Tuesday, July 31, 2007

Today's Interesting Articles

1. WASHINGTON, DC - A proposal by the Office of Federal Housing Enterprise Oversight (OFHEO) that could lower the conforming loan limit ("CLL" - calculations establish the maximum size limit for loans that Fannie Mae and Freddie Mac are allowed to purchase and they are also used to set limits for FHA and VA loans - important to home buyers looking to put 3%-5% down with government subsidized loans especially when the subprime market is deteriorating) as early as 2009 and would establish new guidance for calculating the annual limit so that it could be reduced in the future would have adverse consequences for the nation’s home buyers, according to National Association of Home Builders... In NAHB’s response, David Crowe, the association’s senior staff vice president for regulatory and housing policy, noted that the conforming loan limit remained unchanged in 1993 and 1994, years in which the home price index registered declines, because “the current law does not require a decline in the limit when the price index declines.” These declines were subsequently netted out of future increases in the limit. Authority to increase or decrease the conforming loan limit is included in H.R. 1427, The Federal Housing Finance Reform Act of 2007, and NAHB opposes that provision, Crowe said. “Pending enactment of this authority, NAHB maintains that the loan limit can only be increased, but not decreased, under current statutory authority,” he said. View article..

2. NEW YORK - Kimco Realty (KIM - Cramer's Take - Stockpickr - Rating) is third on the list of high-yield stocks with recently raised dividends. The real estate investment trust, which develops and manages shopping centers, pays a yield of 4.3%, having recently increasing its dividend by 11.1%. Kimco has a P/E of 19.3 and a PEG of 1.8. It just reported a 38% increase in funds from operations, a common real estate performance metric that adds back depreciation and other noncash items to net income. Kimco is also on Stockpickr's Dividend Growth portfolio, which lists stocks that raise their dividends on a regular basis.

3. STOCKTON - On Aug. 10, the Krispy Kreme sign on the doughnut shop at March Lane and Interstate 5 might read something like "Krispy Klosed." The Stockton store, which opened to great hoopla and hurrahs in August 2002, will shut down along with other company-owned stores in Fresno, Citrus Heights and Concord. This will mean a Krispy Kreme-less Central Valley. Stores closed in Roseville and Elk Grove last fall and in Modesto before that. Brian Little, director of corporate communications for Winston-Salem, N.C.-based Krispy Kreme Doughnut Corp., also said Krispy Kreme products will no longer be available in local grocery and convenience stores. He said in a statement that the closures are part of the company's "turnaround." View article..

4. CENTRAL VALLEY - (As a father of two children diagnosed with autism related disorders and the continuing challenges that my wife and I face everyday, this article "struck home") Pregnant women from the Central Valley who were exposed to high levels of pesticides were up to six times more likely to give birth to a child with autism or a related disorder, state health officials said Monday. California Department of Public Health researchers studied 465 children with autism spectrum disorders in 19 counties born between 1996 and 1998, comparing them with a control group of nearly 7,000 other children. They found that women who lived close to fields with the highest use of a group of pesticides known as organochlorines were the most likely to bear children with the disorders, which range from mild to severe and cover a wide array of neurological and developmental problems, including difficulties with speaking, social interaction and motor skills. View article..

Monday, July 30, 2007

Writing a Compelling Executive Summary

By now (7/30/07), the word is out on the housing slump, but the verdict is still out as to its affect on the commercial markets (one side note - I received an email from a fellow CCIM in St. Louis that is advising for sale a local 184k SF shopping center for $3.9M or $21.14/SF with two large vacancies totally 72% of the property - I haven't seen these types of properties since the RTC days).

So, as the credit crunch grows from Wall Street to Main Street, the need for developers and brokers to artfully pitch their ventures will become tantamount as more projects chase tighter purse strings from private sources. It might be time to recall an article and website that I found effective in developing a "compelling executive summary". As the San Jose VC firm, Garage Technology Ventures, points out on their website, the job of the executive summary is to sell, not to describe (although designed for the submitting technology ventures to the fund, I still think this applies to real estate developers in this market).

Here's the short list (click 'website' link above for full article) in writing a compelling executive summary (adapted for the 'real estate' slant):
  1. The Grab - Direct, specific and concise statement why you have a really big project;
  2. The Problem - Make clear that this is a big problem (or need) in the market that you're going to solve with your project;
  3. The Solution - Make clear that you fit into the market after the project is complete (and absorption is taken into account in your proforma);
  4. The Opportunity - Basic market info why your project works in the local market and why there could exist further expansion after the initial phase and absorption is complete;
  5. Your Competitive Advantage - Know your project's price points vs. the existing competition;
  6. The Model - How specifically are you going to generate income (i.e.: lower rents than competition, taking advantage of pent-up demand, etc.) and when?
  7. The Team - Why is your team uniquely qualified to use these funds for this project;
  8. The Promise - Your fundamental objective is to show the financial viability of the project and how it will meet the lenders' needs (5 yr, 10 yr proforma and any levels of equity participation promised with the project); and,
  9. The Ask - State the minimum amount that you will need to complete the project (assuming that you'll include a "fudge factor" for entitlement overruns that always occur in development).

Friday, July 27, 2007

National: Upcoming Wall Street expectations

NEW YORK (MarketWatch) -- U.S. stocks will continue to fall next week, in continuation of a sell-off that saw the Dow Jones Industrial Average experience its worst week in over four years, due to nervousness that the easy-money binge of the last few years has come to an end.

Another heavy week of earnings, including 99 reports from S&P 500 companies, capped by the all-important July employment report on Friday, also awaits investors.

But stocks will remain vulnerable to any new signs of distress from hedge funds hit by their exposure to bad U.S. home loans, as well as from credit markets, where Wall Street firms and corporations are finding it harder and harder to obtain financing.

"We're finishing up earnings season and the general tone has been positive," said Owen Fitzpatrick, head of the U.S. equities group at Deutsche Bank. "But it's been overwhelmed by the whole subprime and credit-market issues."

View article..

Thursday, July 26, 2007

National: The Credit Window is Now Closed

"The credit window is now closed," writes strategist Barry Ritholtz in his blog, and the "multi-engine plane" that is the market has lost one of its sources of power ("liquidity - what is occurring today is a full blown repricing of the liquidity spigot slowly turning off").

As for the U.S. housing market, economist Mark Zandi expects a lot more pain, but not a recession. Here are some highlights of his forecast, based on a study using anonymous data collected by consumer credit agency Equifax:
  1. Home prices will fall 10% from the peak nationally, more in the bubble regions in California, Florida, Nevada, Arizona and Washington, D.C.
  2. Home sales could bottom later this year, home construction could bottom early next year, and house prices could bottom late next year. It'll be 2010 before the housing market could be termed "normal."
  3. About 17% of total mortgage debt is at risk, totaling about $2.5 trillion in subprime, Alt-A and jumbo debt. About $1.4 trillion is at serious risk of default. Investors will lose about $113 billion as $460 billion worth of mortgages default.
  4. About 20% of the subprime loans written in the last half of 2006 will fail, with the peak of the defaults not coming until 2011. A "significant number" of these borrowers never made a single payment.
  5. More than 2.5 million first mortgages will default this year and next year. Subprime borrowers will experience significant financial distress.
  6. The U.S. economy will grow less than 3% annualized through the middle of 2009. A healthy job market should prevent a recession, although the jobless rate will likely rise to 5% from 4.5% by the end of the year.
  7. Consumer spending has already slowed and will slow further.
View article..

Sacramento: Regional 2Q Industrial Report

Every quarter we receive market statistics for regions around the country from CBC and other competing national brokers. Colliers International has office in both Sacramento and Roseville, as well as covering the greater Sacramento Region. Click on the link to view their Sacramento Industrial Trends Report for the second quarter of 2007.

Wednesday, July 25, 2007

Northwest: Smaller Cities Buck Housing Slump

In an attempt to find some promising news about the housing market and the indicators that I've found over the last month to give us exactly what we all knew would happen (especially here in California - having seen the developers over the past four years fall all over themselves to option up anything that could be entitled quickly at astronomical prices per acre), I wanted to find areas that still had a retail market for Bay area developer clients. It will be these smaller markets that provide retail buyers for those modest developments (so long to the 1,000 acre master planned communities wanting entitlements in this market when the inventory of foreclosures show-up through these delinquencies. Below is the AP article from 7/19..

"SALEM, Ore. (AP) -- Aside from being Oregon's capital city, Salem doesn't have much to boast about. Most downtown restaurants close by 7:00 p.m. and Lefty's -- the only cool bar in town, according to local college students -- is known for its karaoke fundraisers.

But the real estate market here is buzzing. For-sale signs litter front yards and the local paper is fat with ads for homes.

The community of 150,000 or so souls is a prime example of an overlooked phenomenon in the country's overheated housing market: While demand for homes has nose-dived from Florida to California, some smaller metropolitan pockets continue to thrive.

Sleepy towns like Salem, Ore.; Wenatchee, Wash.; and Provo-Orem, Utah may lack glamor but they are among the few places in the country where housing prices are growing at double-digit rates, according to a recent federal study...

..Between the first quarters of 2006 and 2007 homes in Salem appreciated 13.4 percent, 14.5 in Boise City-Nampa, Idaho, and 16.8 percent in Grand Junction, Colo."

View article..

CNNMoney: Subprime woes hit junk bonds

This article yesterday from CNN confirms an earlier post (July 16, 2007) I found regarding the two prong approach of identifying the losses from the subprime market (and recasting those losses to junk status) and its affects on the market..

NEW YORK (CNNMoney.com) -- Woes plaguing the subprime mortgage market are spreading to junk bonds, according Bill Gross, manager of the world's largest bond fund.

Credit markets are facing a "sudden liquidity crisis" in the high-yield bond sector as a growing lack of confidence has frozen future lending, the PIMCO bond manager wrote in an August investment newsletter posted on the PIMCO Web site.

CNNMoney.com's Allen Wastler looks at adjustable rate mortgages resetting from their low teaser rates.
Play video

"Both borrowers and lenders may have bitten off more than they can chew, and even those that swallow their hot dogs whole -- Nathan's Famous Coney Island style -- are having a serious bout of indigestion," he wrote.

The subprime mortgage market, in which loans are granted to high risk borrowers despite little or poor credit, has been battered by rising default rates and delinquencies.

U.S. mortgage lenders, including bankrupt New Century Financial, as well as Countrywide Financial (down $3.92 to $30.14, Charts, Fortune 500), which slashed its full-year earnings estimates Tuesday, have been stung by massive losses. Two Bear Stearns (down $2.86 to $131.39, Charts, Fortune 500) hedge funds were also virtually wiped out.

View article..

Tuesday, July 24, 2007

National: Mortgage Delinquency Map

Mortgage delinquencies continued to climb in the second quarter, new data show.

The map below shows how delinquency rates have increased in those metro areas as the housing market has slowed. The pickup in delinquencies has been particularly notable in parts of Florida and California. Nationwide, delinquency rates climbed to 3.15% in the second quarter, compared with 2.87% in the first quarter.

The map below shows the two counties in Northern California, San Joaquin and Merced, that lead the way in delinquencies over the period.

View article..

Monday, July 23, 2007

National: Top Business Journal Real Estate Headlines

Every week I receive the top real estate headlines from business journals around the country. Below is a shortened list of top news stories that can provide some great insight into the regional markets and direction of the commercial market. One interesting note in this week's trend is the fact that office rents appear to be rising enough to support new construction in several markets (from Boston and Tampa stories)


Outside developers aid Westside commercial expansion

New Midtown tower among city's largest

St. Croix bolsters presence in S.E. Austin with purchase

Lancaster Foods doubles warehouse space in Jessup

COPT plans Harford Co. office park: At 800,000 square feet, it would be the county's largest complex

In reversal, new now cheaper

Google eyes E. Cambridge sites

Growth study set for Lancaster airport area: 306-acre field could have future as cargo airport

Defense contractor training center to open near Wright-Patt

East Bay
SunCal deal for Alameda Point OK'd: Mayor: 'I believe this is our last shot'

Honolulu's office vacancy rate falls to 6.5%, driving rental costs even higher

Single tenant fills spec building: Foster Wheeler leases entire Energy Center I to consolidate offices

Industrial center planned

Finard invests at Court Square: BankTennessee to lease Welcome Wagon space

Rust-Oleum plans huge Kenosha warehouse

California firm acquires Pewaukee buildings: Two prime properties bought for $37 million

Building hosting CMT on the block

Research park begins search for additional site

Sale pending on Union Trust

U.S. Steel could go back to Duquesne

Energy efficiency even playing a role in baseball stadium plans

Opus plans 8M square feet near Port of Stockton: Logistics center would serve overflow from deep-water ports

San Antonio
New data center planned for the city's far West Side

San Francisco
Shorenstein to quit BofA for older digs

San Jose
Carl Berg tentatively agrees to sell Mission West Properties

San Jose
Commercial condos target smaller space pent-up demand

Redmond rezone spurs hopes for corporate HQ

South Florida
Potential for office space glut seen

South Florida
Weston developer tests office condo market in Jacksonville

South Florida
New developments hope to revitalize Opa-locka airport grounds

St. Louis
13-acre tract on The Hill up for grabs

Tampa Bay
As rents rise, office costs need closer look

Tampa Bay
$30-something office rents become norm

Tampa Bay
Demand for industrial space outpacing new projects, sales

Washington, D.C.
Real Estate: D.C. rethinks real estate with a GSA-like assessment

Friday, July 20, 2007

National: When the housing rebound comes

(Money Magazine) -- If you're the sensitive type of homeowner, you may want to skip the rest of this paragraph, which recounts the unrelentingly grim news about home prices.

At least 42 percent of major housing markets are in decline, with some projected to fall by double digits over the next five years.

One alarming sign: The National Association of Realtors has reversed its usually sunny outlook and is now predicting a 1 percent drop nationwide in existing home prices in 2007, the first such prediction in the four decades since NAR started tracking prices.

Still, no bear market lasts forever, and indeed, predictor NAR, quickly recovering from its unusual flash of pessimism, is forecasting that prices will bottom out this quarter.

How will you know?

Because housing markets are intensely local, it won't do much good to check national figures. Instead, stay alert to leading indicators of recovery in your local market, such as:

Inventory is declining

A local broker should be able to tell you the months' worth of inventory - that is, the estimated amount of time, given the current pace of sales, that it would take to sell all the homes currently up for sale.

In markets with fewer than 6.5 months of inventory, homes tend to be appreciating faster than inflation, says Mark Dotzour, chief economist at the Real Estate Center at Texas A&M; above 6.5, prices are lagging inflation.

Above nine or 10 months, prices start to drop, creating an ice-cold market for sellers. Compare the current data with that of the previous few quarters to see whether the trend is downward or upward.

View article..

Thursday, July 19, 2007

Home Buyer Tip: A 6-step plan for boosting credit score to buy home

WASHINGTON (MarketWatch) -- Question: I need some assistance in cleaning up my very poor credit score of 638 from Trans Union and 559 from Equifax. It's not the result of any credit cards but poor choices (which I admit) and a divorce with little to no child support of three girls. I'm in my mid-forties and all three girls are over the age of 18.

My question is how do I increase my FICO score within the next 6-10 months and is there a reputable agency that can work on my behalf? I would like to purchase a home early next year. I know there's a lot of work that needs to be done and would greatly appreciate any assistance you or an agency can provide.

List below.. View article for details..

1. Settle collections
2. Get rid of the 'black marks'
3. Clean up late pays
4. Get even
5. Remain open
6. Remain active

Bernanke: Subprime hit could top $100B

NEW YORK (CNNMoney.com) -- Losses in the fast-unraveling subprime lending market could top $100 billion, but the Federal Reserve is taking measures to protect borrowers, according to Fed Chairman Ben Bernanke.

"The credit losses associated with subprime have come to light and they are fairly significant," Bernanke told the Senate Banking Committee in a second day of testimony on the Fed's twice-yearly economic report.

Federal Reserve Chairman Ben Bernanke

"Some estimates are in the order of between $50 billion and $100 billion of losses associated with subprime credit problems," he said, referring to a segment of the mortgage market that caters to borrowers with shaky credit.

Defaults on mortgages in the subprime sector have risen sharply in the last few months, resulting in the implosion of several subprime mortgage lenders and funds that bought the repackaged debt. Investors fear more banks and funds will get caught holding bad loans, creating problems across the broader economy.

Bernanke said that the most reliable indicators show U.S. home prices have not declined nationally and that the housing slump had so far not led U.S. consumers to cut back on spending.

He said, however, that if prices did drop, consumers might trim spending by as much as 9 cents for each dollar of wealth lost.

As a result of the weaker-than-expected housing sector, the Fed has lowered its growth forecasts for this year and next, but the U.S. central bank believes the drag should ease over time.

View article..

Wednesday, July 18, 2007

National: The end of the old MLS?

So you think that Silicon Valley won't have an effect on the real estate business? From today's San Francisco Chronicle, there is a new player in the home buyer's arsenal of online tools that works as an "aggregator" of information from the traditional MLS, craigslist, trulia, zillow, etc. in a netvibes type interface.

Terabitz.com, the brainchild of a near-child, will go live with its real estate "dashboard," where users can create a personal page from for-sale listings, valuation tools, maps, photos, crime statistics, weather and neighborhood cafes, banks and airports. Whereas other sites usually provide a few of those resources, Terabitz says its hub aggregates all the information a home shopper needs -- from a place to peruse four-bedroom colonials to where to find a baby crib.

The home buyer (and for that matter, any lender, investor or potential seller) can view current inventory for sale and for rent from multiple sources, giving the home buyer more resources than most agents may have in their standard MLS database (also, it is the agent that pays an annual fee to input their listings into the database). It also gives the agent's potential clients the information of recent sales comps, a common request from clients when they're interested in making an offer or signing a listing agreement.

Terabitz works like this: The visitor types in a city or ZIP code. Then under tabs such as "listings" or "education" or "financing", there are icons representing different items - or "bitz" in company parlance -- such as Google's home listings, nearby colleges, neighborhood photos and local mortgage rates. By dragging and dropping the icons into the "workspace," users can choose which information they want on their page. The data is available in list form, or, for certain data sources, a layered map. From there, the user can save those snapshots and e-mail them to their friends, family or mortgage broker.

As Terabitz (or other online resources like it) gain acceptance as an aggregator of information for the "masses", additional venture capital will flow in an effort to make the site a "one stop shop" for the home buyer and sellers. As it's been reported recently, 80% of home buyers use the internet to find their next big purchase.

Ashfaq Munshi, CEO of Terabitz and a Silicon Valley veteran who was the former chief executive officer of Level 5 Networks, said he has raised $10 million from Tudor Capital, part of the Tudor Hedge Fund. Munshi plans to charge vendors for Real estate site has all kinds of info and "Do-it-yourself" features allows users to add data they want placement -- for instance, Starbucks would pay a fee for always being first on a list of local cafes. Terabitz would also make available, for a fee, sites for real estate brokers and others.

A real estate agent's ability to adopt and adapt to these trends in technology is half the battle in this business. It is essential to stay current with the trends in "end user" access.

View article..

Tuesday, July 17, 2007

National: Market Cycles & Income-producing Real Estate

Number Of Months From Peak-To-Peak of Each Business Cycle Since 1900

Information Source: Nat’l Bureau of Economic Research, Inc.

An investor needs three pieces of information for developing a reasonable investment strategy and the chart provides this information: (1) The average length of time from peak-to-peak for the prior twenty-one cycles is 58 months. (2) The current business peak was reached in March 2001. (3) We are presently 68 months into the current cycle. What have we concluded so far?

  • Given the country’s current economic model, the economy is cyclical.
  • Bull markets don’t last forever.
  • Recessions don’t last forever.
  • The average cycle for the past 100 years from peak-to-peak is 58 months.
  • The peak for the current cycle was March 2001.
  • We are 68 months into the current cycle.

This information gives an investor the next possible peak and the length of time needed for the subsequent peak. The average is 58 months. The shortest peak-to-peak business cycle is 17 months and the longest is 128 months. Given those conclusions, the real estate investor has to follow a sound investment strategy which includes techniques that insure staying power.

View article..

Online: New Online Maps for Real Estate Users

Since Google made its maps available for customization last year, savvy programmers have created thriving businesses by adding layers of information.

So in May, Washington-based startup FortiusOne launched GeoCommons, a cartographic portal where users can easily create their own mashups.

The site has 2 billion pieces of localized data -- from census figures and school district budgets to water-contamination and traffic-congestion hot spots -- and it is rapidly adding more. Two examples are below offered by users that collected data through business and government sites:

1. Foreclosure Filing and the Subprime Collapse: Foreclosure filings are starting to hit hard. People all over the country are having trouble paying off their ARMs (Adjustable rate Mortgages) and houses are being foreclosed. This is having a ripple effect in the economy, Home Depot and Lowe's have already cut their earnings estimates and it looks likely that more trouble is on the way. Our map will show you the locations of foreclosures, auction notifications, and other housing indicators. this map shows the Top 500 Zipcodes ranked by number of foreclosures.

2. House Hunting Made Easy: I wanted to demonstrate how to speed up a home search by using Intersection Heat Maps. In my scenario, we are looking for a home in neighborhoods that have large numbers of kids, large numbers of tech workers, newer homes, low crime rates, and large number of parks. This data includes information on subsidized housing in the lower 48 states. The source of the data is HUD. A full description of the variables and coding used in the dataset is provided on the HUD website: http://www.huduser.org/picture2000/dictionary.pdf

Monday, July 16, 2007

National: The Great Mortgage Party Hangover

This is a recent article I pulled from Inman and the assessment of the troubles that has yet to affect our industry. Lou Barnes discusses the premature "housing crash" that the bond market buyers anticipated a year ago, only to get clobbered with resilient market data ("People are buying cars, going to restaurants, taking vacations in Tahoe.. just not buying houses" from a recent Sacbee article). Now, the market pundits and bond agencies are acknowledging their timing errors and are re-rating their methodologies with stricter guidelines, leading to a two-part "end game": (i) where are the loses? and (ii) what is the effect?

Part one, the mortgage losses. Very little money has been "lost." The market value of the securitized mortgages in question has fallen 30-70 percent, but if you don't sell, you don't have to recognize loss. The re-rating of this stuff to junk will force institutional investors to sell, to recognize, and probably depress value farther. We will also learn who has lost, and it's going to be an embarrassing and painful parade. This week, S&P, Moody's and Fitch downgraded no more than 1 percent of the trash outstanding; the outcome for the other 99 percent is sure as sunrise, the holders in frozen panic. Market losses from forced sales are near, but there is still little actual credit loss from defaulted mortgages -- that's still ahead, and the loss magnitude will depend on the depth and length of the housing recession.

Part two, the housing market. Housing moves slowly, in an aching grind. Sellers resist discount, preferring to hold vacant, or to rent at a loss, or to stay put. Loan servicers are slow to foreclose: they are not staffed to do so (or to do anything except to send you all that mail trying to get you to buy insurance and pre-pay programs), fiddle endlessly and pretend to negotiate workouts of hopeless cases. The housing picture is changing -- not selling, just changing. Foreclosure data is notoriously bad (every county and state has different procedures and law), but RealtyTrac's trend is probably about right, if only in consistency of error. The pattern is stark: national foreclosure filings are up 56 percent year-to-date, but mortgage defaults are up 86 percent -- foreclosure lag. Based on housing markets early to the distress party, Colorado the leading example, Bubble Zone foreclosures will increase for at least the next three years (announcements of bottom in 2008 are fantasy-based). Do some math. Home resales run a tad over 6 million annually, plus another 1 million new-builds. Re-sellers still want to re-sell, and builders, desperate to unload land and to maintain survival volume, are still building at undercut prices. Demand is off (un-affordability and anxiety), but a new seller has arrived: first-half '07 foreclosure filings just short of 1 million. Pull-through from filing to foreclosure is unpredictable, but it looks as though re-sellers and builders will soon be joined by another million foreclosure re-sellers (or two, or three...). That's market saturation, not clearing. We are going to get spillover into GDP. Book it. And we're going to see a serial credit panic. However, the disaster mongers are mistaken. Credit losses are distributed globally, and there is great long-term strength in housing (population growth, land scarcity, wealth...). The forecast here continues to be for a long period of flat prices in the Bubble Zones, but vastly more foreclosure damage from flat prices than previously modeled or imagined, the Great Hangover from the '01-'06 Mortgage Credit Party.

Saturday, July 14, 2007

Upcoming Week: What to expect the Fed to say about housing

While the Fed is expected to remain optimistic about inflation fears and semi-soft manufacturing growth, here's what Marketwatch anticipates for the Housing sector:

"Bernanke could also bring some depressing news on housing with him into the hearing room. The Commerce Department will report on housing starts and building permits for June earlier in the morning on Wednesday, at exactly the same time the CPI is released. The median forecast calls for a 1.6% decline in starts to a seasonally adjusted annual rate of 1.45 million. Building permits are expected to fall 2.3% to 1.485 million.

Housing starts are down about 24% in the past year, while permits are down about 21%.
On Tuesday, the home builders will release their sentiment index for July. After falling to a 16-year low of 28 in June, another decrease is possible in July, our survey says.

"The housing market overall continues to be on the ropes, with another rash of credit quality problems in the subprime lending sector surfacing in recent weeks," wrote Gault and Bethune. The housing market "poses the greatest downside risk to the outlook for the second half of 2007."

Bernanke, like other Fed officials, has insisted that the housing slump won't drag down the rest of the economy into recession.

Bernanke will face some tough grilling from the House committee on Wednesday about the Fed's role in inflating the housing bubble. It's not so much the ultra low interest rates the Fed adopted in 2002 and 2003, but the ultra lax regulation over mortgage lenders that allowed the proliferation of exotic mortgage products that allowed buyers to overpay for homes.

With the inventory correction nearly complete, orders and production at U.S. manufacturers has picked up in recent months. The outlook calls for a 0.6% increase in industrial output in June. The industrial production numbers will be released on Tuesday."

Friday, July 13, 2007

Interesting items I found on the web today

Home buyers and home sellers alike can find more innovative and useful features than ever on real estate web sites, which are nimbly adapting to the U.S. housing slump. Residential agents are beginning to be wary of www.buysiderealty.com and www.iggyshouse.com – while investors, lenders and homeowners are using valuation tools like www.zillow.com, www.housefront.com and www.trulia.com

At market close today, Research in Motion (RIM)'s market cap of $42.3 billion edged out Motorola's $41.4 billion. This despite the fact that RIM's annual revenue of $3 billion is puny next to Motorola's nearly $43 billion. (Yes, you read that right; Motorola's market cap is less than its annual revenue.)

A new service called Ether (www.ether.com) provides an innovative and easy way to sell what you say to others that need or want your expertise.

Silicon Valley: Another huge commercial property sale said to be in works

One of the region's most-respected commercial property owners is contemplating the sale of his entire 7.7-million square-foot Silicon Valley portfolio, sources say. But neither party to the potential transaction would confirm details on Friday.

Well-placed sources in valley real estate say Carl Berg is selling his entire Silicon Valley portfolio to Starwood Capital Group, a privately owned, Connecticut-based real estate investment firm. The deal, if done, would be the largest commercial property sale in Silicon Valley history, as measured by square footage.

The previous record-setter was the Peery-Arrillaga portfolio of 5.3 million square feet, which sold last year for more than $1 billion. A purchase price for the Berg deal could not be learned, but one source said it will likely total less than the Peery-Arrillaga sale.

View article..

Thursday, July 12, 2007

NorCal: Foreclosures' furious pace

SJ is 1st, Merced 2nd, Stanislaus 4th in nation's mortgage defaults

About $925 million worth of mortgages have been foreclosed on since January in the Northern San Joaquin Valley, and 2,575 homes have been auctioned off on courthouse steps in Stanislaus, San Joaquin and Merced counties.

During June alone, there were 203 home foreclosure auctions in Modesto at which lenders tried to recover what they could from $66 million in delinquent loans, according to the ForeclosureRadar research firm.

By comparison, only 15 such home auctions took place in June 2006, and those loans were worth just $4 million, said Sean O'Toole, who owns ForeclosureRadar, a research firm based in Discovery Bay.

O'Toole has been tracking the rapid rise in foreclosures throughout California. Statewide last month, he said, there were foreclosure auctions for 6,960 homes with loan values of $2.83 billion.

"Foreclosure sales now represent about 16 percent of all home sales in California," O'Toole said.

View article..

Local News: Elk Grove council approves mall plan

The open-air facility will be the first regional shopping center in the city.

By Sandy Louey - Bee Staff Writer

Published 6:29 am PDT Thursday, July 12, 2007
Story appeared in METRO section, Page B2

Late Wednesday night the Elk Grove City Council approved plans for a 1.1 million-square-foot open-air shopping mall.

Elk Grove Promenade, the city's first regional shopping center, will have as much retail space as the 1.1 million-square-foot Arden Fair mall and nearly as much as the 1.3 million-square-foot Roseville Galleria.

The council approved the development plan 3-1. Councilmen Gary Davis, Patrick Hume and Michael Leary voted in favor, while Councilwoman Sophia Scherman was opposed. Mayor Jim Cooper was out of town.

The 107-acre project at Grant Line Road and Highway 99 is expected to generate nearly $4 million in sales tax revenue its first full year of operation and provide 2,500 jobs, according to Louis Bucksbaum, who is overseeing the project for Chicago-based General Growth Properties.

General Growth hopes to break ground this summer with October 2008 as the opening date.

View article..

Local News: Housing project limited in scope

Feed: Recordnet News Headlines
Posted on: Thursday, July 12, 2007 4:00 AM
Author: Recordnet News Headlines
Subject: Housing project limited in scope

LODI - The committee that is overseeing an affordable-housing project on Lodi's East Side voted Wednesday to limit development to senior rental homes.

View article...

COPPEROPOLIS - It will be at least another two weeks before the developers of Tuscany Hills win approval for their plan to bring 335 luxury homes, a golf course and an aggressive lake protection plan to 1,113 acres on the shore of Lake Tulloch.

View article...

Wednesday, July 11, 2007

Retail Developers Increasingly Target 'Active Adults' in Lifestyle Communities

In the retail industry today, there's a lot of talk about the "aging baby boomer" population; what effect will their retirement have on the economy? When will they retire? How will they live when they retire? What will they buy?

Of particular interest is the growth of so-called "active adult communities," designed to serve the 55+ age group and that include retail as an integral part of such development. CoStar spoke with three executives with firms that are active in this segment, including Pulte's Del Webb communities, The Villages of Florida, and Inland real estate to learn more about the retail requirements of this population - changes to community and shopping center design or retail tenant mix in response to generational changes.

View article..

CAP Rate Follies

Capitalization rates are often controversial and misunderstood variables in commercial real estate valuation equations. To value properties, most buyers and sellers prefer an income approach, which analyzes cash flows to determine debt service and investor return — typically the internal rate of return — so it's easy to see why cap rates are scrutinized.

In fact, no other valuation aspect is debated as heavily as cap rates because unsupported data often lead to inaccurate commercial property valuations. By understanding the fallacies that exist, real estate professionals can perform more thorough financial analyses for their clients.

View article..

The Benefits of Cost-Segregation Studies

When a commercial property is purchased or constructed, a building asset is created and the dollars are entered into a fixed-asset system as 39- or 27.5-year property. Using the straight-line method, owners can take portions of the purchase as taxable income deductions each year of the schedule. Cost-segregation studies, which analyze the components that make up the building and assign these various components with recovery periods, can provide property owners with distinct tax advantages over the straight-line depreciation method.

Cost segregation is a process in which detailed entries are made in a fixed-asset system for all long- and short-life property. For instance, certain aspects of the property may be assigned a three-, five-, seven-, or 15-year tax life. These shorter lives are depreciated at an accelerated rate that dramatically increases taxpayers’ federal tax deductions. The impact of cost-segregation studies can be significant.

View article..

FW: Federal officials reject local site for biolab (2:12 p.m.)

Feed: Recordnet News Headlines
Posted on: Wednesday, July 11, 2007 3:08 PM
Author: Recordnet News Headlines
Subject: Federal officials reject local site for biolab (2:12 p.m.)

TRACY – Officials at the U.S. Department of Homeland Security have rejected a controversial bid to build a laboratory researching some of the most deadly and incurable diseases on a high-explosives test range in the hills southwest of Tracy.

View article...

FW: Weingarten, PNC pair up to buy retail centers

Feed: bizjournals.com Real Estate:Commercial headlines
Posted on: Wednesday, July 11, 2007 1:29 PM
Author: bizjournals.com Real Estate:Commercial headlines
Subject: Weingarten, PNC pair up to buy retail centers

Real estate firms Weingarten Realty Investors and PNC Realty Investors Inc. have formed a joint venture to acquire three retail centers in Alpharetta, Ga.; Plano, Texas; and Stuart, Fla. for $150 million.

View article...

FW: Real estate search engine launches

Feed: bizjournals.com Real Estate:Commercial headlines
Posted on: Wednesday, July 11, 2007 11:48 AM
Author: bizjournals.com Real Estate:Commercial headlines
Subject: Real estate search engine launches

Zooven Inc., which offers an online real estate database, has partnered with Austin 360 Realty to launch Zooven.com, a real estate brokerage services company.

View article...

Doerken Properties buys Sacramento properties

Doerken Properties Inc., a Santa Monica real estate investment firm, has purchased a portfolio of three Sacramento-area properties for $64.4 million.

Doerken purchased the portfolio from Kimco Realty Corp. The three properties Doerken bought are:

  • Commonwealth Square, 703 East Bidwell St. in Folsom -- anchored by Raley's, the shopping center is 97.5 percent occupied
  • Kmart Center, 5200 Stockton Blvd. in Sacramento -- anchored by Kmart and Big Lots, the center is 100 percent occupied
  • Glenbrook Shopping Center, 8700 La Riviera Drive in Sacramento -- anchored by Big Lots, the center is 100 percent occupied.

The deal was financed by George Smith Partners.

Single-family starts to decline again in 2008, Realtors say

WASHINGTON (MarketWatch) -- Construction of single-family homes will probably decline for a third straight year in 2008, according to the latest monthly forecast from the National Association of Realtors.

The group's July forecast, released Wednesday, is more pessimistic than its June forecast in nearly every aspect.

"With profit margins coming under pressure, homebuilders will limit new construction well into 2008," said Lawrence Yun, senior economist for the NAR, in a press release. "This should help the overall inventory level to move steadily into a more balanced state."

Click here for article..

Tuesday, July 10, 2007

Mortgage resets: Record bill coming due

NEW YORK (CNNMoney.com) -- More than two million subprime adjustable rate mortgages (ARMs) are poised to reset at much higher rates in coming months, worsening an already suffering housing market.

Borrowers who took out hybrid ARMs in 2004 and 2005 to secure low "teaser" rates for the first two or three years of the loan may see their monthly mortgage payments climb by 35 percent or more.


$30K HELOC 7.20%
$50K HELOC 7.09%
$30K Home Eq 8.14%
$50K Home Eq 8.07%
$75K Home Eq 7.96%
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Money Magazine's Walter Updegrave gives a reader advice on the best way to get her retired parents a reverse mortgage.
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Consumer groups and politicians worry that hundreds of thousands of subprime ARM borrowers will be unable to keep up with their mortgage payments and will lose their homes.

"In October alone more than $50 billion in ARMs will reset," according to Mark Zandi, chief economist and co-founder of Moody's Economy.com. That's a record, according to Zandi.

A buyer in 2005 with poor credit and limited means might have signed on for a $200,000 2/28 hybrid ARM, locking in a fixed rate of 4 percent for two years. After paying $955 a month, his bill would now be set to spike to $1,331, a 39 percent increase.

Until recently, rising home prices bailed out many ARM borrowers in trouble. They could raise cash with cash-out refinancings or home equity lines of credit. If worse came to worse, they could sell the house and get some money back.

But prices have stabilized or slipped in many markets. (Latest home prices.)

Click here for article..

Florida pre-foreclosures spike for first half of '07

Florida took the No. 2 spot among the states with the highest preforeclosure filings from January through June, foreclosures.com reported Monday.

Florida posted 90,145 pre-foreclosure filings -- homeowners who have defaulted on their mortgages but have not yet lost their homes -- or 1.42 percent per capita. That compared with 39,037 filings, or .62 percent per capita, for the same period in 2006.

Nationwide, three out of every 1,000 homeowners lost their homes to foreclosure in the first half of the year, which represents a 41 percent increase compared to the same period last year. There also were more than 507,000 preforeclosure filings in the United States, or nearly seven of every 1,000 households, for the first six months of the year.

Click here for link..

CCIM Podcasts - Free downloads

Finally, want to hear what’s going on in the industry? Visit the CCIM Podcast page -- http://podcast.ccim.com/. No User ID or password required.


Edward M. Bury, APR
Director of Public Relations

CCIM Institute

Fastest-growing in your state

California is once again home to the most companies on this list, with 37 of the fastest growing techs headquartered there. See how your state ranks. (more)

California to build 'world's largest' solar farm

Cleantech America, a San Francisco based developer, has launched a project to build the world's largest solar farm, giving this Spanish solar tower a run for its money, as well as insulting the work of countless Tesco engineers and their puny, insignificant solar roof. When completed in 2011, the 80-megawatt spread of solar panels will cover roughly 640 acres and be 17 times the size of the largest US solar farm in existence. The project, which will generate enough power for nearly 21,000 homes, will be sold to the Kings River Conservation District, a public agency that purchases power for 12 cities and two counties in California's Central Valley. The company hopes that a solar farm of this size will be an industry-wide tipping point for energy providers, and will drive the cost of solar energy downward. Meanwhile, Tesco and Spain will be plotting their sublime revenge.

Click here for link..

Bubble-proof markets

Income trends and development restrictions have made each of these top cities safe bets for investors, reports Business 2.0 Magazine in its November 2006 issue. Click here for link..

Top 10 foreclosure markets

Where the action is: Here are the top 10 markets for foreclosed homes as of September 2006, according to data from Realty Trac. Click here for link..

Top 10 cities: Where to buy now

The real estate slump could get worse before it gets better. Business 2.0 Magazine, in its November 2006 issue, identifies 10 markets that offer great opportunities for those who have the patience to buy and hold. Click here for link..

Monday, July 9, 2007

Characteristics of Great Sales Negotiators

by Kelley Robertson
author of Stop, Ask, and Listen

Virtually everyone in sales is required to negotiate. After conducting hundreds of workshop and working with thousands of people during the last decade, I have discovered that most sales people are not as effective at negotiating as they could be.

However, I do come across great sales negotiators from time-to-time and have noticed that they typically have a few things in common. Here are the characteristics they usually possess.

Understanding of the negotiating process. Highly effective negotiators recognize that negotiating is a process, not just something that is done when discussing the terms and conditions of a solution. Negotiating is much more than haggling about price. It requires an understanding of the dynamics that affect the process and influence the behavior of people. Great negotiators invest time learning different tactics and strategies and how each technique contributes to the overall outcome.

Focus on win-win. Win-win means that both parties feel good about the outcome of the negotiating process. Some books that state win-win solutions are not possible in business negotiating; the authors write that someone usually gives away more than they should and the outcome becomes a win-lose situation. Great negotiators don't believe that. They help their customer try and solve problems and look for opportunities to give as much value as possible. They also know how and when to limit their concessions, give-aways, and discounts so they can work out an agreement that is equitable for both parties.

Patience. Too many people search for the quick fix try to close the sale as fast as possible so they can move on the next prospect. Great sales negotiators recognize that patience is a virtue and that rushing the process often leads to an undesirable outcome. They don't hurry to reach an agreement. Instead, they take time to gather the necessary information. They think carefully about possible solutions. They take their time during the entire process. This is critical because major mistakes are made when we try to reach an agreement too quickly. We rush through the process, not giving the other person's offer ample attention, and often end up with an outcome that is win-lose. Simply because we were in a hurry.

Creativity. Most great negotiators are also very creative. They use their problem-solving skills to determine the best solution and look for unique ways to achieve their goal. A friend of mine was once embroiled in a bitter lawsuit with a company and after months of negotiation, he came up with a solution that ended the suit. He stretched out beyond the normal answers and developed an alternative that was accepted by the other party. In other words, he got creative.

Willingness to experiment. Negotiating is a very dynamic process because no two people are alike. What works extremely well in one situation can backfire in another. That's why great negotiators practise using a variety of concepts and techniques. They experiment with different strategies, solutions, and tactics. And a small failure does not prevent them from experimenting with new ideas in the future.

Confidence. Great negotiators are confident when they enter a negotiation. They aren't arrogant or rude or cocky-they are simply confident. They have developed a high belief in their ability to reach an win-win agreement. They are confident that they can handle anything that comes their way in a negotiation and this confidence is developed through experience. Great negotiators evaluate themselves regularly. They learn from their mistakes and victories. They focus on improving their skill. They develop an internal confidence that is unshakable.

Keen listening skills. People will tell you virtually everything you need to know if you ask the right questions AND listen carefully to their answers. I personally believe that this one attribute is the most important skill in selling and negotiating. I remember my wife talking to a prospect on the telephone and at one point during the conversation she sensed that he had more to say. She waited patiently and listened carefully and the other person eventually gave her valuable information that helped her close the sale. Unfortunately, too many sales people simply wait for their turn to talk, or even worse, interrupt their prospect. This lack of listening means they often miss hearing key information that will assist them in the negotiations.

Negotiating is not a skill that is easily acquired. It takes time, effort and energy. If you want to improve your negotiating ability you must be ready to work at it. Invest the time learning the dynamics and science of negotiating. And be prepared to push yourself out of your comfort zone.

Copyright 2007 Kelley Robertson, All rights reserved.

Modesto - SJ Valley Home Bidders Beware..

Another home foreclosure auction is headed to Modesto, and it's got potential bidders hankering for a bargain. But before you start waving your bidding number in front of a fast-talking auctioneer, there are things you should know about home auctions. Most of the more than 500 people who attended last month's auction in Modesto never had seen houses sold that way. The process caused confusion because some deals quickly fell through with several of the high bidders. Those houses ended up being auctioned off again and again, until the auctioneer found bidders who were financially qualified to purchase the homes and had brought sufficient down payment funds.

Bidding rules will be different for the next big auction, scheduled by Hudson & Marshall for July 19 at Modesto Centre Plaza. And more auctions are expected to be held later this summer and fall. That's because lending institutions have repossessed thousands of Northern San Joaquin Valley homes, and they're eager to sell them any way they can. So here are some bidding tips for first-time buyers, seasoned real estate investors and everyone else who is considering buying a home at auction:

RESEARCH HOME VALUES — "It's definitely a buyer's market and everything's on sale right now," said Ken David Elving, co-owner of Matel Realtors. He is representing the sellers of five homes that will be auctioned July 19 in Modesto.

To determine a home's value, Elving said, don't rely on what homes sold for in the past because prices have been falling very quickly. "Focus on the prices being asked for homes for sale now," Elving said. To determine a "comp" — or comparable price — he suggested looking on a Web site to see the asking price for similar homes. Current asking prices often are substantially less than previous sales prices for identical homes.

Example: Elving said a home in the July 19 auction at 1855 Vintage Circle in Oakdale sold in May 2006 for about $550,000. By this spring, that 2,784square-foot home was back on the market for $394,000. No one bought it, so now it will go to the highest bidder. A search of properties for sale in that neighborhood shows several slightly larger homes priced about $360,000. So that $360,000 price may be a more logical bid than $550,000...

(Click link for full article)..

FW: Mitigation Land

Developer looking for raw land in San Joaquin Co for mitigation..

Sent: Thursday, July 05, 2007 11:17 AM
To: sbroderick98
Subject: RE: Mitigation Land

Hi Sean

I just sat down with the developer and he has finished purchasing property
in Sacramento County. Yolo County was not an option.

He is concentating on picking up property in San Joaquin County.

  • Approximately 12,000 acres
  • Requirements: Minimum 300 acre parcels
  • Delta type soil
  • Row Crop Ok, just no permanent crops
  • No grazing land
  • Old orchard or Vineyards may be ok depending on the
    soil samples and
  • aerial photos.

FW: Yellowstone Property

New opportunity from Friday from a business partner..

From: Sean M. Broderick, CCIM
Sent: Friday, July 06, 2007 10:53 AM
Subject: Yellowstone Property

Attached are some numbers on a 1,200 acre master plan outside of the West entrance to Yellowstone Nat. Park.. One of my clients has paid option money and entitlement fees to this point (about 90% complete) and need additional capital to get entitlements approved in 2/08. They are willing to give up 40% equity for a $3M equity infusion as soon as possible. From the numbers, there is $60M+ anticipated profit for the 40% equity partner as well as 12% pref on the $3M. Once entitlements are acquired in Feb ’08, the bank financing is in place to return ½ of the $3M equity capital.

Let me know if this is something that you’d would have an interest in.. My contact information is provided below..

Thanks, Sean..

Watch List (July 8-14): Small Markets vs. Large

Article from the CoStar group with information on the home price decline in markets throughout the country.