Area vacancies down Rents up

Some real estate statistics, where “falling” and “low” are good news – Jupiter, Tequesta, Palm Beach Gardens and North Palm Beach apartment vacancy rates are at five percent, with 182 vacancies out of 3,608 units, according to a November 2010 through February 2011 survey compiled by L. Keith White, president of Reinhold P. Wolff Economic Research, Inc. in Ft. Lauderdale. The survey covered multi-unit apartment complexes.

“South Florida vacancy rates are as low as they have been in three years,” White said. “There’s demand for rentals, with the overall average rents up 3.3 percent from February 2010.

That rental rate increase followed two-percent declines in 2008 ad 2009, he said. “So, we’ve reversed that trend and it’s back to fairly normal now.”

The reason for the low vacancy rates and the rise in rental price are due to a “tremendous lack of new apartment construction as well as the apartment-to-condo-conversions that took place between 2002 and 2006,” he explained. “We lost thousands of units to conversions.”

Contributing to the demand for rentals are families who’ve lost their homes through foreclosure and short sales and can’t buy, as well as prospective homebuyers who’ve had difficulty in getting a loan, he said.

Another factor, investors buying homes and renting them, impacts the rental market, too, he said. “In Palm Beach County, February 2010, the vacancy rate was 5.1 percent. This year it’s at 5.3 percent.

“It’s a little bit of an increase, and if we didn’t have those single-family homes offered for rent, we would be near zero percent vacancy rate for apartments.”

Concerning leases, White forecasts that over the next two years, increases will be back to normal, “three percent, or four percent if new apartments are not built,” he said.

The days of incentives have declined, but are not over, he added. “When a new rental project is finished, it’s typical to offer one month off for the apartment to try to fill the project up quickly. But, when you are looking at existing projects that have been on the market for a while –no question that the incentives they offer have declined over the last year. And even though there are still some here or there, like offering two months rent, incentives are offered only on vacant units.”

According to White’s survey, average monthly rental rates for apartments in Jupiter/Tequesta/Palm Beach Gardens/North Palm Beach are $1,035 for a one-bedroom units, $1,235 for a two-bedroom units, and $1,467 for three-bedroom units.

Turning the focus to home rentals, Thomas Copeland, of Rental Plus and Camlet Copeland Realty in Jupiter, said, in the last six months, the demand is getting stronger, low inventory has held steady, and price is creeping up a little.

copeland sm
This three bedroom, two-bath home, at 151 Wandering Trail in Jupiter, has tile throughout, an eat-in kitchen, family room, screened patio and a garage. The community, Indian Creek, features a pool, tennis and a park next door. Rent is $1,500 per month, unfurnished and it’s offered by Realtor Thomas Copeland of Rental Plus and Camlet Copeland Realty in Jupiter

“If the price is right, it’s gone within 30 days,” he said.

More than half of the people looking for rentals are looking in the low range, he noted. “Rentals in the $1,000-to-$1,200 range will get them a 900-to-1,000 square-foot apartment in Jupiter Village or Chasewood. About 20 percent of prospective renters are looking in the $1,500-to-$1,800 price range, which will get them about 1,200-square-foot apartment In Indian Creek. Abacoa has some units that start in that price range,” he said. Rule-of-thumb, you can expect to pay $1 per square foot for an unfurnished annual rental,” he added.

He hasn’t seen a flood of investor-owned rentals come on the market, but investors buying up good deals that can be used as rentals do help the market, he added.  “Investors can make money, with 10-to 20-percent down. Properties will carry themselves or give a short return of the capital investment. The cap rate is close to 10percent and you haven’t had that opportunity since the early 1990s.”

Concerning leases, he forecasts they will go up a little – up to five percent — in the next six months to a year. “It won’t be drastic,” he said. “But they’ve been stagnant for two years.”

Waterfront Properties agent Dan Uzzi Dan Uzzi said competition for rentals is “unbelievable.”

uzzi sm
Realtor Dan Uzzi with Waterfront Properties offers this three-story, three-bedroom townhome at 2411 San Pietro in gated Harbour Oaks, Palm Beach Gardens. It’s within walking distance to Downtown at the Gardens and local restaurants. The lease is $2,000 a month.

“I just rented a home. On Friday, there were nine properties that we had scheduled to see. By Monday, that number dropped to six.”

Most popular are unfurnished two- or three-bedroom homes in Abacoa or the Bluffs, or townhouses in Palm Beach Gardens running from $1,200 to $2,500 a month, he noted.

The typical renters are “families who’ve gone through foreclosure, young people not in the position to buy yet, or people who are scared of the market.”

Joe Quirk of Cobblestone Realty, LLC, said in areas he works with (Jupiter, North Palm Beach and Juno Beach), he continues to see a strong demand for rental properties, especially in Jupiter, north of Donald Ross Road, Abacoa and homes in the Jupiter High School district.

Quirk sm
This home at 182 Hampton Circle, Jupiter, has three bedrooms, two baths and a family room. It features tile and wood floors. The house is listed for $2,200 with Thomas Quirk, a realtor with Cobblestone Realty, LLC.

“There’s a good increase of families relocating because of Florida Atlantic University and companies like Scripps and G4S, which used to be Wackenhut. Its new headquarters in Abacoa opened in February and the company has 250 employees. That’s bringing into the area an increase of renters as well as new homebuyer prospects.”

Continued activities relating to foreclosures and short sales also impact rentals, as people with families leave their homes but rent in the same area because they want their children to stay in the same school districts, he added.

And “although rent prices have not changed much since last fall, they’ve maintained,” he noted.

“Spring Training brought in an exceptionally high demand for short-term, furnished, one- and two-bedroom units in Abacoa,” he said. “We were getting inundated with calls by Marlin players and administrative staff as well as fans. There weren’t enough rentals and people were going all the way north to Tequesta and south to West Palm Beach for rentals for February and March. Rates were $4,000 to $6,000 per unit, according to proximity to the stadium, and people have already locked up units for next year.”

Investors, meanwhile, are not flooding the market with rental units, he said. “I don’t anticipate that. Foreign investors, many of them Canadians, are buying foreclosures and fixing them up as second homes. They are not renting them out.”

written for palm2jupiter

Some ideas

Housing Doesn’t Need a Crash. It Needs Bold Ideas, By GRETCHEN MORGENSON, September 11, 2010.

Interesting post, and focuses on headlines I’ve been thinking about. Should the market be allowed to crash? The reasoning goes: When house prices hit rock bottom, buyers will come out of the woodwork and snatch those great deals up.

But, notes Morgenson, where are all those buyers? According to CoreLogic, 46 percent of Florida homeowners are under water (and therefore stuck).

And sellers who have had to go through the short sale process can’t buy – They’ve been barred from receiving a mortgage for a certain period.

Then there’s the argument that helping those homeowners underwater, but who are still making their mortgage payments, would penalize responsible homeowners who didn’t take on a mortgages that they couldn’t afford.

STILL, there are real, broad economic gains to be had by helping people who are paying their mortgages to remain in their homes. Figuring out how to reduce their payments can reward responsible borrowers while slowing the vicious spiral of foreclosures, falling home prices and more foreclosures. And it just might help restore people’s confidence in the economy and get them buying again.

She asks readers to recall an idea suggested two years ago by Wall Street veterans, Thomas H. Patrick, a co-founder of New Vernon Capital, and Macauley Taylor, principal at Verum Capital. Their plan calls for refinancing all the nonprime, performing loans held in privately issued mortgage pools (except for Fannie’s and Freddie’s) at a lower rate.

The mass refinancing could have helped borrowers, while retiring mortgage securities at par and thus helping pension funds, banks and other investors in those pools recover paper losses created when prices plummeted. Fannie Mae and Freddie Mac could have financed the deal with debt.

At that time, $1.5 trillion in mortgages sat in these pools. Now, $1.065 trillion of nonprime loans is in private mortgage pools, and, according to CoreLogic of the 1.6 million loans in these pools, two-thirds are 60 days delinquent or more.

That means, she says, one-third are still making payments, and a good many of those homeowners are underwater and would benefit from an interest-rate cut.

So, the reasoning goes, let Fannie and Freddie buy these loans out of the pools at par and reduce their interest rates. That way,institutions holding these loans would be fully repaid, a lot of borrowers would be helped and additional foreclosures that are so damaging to neighborhoods might be averted.

“Every program that the government has announced was focused on bad credits, but they were trying to fix a hole that is too big,” Mr. Patrick said. “The idea is to try to preserve the decent risks and not let them go bad.”

Barry Ritholtz counters, Better Idea: Principal Reduction/Balloon Payment:

Let’s use round numbers to keep this simple: Someone paid $500k for house with a $400k mortgage. But the house is now worth $300k. This is a house that very well might be a walkaway, or go into foreclosure.

Solution: The bank refinances the home for its appraised value — $300k. It takes the $100k balance of the mortgage, and puts it into a zero interest, 10-year balloon loan. After year 10, if the mortgagee has stayed current on all of his payments, the $100k balloon payment gets reduced by 50%. The bank takes a hit on half of the “overlending.” The homeowner takes a hit on their downpayment. The $50k then gets added into the duration of the mortgage (20 years) at the same rates as the original $300k.

Prices come down the 10% they are overvalued, but not in a wrenching fashion. In theory, the homeowner will be earning more money by then, RE values will have stabilized (or even gone up). The bank doesn’t take a full hit — its a smaller write-down a decade later. And homeowners get to stay in a house at a price they can afford.

There is only a little congressional action required: The interest-free loan should be tax exempt (it would otherwise be taxable). The banks should be permitted to put these loans into a special “held to maturity” vehicle, so they don’t have to take the accounting write down today. The entire process is voluntary, but it is obviously in the banks’ interest to delay the writedown, and in a fashion that reduces foreclosures.

Working on the figures

Far more experienced people than I admit to uncertainty when it comes to the state of real estate.

Are we headed for a double dip as some analysts predict? Or is the worse over as others proclaim? (For example: Karl Case recently wrote, “Buying a house now can make a lot of sense.”)

The key word, here, is uncertainty, rather than confusion. Boiled down, the basic question is -Does a house represent a luxury, or is it a roof over your head – a staple like food and clothing?

This was addressed in “The Bears and the State of Housing,” by David Leonhardt in the NYT on Sept. 7.

I’ve simply boiled down what he said, for myself, so that I can better understand what’s going on. And, so, he’s the brains, not I, and here’s what he comes up with, if you care to follow along.

Those who say that housing is like a luxury good, claim that when people get richer, they spend more on housing, so the cost of housing rises with increased income.

Those who say it is more like a staple, they believe that home prices rise with the price of inflation, more in line with food.

From 1970 to 2000, home prices did rise with incomes, and that seems to be something that everyone agrees upon. But, the bears say, that was an exception. The government added tax breaks for home ownership and interest rates were falling and those days are over, they say – and they point to data compiled by Robert Shiller that shows that house prices rose no faster than inflation during that period. As people get richer, they spend less of their income on staples, obviously (As you get richer, you don’t usually spend your extra income on groceries). So, houses prices should rise at about the same rate as general inflation, and well below income.

If that is true, house prices may still be overvalued by about 30 percent (the gap between the average household income growth and inflation over the last generation).

Shiller’s index suggests the same overvaluation. Today, it is around 130, which is down from the 2006 bubble peak of 203 but far above the 1890 to 1970 average of 94.

The other side (including economists like Case, Mark Zandi (Moody’s Analytics) and Tom Lawler (a Virginia economist who was one of the first to predict the end of the housing boom), they believe that house prices rise almost as fast as incomes.

Case bases his case on the fact that statistical housing information pre-1970 is patchwork. Shiller’s index, for example, relies on several sources, like Labor Department surveys, which often paint a more negative picture of past house prices than other surveys. The Census Bureau, for example, since 1940, has been asking people how much they think their house is worth (Lawler writes about this in one of his newsletters), and the answers suggest that home values rose as fast as incomes.

Then, there are Shiller’s statistics that show that consumer spending (i.e. income) devoted to housing has hovered around 14 to 15 percent for the last 60 years, while food, by contrast, has dropped to 13 percent from 25 percent.

Then there’s the old location, location, location. Zandi says, overtime, the value of the land should grow almost as fast as the local area’s economic output (or income).

In the end, based on all this, here’s Leonhardt’s best advice — he put’s himself in the less bearish camp — don’t think of a house as an investment. Think of it as a place to live. If you are going to move within three years, rent, because the hassle of buying and the one-time costs are too big.

And, he adds, since the economy is weak and there are still a high number of foreclosures, prices may continue to fall during the next year or two, and, if income growth remains weak for years, it might hold down the home-price growth.

On the other hand, if you do plan to stay longer than three years, eventually, he believes, prices should begin to rise again, maybe not quite keeping up with income, but outpacing food and clothing.

Sounds like a long way of getting to the end, but it’s an interesting train of thought, don’t you think?
In my research, people that I talk to have come to the same conclusion, but it’s nice to see the underlying reasoning plotted out.

Foreclosures, May, Palm Beach County

I guess this is good news.For our county at least. Palm Beach County showed a slowdown in its foreclosure activity in May, according to RealtyTrac’s monthly market report. Palm Beach County saw a 21.29 percent drop in the number of foreclosures from May 2009, and a 1.98 percent month-over-month decline. The county also had the least number of foreclosures, 2,977, or one in every 215 households. Foreclosure filings include default notices, scheduled auctions and bank repossessions.

Broward, on the other hand, saw 6,719 foreclosure filings reported in May — one in every 120 households — and a 40.67 percent increase over the number of reported foreclosure filings in May 2009 and a 5.82 increase over April’s foreclosure filings.

Interesting June for real estate in South Florida – and this is only June 8

Jimmy Buffett sells his 1925 Palm Beach mansion at 540 S. Ocean Boulevard for $18.5 million. The priciest sale for 2010, it was not listed, sold to a Delaware company with offices in New York, Via Marina, and was appraised for $23.3 million… we wonder – are his stone parrots that top the gates to his drive included in the deal? And that little duplex that he owns on Root Trail? Renters were told the lease will not be renewed.

A UK business school is opening in Miami. Starting with 30 part-time students, it has plans to grow to 600 students over the next three years…

Green Now’s plans to build a recycling facility in Sunrise were voted down in February by commissioners who said it did not meet city code. It also was protested by residents, who cited traffic congestion, noise and pollution as reasons. Principals of Green Now have filed a lawsuit in an attempt to force the city to reconsider.

And a $6 million plan to expand the Delray Beach retreat center of Opus Dei is being opposed to residents who see that, down the road, it may well end up as a drug rehab center.

So, I see, I have not been the only one protesting.

All in a day’s work. Really, it took that long.

I was looking for foreclosure numbers last month, and found myself with a daunting project. How many homeowners are there in the United States, and how many are in, or going into, foreclosure? How much is that number up from previous years?

(I’m sorry, but I have to tell the back end of this story, first. If you aren’t interested, just skip down– I’ve put the basic info in red, so you can find it easy.)

I thought finding those numbers on the net would be a simple process. Well, it wasn’t.

Then, this Sunday, while standing in line waiting to vote (it took four hours) I read Time from cover to cover, and saw that I’m not the only one who has trouble with foreclosure numbers.

As Time pointed out, when Congress, Wall street analysts, the US Treasury, the FDIC, the FBI, a few Federal Reserve banks, a dozen states, even some lenders, want numbers on foreclosure, they use RealtyTrac.

Who is RealtyTrac? The company was started by Derek White, a real estate agent, and Michael Keane, a computer programmer, in 1996. They got the idea to gather, then sell, a list of addresses of repossessed houses to Santa Barbara Calif. real estate agents.  James Saccacio, a one-time corporate banker, took over as CEO in 2000, and he decided it would be a good idea to offer foreclosure information on a national level.

Not such an easy job he found out – each state has its own laws about how the three steps of foreclosures (default notice, court judgment and sheriff’s sale) are made public, and to wade through all that is time consuming and labor intensive.

According to Time, RealtyTrac has 150 contractors collecting data in 2,200 counties, which covers some 90% of households.

And although RealtyTrac has been the go-to (and, by the way, cleared $40 million in revenue last year), the company has also been gone after. In 2007, after RealtyTrac came out with numbers putting Colorado near the top of the list of states with foreclosure problems, Kathi Williams, director of the Colorado Division of Housing, called RealtyTrac’s numbers “ridiculous and irresponsible.”

The Mortgage Bankers Association’s chief economist (who wasn’t named in the Time article) complained that RealtyTrac was “damaging the industry.”

As a result, RealyTrac has changed its methodology (it now counts “unique” houses, what does that mean?) and since its business is to sell addresses of foreclosures to real estate agents, investors and homebuyers, it gives data to any government entity that wants it.

Note that RealtyTrac’s measure of foreclosures as a percentage of all households, while, if you measure foreclosure rates as a percentage of households with a mortgage, you’d get a different (and higher) figure.

With that said, let’s head on over to RealtyTrac and see if we can find the numbers…

“Through August of 2008 more than 2 million properties nationwide received a foreclosure filing, up more than 50 percent from the same period in 2007, according to the RealtyTrac U.S. Foreclosure Market Report. If foreclosure activity continues at the same pace for the remainder of the year, close to 1 million homeowners will lose their homes to foreclosure in 2008, up from about 400,000 in 2007.”

Nationally, here are its numbers on properties with foreclosure filings for Sept. 2008.

39,892 with Notices of Default, 58,606 with Lis Pendens, 61,442 with Notice of Trustee Sale, 24,780 with Notice of Foreclosure Sale, and 81,312 properties that have been foreclosed on and repurchased by the bank
Total is 265,968, up 20.98% from Sept. 2007 and a rate of 1 of 475 housing units.

Florida foreclosures total is 47,965, with 1 of 178 housing units and 43.78% more than last year.

Other numbers I’ve gleaned from Google:
Homeownership in the United States was at about 66.2%, according to the 2000 census, and a ratio of 2 to 3 US householders (69.8 million) owned their homes.

Between 2005 to 2007, 22 million Americans purchased a new or existing houses (Paul Krugman, New York Times, 6/23/08).

And here are some other numbers – these from CBC, Oct. 31, 2008:
“About 7.63 million properties, or 18 percent, had negative equity in September, and another 2.1 million will follow if home prices fall another 5 percent, according to a report by First American CoreLogic. The data, covering 43 states and Washington, D.C., includes borrowers nationwide, even those who took out mortgages before housing prices began to soar early this decade.”
The article goes on to say, “About 68 percent of U.S. adults own their own homes, and about two-thirds of them have mortgages.”

Hey, I’m just trying to figure out the numbers here. Overall population in the United States = 300 million people. Households = 112,362,848 (that number is from http://www.census.gov/population/projections/nation/hh-fam/table1n.txt ).
Use the CoreLogic figure of  68% households owning their own homes, and that comes to 76,406,737 households. Take 2/3 of that and it comes to 50,937,824 householders with mortgages  (I just did the math on that one, and what’s going on with the 22 million who purchased in Krugman’s two-year period? How are those figured in?) Now, think about one million of those families losing their homes this year…

Well, that’s the closest I can get. Am waiting to hear back from RealtyTrac to see what numbers they use for householders owning homes and what a unique house is, anyway.