bubbleinfo.com

from sddt.com

The status of the economy, banking, residential and commercial real estate were discussed during an Institute of Real Estate Management Forecast at the Hyatt Aventine La Jolla last Friday.

Hans Ganz, president and CEO, Pacific Trust Bank, said the dilemma for the lender is that while a home might have been purchased for $1 million, it is going to be valued by the current comparables in the area. Values have almost universally declined. Add to that a couple of foreclosures in the area and that $1 million home may be suddenly worth $600,000 — more than eliminating any equity. “Now where is the incentive for the lender to refinance that home?” Ganz asked.

Save for refinancing, Ganz does believe mortgage lending will soon be assuming a more normal pattern, however. “We’ll start seeing upturns by the middle of next year. The money isn’t going to stay on the sidelines very long,” he predicted. Ganz said this is an excellent time for real estate investors, and made a prediction. “More millionaires will be made in 2009 than we’ve seen in many years.”

Although it has been said before, UCLA Anderson School of Management professor and economist Stephen Cauley also said with home prices low and interest rates low, there has never been a better time to buy a home.

“This may be a once in a lifetime opportunity,” he said.

Stath Karras, a Cushman & Wakefield executive managing director, meanwhile said the multifamily market is being strengthened on numerous fronts. Karras said he is already noticing that more people are doubling up in apartments than before this latest downturn. “You have demand from echo-boomers, defaulting homeowners entering the rental market, and people who can’t qualify for a home having to stay in the rental market. What’s not so good for apartment investors is we still have a lot of vacant condos out there,” he added.

If he is uncertain about anything, Karras said it is what the impact will be “of all those empty houses” that are being foreclosed upon. “A lot are being purchased for rental purposes,” he said.  While rents have managed to hold their own thus far, Karras predicted there will be some softening both due the houses being rented and the overhang of the condominium market. Karras said the good news is he expects the capital markets to come back mid- to late 2009.

Cauley, while conceding that he doesn’t know what will happen next year, said there is a 60 percent chance the recession will be short-lived and commercial real estate markets will be all right.  “Another possibility (about 20 percent) is there will be little or no economic growth. This would mean a series of recessions _ a kind of slow death,” he said.

“And there is a 20 percent chance we could have a long-term recession or depression _ yuk,” Cauley continued. All that said, Cauley, believes that Sen. John McCain was right when he said ‘the fundamentals of the economy are strong.”

“To be sure those fundamentals have been submerged, and there has been an implosion in the credit markets, but the strength is still there,” he said.

Mark Read, a CB Richard Ellis (NYSE: CBG) senior managing director, who quipped that people’s 401 Ks are now 201 Ks, noted that the commercial real estate had an unprecedented five-year run and it’s only natural that it would taper off anyway. Still, he admitted times may be tough for a while.  “If you want to know what’s going to happen with commercial real estate, just look at job growth,” Read said.

Unemployment, plus or minus 6.5 percent here with some predictions it may reach 7 percent, seems to be going in the wrong direction. Other realities may impact the commercial market. 

“You have owners who bought in ’05 or ’06 or ’07 who have buildings worth 15 to 20 percent less than they paid for them,” Read said. He predicts this unsettled market will last at least through the first half of the year, and there may be further company consolidations and mergers along the way.

Read added the strong commercial real estate brokerages will survive the downturn, but to do so some may have to outsource many of their real estate functions along the way to keep the costs down. For commercial property investors, as is the case in residential, he said “there are some incredible deals out there.”

“And on the other side, this is a great time to be a tenant,” Read said adding that incentives such as free rent and generous tenant improvement allowances may be particularly attractive right now.

We’ve had particular interest in the short sale on Grivetta in Aviara.

The listing agent inputted the listing onto the MLS at an ultra-low price, but he already had his own deal put together.  He told me that the buyer saw him pounding the sign in the front yard, and bought it on the spot.  In the remarks he noted that “back up offer only” and that offers submitted would have to be “site unseen only”.

But with a short sale, anything can happen.  Either the bank can hold out for more money, and/or enough offers get sent in that the listing agent finally submits them all.  Not sure which happened here, but the buyer’s agent was also added as the second listing agent:

934 Grivetta, Carlsbad 92011

5 br/4 ba, 3,492sf

YB: 1999

$550,000  LP 10/15/08

$682,000  SP  12/11/08 

$195/sf

HOA = $79/mo.

Whatever caused the price to go that much higher – it’s good to see that the market prevailed.

How is the rest of Carlsbad doing this month? Are sellers drastically discounting their LPs to get out, or is it more leisurely? Are other sellers opting to go low with their list price, and try to bid up (in bold below)?

There have been 19 detached homes close escrow in December so far:

* REOs (3)
** Short Sales (2)

Difference between avg list price and avg sales price: -12%

Of the four sellers who bought in 2003, two sold for more, two for less.

Of the six sellers who purchased since 2004, one sold for more, five for less.

************************************************************

If you can get the list price right, and find a buyer within 30 days, you get fairly close to what you’re asking. If you price higher, it takes longer, and the drop is typically bigger.

My rule-of-thumb is that you’ll get within 5% of your LP if you sell in the first 30 days, and then at least 10% off for longer than 30 days – how does it apply here?
(DOM from previous recent listings included)

Properties that went pending in 30 days or less, and the difference between LP & SP:
+24%, +14%, -1%, -3%, -5%, -6%, -8%, -14%

median = -5% off list price

Properties that went pending after 30 days on market, and the difference between LP & SP:
-11%, -11%, -13%,-16%,-17%,-18%, -19%, -20% -20%,-20%, -23%
(bold are those at 100+ days on market)

median -18% off

************************************************************
Another rule-of-thumb for medium-priced homes is that – in the buyers’ eyes – they are going down about $1,000 per day once they’re on the open market.

Sellers are bold and optimistic the first 30 days. But after that, they start looking around for what else, or who else, to blame besides their price. If you are looking for a big discount off the list price, your chances are better, later.

The foreclosure train is getting back on the tracks.

Here are the November stats, from Ward’s site:

The 18% increase on NODs filed last month is a good sign that the lenders are adjusting to the new 30-day-delay law. Hopefully it’ll mean we’ll see a nice uptick in REO inventory for spring!

Another interesting stat that Ward follows is the number of trust deeds recorded. Back in the day when virtually every buyer was financing with two loans, the mortgage, escrow, and title companies were awash with volume business. Here’s how things have changed:

November’s total is 13% of the 2003 average. Massive consolidation still underway in the mortgage, escrow and title businesses.

Would this bother you if you were thinking of buying a house nearby?

Youtube 34-second video:

Espn.com is running a story comparing Oceanside and Carlsbad through the eyes of two HS football players – both of whom won their county championship games on Friday:

The challenge: To look at class in sports, circa 2008. A story so big it can be captured only in a photograph from a satellite. The alternative: Put it under a microscope. Find two prep teams in the same area code, one where students are constantly reminded of hardship, the other where fortunate sons and daughters might not always be aware of their privileged births. Urban and suburban. And from those teams, find a couple of players, good players, all-conference but not pro prospects — just a couple of young athletes who are starting to figure out their places in the world, who fairly represent their student bodies. Then, across a typical week in the season, measure the distance between their lives.

http://sports.espn.go.com/espn/eticket/story?page=sandiegohs

It’s a long story, but worth the read.

from the U-T:

Carlsbad’s new municipal golf course lost nearly twice as much money as was expected for its first year of operation, and taxpayers will be asked to chip in $1.6 million for the course in 2009.

The course, The Crossings at Carlsbad, was projected to lose $893,428 in 2008, an amount the council approved last year. That loss ballooned to $1.6 million, however, and the budget projects a similar loss in 2009.

The course made less money than projected – $6.4 million as opposed to $6.6 million – and cost more to operate – $5.9 million as opposed to $5.6 million.  City Finance Director Lisa Irvine said the course breaks even on operations, but the city charges the construction bond payments and the cost of establishing native habitat to the golf course budget.

“If it didn’t have this debt and didn’t have this habitat, this should be self-sustaining,” Irvine said.

The city was required to set aside half of the golf course’s 400 acres as habitat, which cost nearly $600,000 to establish in 2008. The 2009 budget includes $514,000 for habitat.

The debt payment is $1.1 million a year on $18.5 million in construction bonds.

The staff report on the golf course budget notes that fewer people are playing golf in the recession, and that is pulling down revenue.  However, Irvine said the restaurant on the grounds, Canyons, is still drawing customers and is doing well, offsetting some of that decline.

Irvine said the council is being asked to pay $1.6 million from the city’s general fund reserve to cover the course’s losses, so that will not affect the city’s daily operations.

The City Council will address the golf course’s 2009 budget at its meeting Tuesday.

*****************************************************************************************

The Crossings ranked in Golf Magazine’s Top Ten of new public courses:

http://www.golf.com/golf/gallery/article/0,28242,1690265-10,00.html

But it should be ranked high - it cost $70 million, about twice as much as any other public course in the history of building public courses (and they financed $18.5 million?).

“With all of the major golf manufacturers located here … we view Carlsbad as the golf capital of the world,” said Carlsbad Mayor Bud Lewis. “We are proud that in its inaugural year, The Crossings at Carlsbad is not only representative of who we are as a community, both in the quality of the course and its clubhouse, but also lives up to the area’s reputation for golf excellence.”

from Bloomberg.com

http://www.bloomberg.com/apps/news?pid=20601109&sid=aGvwttDayiiM&refer=home

By Mark Pittman

Dec. 12 (Bloomberg) — The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

“If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC, which oversees $22 billion in assets.

The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank loans don’t have the oversight safeguards that Congress imposed upon the TARP. 

Total Fed lending exceeded $2 trillion for the first time Nov. 6. It rose by 138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when central bank governors relaxed collateral standards to accept securities that weren’t rated AAA.

‘Been Bamboozled’

Congress is demanding more transparency from the Fed and Treasury on bailout, most recently during Dec. 10 hearings by the House Financial Services committee when Representative David Scott, a Georgia Democrat, said Americans had “been bamboozled.”

In response to Bloomberg’s request, the Fed said the U.S. is facing “an unprecedented crisis” in which “loss in confidence in and between financial institutions can occur with lightning speed and devastating effects.”

“There has to be something they can tell the public because we have a right to know what they are doing,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press.

“It would really be a shame if we have to find this out 10 years from now after some really nasty class-action suit and our financial system has completely collapsed,” she said.