses.” The foundation has already collected nearly $2.8 million for relief efforts; NAR is absorbing all administrative costs to provide emergency relief for hurricane victims in Louisiana, Mississippi and Alabama, including displaced Realtors. Many Realtor associations throughout the region have developed a special information template that members can use to forward information to the federal government about available inventory that could be used to house people displaced by the storm. It is estimated that most of the flooded homes will have to be rebuilt, including about 80 percent of the homes in the city of New Orleans. Along with homes that will have to be replaced along the Mississippi and Alabama coastline, a minimum of 200,000 homes have been lost. However, the level of new housing construction will be only 130,000 higher than pre-Katrina projections. “Housing construction will be insufficient to replace the number of homes destroyed or that will have to be demolished,” Mansell said. “Apartment vacancies are dwindling, and mobile homes will help to address the jump in housing needs.” He is meeting with Realtors® and member associations in the Gulf Coast region this week to present relief checks and to assess long term consequences. The Louisiana Realtors Association has launched www.HurricaneHousing.net. Realtor members and property owners alike can submit data on available shelter in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi and Texas, and people displaced by the hurricane can search the database directly. The storm’s impact will cause the economy to grow more slowly than in earlier projections, but the economy will get a lift once rebuilding gets under way. The U.S. gross domestic product is forecast to grow at a pace of 2.3% in the third quarter and 2.7% in the fourth quarter, with GDP for all of 2006 pegged at 3.8%. The unemployment rate is seen to peak at 5.3% during the first half of next year before declining in the second half. The Consumer Price Index is expected to increase 3.5% this year, while inflation-adjusted disposable personal income should grow by 1.4%. The consumer confidence index is likely to dip to 100 early next year, and then rise to 107 by the end of 2006. In related news, Virginia Realtors have contributed $250,000 to fund rescue and recovery efforts underway in Alabama, Louisiana and Mississippi following the destruction caused by Hurricane Katrina. The donation from the Virginia Association of Realtors (VAR) joins the $1.15 million pledged by the National Association of Realtors (NAR) "Realtor Relief Fund" to fund the emergency relief efforts underway in the area. Already $30,000 of Virginia's donation has been allocated to sending a 26-foot truck full of much-needed items (water, personal hygiene products, hammers and nails, etc.) to Jackson, MS for distribution to the affected areas. The remaining $220,000 has been split between the Mississippi Association of Realtors, Louisiana Association of Realtors, and Alabama Association of Realtors.
Monday, September 12, 2005
Hurricane Katrina claims could reach $60 billion.
Hurricane Katrina claims could reach $60 billion.
Insurance companies now report that the estimated claims costs for property-casualty firms from Hurricane Katrina have reached upward of $60 billion.
As a result, Standard Poor's put the ratings of 10 insurance groups on its watch list for potential downgrade. Among them are State Farm Insurance, Allstate Corp. and such top commercial insurers as Lloyd's of London.
Sellers of home insurance could soon be dealing with billions of dollars more in claims costs if some class-action lawsuits and elected leaders are successful in forcing them to pick up costs from flooding, despite the fact that standard coverage has excluded flood damage for decades.
While most flood insurance is sold by the U.S. government, the bulk of homeowners in the affected Gulf Coast areas are not believed to have purchased the specialized policies.
Insurance companies now report that the estimated claims costs for property-casualty firms from Hurricane Katrina have reached upward of $60 billion.
As a result, Standard Poor's put the ratings of 10 insurance groups on its watch list for potential downgrade. Among them are State Farm Insurance, Allstate Corp. and such top commercial insurers as Lloyd's of London.
Sellers of home insurance could soon be dealing with billions of dollars more in claims costs if some class-action lawsuits and elected leaders are successful in forcing them to pick up costs from flooding, despite the fact that standard coverage has excluded flood damage for decades.
While most flood insurance is sold by the U.S. government, the bulk of homeowners in the affected Gulf Coast areas are not believed to have purchased the specialized policies.
Katrina is fading in the bond market's rear-view mirror.
Katrina is fading in the bond market's rear-view mirror. Rates are back where they were two weeks ago, the 10-year T-note above 4.1 percent, mortgages 5.75 percent, save a residual bid in the 2-year T-note, placed by the few still hoping that Katrina will force the Fed to back off.
Give that up. Expect the Fed to proceed with another .25 percent on Sept. 20, Fed funds to 3.75 percent, and another Nov. 1 and Dec. 13, and continuing until the economy slows, housing first.
How can Katrina have had so little impact? Why no 9/11 follow-through?
More stories by Lou BarnesKatrina's reach on bond marketReal estate rates ride energy-market roller coasterFixed-rate home loans escape Fed's wrathJob gains boost real estate ratesEconomic strength puts pressure on real estate ratesFederal funds rate could top 4% by year-end>>More
9/11 itself, as a financial matter, lasted barely 90 days. The follow-on Fed easing and near-hit deflation were stock-bubble artifacts. The main economic impact of 9/11 was the total shutdown of Wall Street for 10 days, whereas the Gulf Coast is one of the weakest economies in the nation, on a par with Appalachia except for energy infrastructure. Were it not for energy (now either back on line or replaced by collateral circulation), Katrina would have had no measurable economic impact at all.
Yes, there are some 400,000 unemployed. Yes, the spike in retail energy costs has a slowing effect on the economy. But both are more than offset – way more, sez here – by the counter-flood of money spent and to be spent on rescue, relocation and reconstruction. If you count up all the R3 people at work around the country, it may be a bigger number than the unemployed; at least, better paid.
Insured losses may be in the $50 billion range, but cause no economic drag at all. Properly reserved losses cause no harm to insurance companies, just a post-storm surge of cash into the economy, paying claims. Congress has appropriated $62 billion so far, in one week, having no idea what for, but appropriated nevertheless. If you want something done fast, don't call FEMA; nothing in government or physics moves faster than Congress when asked to give money away.
From the Fed's perspective, the inflation consequences of the energy-price spike are more harmful than any beneficial slowing of the economy. Energy prices have calmed in the last week, but it looks as though we're going to have three-buck gas for quite a while, and sky-high heating bills this winter.
Give that up. Expect the Fed to proceed with another .25 percent on Sept. 20, Fed funds to 3.75 percent, and another Nov. 1 and Dec. 13, and continuing until the economy slows, housing first.
How can Katrina have had so little impact? Why no 9/11 follow-through?
More stories by Lou BarnesKatrina's reach on bond marketReal estate rates ride energy-market roller coasterFixed-rate home loans escape Fed's wrathJob gains boost real estate ratesEconomic strength puts pressure on real estate ratesFederal funds rate could top 4% by year-end>>More
9/11 itself, as a financial matter, lasted barely 90 days. The follow-on Fed easing and near-hit deflation were stock-bubble artifacts. The main economic impact of 9/11 was the total shutdown of Wall Street for 10 days, whereas the Gulf Coast is one of the weakest economies in the nation, on a par with Appalachia except for energy infrastructure. Were it not for energy (now either back on line or replaced by collateral circulation), Katrina would have had no measurable economic impact at all.
Yes, there are some 400,000 unemployed. Yes, the spike in retail energy costs has a slowing effect on the economy. But both are more than offset – way more, sez here – by the counter-flood of money spent and to be spent on rescue, relocation and reconstruction. If you count up all the R3 people at work around the country, it may be a bigger number than the unemployed; at least, better paid.
Insured losses may be in the $50 billion range, but cause no economic drag at all. Properly reserved losses cause no harm to insurance companies, just a post-storm surge of cash into the economy, paying claims. Congress has appropriated $62 billion so far, in one week, having no idea what for, but appropriated nevertheless. If you want something done fast, don't call FEMA; nothing in government or physics moves faster than Congress when asked to give money away.
From the Fed's perspective, the inflation consequences of the energy-price spike are more harmful than any beneficial slowing of the economy. Energy prices have calmed in the last week, but it looks as though we're going to have three-buck gas for quite a while, and sky-high heating bills this winter.
Renters Face Decision to Purchase Condo Conversions!
Renters face decision to buy or fly with condo conversionsBy Dick Hogan.
Published by news-press.com on September 12, 2005
Cape Coral resident Arthur Perez, 61, received notice Aug. 3 that he will have until the end of his lease in April to purchase his apartment at Coral Cove Condominiums or move. Many area apartment complexes are converting to condominiums. STEPHEN HAYFORD/news-press.com
Kevin Geren, a paramedic for Lee County EMS, is likely to be forced out of his apartment in Gateway by a conversion. He lives in this two-bedroom apartment with his wife and stepdaughter.
Southwest Florida's riding the crest of a condo conversion wave — making big bucks for developers but headaches for some renters who can't or won't buy their apartments.Experts agree that the boom is well under way in super-heated real estate markets such as Lee County's, where thousands of apartments have been converted or are in the process. But they are split when it comes to predicting whether the high prices caused by the boom can be sustained in the long haul.Meanwhile, renters sometimes have tough decisions to make.
"I'm likely to be forced out," said Kevin Geren, 33, a Lee County paramedic who lives with his wife and a stepdaughter in a two-bedroom apartment at The Grand Apartments at Gateway, which is being converted into condos by Miami-based Prestige Builders Group.
Geren's thinking about buying and says it may be a good deal. "If they're willing to sell me one for $165,900 but sell to the general public for $180,000, it may be a decent investment."The alternatives are bleak, he said: renting a three-bedroom house would cost about $1,400 a month; a three-bedroom apartment rents for $1,100-$1,200. He's paying $900 now.
Meanwhile, housing prices have exploded in Lee County recently. The median price of an existing single-family home rose from $200,000 in July 2004 to $287,500 in July 2005, according to the Florida Association of Realtors.As a result, apartments are quickly becoming condominiums. The Gardens at Bonita Springs, for example, started out as an apartment complex but switched to condos in 2004 because that made more economic sense to owner Royal Palm Communities.
ECONOMICS FUEL TREND
Simple economics are behind the nationwide trend, said John McIlwain, senior resident fellow for housing at the private, nonprofit Urban Land Institute.For the first time in history, he said, "The price of an existing condo is more than the price of an existing single-family home": $219,000 vs. $217,000 according to the National Association of Realtors.
In addition, McIlwain said, most rental markets around the country are soft, and there's a major influx of young couples priced out of the single-family-home market and "empty nesters" who don't want the hassles of keeping up a house.So far, for buyers and developers alike, the conversion craze has been mostly profitable as housing prices have continued to soar. In Regatta Point, formerly Kenwood Apartments on College Parkway in south Fort Myers, prices started at $129,000 but "the prices have escalated quite a bit," said Lourdes Castaner-Ruano, marketing director for Hialeah-based Puig Development Group, which is doing the conversion.
Puig is also converting River Bend Apartments and recently sold out the former Renaissance Apartments, both on Winkler Avenue in Fort Myers. Castaner-Ruano said buyers in this market are a mix of investors, people looking for a place to live and second-home purchasers, many of them from the east coast."In some of these projects they've been literally raising the prices every hour at the grand opening," said Deerfield Beach-based Jack McCabe, a multifamily housing market analyst with McCabe Research & Consulting.But, he said, things don't look good for the future in South Florida and other markets where a lot of apartment buildings are going condo. "There's almost a feeding frenzy right now in real estate that was present before the stock market bust in 2000 and before other busts before that."
The pace isn't sustainable, McCabe said, noting that in South Florida, 17,000 apartments were converted into condos in 2004 and 25,000 have been so far this year.Southwest Florida isn't at that point yet, however, and still offers bargains compared to other markets: Converters typically pay $98,000 to $105,000 a unit for a large, 20-year-old complex, compared with $200,000 in Miami.
CONVERSION EASIER
Randy Mercer, a commercial real estate agent with CB Richard Ellis, Fort Myers-Naples, said it's a lot faster and easier to convert existing rental complexes to condominiums than to build them from scratch. "If you build you have to buy the land, go through permitting, pre-selling and all of that."Besides, he said, "People are still paying rent through the conversion process, so it's not like you're buying an empty shell."
Under state law, renters have to leave once their lease is up although they must be offered the first chance to purchase their apartments.Mercer doesn't agree with McCabe that there's a crash coming. Conversions will always be attractive, he said, because typically the older complexes are in good locations and priced lower than new condos.
They're attractive to people who otherwise would be pushed out to the edge of the urban area where new homes are being built. "They can't get a $400,000 house but they can get a $150,000 or $170,000 condo."Still, he said, the boom in Lee County conversions may be just about over. "I think there are a few projects that are left in the marketplace, but I think most of the really good ones are gone."Not all apartment complexes are equal, he said. The ideal complex for conversion has at least 150 to 175 units and is in a good enough neighborhood to be attractive to buyers.
McCabe warned that consumers should be careful about buying a conversion.Buyers should make sure they understand things such as how much money the seller has agreed to give the condominium association to cover any repairs and replacements that may need to be done. Almost nobody is being careful enough with such details or even getting an independent inspection, which is done routinely when buying a house, he said.
"They may get in and find there's a huge mold problem behind the drywall, or the heating and air-conditioning system may need to be replaced," McCabe said. "The seller may have left only $40,000 in reserves. The buyers can get themselves into significant financial outlays."
Retired, never owned, not ready to start now
Arthur Perez, 62, retired and moved to Cape Coral from New York City to raise his two children, ages 10 and 12.But he recently was told that Coral Cove Apartments, where he lives, is being converted into condominiums."I might consider staying but it's basically up in the air," Perez said. "I've never owned, I've never been into the real estate."
He wants to keep his children in the schools they attend, but is having a hard time finding a three-bedroom apartment he can afford and has doubts about spending the roughly $200,000 his apartment would cost."I worked for the phone company for 31 years and I'm on a tight budget," he said. "It's a fixed pension, one of those early outs. That's one of my particular problems: I'm kind of limited as far as what I can do."
With wedding, moving plans, not time to buy
William Staros, 22, is a full-time student and part-time Lee County substitute teacher who graduates next year and plans to go to Miami to get a teaching job after he gets married. His fiancee is also graduating and will look for a job there as a theater director.But Staros' apartment at the River Bend complex on Winker Avenue is being converted into condominiums. "They want everyone out by the end of November."Now they're agonizing over what to do. "We may just go and get a loan and get a first house but the prices they're asking are just absurd."
They may try to find an apartment to rent, he said, but "we don't want to live in a run-down community. The big issue is we're getting married this Christmas and more than likely we'll only stay here another six or seven months."
BY THE NUMBERS
Here are some statistics on condominium conversions of apartment buildings:• 60,844: number of apartments bought in 2004 for conversion purposes• $2 billion: amount condo converters paid for apartment buildings in 2004 ($123,575 per unit)
• $1.6 billion: amount condo converters paid for apartment buildings through mid-May ($155,400 per unit)• $200,000: typical price per unit paid by converters in Miami
• $98,000-$105,000: typical price per unit paid by converters in Lee County• 22 percent: percentage of condo conversion units in Florida bought by foreigners over the past two years
Published by news-press.com on September 12, 2005
Cape Coral resident Arthur Perez, 61, received notice Aug. 3 that he will have until the end of his lease in April to purchase his apartment at Coral Cove Condominiums or move. Many area apartment complexes are converting to condominiums. STEPHEN HAYFORD/news-press.com
Kevin Geren, a paramedic for Lee County EMS, is likely to be forced out of his apartment in Gateway by a conversion. He lives in this two-bedroom apartment with his wife and stepdaughter.
Southwest Florida's riding the crest of a condo conversion wave — making big bucks for developers but headaches for some renters who can't or won't buy their apartments.Experts agree that the boom is well under way in super-heated real estate markets such as Lee County's, where thousands of apartments have been converted or are in the process. But they are split when it comes to predicting whether the high prices caused by the boom can be sustained in the long haul.Meanwhile, renters sometimes have tough decisions to make.
"I'm likely to be forced out," said Kevin Geren, 33, a Lee County paramedic who lives with his wife and a stepdaughter in a two-bedroom apartment at The Grand Apartments at Gateway, which is being converted into condos by Miami-based Prestige Builders Group.
Geren's thinking about buying and says it may be a good deal. "If they're willing to sell me one for $165,900 but sell to the general public for $180,000, it may be a decent investment."The alternatives are bleak, he said: renting a three-bedroom house would cost about $1,400 a month; a three-bedroom apartment rents for $1,100-$1,200. He's paying $900 now.
Meanwhile, housing prices have exploded in Lee County recently. The median price of an existing single-family home rose from $200,000 in July 2004 to $287,500 in July 2005, according to the Florida Association of Realtors.As a result, apartments are quickly becoming condominiums. The Gardens at Bonita Springs, for example, started out as an apartment complex but switched to condos in 2004 because that made more economic sense to owner Royal Palm Communities.
ECONOMICS FUEL TREND
Simple economics are behind the nationwide trend, said John McIlwain, senior resident fellow for housing at the private, nonprofit Urban Land Institute.For the first time in history, he said, "The price of an existing condo is more than the price of an existing single-family home": $219,000 vs. $217,000 according to the National Association of Realtors.
In addition, McIlwain said, most rental markets around the country are soft, and there's a major influx of young couples priced out of the single-family-home market and "empty nesters" who don't want the hassles of keeping up a house.So far, for buyers and developers alike, the conversion craze has been mostly profitable as housing prices have continued to soar. In Regatta Point, formerly Kenwood Apartments on College Parkway in south Fort Myers, prices started at $129,000 but "the prices have escalated quite a bit," said Lourdes Castaner-Ruano, marketing director for Hialeah-based Puig Development Group, which is doing the conversion.
Puig is also converting River Bend Apartments and recently sold out the former Renaissance Apartments, both on Winkler Avenue in Fort Myers. Castaner-Ruano said buyers in this market are a mix of investors, people looking for a place to live and second-home purchasers, many of them from the east coast."In some of these projects they've been literally raising the prices every hour at the grand opening," said Deerfield Beach-based Jack McCabe, a multifamily housing market analyst with McCabe Research & Consulting.But, he said, things don't look good for the future in South Florida and other markets where a lot of apartment buildings are going condo. "There's almost a feeding frenzy right now in real estate that was present before the stock market bust in 2000 and before other busts before that."
The pace isn't sustainable, McCabe said, noting that in South Florida, 17,000 apartments were converted into condos in 2004 and 25,000 have been so far this year.Southwest Florida isn't at that point yet, however, and still offers bargains compared to other markets: Converters typically pay $98,000 to $105,000 a unit for a large, 20-year-old complex, compared with $200,000 in Miami.
CONVERSION EASIER
Randy Mercer, a commercial real estate agent with CB Richard Ellis, Fort Myers-Naples, said it's a lot faster and easier to convert existing rental complexes to condominiums than to build them from scratch. "If you build you have to buy the land, go through permitting, pre-selling and all of that."Besides, he said, "People are still paying rent through the conversion process, so it's not like you're buying an empty shell."
Under state law, renters have to leave once their lease is up although they must be offered the first chance to purchase their apartments.Mercer doesn't agree with McCabe that there's a crash coming. Conversions will always be attractive, he said, because typically the older complexes are in good locations and priced lower than new condos.
They're attractive to people who otherwise would be pushed out to the edge of the urban area where new homes are being built. "They can't get a $400,000 house but they can get a $150,000 or $170,000 condo."Still, he said, the boom in Lee County conversions may be just about over. "I think there are a few projects that are left in the marketplace, but I think most of the really good ones are gone."Not all apartment complexes are equal, he said. The ideal complex for conversion has at least 150 to 175 units and is in a good enough neighborhood to be attractive to buyers.
McCabe warned that consumers should be careful about buying a conversion.Buyers should make sure they understand things such as how much money the seller has agreed to give the condominium association to cover any repairs and replacements that may need to be done. Almost nobody is being careful enough with such details or even getting an independent inspection, which is done routinely when buying a house, he said.
"They may get in and find there's a huge mold problem behind the drywall, or the heating and air-conditioning system may need to be replaced," McCabe said. "The seller may have left only $40,000 in reserves. The buyers can get themselves into significant financial outlays."
Retired, never owned, not ready to start now
Arthur Perez, 62, retired and moved to Cape Coral from New York City to raise his two children, ages 10 and 12.But he recently was told that Coral Cove Apartments, where he lives, is being converted into condominiums."I might consider staying but it's basically up in the air," Perez said. "I've never owned, I've never been into the real estate."
He wants to keep his children in the schools they attend, but is having a hard time finding a three-bedroom apartment he can afford and has doubts about spending the roughly $200,000 his apartment would cost."I worked for the phone company for 31 years and I'm on a tight budget," he said. "It's a fixed pension, one of those early outs. That's one of my particular problems: I'm kind of limited as far as what I can do."
With wedding, moving plans, not time to buy
William Staros, 22, is a full-time student and part-time Lee County substitute teacher who graduates next year and plans to go to Miami to get a teaching job after he gets married. His fiancee is also graduating and will look for a job there as a theater director.But Staros' apartment at the River Bend complex on Winker Avenue is being converted into condominiums. "They want everyone out by the end of November."Now they're agonizing over what to do. "We may just go and get a loan and get a first house but the prices they're asking are just absurd."
They may try to find an apartment to rent, he said, but "we don't want to live in a run-down community. The big issue is we're getting married this Christmas and more than likely we'll only stay here another six or seven months."
BY THE NUMBERS
Here are some statistics on condominium conversions of apartment buildings:• 60,844: number of apartments bought in 2004 for conversion purposes• $2 billion: amount condo converters paid for apartment buildings in 2004 ($123,575 per unit)
• $1.6 billion: amount condo converters paid for apartment buildings through mid-May ($155,400 per unit)• $200,000: typical price per unit paid by converters in Miami
• $98,000-$105,000: typical price per unit paid by converters in Lee County• 22 percent: percentage of condo conversion units in Florida bought by foreigners over the past two years
The Seller's Dilemma:Is Now the Time?
The Seller's Dilemma:Is Now the Time?
By JUNE FLETCHER.
For months, Richard and Sher Pestino have watched real-estate prices in their neighborhood in Loomis, Calif., climb toward, and pass, the $1 million mark. But it was only this week that the couple decided to sell their own four-bedroom house.
Among the deciding factors: A neighbor's home wasn't selling, leading them to believe the market was cooling. Then came a series of confusing economic indicators, and Hurricane Katrina. "We decided it's time to be sensible," says Mrs. Pestino, an office manager for a venture-capital firm.
Homeowners who've been trying to pick the right time to sell are grappling with a new set of questions. Over the last two weeks, as Katrina reeled through the south, a less-noticed array of at-times contradictory economic data were also released. On one hand, median prices for existing homes climbed at a record pace, and mortgage rates last week dropped yet again. On the other, according to a report issued Aug. 23, existing-home sales declined in July, the second time this year. Rising oil prices, meanwhile, could result in lower interest rates that would keep the boom going -- or could prompt a recessionary trend.
The optimistic view, held by economists such as David Lereah of the National Association of Realtors, argues that housing prices could continue to grow. In July, for example, existing-home prices rose to a record median price of $218,000. In the second quarter of 2005, 24 states and the District of Columbia showed double-digit annual price growth, according to the Office of Federal Housing Enterprise Oversight. Indeed, Katrina has had the surprising effect of lowering mortgage rates, a development that's likely to keep people buying houses. The bond market has pushed down the long-term rates on which mortages are based, partly because it expects the Federal Reserve to be less aggressive in raising rates despite some jitters about inflation. For the week ending Sept. 2, the average contract rate for a 30-year fixed rate mortgage was 5.64%, down from 5.78% two weeks earlier, according to the Mortgage Bankers Association.
Yet the more pessimistic feeling among other economists is that the rapid home-price growth over the last eight years is winding down. In July, existing-home sales dropped 2.6%, while new-home prices in June fell to $219,500, from a record $237,300 in February 2005. As of Aug. 26, the Mortgage Bankers Association reported that its index of demand for mortgages used to purchase homes was 470.6, down 11% from the peak of 529.3 in June.
All of that has prompted Michael Aston to begin researching an asking price for his 80-foot-by-120-foot canal-front lot in Punta Gorda, Fla. The retired businessman worries real-estate prices have climbed too high in the area -- prices overall in the neighborhood have increased almost 30% since June 2005 -- and about future hurricanes. Though he hasn't decided whether to offer the lot now or to wait until January when the "snowbirds" start heading south for their vacations, Mr. Aston says he's committed to selling, because "a nosedive is possible." He's also begun receiving entreaties from brokers: One, the 58-year-old says, offered to cut his 10% commission to 4%.
Buying in Texas
In San Diego, economic indicators coupled with the impact of Katrina prompted Robert Campbell to take a different tack. Watching news accounts of the storm, Mr. Campbell, an economist and self-employed investor, became convinced that the post-Katrina landscape included high oil prices that would slow job growth and prompt a recession. In this scenario, he concluded that homeowners would cash out of high-priced areas and move to more affordable ones. After identifying Austin, Texas, as one likely destination, Mr. Campbell began calling fellow investors, looking to raise $3 million to buy raw land in Austin. His plan: Buy up land at $10,000 an acre, spend about $300,000 subdividing it, then sell it for $20,000 an acre to homebuilders. "I think things are ripe for a correction," says Mr. Campbell.
In spite of worries about Katrina's immediate impact, over the long term, some economists say that high oil prices may well be the factor that puts the brakes on soaring home prices. Since the Gulf of Mexico supplies about one-fourth of U.S. demand for oil, Katrina's devastation has already yielded higher oil prices. That will make it more expensive to produce and transport building-related materials, from windows to drywall.
Muddling the picture further: the rebuilding of New Orleans, which will attract construction workers for months or years, and take them away from other parts of the country. That may cut into the supply of new homes that can be built elsewhere, says William C. Young, an economist in Arlington, Va., and as supply shrinks, prices will rise.
Sprucing Up for Sales
For sellers in the nation's hottest housing markets, the thought that the peak may have passed is sobering. In the suburban Washington, D.C., market, the number of contracts for single-family homes fell 8.9% in July from the year before. Brokers who used to oversee bidding wars of houses that hadn't had a makeover in decades are now pushing sellers to fix up their places to sell faster.
Vivian Donahue says she encouraged one client in Falls Church, Va., to spend $6,000 to put in new carpeting and refinish her hardwood floors, to compete with similar homes nearby that had been on the market for weeks. "You wouldn't have had to do this a year ago," she says. Her client's spruced-up house sold in a few days at a little more than its $475,000 asking price; the others are still for sale.
In Cape Cod, broker Jack Cotton says things have changed since a year ago, when prices were in a "frenzy" and he was advising clients to price their homes at or slightly above the market. Following Katrina, he's expecting a slowdown, at least in the short run, and has started telling sellers to price about 5% below the asking price of comparable homes that have sat on the market for at least a month. "That will create urgency," he says. For sellers who don't want to lower their prices, he's recommending they pull their homes off the market for at least a year, when he expects the national economy to have recovered from Katrina's effects.
By JUNE FLETCHER.
For months, Richard and Sher Pestino have watched real-estate prices in their neighborhood in Loomis, Calif., climb toward, and pass, the $1 million mark. But it was only this week that the couple decided to sell their own four-bedroom house.
Among the deciding factors: A neighbor's home wasn't selling, leading them to believe the market was cooling. Then came a series of confusing economic indicators, and Hurricane Katrina. "We decided it's time to be sensible," says Mrs. Pestino, an office manager for a venture-capital firm.
Homeowners who've been trying to pick the right time to sell are grappling with a new set of questions. Over the last two weeks, as Katrina reeled through the south, a less-noticed array of at-times contradictory economic data were also released. On one hand, median prices for existing homes climbed at a record pace, and mortgage rates last week dropped yet again. On the other, according to a report issued Aug. 23, existing-home sales declined in July, the second time this year. Rising oil prices, meanwhile, could result in lower interest rates that would keep the boom going -- or could prompt a recessionary trend.
The optimistic view, held by economists such as David Lereah of the National Association of Realtors, argues that housing prices could continue to grow. In July, for example, existing-home prices rose to a record median price of $218,000. In the second quarter of 2005, 24 states and the District of Columbia showed double-digit annual price growth, according to the Office of Federal Housing Enterprise Oversight. Indeed, Katrina has had the surprising effect of lowering mortgage rates, a development that's likely to keep people buying houses. The bond market has pushed down the long-term rates on which mortages are based, partly because it expects the Federal Reserve to be less aggressive in raising rates despite some jitters about inflation. For the week ending Sept. 2, the average contract rate for a 30-year fixed rate mortgage was 5.64%, down from 5.78% two weeks earlier, according to the Mortgage Bankers Association.
Yet the more pessimistic feeling among other economists is that the rapid home-price growth over the last eight years is winding down. In July, existing-home sales dropped 2.6%, while new-home prices in June fell to $219,500, from a record $237,300 in February 2005. As of Aug. 26, the Mortgage Bankers Association reported that its index of demand for mortgages used to purchase homes was 470.6, down 11% from the peak of 529.3 in June.
All of that has prompted Michael Aston to begin researching an asking price for his 80-foot-by-120-foot canal-front lot in Punta Gorda, Fla. The retired businessman worries real-estate prices have climbed too high in the area -- prices overall in the neighborhood have increased almost 30% since June 2005 -- and about future hurricanes. Though he hasn't decided whether to offer the lot now or to wait until January when the "snowbirds" start heading south for their vacations, Mr. Aston says he's committed to selling, because "a nosedive is possible." He's also begun receiving entreaties from brokers: One, the 58-year-old says, offered to cut his 10% commission to 4%.
Buying in Texas
In San Diego, economic indicators coupled with the impact of Katrina prompted Robert Campbell to take a different tack. Watching news accounts of the storm, Mr. Campbell, an economist and self-employed investor, became convinced that the post-Katrina landscape included high oil prices that would slow job growth and prompt a recession. In this scenario, he concluded that homeowners would cash out of high-priced areas and move to more affordable ones. After identifying Austin, Texas, as one likely destination, Mr. Campbell began calling fellow investors, looking to raise $3 million to buy raw land in Austin. His plan: Buy up land at $10,000 an acre, spend about $300,000 subdividing it, then sell it for $20,000 an acre to homebuilders. "I think things are ripe for a correction," says Mr. Campbell.
In spite of worries about Katrina's immediate impact, over the long term, some economists say that high oil prices may well be the factor that puts the brakes on soaring home prices. Since the Gulf of Mexico supplies about one-fourth of U.S. demand for oil, Katrina's devastation has already yielded higher oil prices. That will make it more expensive to produce and transport building-related materials, from windows to drywall.
Muddling the picture further: the rebuilding of New Orleans, which will attract construction workers for months or years, and take them away from other parts of the country. That may cut into the supply of new homes that can be built elsewhere, says William C. Young, an economist in Arlington, Va., and as supply shrinks, prices will rise.
Sprucing Up for Sales
For sellers in the nation's hottest housing markets, the thought that the peak may have passed is sobering. In the suburban Washington, D.C., market, the number of contracts for single-family homes fell 8.9% in July from the year before. Brokers who used to oversee bidding wars of houses that hadn't had a makeover in decades are now pushing sellers to fix up their places to sell faster.
Vivian Donahue says she encouraged one client in Falls Church, Va., to spend $6,000 to put in new carpeting and refinish her hardwood floors, to compete with similar homes nearby that had been on the market for weeks. "You wouldn't have had to do this a year ago," she says. Her client's spruced-up house sold in a few days at a little more than its $475,000 asking price; the others are still for sale.
In Cape Cod, broker Jack Cotton says things have changed since a year ago, when prices were in a "frenzy" and he was advising clients to price their homes at or slightly above the market. Following Katrina, he's expecting a slowdown, at least in the short run, and has started telling sellers to price about 5% below the asking price of comparable homes that have sat on the market for at least a month. "That will create urgency," he says. For sellers who don't want to lower their prices, he's recommending they pull their homes off the market for at least a year, when he expects the national economy to have recovered from Katrina's effects.
Friday, September 09, 2005
Housing Permits hit record in Lee County.
Permits hit record in Lee, Cape Coral
Prospective buyers line up for yet-to-be-built projectBy Dick Hogandhogan@news-press.com Published by news-press.com on September 8, 2005
Real estate agents and home buyers waited outside the complex in order to be among the first to put down a deposit for new homes at Majestic Palms, a new community. The number of permits pulled for single-family homes in Lee County and Cape Coral soared to records in August as demand for new houses reached a near frenzy.Nowhere was the desire to buy a home more urgently felt than at the gate in front of Lakewood Village, where 11 people were waiting Wednesday afternoon for the chance to put $5,000 down on a carriage home in the yet-to-be-constructed Majestic Palms development at McGregor Boulevard and Kelly Road in south Fort Myers.Those in line were vying for the chance to be first when Pulte Homes opens the doors of its sales center at 10 a.m. today.
Prospective buyers line up for yet-to-be-built projectBy Dick Hogandhogan@news-press.com Published by news-press.com on September 8, 2005
Real estate agents and home buyers waited outside the complex in order to be among the first to put down a deposit for new homes at Majestic Palms, a new community. The number of permits pulled for single-family homes in Lee County and Cape Coral soared to records in August as demand for new houses reached a near frenzy.Nowhere was the desire to buy a home more urgently felt than at the gate in front of Lakewood Village, where 11 people were waiting Wednesday afternoon for the chance to put $5,000 down on a carriage home in the yet-to-be-constructed Majestic Palms development at McGregor Boulevard and Kelly Road in south Fort Myers.Those in line were vying for the chance to be first when Pulte Homes opens the doors of its sales center at 10 a.m. today.
Katrina worries local Florida Builders.
Katrina worries local builders.
Shortages, rising costs may be on horizon.
By PETE SKIBAPSKIBA@NEWS-PRESS.COM Published by news-press.com on September 9, 2005.
Although Hurricane Katrina's massive destruction missed Lee County, its impact still could stall local builders.Local builders at a trade show in Cape Coral on Thursday worried the massive rebuilding effort needed in Louisiana, Mississippi and Alabama could divert construction supplies they need.The trade show hosted by the Cape Coral Construction Industry Association included a round table discussion concerning trends in the industry.
Shortages, rising costs may be on horizon.
By PETE SKIBAPSKIBA@NEWS-PRESS.COM Published by news-press.com on September 9, 2005.
Although Hurricane Katrina's massive destruction missed Lee County, its impact still could stall local builders.Local builders at a trade show in Cape Coral on Thursday worried the massive rebuilding effort needed in Louisiana, Mississippi and Alabama could divert construction supplies they need.The trade show hosted by the Cape Coral Construction Industry Association included a round table discussion concerning trends in the industry.
Thursday, September 08, 2005
Naples: Condo Conversion.
NAPLES: Condo Conversion! Just Released!
PAY NO CLOSING COSTS!
Near I-75 and Vanderbilt Beach Rd. No Restrictions!
ONLY 5% down! Closing in 45 Days! There are only 280 units in this gated community.Buildings are only 3 years old! Townhomes in the area are selling in the Mid $300`s.
1bedroom, 1bath w/ 911 SF under A/C. Starting @ $190K.
2bedroom,1bath w/ 1120 SF under A/C. Starting @$240K.
3bedroom,2bath w/1605 SF under A/C. Starting @$330K.
Maintenance Fee is $199.00 per month. Includes-80 Channel Cable TV,Master Policy Insurance of the Exterior, Pool, Fitness Center!
Naples is truly a golf enthusiasts dream come true with more championship golf courses per capita than anywhere else in the world.A place where the scarlet sun falls below the towering cypress trees painting soft pink and orange hues onto the vibrant greens that stretch out before you.
Visit us @www.preconstructioninflorida.com.
PAY NO CLOSING COSTS!
Near I-75 and Vanderbilt Beach Rd. No Restrictions!
ONLY 5% down! Closing in 45 Days! There are only 280 units in this gated community.Buildings are only 3 years old! Townhomes in the area are selling in the Mid $300`s.
1bedroom, 1bath w/ 911 SF under A/C. Starting @ $190K.
2bedroom,1bath w/ 1120 SF under A/C. Starting @$240K.
3bedroom,2bath w/1605 SF under A/C. Starting @$330K.
Maintenance Fee is $199.00 per month. Includes-80 Channel Cable TV,Master Policy Insurance of the Exterior, Pool, Fitness Center!
Naples is truly a golf enthusiasts dream come true with more championship golf courses per capita than anywhere else in the world.A place where the scarlet sun falls below the towering cypress trees painting soft pink and orange hues onto the vibrant greens that stretch out before you.
Visit us @www.preconstructioninflorida.com.
Wednesday, September 07, 2005
Baton Rouge Real Estate Becomes a Hot Topic!
Baton Rouge Real EstateBecomes Hot Property
By JEFF D. OPDYKEStaff Reporter of The Wall Street Journal
BATON ROUGE, La. -- Overnight, this city of 400,000 has grown faster than any other in America.
Exactly how many have come to the metropolitan area isn't known, but the tens of thousands of residents and business owners from across the hurricane-ravaged parishes of southern Louisiana seeking to rebuild businesses and lives illustrate a far larger picture of the mass migration that promises to reshape life in Gulf Coast and deep South communities such as Houston; Jackson, Miss.; Mobile, Ala.; and Memphis, Tenn.
"There is just a huge demand for office space," said Herb Gomez, executive vice president for the Greater Baton Rouge Association of Realtors. Anything you can turn into offices is being grabbed up at the list price. We have members [of the Realtors association] trying to find any vacant grocery store or old strip center that they can."
Mark B. Hebert, president of Kurz & Hebert Commercial Real Estate Inc., says "buildings we couldn't give away are now being snapped up" as businesses from as far away as the Mississippi Gulf Coast come looking for new space in Baton Rouge. Mr. Hebert says bank processing centers, law firms and a host of other service-oriented businesses "that never again want to be down for weeks at a time are calling us every day saying they want out and they want something permanent in Baton Rouge."
As a result, businesses are signing leases for Class A office space, the highest quality, at as much as $24 a square foot, up from $18 or $19 before Katrina. Class B space is up to $20 from about $15. Class C space, "where you were lucky to get maybe $8 to $10, is now going for $12," Mr. Hebert says.
One upscale shopping center still being built, and home to a Whole Foods Market that opened this summer, was about 73% leased before Katrina. Mr. Hebert says based on the influx of calls he and his partner are fielding, "this will be 100% leased when we open it again." He has to hire extra staff this week to handle the increased volume.
Similar dynamics are unfolding in the residential market. Before Katrina, "a fast sale here was a home that sold in a week in a hot neighborhood," says Judy Burkett, owner of Judy Burkett Realtors in Baton Rouge. "Today, homes last for minutes. You put them into the [Multiple Listing Service] system, and they're gone almost immediately."
Because phone networks haven't been completely repaired, buyers and agents are frustrated that by the time they ring through to a seller, an available house has already been sold. On average-priced homes in the $140,000 range, buyers are bidding as much as $10,000 above the asking price, sight unseen, and hoping to get a contract signed before a competing bid arrives. In one instance Ms. Burkett knows about a seller who accepted an offer on a house but hadn't yet signed the paperwork when another buyer knocked on his door and offered $30,000 more.
Homes that have been on the market for a year in some cases "are now receiving multiple offers at the listing price or above," says Betty W. Jackson, a CJ Brown agent who has sold off all of her inventory of homes.
Even in smaller cities, the impact is being felt. Amy Jones, a spokeswoman for U.S. Rep. Charles Boustany, said real-estate agents had reported to the Louisiana congressman's office that 250 homes were sold in one day in Lafayette, about 60 miles west of Baton Rouge. "Just about every available property here has been sold," she said.
President Bush passed through Baton Rouge yesterday, meeting with storm refugees and promising help. Earlier, Baton Rouge Mayor Melvin Holden asked for billions in federal aid to help the city handle the influx.
"We're now part of an experiment," says Jim Richardson, an economics professor at Louisiana State University in Baton Rouge. "An infrastructure that was meant to handle, maybe, 400,000 people, is now being asked to handle 500,000 or more. There are lots of pressures that are just now beginning to be felt."
The question regional cities and their public officials and business leaders now face is whether this dislocation is just a temporary upset or a permanent change. If it is the former, locals will have to learn to cope with inconveniences that could last for several months.
But if roots set and the changes now taking shape become permanent, local, state and federal governments will be pressed to come up with the money necessary to expand services and infrastructure, and to create new jobs, schools and subdivisions needed to make room for their new residents.
If anyone can find a place to live here, it is Arthur Sterbcow. As president of Latter & Blum/CJ Brown Realtors in New Orleans, Mr. Sterbcow has at his disposal a major property-management company located in Louisiana's capital city. Yet these days, even he has trouble finding a home for his family.
After a pine tree speared the center of his St. Tammany Parish home during Katrina's spin across southeastern Louisiana, Mr. Sterbcow phoned his company, one of the region's largest real-estate firms, and put in his request for a rental. "They told me all we have is one left, a two-bedroom apartment across the street from a drug-rehab center," Mr. Sterbcow recalls. "What was I going to do? I had to take it."
Such is life these days in Baton Rouge, where two cities have forcibly been merged into one, causing stresses and strains for which no government can adequately prepare.
Without changes, however, "the pressures on Baton Rouge's infrastructure will be astronomical," said Mr. Sterbcow. "The city can't just sit back and play catch as all these new residents and businesses arrive. If you screw up and don't provide the services and infrastructure, you're going to lose them to Texas,Florida, and Georgia."
By JEFF D. OPDYKEStaff Reporter of The Wall Street Journal
BATON ROUGE, La. -- Overnight, this city of 400,000 has grown faster than any other in America.
Exactly how many have come to the metropolitan area isn't known, but the tens of thousands of residents and business owners from across the hurricane-ravaged parishes of southern Louisiana seeking to rebuild businesses and lives illustrate a far larger picture of the mass migration that promises to reshape life in Gulf Coast and deep South communities such as Houston; Jackson, Miss.; Mobile, Ala.; and Memphis, Tenn.
"There is just a huge demand for office space," said Herb Gomez, executive vice president for the Greater Baton Rouge Association of Realtors. Anything you can turn into offices is being grabbed up at the list price. We have members [of the Realtors association] trying to find any vacant grocery store or old strip center that they can."
Mark B. Hebert, president of Kurz & Hebert Commercial Real Estate Inc., says "buildings we couldn't give away are now being snapped up" as businesses from as far away as the Mississippi Gulf Coast come looking for new space in Baton Rouge. Mr. Hebert says bank processing centers, law firms and a host of other service-oriented businesses "that never again want to be down for weeks at a time are calling us every day saying they want out and they want something permanent in Baton Rouge."
As a result, businesses are signing leases for Class A office space, the highest quality, at as much as $24 a square foot, up from $18 or $19 before Katrina. Class B space is up to $20 from about $15. Class C space, "where you were lucky to get maybe $8 to $10, is now going for $12," Mr. Hebert says.
One upscale shopping center still being built, and home to a Whole Foods Market that opened this summer, was about 73% leased before Katrina. Mr. Hebert says based on the influx of calls he and his partner are fielding, "this will be 100% leased when we open it again." He has to hire extra staff this week to handle the increased volume.
Similar dynamics are unfolding in the residential market. Before Katrina, "a fast sale here was a home that sold in a week in a hot neighborhood," says Judy Burkett, owner of Judy Burkett Realtors in Baton Rouge. "Today, homes last for minutes. You put them into the [Multiple Listing Service] system, and they're gone almost immediately."
Because phone networks haven't been completely repaired, buyers and agents are frustrated that by the time they ring through to a seller, an available house has already been sold. On average-priced homes in the $140,000 range, buyers are bidding as much as $10,000 above the asking price, sight unseen, and hoping to get a contract signed before a competing bid arrives. In one instance Ms. Burkett knows about a seller who accepted an offer on a house but hadn't yet signed the paperwork when another buyer knocked on his door and offered $30,000 more.
Homes that have been on the market for a year in some cases "are now receiving multiple offers at the listing price or above," says Betty W. Jackson, a CJ Brown agent who has sold off all of her inventory of homes.
Even in smaller cities, the impact is being felt. Amy Jones, a spokeswoman for U.S. Rep. Charles Boustany, said real-estate agents had reported to the Louisiana congressman's office that 250 homes were sold in one day in Lafayette, about 60 miles west of Baton Rouge. "Just about every available property here has been sold," she said.
President Bush passed through Baton Rouge yesterday, meeting with storm refugees and promising help. Earlier, Baton Rouge Mayor Melvin Holden asked for billions in federal aid to help the city handle the influx.
"We're now part of an experiment," says Jim Richardson, an economics professor at Louisiana State University in Baton Rouge. "An infrastructure that was meant to handle, maybe, 400,000 people, is now being asked to handle 500,000 or more. There are lots of pressures that are just now beginning to be felt."
The question regional cities and their public officials and business leaders now face is whether this dislocation is just a temporary upset or a permanent change. If it is the former, locals will have to learn to cope with inconveniences that could last for several months.
But if roots set and the changes now taking shape become permanent, local, state and federal governments will be pressed to come up with the money necessary to expand services and infrastructure, and to create new jobs, schools and subdivisions needed to make room for their new residents.
If anyone can find a place to live here, it is Arthur Sterbcow. As president of Latter & Blum/CJ Brown Realtors in New Orleans, Mr. Sterbcow has at his disposal a major property-management company located in Louisiana's capital city. Yet these days, even he has trouble finding a home for his family.
After a pine tree speared the center of his St. Tammany Parish home during Katrina's spin across southeastern Louisiana, Mr. Sterbcow phoned his company, one of the region's largest real-estate firms, and put in his request for a rental. "They told me all we have is one left, a two-bedroom apartment across the street from a drug-rehab center," Mr. Sterbcow recalls. "What was I going to do? I had to take it."
Such is life these days in Baton Rouge, where two cities have forcibly been merged into one, causing stresses and strains for which no government can adequately prepare.
Without changes, however, "the pressures on Baton Rouge's infrastructure will be astronomical," said Mr. Sterbcow. "The city can't just sit back and play catch as all these new residents and businesses arrive. If you screw up and don't provide the services and infrastructure, you're going to lose them to Texas,Florida, and Georgia."
Monday, September 05, 2005
Katrina`s effect on New Homes Sales.
One week after the destruction in New Orleans and Mississippi, it`s time to digest what the future will bring in the Housing Market.
The cost of rebuilding new homes for people who have been hit in this region will cost billions. Projections of completion of such as task is 9 months to a year. In my opinion we`re looking at a 5-6 year turnaround before these cities are actually rebuilt.
How will this effect the rest of our country? Expect materials such as Dry Wall, Sheet Rock, Concrete Block, Paint and Labor Costs to rise across the board. This will indeed cause the prices for new construction to rise an average of 20-25%.
What does this mean for investors? I strongly suggest that it`s time to look at purchasing new construction as well as condo conversions today, not tomorrow. Housing will be scarce in certain regions. Because of our location Florida, will undoubtedly gain from this as well as Texas.
It`s certain that these people will relocate to our area`s in search of jobs. Places like Jacksonville,Tampa and Orlando will benefit for those seeking new employment.
Rentals in these area`s will be at a premium!
In the next two weeks, look for Fed Chairman Greenspan to leave interest rates alone for the time being! With gas prices continuing to move higher, it doesn`t make sense to let the interest rates continue to rise!
Inflation during times of massive destruction is not what this country needs right now and the rest of the world is watching us very carefully to see how our government reacts. I highly doubt at this juncture that President Bush will allow this to happen. Within the next few weeks, we`ll see what direction our nation will be heading.
Our prays go out to our neighbors in New Orleans and Mississippi.
The cost of rebuilding new homes for people who have been hit in this region will cost billions. Projections of completion of such as task is 9 months to a year. In my opinion we`re looking at a 5-6 year turnaround before these cities are actually rebuilt.
How will this effect the rest of our country? Expect materials such as Dry Wall, Sheet Rock, Concrete Block, Paint and Labor Costs to rise across the board. This will indeed cause the prices for new construction to rise an average of 20-25%.
What does this mean for investors? I strongly suggest that it`s time to look at purchasing new construction as well as condo conversions today, not tomorrow. Housing will be scarce in certain regions. Because of our location Florida, will undoubtedly gain from this as well as Texas.
It`s certain that these people will relocate to our area`s in search of jobs. Places like Jacksonville,Tampa and Orlando will benefit for those seeking new employment.
Rentals in these area`s will be at a premium!
In the next two weeks, look for Fed Chairman Greenspan to leave interest rates alone for the time being! With gas prices continuing to move higher, it doesn`t make sense to let the interest rates continue to rise!
Inflation during times of massive destruction is not what this country needs right now and the rest of the world is watching us very carefully to see how our government reacts. I highly doubt at this juncture that President Bush will allow this to happen. Within the next few weeks, we`ll see what direction our nation will be heading.
Our prays go out to our neighbors in New Orleans and Mississippi.
Sunday, September 04, 2005
Losses from Katrina will effect us all.
Losses from Hurricane Katrina are expected to be so sweeping the nation's flood insurance program will have to ask taxpayers for money to cover the costs.Claims filed under the National Flood Insurance Program could run as high as $20 billion, experts said.
The program collects only $1.85 billion a year in premiums, so the balance will have to come from somewhere else.The insurance program, a part of the Federal Emergency Management Agency under the Department of Homeland Security, has authority to tap the treasury for $1.5 billion, but that will not be enough.
The single costliest event in the program's history was Tropical storm Allison in 2001 at $1.27 billion. Claims from the 2004 hurricane season totalled $1 billion.Together, those won't compare to Katrina, said Ed Pasterick, with the National Flood Insurance Program."It's huge. It will be in the billions," he said.
The insured value, just for flooding, of homes and businesses across New Orleans alone amounts to $32 billion.To cope with anticipated claims, the flood program will have to borrow money from the U.S. Treasury or get Congress to give it to them. Either way, it will need a huge influx of cash to stay afloat in coming months.
Whatever happens, the insurance program will not go under."The government is not going to default on contracts they have with the public," Pasterick said. "The bottom line and the word we have to get out is that it doesn't matter the size of this, we will be able to pay the claims."Pasterick does not expect rates to increase.
Rates are set on average historical losses, he said. Katrina would raise that figure, but actuaries may throw it out because it skews the results.Before Katrina hit, the insurance program had about $100 million in reserves to pay claims.
In a typical year, the $1.85 billion in premiums more than covers its usual payout of about $800 million.Because Katrina's scope is unprecedented, the agency could be saddled with a debt four or five times greater than its net income.Bob Hunter is director of insurance for the Consumer Federation of America and the former Federal Insurance Administrator. He estimates Katrina will cost the flood insurance program between $10 billion and $20 billion.
For the first time in hurricane insurance history, he said, damage claims from flooding will exceed claims from wind.Floods have caused the nation's worst natural disasters in terms of lost lives and property damage, but only 10 to 15 percent of homeowners are insured for flooding, Hunter said.
In New Orleans, where everyone knows they are below sea-level, 50 to 60 percent of properties have flood insurance.In just four Louisiana parishes affected by flooding the insurance program has nearly 217,000 policies worth more than $32 billion in coverage."I think taxpayers will say we need to take care of people and we shouldn't walk away from people with insurance policies," Hunter said.
Still, New Orleans shouldn't be rebuilt until flooding risks are minimized, he said."Everybody knew there was the possibly of flooding, they just weren't expecting it up to the roofs," he said.
And the government didn't invest in fixing the problem, Hunter said."It was not an unknown risk," he said, "but the money is being spent in Iraq and places like this instead."Erin Stawski, 39, said she's angry with the federal government for ignoring pleas to fix southern Louisiana before a catastrophe struck.
"They knew what would happen if we had a big storm," she said, speaking from a Fort Myers home where she and her family have taken refuge.Now the woman from Chalmette, La., southeast of New Orleans, has a house with three to five feet of water. She was told the home was not in a flood zone, so she doesn't carry flood insurance.
"We were hoping FEMA would help us, but we have to call the SBA and get a low interest loan from them," Stawski said.As bad as conditions are in New Orleans, it's not the only disaster scenario that can hit the flood insurance program, said David Conrad, a water resource specialist for the National Wildlife Federation.Metropolitan areas in Florida, Texas and the Mid-Atlantic also are in danger of wide-spread and devastating floods.
Conrad said he hopes Katrina will lead to more discussion about how to lessen storm dangers and manage development and redevelopment."What we're learning from these major storms is that it's so important to rebuild right," he said.
The flood insurance program requires new buildings and development to reduce the potential for property damage, said J. Fletcher Willey, owner of the Willey Agency in Nags Head, N.C. He's a member of an advisory committee to the Federal Emergency Management Agency."Flood insurance is a good thing and flood plain management is a good thing, but you have to have both," he said.Everyone is at risk for a flood, he said, so taxpayers needn't gripe about having to foot the bill for New Orleans, Mississippi and Alabama.
"Floods happen everywhere," he said. "They happen in Fargo, North Dakota, or in Pennsylvania, along the Mississippi and in downtown Chicago."The federal government got into the flood-insurance business in 1968 because private insurers refused to provide coverage.
That left FEMA to bail out property owners, and with its own insurance company, the government could pay claims using premiums it collected.People who own property in a flood zone and have a mortgage are required to carry the insurance. The program has grown to include 4.6 million properties, making it the biggest single-peril insurer in the world.About 1.85 million of those insurance policies, 40 percent, are in Florida.
Although people buy and pay for flood insurance through a private insurance company, the National Flood Insurance Program provides the coverage.The national program pays a commission to private insurers.
Last year, those commissions totaled $600 million on $1.85 billion in premiums. With $1.25 billion in claims and $165 million in administrative costs, the program had to borrow $200 million from the treasury.One question is whether borrowing to cover short-falls is a good strategy or whether a reserve fund is needed.Larry Larson, of the Association of State Flood Plain Managers, said he would like Congress to authorize the flood insurance program to build up a higher catastrophe fund.
"Everyone might pay $5 a year and over 20 years it would build to a $400 million fund," Larson said.But when the flood program goes through years with below normal claims and builds up reserves, Congress starts to question whether premiums should be lower, he said.
The agency can't win, he said:"They're damned if they do, and they're damned if they don't."
The program collects only $1.85 billion a year in premiums, so the balance will have to come from somewhere else.The insurance program, a part of the Federal Emergency Management Agency under the Department of Homeland Security, has authority to tap the treasury for $1.5 billion, but that will not be enough.
The single costliest event in the program's history was Tropical storm Allison in 2001 at $1.27 billion. Claims from the 2004 hurricane season totalled $1 billion.Together, those won't compare to Katrina, said Ed Pasterick, with the National Flood Insurance Program."It's huge. It will be in the billions," he said.
The insured value, just for flooding, of homes and businesses across New Orleans alone amounts to $32 billion.To cope with anticipated claims, the flood program will have to borrow money from the U.S. Treasury or get Congress to give it to them. Either way, it will need a huge influx of cash to stay afloat in coming months.
Whatever happens, the insurance program will not go under."The government is not going to default on contracts they have with the public," Pasterick said. "The bottom line and the word we have to get out is that it doesn't matter the size of this, we will be able to pay the claims."Pasterick does not expect rates to increase.
Rates are set on average historical losses, he said. Katrina would raise that figure, but actuaries may throw it out because it skews the results.Before Katrina hit, the insurance program had about $100 million in reserves to pay claims.
In a typical year, the $1.85 billion in premiums more than covers its usual payout of about $800 million.Because Katrina's scope is unprecedented, the agency could be saddled with a debt four or five times greater than its net income.Bob Hunter is director of insurance for the Consumer Federation of America and the former Federal Insurance Administrator. He estimates Katrina will cost the flood insurance program between $10 billion and $20 billion.
For the first time in hurricane insurance history, he said, damage claims from flooding will exceed claims from wind.Floods have caused the nation's worst natural disasters in terms of lost lives and property damage, but only 10 to 15 percent of homeowners are insured for flooding, Hunter said.
In New Orleans, where everyone knows they are below sea-level, 50 to 60 percent of properties have flood insurance.In just four Louisiana parishes affected by flooding the insurance program has nearly 217,000 policies worth more than $32 billion in coverage."I think taxpayers will say we need to take care of people and we shouldn't walk away from people with insurance policies," Hunter said.
Still, New Orleans shouldn't be rebuilt until flooding risks are minimized, he said."Everybody knew there was the possibly of flooding, they just weren't expecting it up to the roofs," he said.
And the government didn't invest in fixing the problem, Hunter said."It was not an unknown risk," he said, "but the money is being spent in Iraq and places like this instead."Erin Stawski, 39, said she's angry with the federal government for ignoring pleas to fix southern Louisiana before a catastrophe struck.
"They knew what would happen if we had a big storm," she said, speaking from a Fort Myers home where she and her family have taken refuge.Now the woman from Chalmette, La., southeast of New Orleans, has a house with three to five feet of water. She was told the home was not in a flood zone, so she doesn't carry flood insurance.
"We were hoping FEMA would help us, but we have to call the SBA and get a low interest loan from them," Stawski said.As bad as conditions are in New Orleans, it's not the only disaster scenario that can hit the flood insurance program, said David Conrad, a water resource specialist for the National Wildlife Federation.Metropolitan areas in Florida, Texas and the Mid-Atlantic also are in danger of wide-spread and devastating floods.
Conrad said he hopes Katrina will lead to more discussion about how to lessen storm dangers and manage development and redevelopment."What we're learning from these major storms is that it's so important to rebuild right," he said.
The flood insurance program requires new buildings and development to reduce the potential for property damage, said J. Fletcher Willey, owner of the Willey Agency in Nags Head, N.C. He's a member of an advisory committee to the Federal Emergency Management Agency."Flood insurance is a good thing and flood plain management is a good thing, but you have to have both," he said.Everyone is at risk for a flood, he said, so taxpayers needn't gripe about having to foot the bill for New Orleans, Mississippi and Alabama.
"Floods happen everywhere," he said. "They happen in Fargo, North Dakota, or in Pennsylvania, along the Mississippi and in downtown Chicago."The federal government got into the flood-insurance business in 1968 because private insurers refused to provide coverage.
That left FEMA to bail out property owners, and with its own insurance company, the government could pay claims using premiums it collected.People who own property in a flood zone and have a mortgage are required to carry the insurance. The program has grown to include 4.6 million properties, making it the biggest single-peril insurer in the world.About 1.85 million of those insurance policies, 40 percent, are in Florida.
Although people buy and pay for flood insurance through a private insurance company, the National Flood Insurance Program provides the coverage.The national program pays a commission to private insurers.
Last year, those commissions totaled $600 million on $1.85 billion in premiums. With $1.25 billion in claims and $165 million in administrative costs, the program had to borrow $200 million from the treasury.One question is whether borrowing to cover short-falls is a good strategy or whether a reserve fund is needed.Larry Larson, of the Association of State Flood Plain Managers, said he would like Congress to authorize the flood insurance program to build up a higher catastrophe fund.
"Everyone might pay $5 a year and over 20 years it would build to a $400 million fund," Larson said.But when the flood program goes through years with below normal claims and builds up reserves, Congress starts to question whether premiums should be lower, he said.
The agency can't win, he said:"They're damned if they do, and they're damned if they don't."
Friday, September 02, 2005
30 Yr Mortgages Go Down!
Rates on 30-year mortgages go down
Mortgage Rate Trend Index: Sixty percent of the mortgage industry experts polled by Bankrate.com this week expect mortgage rates to remain unchanged over the next 35 to 45 days, while 40 percent believe rates will drop over the period.WASHINGTON (AP) -- Sept. 2, 2005 -- Rates on 30-year mortgages declined for a third consecutive week as bond investors worried that Hurricane Katrina and soaring energy prices will slow the economy.
Mortgage giant Freddie Mac reported Thursday that rates on 30-year, fixed-rate mortgages fell to a nationwide average of 5.71 percent this week, down from last week's 5.77 percent. Rates are now at their lowest point since mid-July and significantly below the four-month high of 5.89 percent, which hit during the week of Aug. 11.
Analysts said the continued low mortgage rates were helping to keep housing markets red hot and predicted that rates could go still lower, given an expected economic slowdown from the hurricane and rising energy prices.
"Market jitters about high energy costs and the spill over into other sectors of the economy have led to a decline in bond yields, which typically mean lower mortgage rates," said Frank Nothaft, Freddie Mac's chief economist.
Nothaft said that speculation that the possible economic slowdown will cause the Federal Reserve to pause in raising interest rates could also contribute to further declines in mortgage rates.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, averaged 5.32 percent this week, down from 5.35 percent last week.
One-year adjustable rate mortgages edged down slightly to 4.48 percent from 4.56 percent. Two weeks ago, one-year ARMs had hit the highest level in more than three years at 4.58 percent.
Rates on five-year hybrid adjustable rate mortgages averaged 5.30 percent this week, unchanged from last week.
The nationwide averages for mortgage rates do not include add-on fees known as points. Both the five-year and 30-year mortgages carried an average fee of 0.6 point this week. The 15-year mortgage carried an average fee of 0.5 point while the one-year ARM had an average fee of 0.7 point.
A year ago, 30-year mortgages averaged 5.77 percent, 15-year mortgages were at 5.15 percent and one-year ARMs averaged 3.97 percent. Freddie Mac does not have historical data on the five-year ARM which it began tracking this year.
Mortgage Rate Trend Index: Sixty percent of the mortgage industry experts polled by Bankrate.com this week expect mortgage rates to remain unchanged over the next 35 to 45 days, while 40 percent believe rates will drop over the period.WASHINGTON (AP) -- Sept. 2, 2005 -- Rates on 30-year mortgages declined for a third consecutive week as bond investors worried that Hurricane Katrina and soaring energy prices will slow the economy.
Mortgage giant Freddie Mac reported Thursday that rates on 30-year, fixed-rate mortgages fell to a nationwide average of 5.71 percent this week, down from last week's 5.77 percent. Rates are now at their lowest point since mid-July and significantly below the four-month high of 5.89 percent, which hit during the week of Aug. 11.
Analysts said the continued low mortgage rates were helping to keep housing markets red hot and predicted that rates could go still lower, given an expected economic slowdown from the hurricane and rising energy prices.
"Market jitters about high energy costs and the spill over into other sectors of the economy have led to a decline in bond yields, which typically mean lower mortgage rates," said Frank Nothaft, Freddie Mac's chief economist.
Nothaft said that speculation that the possible economic slowdown will cause the Federal Reserve to pause in raising interest rates could also contribute to further declines in mortgage rates.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, averaged 5.32 percent this week, down from 5.35 percent last week.
One-year adjustable rate mortgages edged down slightly to 4.48 percent from 4.56 percent. Two weeks ago, one-year ARMs had hit the highest level in more than three years at 4.58 percent.
Rates on five-year hybrid adjustable rate mortgages averaged 5.30 percent this week, unchanged from last week.
The nationwide averages for mortgage rates do not include add-on fees known as points. Both the five-year and 30-year mortgages carried an average fee of 0.6 point this week. The 15-year mortgage carried an average fee of 0.5 point while the one-year ARM had an average fee of 0.7 point.
A year ago, 30-year mortgages averaged 5.77 percent, 15-year mortgages were at 5.15 percent and one-year ARMs averaged 3.97 percent. Freddie Mac does not have historical data on the five-year ARM which it began tracking this year.
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