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Manhattan’s 2010 – Sound Familar?

Hat tip to the Coronado Kid for sending this 2010 summary from The Apple, Peeled:

BUYERS – Top 7 Lessons of 2010:

1.     Bears will always be bears: Many bearish voices in 2009 were calling for the NY Real Estate market to fall off a cliff … at the very least for prices to drop another 20%.  In 2010, feverish discussions continued on StreetEasy and Urban Digs, making the case that the downturn seen to date was only the beginning.  And yet few could argue that things have not at least stabilized, if not improved, as compared to 2009 – some may even call it having formed a bottom.

2.     Deep discounts are so 2009: No longer could buyers negotiate 10-15% off asking prices.  Buyers felt a sense of disbelief in having to often pay full ask, sometimes even engaging in bidding wars in what they thought was a buyer’s market.  This was the result of too many would-be-buyers chasing too few properties.  Good inventory was hard to find in 2010.

3.     A deal is not a deal until a signed contract’s in place:  Although a very questionable strategy, to be sure, this year was the year of multiple contracts being sent out by sellers to hedge their bets after hearing of so many deals that fell apart due to financing issues.

4.     Parallel offers help avoid attachment: Frustration rose for many buyers who had accepted offers on the table, only to then find out the seller reneged and sold the apartment to someone else.  In turn, buyers began negotiating in parallel to avoid putting all of their eggs in one basket.

5.     New developments come with their own headaches: It used to be that buying new meant buying better quality than an older building would offer, saving you money by not having to fix the apartment’s infrastructure or renovate its looks.  Yet many new buildings drew a flurry of lawsuits due to shoddy construction and cut corners.  It paid to do your own due diligence about the developer and the building’s reputation.

6.     Easy money is dead: Getting qualified for a loan became the biggest obstacle to getting a deal done in 2010.  Buyers had to have great credit, great debt-to-income ratios and click their heels three times while repeating “there’s no place like home” to get a mortgage.  (Even then, signing a contract without a mortgage contingency was akin so Russian Roulette.) If they looked to get a Jumbo mortgage, then they had to throw in a sacrifice to the mortgage gods to make the mortgage go through.

7.     Technology rules (to a point): So many buyers leveraged the internet and its real estate advances this year.  They became expert at finding the right properties, researching them, comparing them, and using the information at their fingertips to fuel their negotiation strategies.  The frustration kicked in when sellers budged no more and buyers realized that real estate is not such an efficient market, neither on the buy nor sell side of the equation.

SELLERS – Top 7 Lessons of 2010

1.  New York is not Miami: We’ve all heard it so many times, perhaps it’s even escaped your own lips at some point: “But New York is different!”.  The country underwent the most significant downturn in our generation, middle-America is suffering, housing prices are down north of 50% in some areas of the country and unemployment hovers around the double digit barrier … and the worst that the NY Real Estate market could do was down 20-25% on average from its 2006 peak?  Yes, the higher the pricepoint, the more significant the down-turn, but … one must admit, it’s still damn impressive!

2.  Renovations sell, fixer uppers don’t:  2010 was the year of the first-time home buyer and of the turn-key purchaser.  This means that newly renovated properties sold faster than ever before, particularly now that buyers no longer had access to home equity lines of credit to use towards fixing an older property.  Those who chose to buy wanted to a prêt-a-vivre home, ready to live in from the start.

3.  Proper pricing is so now:  Sellers who tried to “test the market”, hoping for that one special buyer who would happen to give them their high asking price saw themselves on the market for a loooooong time.  Then the enemy became time on market, with buyers neglecting price-improved properties out of the skepticism that comes along considering a stale listing.

4.  Renting is a real option:  With the rental market making a real comeback this year, many sellers on the fence of parting with their properties found it lucrative to rent.  Inventory was slim and having a tenant in place for 1-2 years to ride out the storm paid off.

5.  Cash is still king:  With the turbulence felt in the credit markets, sellers had to contend with the very real tradeoff between accepting an ok all-cash offer and a higher, mortgage contingent one.  Many chose cash, over bearing the risk of the deal falling through after months of buyers slugging it out with their bank.

6.  Appraisals matter:  Just because you were lucky enough to get the price you wanted for your apartment, it didn’t mean the negotiations were done.  Appraisals became the Achilles’ heel of the industry as they seemed to consistently come in below the contract-signed price, throwing a wrench in the whole process.  Appraisals became commoditized and many began criticizing the process, now driven by volume versus quality and experience.

7.  Your building has its own credit rating:  Many sellers felt stranded by the inability of their buildings to get approved for financing, an issue that often popped up at the tail end of the entire process.  After going through the motions of putting the property up for sale, negotiating the price, and moving towards a close, many owners in land-lease buildings, or those with too great a concentration of rental units or owners found themselves having to rationalize staying in their home.

Buy vs. Rent

Hat tip to SM for sending this along, from David Leonhardt at the nytimes.com:

Below is an updated list of rent ratios — the price of a typical home divided by the annual cost of renting that home — for 55 metropolitan areas across the country.

We last covered this subject about eight months ago, and you’ll notice that most ratios have not changed much since then. A good rule of thumb is that you should often buy when the ratio is below 15 and rent when the ratio is above 20. If it’s between 15 and 20, lean toward renting — unless you find a home you really like and expect to stay there for many years.

Metro area Ratio
East Bay, Calif. 35.9
Honolulu 34.4
San Jose, Calif. 32.7
San Francisco 27.9
Seattle 27.3
Charlotte, N.C. 27
Orange County, Calif. 27
New York (Manhattan) 26.7
Raleigh, N.C. 26.2
Portland, Ore. 25.9
North – Central New Jersey 25.2
Nashville 24
Denver 22.6
San Diego 22.1
Long Island, N.Y. 21.4
Milwaukee 21.4
Austin, Tex. 20.5
Norfolk, Va. 19.9
Richmond 19.7
Memphis 19.3
Bridgeport, Conn. 18.5
Hartford 18.4
Boston 18.4
Washington – Northern Virginia – Maryland 18.3
Oklahoma City 18.2
Baltimore 17.6
Columbus, Ohio 17.6
Palm Beach County, Fla. 17.6
Salt Lake City 17.6
Sacramento 16.7
San Antonio 16.7
Chicago 16.6
New Orleans 16.2
Philadelphia 16.1
Houston 15.9
Fort Lauderdale, Fla. 15.7
Miami 15.6
New York 15.4
Los Angeles 15.4
Kansas City, Kan. 15.3
Inland Empire, Calif. 15.1
National average for metro areas 15.1
Indianapolis 15.1
Jacksonville, Fla. 15
Minneapolis 14.9
St. Louis 14.6
Las Vegas 14.3
Atlanta 14.3
Orlando, Fla. 14.1
Tampa, Fla. 14
Cincinnati 13.9
Dallas – Fort Worth 13.8
Phoenix 13.3
Detroit 12.4
Cleveland 11.7
Pittsburgh 11.4

It’s pretty amazing when you think about it. The country has suffered through a terrible crash in home prices, yet buying a house remains an iffy proposition in many markets.

The data comes from Mark Zandi of Moody’s Analytics and covers the second quarter of this year. Home prices haven’t changed very much since then, so I would expect ratios in most places to be quite close to the numbers you see here.

San Diego 2011 Home Prices +3.5%

From HW:

San Diego should see home prices rise 3.5% next year, but prices in Florida and Nevada, two states where the foreclosure crisis is especially acute, will drop 6% to 7%, according to a real estate market forecast.

While 40% of major metros are expected to see appreciation in home prices, most of that is expected to be fairly mild.

The forecast comes from Santa Ana, Calif.-based Veros Real Estate Solutions, a technology firm serving the financial services industry.

The forecast looks at the median price tier in metros of 500,000 or more. For December 2010 through December 2011, select markets in the U.S. can expect to witness 2.5% to 3.5% appreciation on home values, including Washington state’s tri-city area.

Projected five strongest markets:

1.    San Diego / Carlsbad / San Marcos, Calif. (+3.5%)

2.    Kennewick / Richland / Pasco, Wash. (+3.4%)

3.    Pittsburgh, Pa. (+2.7%)

4.    Fargo, N.D. (+2.6%)

5.    Washington, D.C. metro area (+2.5%)

Projected five weakest markets:

1.     Reno/Sparks, Nev. (-7.2%)

2.     Orlando/Kissimmee, Fla. (-6.5%)

3.     Boise City/Nampa, Idaho (-6.4%)

4.     Deltona/Daytona Beach/Ormond Beach, Fla. (-6.3%)

5.     Port St. Lucie/Fort Pierce, Fla. (-6.3%)

Looking out to the 12 to 24 month horizon, nearly 60% of markets are expected to appreciate,” he says, “So while things aren’t happening rapidly, the forecast indicates they are getting better.”

Veros provides forecasts on the national real estate market with the capacity to segment results by property types, pricing tiers, and by metro area, county or ZIP code.  The forecast utilizes more than 50 critical decisioning factors to develop reliable market trend predictions, the company said. It takes into account factors such as unemployment and housing inventory levels, among others.

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Also from HW:

National home prices will not increase from the previous year until the fourth quarter of 2012, according to a panel of economists surveyed by MacroMarkets, a financial technology company.

The survey was compiled from 110 responses in December, and it is based upon the projected path of the Standard & Poor’s/Case-Shiller national home price index over the next five years. According to the survey, home prices in the fourth quarter of 2010 will show a 1.13% drop from a year ago, but will begin to stabilize.

 

At the end of 2011, prices are expected to remain 0.17% below where they will be at the end of this year. But by the close of 2012, prices will have begun its long journey to recovery, increasing nearly 2% from 2011, according those surveyed. By 2015, prices will be increasing by more than 3.5% from the previous year.

Robert Shiller, who co-founded MacroMarkets and remains its chief economist, said less than 3% of those surveyed expected a negative change in 2015. The 3.7% increase expected in that year would be higher than the average annual rate of increases before the bubble.

MacroMarkets Managing Director Terry Loebs said the survey consistently points to price stability in the intermediate and long-term. However, he stressed that the recovery will be long road.

“Weak market fundamentals persist and continue to gnaw at wealth and confidence in these uncharted, post-bubble waters,” Loebs said.

SD County Detached REO Map

I checked the tax rolls by owner name to find the detached properties currently owned by lenders – there were only 1,991 of them, which is about how many detached properties sell every month.

Don’t be alarmed, the pushpins are the size of a city block until you zoom in – and you can select ‘satellite’ or ‘hybrid’ versions in the top-right corner.  Scroll around and notice how few are in the North SD County Coastal region:

Frosty Beer

From the nytimes.com, via cnbc.com:

Truckee, Calif. When Mimi Ash arrived at her mountain chalet here for a weekend ski trip, she discovered that someone had broken into the home and changed the locks.

When she finally got into the house, it was empty. All of her possessions were gone: furniture, her son’s ski medals, winter clothes and family photos. Also missing was a wooden box, its top inscribed with the words “Together Forever,” that contained the ashes of her late husband, Robert.

The culprit, Ms. Ash soon learned, was not a burglar but her bank. According to a federal lawsuit filed in October by Ms. Ash, Bank of America had wrongfully foreclosed on her house and thrown out her belongings, without alerting Ms. Ash beforehand.

In Texas, Bank of America had the locks changed and the electricity shut off last year at Alan Schroit’s second home in Galveston, according to court papers. Mr. Schroit, who had paid off the house, had stored 75 pounds of salmon and halibut in his refrigerator and freezer, caught during a recent Alaskan fishing vacation.

“Lacking power, the freezer’s contents melted, spoiled and reeking melt water spread through the property and leaked through the flooring into joists and lower areas,” the lawsuit says. The case was settled for an undisclosed amount.

More common are cases like Ms. Ash’s, in which a homeowner was behind on payments, perhaps trying to work out a modification, when bank crews changed the locks.

In Florida, contractors working for Chase Bank used a screwdriver to enter Debra Fischer’s house in Punta Gorda and helped themselves to a laptop, an iPod, a cordless drill, six bottles of wine and a frosty beer, left half-empty on the counter, according to assertions in a lawsuit filed in August. Ms. Fisher was facing foreclosure, but Chase had not yet obtained a court order, her lawyer says.

The break-in was discovered when a Canadian couple renting the house returned from the beach.

(more…)

Pacific City, Oregon

Poised on a timbered ridge overlooking the Pacific Ocean, this 6,000 square foot residence is organized around a two-story great room reminiscent of a grand lodge. The interior features natural Douglas fir timber construction and a massive Columbia river basalt fireplace. The exterior is cedar, left to weather naturally in the salt environment to a soft silvery grey.

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