Auctions catch on as sales route for all types of property

AVRUM D. LANK
Milwaukee Journal Sentinel

MILWAUKEE � As 2007 wound down, David Leszczynski faced a challenge. After spending more than $10 million and three years converting a 1930s Art Deco skyscraper to a downtown condominium project, some of the units were still empty. With real estate sales falling, credit tightening and the economy slowing, Leszczynski knew he had to think creatively to find buyers.

Without doing that, he said, "you could sit and wait a long time" for the building to fill. His solution: an auction. Auctions have existed for centuries and are commonly used to sell foreclosed or repossessed real estate. In the Southern U.S. and in parts of the West Coast, they are becoming more common to sell real estate of all types.

It's unusual for Milwaukee developers to auction condos, said the agent for Leszczynski's Wisconsin Towers. "But it is something that we are starting to see a little bit more of," he added. "In today's real estate market, you have got to be proactive," Leszczynski said. "I am convinced it is a good way to let the public set the price."

Craig A. Muri, president of the condo board, also is behind the effort. "I think it is a really good idea, very creative," said Muri, who, with his partner, has owned a unit in the building since June. "With the market the way it is right now, you have got to look to see what your options are and get out of the box." Muri understands the auction results will affect the value of all the units in the building.

"All of our values are going to stay relatively the same. I can't imagine the units are going to sell for much less than 90 percent of list price," he said. "Obviously value will go down, but I think values have gone down given the way the economy is now." Periodically, single-family homes not in foreclosure will be auctioned off, said Michael D. Holloway, owner of Homebuyers Associates, a real estate agency in Milwaukee that represents only purchasers. But he is not aware of other condos being sold that way.

As for bidding at a condo auction, "on the surface I would just have a concern because it is a new approach," Holloway said. "If it is a true auction, if there is bidding against people, then emotion comes into play, and I am one for buying on information and not emotion." Also, auction deals often do not include contingencies for things such as inspections or the sale of another property, so it's important to do some homework, he said.

It is unusual for an owner-occupant to auction a house, said Dentice, but some companies do. Real estate auctions are the fastest-growing part of the auction business, said Chris Longly, public affairs manager for the National Auctioneers Association of Overland Park, Kan., although he could not say how much of that growth is due to foreclosure sales.

A quick, clean deal is what appeals to sellers, he said. "The market has changed," he said. "People want things now."

 

Group raising awareness about real estate auctions

By Katy Stech

Monday, March 10, 2008

As home auctions gain popularity in Charleston, a handful of local real estate auctioneers are banding together to dispel myths that surround their practice. "The first (misconception) is that you're going to sell their house for $5," explained Linda Page, a real estate auctioneer and owner of Page's Thieves Market Inc. in Mount Pleasant.

In fact, most homes sell at a price that's between 70 percent and 125 percent of the listing price through the Charleston Trident Association of Realtors Multiple Listing Service. That's according to a detailed analysis of last year's auction sales by auctioneer Mike Harper. "It's an indicator for sellers for what they can expect to attain," he said.

The point of the new group is to raise awareness of the professionalism behind the trade. A proper real estate auctioneer maintains both a real estate license and an auctioneer's license, Page said.

Auctions have taken the spotlight during the slowed real estate market because they can help move property quickly and efficiently. Though they are receiving a lot of attention these days, real estate auctioneer Scott Hodges is quick to point out that the sales technique has been around a while. "A lot of people have (the idea) that they are a fad or brand-new, but the auction method has been around for thousands of years," he said.

Hodges, recently joined Keller Williams Realty. He said that the merger is a sign of a company that continues to "think outside of the box" when it comes to alternative ways to sell real estate.

Going twice

Speaking of auctions, Trademark Properties' "Liquidation Sensation" campaign comes to a close Friday at the Gaillard Auditorium. As of late last week, the James Island real estate company had about 410 properties across the state signed up to be auctioned off in front of a select group of potential buyers. The properties' total value tops $150 million.

In Charleston, about 46 properties, mostly single-family homes, are up for grabs. They range from luxurious beachfront properties on Seabrook Island, Edisto Island and the Isle of Palms to more modest homes on Daniel Island and in North Charleston. Many homes are newly built, offered by developers who overshot their inventory.

Broker-in-charge Richard C. Davis, whose firm was profiled in the television show "Flip This House" and later "The Real Deal," said auctions are another "tool in the belt" for real estate agents. They are a good way to link up buyers and investors with property owners who are desperate to sell despite the slower real estate market.

Full disclosure

Leaders at the South Carolina Association of Realtors have decided to continue releasing statewide home sales data on a monthly basis.

Nick Kremydas, the association's chief executive officer, confirmed that the group was deciding whether to release the sales figures on a monthly or a quarterly basis. He argues that quarterly figures would give a broader picture of the state's real estate market. "The idea was that if you did quarterly releases, you'd have better trend indicators," he said, noting that January sales "don't look so good" compared with January of last year.

But a decision to release information less frequently would have raised eyebrows, given the slowed conditions and the association's bullish stance on the real estate market. In North Carolina, the statewide professional group for real estate agents releases figures on a monthly basis. Georgia's association isn't releasing sales figures now but plans to start soon � on a quarterly basis.

 

Real Estate and Development

LV-area ZIP codes flush with foreclosure filings

By Brian Wargo / Staff Writer

Nevada had held the top spot in the nation for foreclosures, and now the Las Vegas Valley is taking center stage in the national spotlight of the problem. The valley has long been ranked in the top five nationally in the rate of foreclosure filings.

In December the valley had seven of the top 10 ZIP codes in the nation in foreclosure filings and 16 of the top 20, according to a report by RealtyTrac, a California firm that tracks foreclosures, and CNNMoney.com. A year ago, Detroit and Cleveland had some of the highest foreclosure filings.

RealtyTrac blames the growing problem on a large number of subprime mortgages coming due. Subprime loans are for buyers who didn't have the credit worthiness for a prime loan. Many borrowers used adjustable-rate mortgages to afford homes because prices have risen steeply in recent years. When prices fell, many homeowners could not refinance their loans.

The 89031 ZIP code in North Las Vegas had the highest number of filings - 741 - in December. That included 368 default notices, 285 auction notices and 88 repossessions.

The others and their total filings are:

2. 89131 in Las Vegas: 665.

3. 89148 in Las Vegas: 614.

4. 89108 in Las Vegas: 573.

5. 89052 in Henderson: 484.

6. 89139 in Las Vegas: 476.

7. 89129 in Las Vegas: 473.

10. 89123 in Las Vegas: 448.

Housing expert weighs in: National housing expert John Burns says there is further evidence the U.S. could be in a recession. He says as if the housing market isn't enough of a drag on the economy, businesses are curtailing their spending as well. Not only have manufacturers said their budgets are being cut, but service-sector businesses are shrinking as well, Burns says.

As for the housing market, Burns says the good news is that falling interest rates will help more qualified buyers finance their way out of problems. The existing home market remains weak with few signs of any improvement, and he gave it a grade of a D. The new home market got an F from Burns because sales and prices continue to decline.

Las Vegas the place to buy: Entrepreneur.com listed Las Vegas as one of the top four places to buy an existing home as an investment. The others are Austin, Texas, and surrounding cities; Mission Viejo, Calif.; and Palm Beach, Fla. When it comes to Las Vegas, the online magazine said the city has been hit hard by investors who watched their home values disappear and then left those homes empty. Las Vegas is high on the national list of foreclosures, but it has a strong job market, it reported.

"Las Vegas experienced a 12 percent increase in population, partly driven by retirees looking for Sunbelt states to move to," the publication said. "Coupled with low prices, we could see inventories reduced here, which would also stabilize prices. Be careful what you buy, but (we) like it." The places to avoid are Detroit, Miami, and Riverside and San Bernardino counties in California.

 

Sat Feb 16, 7:51 PM ET

LONG BEACH, Calif. - A penny saved is not necessarily just a penny earned: One man's collection of rare American cents has turned into a $10.7 million auction windfall.

The collection of 301 cents featured some of the rarest and earliest examples of the American penny, including a cent that was minted for two weeks in 1793 but was abandoned because Congress thought Lady Liberty looked frightened.

That coin and a 1794 cent with tiny stars added to prevent counterfeiters each raised hundreds of thousands of dollars, according to the Dallas based auction house , which held the sale in Long Beach on Friday night .

The Auction president said the auction was the biggest ever for a penny collection, with hundreds of bidders vying for the coins. Presale estimates valued the collection at about $7 million.

"It was a fabulous night," he said. "Every major coin collector of American cents was either there in person, bidding online or on the telephone."

The coins came from the collection of Burbank resident Walter J. Husak, the owner of an aerospace-part manufacturing company. Husak became interested in collecting at age 13, while visiting his grandparents who paid him in old coins for helping with chores.

There were 168 successful bidders, and the auction gallery got 15 percent of the total. Auctions bring market value!

 

Banana man tries to auction Long Island house

If you happened to be in Glen Cove over the weekend, you might have seen a human banana � maybe even three of them � hanging around the streets hawking the auction of a $1.4 million Lattingtown home.

The costumes were an attention-getting tactic from a group of real estate investors, who approach sellers with an option to buy their homes. The investors then market the property and try to make a profit by getting buyers who might pay for above the option price.

A pair of Long Island landscaper brothers in the investment group, Matthew and Daniel Schreiber, peeled the idea off investors from Florida, where the housing market has slipped much more than New York�s.

"We went the extra level . . . in this kind of market to bring in more clientele," said Daniel Schreiber. "It wasn�t necessary in the past."

One costume used in Florida was the banana, and the brothers said there�s no deep explanation for why the group of investors settled on a fruit. "It could have been SpongeBob Squarepants," Matthew Schreiber said.

The Schreibers expect out-of-the-box marketing to bear fruit in their other real estate efforts. They say they think the bananas attracted more bidders for the auction on the Lattingtown house, held Sunday.  When asked about the number of bidders, Daniel Schreiber was reticent. "A bunch," he said.

 

Holding onto homes in a depressed housing market wasn't easy in Florida in 2007, but no state in the U.S. was worse than Nevada.

Nevada and Florida ended 2007 as the top- and second-ranked states, respectively, in terms of foreclosure rates, contributing a good portion of the 2.2 million foreclosures filed nationwide last year, data released by RealtyTrack showed.

Florida had more than 2 percent of its households entering some stage of foreclosure in 2007, with a total of 279,325 foreclosure filings on 165,291 properties -- more than twice the number of filings reported in 2006. Foreclosure filings in Florida were up 275 percent in December compared to the same month the previous year, and in the fourth quarter, the total was 211 percent higher than the previous year.

Nevada and Florida joined Michigan, California, Colorado, Ohio, Georgia, Arizona, Illinois and Indiana as the states with the highest foreclosure rates in the nation.

Florida also finished second in total foreclosure filings behind California, which had 481,392 filings on 249,513 properties. Nevada was 10th in overall foreclosure filings.

South Dakota, Vermont, Maine and West Virginia had the best foreclosure rates, combining for just 799 foreclosures.

Nationwide, a total of more than 2.2 million foreclosure filings were reported on nearly 1.3 million properties last year, a 75 percent jump from 2006. The report also shows more than 1 percent of all U.S. households were in some stage of foreclosure during the year, up from 0.58 percent in 2006.

 

Live auction industry exceeds $270 billion in 2007

Residential real estate auction revenue increase 5.3%

despite housing market downturn

 

Overland Park, Kan - In 2007 the gross revenue from goods and services sold at live auction grew 5.3% to $270.7 billion. In 2006, the auction industry sold $257.2 billion in goods and services at auction, an increase of 7.1% from 2005. The annual report was compiled by Morpace, Inc. on behalf of the National Auctioneers Association (NAA) which surveys auction professionals to determine the state of the industry, as well as track key auction specialties within the industry. 

 

While traditional real estate professionals continue to face the challenges of a housing market downturn, the real estate auction market continues to be one of the fastest growing auction sectors generating $58.4 billion in 2007.  Within the real estate segment (i.e. residential, land/agricultural, commercial/industrial), residential real estate auctions witnessed the largest growth, increasing 5.3% from 2006.  Accounting for 32% of the total live auction industry, automobile auctions continue to be the largest sector of the industry generating $87.8 billion in sales.  Charity auction revenue grew from $15.6 billion in 2006, to $16.2 billion in 2007, an increase of 4.1%.  The overall number of live auctions conducted in 2007 increased by 4.6%.

 

"The live auction industry continues to grow at an amazing pace," said NAA president Tommy Williams, CAI. "More and more consumers are realizing the benefits of buying and selling at live auction. Consumers are now buying or selling their homes, purchasing art and antiques, or raising capital for charitable causes through auctions."

 

To assist consumers interested in real estate auctions, the NAA launched the first real estate auction multiple listing service (MLS) in 2007. Prospective bidders from across the world can access www.auctionmls.com to view upcoming real estate auctions ranging from residential, to farm/agricultural real estate.  In addition to launching the first auction MLS, the NAA partnered with the Auction Network to develop the first 24/7 multi-media network devoted to the auction industry.  Everyone from the enthusiast to the casual bidder can participate real-time in a wide variety of auctions taking place worldwide.

 

 

# # #

 

2007 Revenue Estimates by Auction Specialty Areas

- Gross Revenue (Billions)

Art, antiques & collectibles - $13.7 (+3.9%)

Automobiles - $87.8 (+0.6%)

Agricultural machinery & equipment - $18.2 (+0.7%)

Commercial and industrial machinery & equipment - $13.0 (+7.3%)

Livestock - $17.4 (+0.0%)

Land and agricultural real estate - $25.9 (+2.5%)

Commercial and industrial real estate - $15.7 (+4.2%)

Residential real estate - $16.9 (+5.3%)

Personal property - $9.7 (-3.5%)

Intellectual property - $0.2 (+5.1%)

Other (Non-Charity) - $2.2 (-1.9%)

Charity - $16.2 (+4.1%)

 

DENVER � The tough housing market has some home sellers going to auctioneering school to develop a fast way to move properties. Ask Shelly St. John of Denver if she ever expected to be practicing the rapid-fire verbal pacing of an auctioneer and she would have laughed.

"Never in a million years," she said. "Never."

Friday afternoon, she participated in the Bid Calling Boot Camp at the Colorado Auctioneers Association Convention at the Four Points Sheraton in Denver. She practiced her diction, delivery and crowd-interaction style.

St. John is not alone.  According to the National Association of Auctioneers, real estate is the fastest-growing segment of the auction business. Residential property auctions accounted for $16 billion in sales in 2006.

"As the real estate market has changed, traditional agents are coming to the auction people to look for different ways to move properties because the traditional method is becoming very slow," said Walt Partridge, president of the Colorado Auctioneers Association.

Sellers worried about their homes sitting on the market for a year or more are asking auctioneers to move them faster, according to Partridge. He says the average time from listing to closing on a residential property auction is 60 to 90 days.

The galloping cadence of the auctioneer doesn't sound like traditional real estate sales. That's what St. John thought until she decided to give it a try. Now she's sold. The big question here is - does fast talking equate to selling? OR is it really more of a question of total accelerated marketing that matters?

 

Here at Running of the Bulls, we have been venerable bears on residential real estate for some time. Too long, in fact. It was a few years before the top in the housing markets that we started sending out alarms about the real estate nuttiness around the world. But, as never seems to amaze me, what gets stupid can get even more stupid, much more so than one might think.

Perhaps then, ignoring the lessons of the recent past, it is time to start looking for a bottom in the housing market, which I believe will occur either this year or next, though later is more likely than sooner in my opinion.

I do believe we are near a bottom in the homebuilder stocks.

About a year ago, when looking back at where the homebuilders bottomed at in 1991, I calculated that the SPDR Homebuilders ETFwould bottom in the $15-$18 range. I think we still have one more cathartic sell-off to come in the new year, perhaps triggered by the news of a major bankruptcy. However, a move from $19 to $15 is still a 20% decline but most of the pain is done for the homebuilder stocks. For an investor, one should be looking to buy rather than sell.

Anyways, here is a round-up of all things bad in housing from the past month.

Check out this cool real estate map of America.

The forecasters cheerleaders at the National Association of Realtors were basing their forecasts on the red continuing in the above map, falling into the predictable forecasting trap of basing one's prognostications on the rear view mirror. Slate anoints NAR as The Worst Forecasters Ever, though those of us who lived through the Tech Bubble might disagree.

[W]ithin the fraternity of financial and fiscal forecasters, the seers at the National Association of Realtors ��longtime chief economist David Lereah and his successor Lawrence Yun ��may be uniquely ill-equipped to deliver sobering forecasts. They work for a trade group whose mission is to buck up the spirits of real-estate brokers. And real-estate brokers" ��who live to sell, promote, and market" ��are constitutionally disinclined to hear anything but good news. Indeed, as I noted last summer, Lereah's penchant for putting out positive spin on dismal housing numbers inspired a blog and led critics to dub him the Baghdad Bob of real estate. Lereah has moved on. But Yun has picked up where he left off. ...

In addition to claiming that the sun is shining brilliantly even as rain pours down from the heavens in a mighty stream, Lereah and Yun have also hazarded optimistic, educated guesses about the future. In February 2005, Lereah published a book that is my candidate for Longest Title Ever: Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue To Climb Through the End of the Decade �And How To Profit From Them. Naturally, the boom busted soon after publication, and property values began to descend.

On the other side of the spectrum is Gloomy Gus Robert Shiller:

Question: So how rich can you get on real estate?

Answer: From 1890 through 1990, the return on residential real estate was just about zero after inflation.

Question: Excuse me? That's all? Hasn't it been higher lately?

Answer: Since 1987 it's been 6 percent [or about 3 percent a year after inflation].

Question: So real estate doesn't go up roughly 10 percent a year?

Answer: It can't be true that homes rise 10 percent a year. If they did, in the long run no one would be able to afford a house.

Question: Let me grab a calculator. If real estate really rose 10 percent a year, a $25,000 home in 1957 should be worth roughly $3 million now.

Answer: And that flies in the face of common sense. In fact, I'm inclined to think there's a good chance that the return on real estate will be negative, substantially negative, over the next 10 years because all booms reverse in the end.

That common sense seems to have, unsurprisingly, escaped NAR.

The Fox Street Journal has a great interactive presentation on the housing market, via Barry Ritholtz. This is the house price to rental ratio.

How far do prices have to fall? According to Fortune, housing prices are going to decline by 15% from June levels.

click to enlarge

A 34% decline to come in Orlando! That's gotta hurt.

In fact, prices have almost certainly declined more than list prices imply as incentives lower the net price received by sellers. And yes, incentives are abundant in the market.

As the housing market slump deepens, disguised discounts are making it harder to tell exactly how much people are paying for homes.

Buyers, sellers and other market participants typically monitor fluctuating home values through sale records that legally have to be listed with county clerks. But incentives offered to buyers -- ranging from free cars or furniture to cash rebates -- are making those prices less reliable as a sign of what buyers actually paid, netting out the giveaways. And that may be misleading lenders and people shopping for homes, some real-estate lawyers and appraisers warn.

KB Home (KBH) in January sold a new townhome with green siding in the Denver suburb of Parker for $196,000, according to the deed recorded with the Douglas County clerk. But a disclosure form provided to the buyer and seller of a particular property, which isn't part of the public record, shows that home builder KB paid $27,600 to another company, which made a cash payment to the buyer. Netting out that effective discount, the price was $168,400. ...

One risk of these transactions is that they can mislead other buyers into overpaying for similar houses nearby, or give owners of nearby properties an exaggerated notion of their home equity. Lenders can make loans on the basis of an artificially high value, increasing the danger of losses from any default.

The national builder Lennar Corp. (LEN), for instance, last year offered buyers in certain Florida communities vouchers to purchase Mustangs from a local dealership. Lennar said the voucher was deducted from the recorded sales price of the homes. A few months ago, a small builder in Tacoma, Wash., offered a $20,000 Harley-Davidson to buyers of a $479,000 home. One buyer skipped the Harley and instead took a $20,000 incentive from the builder, which reduced the sales price of the home. But in other cases, " the incentive is not always public knowledge," said an agent involved in the sale, Jeff Jensen of Windermere Professional Partners, Tacoma.

It is a vested interest of many parties to keep the stated price higher than the actual market clearing price. However, the more impediments there are in order to reach the clearing price, the longer the crisis will drag on.

Seven percent of homeowners owe more than their house is worth. Or, at least they did a year ago. Today, the proportion is almost certainly higher.

Last March, First American CoreLogic, a housing- and mortgage-data supplier in Santa Ana, Calif., calculated that nearly 7% of 32 million U.S. households studied as of December 2006 owed more than their homes were worth, based on computer estimates of the property values. The homes studied had mortgages originated in 2004 through 2006, around the peak in the housing market.

The Dallas Fed has a good article on the housing market.

And, as the Dallas Fed notes, resets will not peak until 2008.

As you know, the government created a bailout plan for submerging prime borrowers. However, it will unlikely have much of an effect. In fact, it may exacerbate the situation.

Although there are mountains of uncertainty as to how the plan will be structured and implemented, there is no question that as lenders factor in the added risk of having their contracts re-written or of being held liable for defaulting borrowers, lending standards for new loans will become increasingly severe (higher down payments, mortgage rates, and required Fico scores, lower loan to income ratios, and perhaps the death of adjustable rate loans altogether). The result will be additional downward pressure on home prices, despite the fact that in the short term fewer homes will be sold in foreclosure than what might have been without the rescue plan.

Most homes temporarily saved from foreclosure will continue to depreciate as new buyers fail to qualify for loans. As a result, lenders will be on the hook for more losses than had the foreclosures taken place sooner.

Even if those who qualify take the help, many will wind up in foreclosure anyways.

The recidivism rate for non-credit-worthy borrowers is high, according to Rosner. Even during the boom in housing prices, the re-default rate on subprime and Alt-A loans (one step above subprime) two years after a modification was 40 percent to 60 percent, he said.

Thus, the plan merely delays the market reaching its clearing price, delaying the eventual recovery, like what happened in Japan in the 1990s.

The rate of foreclosures may have already peaked.

Foreclosure filings for November surged 68% from a year ago but dropped 10% from October, another sign that foreclosure activity overall may have peaked for the year, a foreclosure-listing service said.

RealtyTrac Inc. Chief Executive James J. Saccacio said that November's 10% drop from October was the first double-digit monthly decrease observed since April 2006.

However, the level of foreclosures has almost certainly not peaked. I mean, 68% growth isn't exactly comforting.

What else may add to foreclosure woes? Try option ARMs.

In a report issued last week, Merrill Lynch economists called option ARMs "ticking time bombs" that will start "ticking louder next year." Merrill estimates that losses on option ARMs could total $100 billion, on top of an estimated $400 billion in losses on subprime and other mortgages.

Option ARMs generally carry a low introductory rate -- in some cases as low as 1% -- and often have high prepayment penalties that make it expensive to refinance. With lending standards getting tighter, refinancing may be impossible in any case. ...

A small number of borrowers with option ARMs are already facing resets that require them to make payments covering interest as well as some principal. The numbers are set to rise sharply: Nearly $156 billion in option ARMs will face payment resets between 2008 and the second quarter of 2012, according to Lehman Brothers estimates, with resets peaking in 2010 and 2011. For more than $90 billion of those loans, borrowers would owe as much as their home is worth or more, according to Lehman, which assumed that home prices will fall 6% both in 2008 and 2009.

Though option ARMs are a smaller market than submergingprime, there are more ticking time bombs out there, as an insider in an excellent interview with Herb Greenberg notes.

[S]ub-prime loans were only a small piece of the mortgage mess. And sub-prime loans are not the only ones with resets. What we are experiencing should be called The Mortgage Meltdown�� because many different exotic loan types are imploding currently belonging to what lenders considered ��qualified� or ��prime�� borrowers. This will continue to worsen over the next few of years. When ��prime�� loans begin to explode to a degree large enough to catch national attention, the ratings agencies will jump on board and we will have ��Round 2. It is not that far away. ...

Sub-prime aren'��t the only kind of loans imploding. Second mortgages, hybrid intermediate-term ARMS, and the soon-to-be infamous Pay Option ARM are also feeling substantial pressure. The latter three loan types mostly were considered ��prime�� so they are being overlooked, but will haunt the financial markets for years to come. Versions of these loans were made available to sub-prime borrowers of course, but the vast majority were considered prime�� or Alt-A. The caveat is that the differentiation between Prime and ALT-A got smaller and smaller over the years until finally in late 2005/2006 there was virtually no difference in program type or rate. ...

Most sub-prime loans in existence are refinances not purchase-money loans. This means that more than likely they pulled cash out of their home, bought things and are now going under. ...

The second mortgage implosion��, ��Pay-Option implosion�� and ��Hybrid Intermediate-term ARM implosion�� are all happening simultaneously and about to heat up drastically. Second mortgage liens were done by nearly every large bank in the nation and really heated up in 2005, as first mortgage rates started rising and nobody could benefit from refinancing. This was a way to keep the mortgage money flowing. Second mortgages to 100% of the homes value with no income or asset documentation were among the best sellers at CITI, Wells, WAMU, Chase, National City and Countrywide. We now know these are worthless especially since values have indeed dropped and those who maxed out their liens with a 100% purchase or refi of a second now owe much more than their property is worth. ...

The �Pay-Option ARM implosion�� will carry on for a couple of years. In my opinion, this implosion will dwarf the ��sub-prime implosion�� because it cuts across all borrower types and all home values. Some of the most affluent areas in California contain the most Option ARMs due to the ability to buy a $1 million home with payments of a few thousand dollars per month. ...

In Northern California, a household income of $90,000 per year could legitimately pay the minimum monthly payment on an Option ARM on a million home for the past several years. Most Option ARMs allowed zero to 5% down. Therefore, given the average income of the Bay Area, most families could buy that million dollar home. A home seller had a vast pool of available buyers. Now, with all the exotic programs gone, a household income of $175,000 is needed to buy that same home, which is about 10% of the Bay Area households. And, inventories are up 500%. So, in a nutshell we have 90% fewer qualified buyers for five-times the number of homes.

In California, the median home price has fallen by 12% from last year.

Home sales decreased 36.2 percent in November in California compared with the same period a year ago, while the median price of an existing home fell 11.9 percent, the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.) reported today.

The New York Times has a good article about the bubble in Florida.

FLORIDA real estate has long been synonymous with boom and bust, but the recent cycle has packed an unusual intensity. The Internet made it possible for people ensconced in snowy Minnesota to type "��cheap waterfront property"� into search engines and scroll through hundreds of ads for properties here. Cape Coral beckoned speculators, retirees and snowbirds with thousands of lots, all beyond winter'��s reach.

Creative finance lubricated the developing boom, making it easy for buyers to take on more mortgage debt than they could otherwise handle, driving prices skyward. Each upward burst brought more investors as� some from as far as California and Europe, real estate agents say. ...

Builders were happy to arrange construction loans, then erect houses in as little as six months. Real estate agents promised to find buyers before the houses were even finished.

"��All you needed was a pulse,"�� Mr. Carey said. "��The price of dirt was going up. We took that leap of faith and put down $10,000." ...

There is a four-year supply of homes in Palm Beach county.

That's because the same issue that forced sellers to pull their properties off the for-sale market now dogs them in the rental market: inventory. There are nearly 35,000 residential properties for sale in Palm Beach County alone, according to Illustrated Properties Real Estate. That's a staggering four-year supply at the current pace of sales.

I see that the real estate market is falling over on its own weight in red-hot Alberta, even with oil prices pushing $100.

Edmonton home prices dropped an average of 6.5 per cent in November from October.

Single-family houses fell 5.3 per cent to $376,267 while condos were down four per cent to $252,277.

Edmonton house prices now are down $50,000 from their May peak of $426,028.

It is too early to call the peak in Alberta, but the laws of economics have not been suspended north of the border. At least not permanently.

Think the problems are limited to the U.S.? Well, when the implosion of the housing market is effecting public offerings in Algeria, you know that the world is truly integrated.

Algeria has suspended the first ever privatisation of a bank in the North African nation due to continuing troubles in global financial markets.

A number of business deals have come unhinged in recent weeks as the cost of borrowing money has risen due to problems in the U.S. housing market.

Algeria was planning to auction off 51% of Credit Populaire d'Algerie.

The finance ministry said that the sale would resume when the "impact of the mortgage crisis" became clearer.

In Asia, it's only a matter of time.

Many Chinese families are already deep into speculating on property, a main driver of the surging prices that have Chinese authorities worried that a bubble might be forming. New apartments north of Shanghai's famous Bund waterfront are selling for a record $17,000 per square meter.

Yi Xianrong, a prominent economist at the China Academy of Social Sciences, a government think tank, is one of those sounding the alarm.

He contends that China's housing loans are riskier than those in the U.S., because he said most loan applicants give false information about their assets and income.

Because China lacks a comprehensive credit data system, borrowers often qualify for loans using false information, Yi says. He thinks the quality of property loans in China might be worse than the risky mortgages that are causing so much trouble in the U.S.

"I estimate that the large majority of mortgage holders would not meet the standards for even subprime loans," Yi said in an interview with the state-run magazine Oriental Outlook.

Fascinating stuff.

What seems obvious to me is that here in America, dirtbags were selling this garbage to people who clearly did not need it, in particular to seniors on fixed incomes.

Some loans were more predatory than subprime, with features so onerous that borrowers refinanced their way out of the American dream, losing their houses � and substantial equity� to mortgages they never stood a chance of repaying.

Lenders persuaded one borrower, a 79-year-old janitor, to obtain 10 subprime refinances over nine years.

Taylor refinanced her home three times in just three years. Those loans stripped away more than $50,000 of her home equity in fees alone and eventually obligated her to mortgage payments that were nearly three times her monthly Social Security check of $761.

Her loans, like many subprime mortgages, came with hefty fees, prepayment penalties, and interest rates that adjusted upward.

Targeting homeowners for mortgages based solely on the financial stake they have in their homes is universally regarded as predatory lending and is illegal under state and federal laws. But experts say that hasn't stopped lenders from doing just that.

I would love to see some of these scumbags do hard time in prison for what they have done, but I doubt that will happen.

Too bad.

 

141 homes sell for a total of $65 million at real estate auction
Monday, December 17, 2007 

Housing - With 96 percent of the houses going for below the reserve price, "we lost money," says the builder

Roger Pollock said he wanted to sell a lot of homes at his two-day auction this weekend -- and he did just that. Pollock said he sold 141 homes for a total of $65 million at the Oregon Convention Center in what was one of the largest real estate sell-offs in Oregon history.

Pollock's Buena Vista Custom Homes had advertised more than 240 homes to sell at auction. By comparison, one auctioneer, had never done a home builder's auction larger than 60 homes.

Pollock turned to the auction when the housing market slowed this fall and his sales turned to a trickle. Rather than pay interest on his construction loans for a year or more until the homes sold, Pollock opted for the auction.

Westside homes in Beaverton and Hillsboro sold best, Pollock said. None of the 29 Bend homes sold, and homes that are now rented didn't sell well, either. Pollock said the sales also will generate about $250,000 for charity.

Although the homes looked especially attractive with super-low starting bids, some brokers were concerned that the homes had a higher, undisclosed "reserve price" that was the lowest Pollock was obligated to accept. But Pollock said about 96 percent of the homes he sold went for below the reserve price. The reserve price, he said, was equal to his costs.

"We didn't make any money on these homes," Pollock said. "We lost money."  "There's been this perception that this wasn't aboveboard," said Pollock, noting that each home has a one-year warranty, standard for Buena Vista's homes. "But I think the results speak for themselves. I did what I said I would do."

About 1,900 people turned out for the auction.

 

Foreclosure auctions gain steam

Dec. 16, 2007 12:00 AM

Last weekend, 2,000 people showed up to bid at, or at least to watch, an auction for more than 200 Valley homes on which lenders had foreclosed.
The two-day auction at the Mesa Convention Center could be the start of a trend. Not only are foreclosures climbing, but so is the number of homes going back to lenders.

Before last year, most of the homes in default sold at trustee auctions on the steps of the Maricopa County courthouse. Now there are few bidders for those auctions because many of the houses are worth less than what is owed on them.

 

Auction firms handled the recent auction in Mesa. Values of the houses to go on the block ranged from $100,000 to $600,000. All had been taken back by big U.S. lenders. More than three-fourths of the properties sold for prices ranging from $75,000 to $465,000.

There weren't a lot of bidding wars, and prices didn't soar. 

Another auctioneer conducted another home auction for 21 Arizona properties Tuesday, including houses in Anthem, Casa Grande, Queen Creek and the West Valley.  Prices started low. The opening bid on a relatively new three-bedroom, 2 1/2-bath house in Goodyear started at $80,000.

The median price of a Valley home is slipping, but it's still $240,000, according to realty studies at Arizona State University. More foreclosure auctions of Valley homes are planned early next year.

Unfortunately, there's plenty of new inventory because 1,344 homes were foreclosed on in metropolitan Phoenix last month. Also, almost 3,500 homeowners who are behind on their mortgage payments got notices that their lender was about to start foreclosure proceedings.

Commercial values rise

Third-quarter figures show the overall value of metro Phoenix's commercial real-estate market increased 1.8 percent, according to the National Council of Real Estate Fiduciaries and supported by ASU commercial real-estate indices.

That compares with a 3.4 percent drop in the housing market's value, said Anthony Sanders, professor of finance at the W.P. Carey School of Business at Arizona State University. The industrial market was the big winner, with a 4.5 percent increase in value. The apartment sector had the smallest gain, at less than 1 percent.

Lower prices, bigger homes

The median price of a Valley home dipped in November, but the homes sold were bigger. Some market-watchers believe the size of homes can skew median figures for an area. For example, if the majority of homes that sell in an area are smaller than the month before, the area will have lower median prices, and vice versa for bigger homes with higher prices.

In November, the median home price for the Valley dipped to $240,000, compared with $259,000 for the same month a year ago. The median size of a home sold last month was 1,750 square feet, compared with 1,650 square feet in November 2006.

 

National Association of Realtors Finally Figures it out!

Property auctions are seeing more action than at any time in the recent past. The proof that auctions are not merely for �stigmatized� properties is in the numbers: Nationally, residential real estate auctions generated some $16 billion in sales during 2006, a 12.5 percent jump from the year before, according to the National Auctioneers Association.

Residential auctions are now the fastest-growing segment of the auction industry, which expects to gross nearly $265 billion in revenue this year. Sellers who need or want to avoid high carrying costs are finding that the bidding process may be the best way to find a qualified buyer fast. Buyers can often land a great price since they�re dealing with highly motivated sellers.

Don�t overlook the vital role a realtor can play on either end of the transaction. On the buyer�s side, realtors can register clients and earn a commission if their bid is successful. In most cases realtors need to accompany the buyers to both pre-auction events and the auction.

Working with sellers, the options are even broader: Realtors can earn a referral fee from an auction company simply by bringing in a new client � or you can essentially cobroker the deal with the auction house. Negotiate your commission with the auctioneer based on your level of involvement.

�Brokers shouldn�t look at auctioneers as a threat to their business,� says Maverick Commins, an auctioneer with Exclusively Auctions, Arizona. �You�re helping clients get the job done, and you get some income out of it. Auctions are simply another option for doing business.�  

Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks.

Quote of the Day

"The market isn't close to hitting bottom. Many people looking to buy can't because of tightening credit conditions, and those that can, are holding back for fear of buying a depreciating asset.'' - Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. (Bloomberg, Nov. 29th)

Real Estate Investment and Sentiment

• In Housing Downturn, A New Uncertainty Factor, (Christian Science Monitor, Nov. 29th): "The last time the economy experienced a real estate downturn, in the early 1990s, the reasons were straightforward: an economic slowdown in regions of the country, rising interest rates, and a growing reluctance by banks to issue new loans. This time... investor jitters are playing as much of a role as banker worries... Investors have sped up the downturn and could deepen it... They have created widespread uncertainty because... bad mortgages [no longer] fester in bank portfolios, the risks are now spread among investment firms, insurance companies, and others. No one knows how broad or deep the losses are."

• Report: Online Real Estate Ad Revenue to Eclipse Newspapers by 2012 (Media Info, Nov. 26th): "Newspaper Association of America: Real estate ad revenue plummeted 24.4% to $1 billion [this year]. Borrell Associates report: By 2012, newspaper real estate ad revenue will hit $3.2B while online real estate ad revenue will surpass that at $3.4B. So far this year, total ad spending on real estate dropped 3%, but online advertising soared 25.8% to $2.6 billion most likely due to a shift of those dollars from print to online. The rate of online growth is expected to slow over the next year -- estimated at around 12% but it should still eclipse newspaper real estate ad revenue.

• Housing Markets Roil Online Advertising Marketplace (Inman News, Nov. 26th): "Sam Sebastian, director of classifieds at Google, observed that newspaper realty ads had "gone off a cliff" and that data suggested the conventional wisdom of increased ad expenditures [in down times, to get more exposure] was "not a valid argument." Sebastian... speculated that realty marketing dollars would "sit on the sidelines" for perhaps six to 12 months while brokers and agents "recalibrated" and "put some dollars in their pockets." After that, he suggested, the market shift could be an important and significant catalyst for growth in online realty advertising."

• Web Bidding Help Drives Live Auctions (Yahoo! Finance, Nov. 24th): "A National Auctioneers Association study found residential real estate auctions have grown 39% since 2003, agricultural real estate grew 33%, and sales of commercial and industrial property surged 27%. Car auctions increased by 10.5% and charity auctions rose 16.5%... Auctioneers were slow to embrace the Internet because it was considered competition, said Ina Steiner, editor of AuctionBytes, a trade publication for online merchants... There are specialty sites like Bid4Assets for real estate and IronPlanet for construction equipment."

• The Upside to the Downturn (Wall St. Journal, Nov. 23rd): "The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees... more homeowners will renovate their kitchens this year -- 7.57 million, up from 7.44 million in 2006 -- but they will spend a lot less, $96.2 billion compared with $127 billion, according to the National Kitchen & Bath Association. Bathroom renovations this year are expected to rise by 5.3% to 10.9 million from 2006, while spending on them will grow 3.8% to $70.2 billion from 2006, the trade group projects. One reason some renovations will cost less this year is the falling price of many key building materials [like] lumber [and] drywall."

 

SOTHEBY'S FAILS TO BRING 40% ON MAJOR AUCTION SALE

By JAMES THORNER, Times Staff Writer - TampaBay.com

SARASOTA - Selling a home these days is tough. Some people try warm cookies and helium balloons. Others give away free washers and dryers. But what if you own million-dollar properties? The kind where you don�t ask about a mortgage because there is no mortgage?

Here�s the answer from a luxury real estate auction held in Sarasota Friday by SKY Sotheby�s International Realty: If you want to move waterfront mansions in a hurry, it�s best to settle for 40 cents to 70 cents on the dollar.

�The current market has been dysfunctional,� said SKY president Chad Roffers, whose company offered up 79 homes worth about $200-million in a giant lawn tent at the private Long Boat Key Club. �Homeowners learned what fair market value is. We had 400 buyers from four countries and 18 states. The market was here.�

Homeowners also learned the limits of auctions, a method gaining favor this year to provide an amphetamine rush to a slumbering market. About 30 of the 79 properties sold on Friday. Some were auctioned, but required a minimum bid, while others were sold �absolute� - best offer takes the property.

While Roffers proclaimed the day a triumph, none of the three Pinellas and Hillsborough County properties on the block ever passed Go. One 5,200-square-foot waterfront house at 6161 51st St. in Bayway Isles in St. Petersburg, originally listed for sale at $2.4-million, couldn�t rustle up a minimum $800,000 bid.

Another of the higher-end waterfront properties, listed at $11.9-million on Longboat Key�s Gulf of Mexico Drive, also failed to sell. Considering their ability to toss around tens of millions of dollars, many of the buyers were a secretive lot. Participants paid a $10,000 deposit just to win use of a blue bidder�s paddle. If they won, they had to write a check for 10 percent of the purchase price on the spot.

�It�s the aftermath of irrational exuberance,� said one anonymous millionaire with a British accent from Southeast Asia who - no doubt enjoying the weak U.S. dollar bargain effect for foreign buyers - scooped up four properties for about half their recent value. His son chimed in: �This is a market wake-up call. Forty to 50 cents on the dollar: I think this is the new reality.�

Despite the bargains, the auction set a record for a single home sale in Sarasota. It was the $14-million sale of an estate called Sugar Bay on Casey Key. The castle-like mansion was built of imported South American coral stone and came with a guest house and 200 feet of beach. But even that was originally listed for $20-million.

Trophy homes like Sugar Bay, those with special locations and attributes, outperformed. Another such winner was a three-story Georgian mansion of 11,000 square feet in Osprey. A bidding war erupted over the house, which sold for $6-million. The losing bidder had been eyeing the house for two years, but never pulled the trigger on a deal. �That one I really wanted. It�s just bad luck,� he said, hugged his friends goodbye and tossed his bidder�s paddle in the trash.

Auctioneer , spent most of the four-hour auction trying to flog interest in the properties that didn�t sell. A house in Apollo Beach�s MiraBay was one such no-sell. It was originally listed for $1.25-million but couldn�t attract an acceptable opening bid. �Five hundred!� the auctioneer bellowed from the stage in the auction tent, seeking half-a-million dollars for the MiraBay. �Four hundred to get it started? Four hundred, anybody?�

By the end of the auction, interest had waned to a trickle. No-sale followed no-sale. Blue bottles of Saratoga spring water littered the floor along with glossy auction booklets. �Looks like there�s a lot of money in this auditorium,� the auctioneer told a dwindling crowd. �But you guys aren�t spending it.�

Millionaires who didn�t land the home of their dreams could have snagged a consolation prize outside the auction tent. Actor Nicholas Cage�s black Ferrari convertible was up for charity auction. Anyone for a minimum opening bid of $315,000?

 

No Slowdown in Foreclosure Filings

Hardest-hit cities are on coasts and in Rust Belt, according to a new survey

By Les Christie, CNNMoney.com staff writer

Nov. 14, 2007

NEW YORK - California, Florida, and Ohio continue to dominate new foreclosure filings, as most of the nation saw increases in the third quarter, according to a new survey. During the period ended Sept. 30, 77 out of the nation's 100 largest metropolitan areas reported rises in delinquencies compared with the previous three months, cited an online marketer of foreclosure properties.

The three most affected states reveal the two main causes of mortgage payment problems: economic weakness, as exemplified by Ohio, and speculative excess that led to high home prices and unaffordable mortgages, as represented by California and Florida.

In the past few months, the foreclosure story has become a tale of two regions. Some of the hardest-hit states have traditionally been in the Midwest, where plant closings and job losses have hit the economy there hard. The other region is the Sun Belt, which is showing even more significant foreclosure growth as out-sized price increases in the first half of the decade led to virtually unchecked real estate speculation.

According to the Center for Responsible Lending, 7.2 million households have subprime mortgages, and more than 14 percent of those are in default. It projects that one of every five of those loans issued in 2005 and 2006 will end in foreclosure, with 2.2 million families losing their homes.

Not every state has been clobbered, according to James Saccacio. "There continue to be pockets of the country - most noticeably metro areas in the Carolinas, Virginia, and Texas - that have thus far dodged the foreclosure bullet," he said in a statement. But, nationally, foreclosure filings, which include all three main stages of foreclosure, default, or late payments, auction and real estate owned (properties reacquired by lenders and now being resold), were up 30 percent compared with the previous three months.

Among metro areas, the highest delinquency rate was in Stockton, Calif., which totaled 7,116 filings during the three-month period, one for every 31 households. Second was the Detroit area with one per 33 households and a total of 25,708. Half the cities in the top 10 were in California.

Several Massachusetts cities experienced huge delinquency jumps during the quarter. Boston filings soared 146 percent to one per every 220 households, Springfield's increased 151 percent (one per 172) and Worcester 122 percent (one per 150).

Filings in the Providence, R.I./ New Bedford, Mass. area climbed a whopping 295 percent, albeit from a low base, to one for every 549 households. The metro areas least affected include Greenville, S.C. (one per 3,289), McAllen, Texas (one per 2,185) and Baton Rouge, La. (one per 2,074).

 

Canadians get edge in real-estate buys

Peter Corbett
The Arizona Republic
Nov. 17, 2007 12:00 AM

Who knew that the loonie would come to the aid of Scottsdale's tepid real-estate market? The loonie refers to the Canadian dollar, which is giving our neighbors to the north increased buying power. Realtors here say that Canadian buyers increasingly are showing interest in houses here as winter residences and investments

"We had three Canadians in one day we were showing around," said Don Matheson, an agent with Re/Max Excalibur Realty who moved here from Canada in 1995. The loonie was worth about $1.03 earlier this week in the United States. That may not sound like much, but $500,000 Canadian was worth $516,168 American.

"The dollar for us is just incredible," said Gordon Ewasiuk of Edmonton, Alberta, a client of Matheson's. "It was worth it to come down." Ewasiuk and his wife, Wanda, bought a house in McDowell Mountain Ranch and a condo. They previously sold a condo they bought four years ago that increased in value by more than 50 percent.

Ewasiuk, who runs a mechanical contracting business, said that his Canadian friends and family are buying property here, including a business associate who bought a house in DC Ranch.  Jane Blacke said that a colleague recently sold a Gainey Ranch home to a Canadian buyer.

Of course, Canadian and other foreign buyers will not turn the local market completely around, but they could help eat away at the big inventory of unsold homes. Karl Stauffer noted that as of Nov. 9, Maricopa County and northern Pinal County had 47,565 resale homes, including 7,285 in the northeast Valley.

Like many Realtors, Stauffer says the market is not as bad as skeptics portray it. People are moving here, commercial building is strong, and financing is cheap, even if some buyers are having trouble qualifying for loans, he said. f Nov. 9, Maricopa County and northern Pinal County had 47,565 resale homes, including 7,285 in the northeast Valley.

Like many Realtors, Stauffer says the market is not as bad as skeptics portray it. People are moving here, commercial building is strong, and financing is cheap, even if some buyers are having trouble qualifying for loans, he said.

 

 

Some S.F. neighborhoods are solid despite meltdown

Carol Lloyd

Sunday, November 11, 2007

Carol Lloyd

Surreal Estate

Note:This column appears Fridays on SF Gate and Sundays (abridged) in the Chronicle.

F rom the mortgage meltdown to the plunge in home sales, dark clouds continue to threaten San Francisco's seemingly endless real estate summer. And yet remarkably, local Realtors I know seem as cheery as ever.

"It doesn't look slow to me," says Bonnie Spindler of Zephyr Real Estate. "I keep telling people it's not a buyer's market, but they don't believe me until they get into the trenches." She says she'd heard that the softest sector of the market was entry-level properties, but a recent open house of a six-unit tenancy-in-common building with units ranging from $500,000 to $590,000 challenged even that generalization: "I had 100 people go through the house and seven or eight requests for disclosure packages. Many of the buyers were already preapproved with loans."

Alexander Clark, whose blog theFrontSteps ( www.thefrontsteps.com) and newsletter (links.sfgate.com/ZBMW) offer similar testimonials from the real estate front, agrees that in the city, the sky is far from falling.

"The inventory for good properties is very low and there's a multitude of buyers for good homes," he says. "For turnkey places with good remodels, priced properly, they are going fast with multiple offers."

In an attempt to explain these discrepancies, Clark's recent newsletter featured a "walk down Lake Street" - a description of recent sales activity on one street in San Francisco. "If you look at numbers, our market has slowed month-to-month and year-to-year, but Lake Street - though a tiny pocket of San Francisco - is representative of what's going on in whole city," it said.

"Literally on the same street there are places that sold with multiple offers and flew off the shelves and there's stuff that's not selling or getting big price reductions." The difference between them? Alexander mentions all the usual suspects: overpricing, lack of staging, homes with no parking, a bad layout or an unfortunate location.

Are these tales of multiple offers, bids way over asking, and legions of eager buyers waiting for a halfway decent home simply the provenance of professional optimism? Not exactly. The same rosy stories radiate from the San Francisco sellers I know.

One couple I know who bought a Victorian worker's cottage two years ago sauntered away from its recent sale with an extra $200,000 and an annual appreciation rate of about 10 percent. Buyers describe the same surreality from the opposite perspective: "We had to overbid"; "There were already three offers when we saw it"; "It's a fixer, but it's all we could find in the neighborhood."

But of course, a few anecdotes do not an economy make.

The federal, state and regional numbers paint an altogether different picture. Two weeks ago, DataQuick released a report under the headline "Bay Area home sales plummet amid mortgage woes." The release noted that Bay Area sales hadn't been so low in two decades and had declined 40 percent since last year, mostly because buyers were finding it increasingly difficult to obtain jumbo loans. (Jumbo loans have since become more available.)

The median price paid for a Bay Area home in September also dropped 4.6 percent, to $625,000, compared with $655,000 in August. A week later, DataQuick said California was experiencing record foreclosure rates - jumping 166 percent for the third quarter over the same quarter of 2006. Some of these homes no doubt are on the auction block: This week, 200 homes from a range of cities - from nearby Oakland and Richmond to farther-flung Tracy and Antioch - will be sold to the highest bidder.

Last week, an ABC News story noted that Antioch and nearby Alamo embody the striking inequities of the current real estate bust. Quoting Prudential California research, the article said home sales in Antioch have dropped 58 percent since last year, while Alamo's have risen 58 percent.

Details on the San Francisco market provide clues as to why some Realtors and homeowners are not feeling the gathering storm. Although sales are off 17 percent compared with last year, the relative lack of inventory means that demand still exceeds supply.

Compared with last year, the median price edged up 1.9 percent to $773,500. And so far, the city hasn't been hit by foreclosures' influence on home prices. According to DataQuick, mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties.

As someone who has been weighing real estate statistics against anecdotes for years, I still sometimes find the whole situation confusing. So I called Ryan Ratcliff, an economist with the UCLA Anderson Forecast and author of its recent California Report, to learn how he makes sense of the apparent contradictions in the market.

"We've noticed that the hardest hit areas are those like Sacramento, where there's been an abundance of new construction," he explained. But in areas like San Francisco, where there's mostly existing housing, he says homeowners set prices based on their desires and aren't in a hurry to sell, which keeps prices high. "But builders don't look at things this way," he added. "For them, housing is inventory, like toys are at Toys R Us, so they cut prices to move homes."

Ratcliff says it's also the more modestly priced areas that have the most foreclosures. "Foreclosures have been most intense in areas where people took out adjustable rate mortgages to buy moderately priced homes," he said. "It's where first-time home buyers really stretched."

Thus, San Francisco real estate has remained relatively unscathed because existing housing immunizes it against builders' deep discounting and its affluent population is less threatened by foreclosure.

Like many people, I tend to fixate more on home prices than home sales as the meaningful statistic. After all, sales numbers may affect the real estate industry's bottom line, but not mine, right? Au contraire, says Ratcliff.

"Most people look primarily at the home prices, but for a lot of people it's just a number on a piece of paper," he explains. "The two primary influences of the housing market on the economy are in jobs: either construction-related employment or real estate and mortgage industry jobs. It's there that we expect the current housing crisis to drag down the California economy, staying sluggish through the end of 2008."

So, although San Francisco's housing market has not been hit hard like those in Sacramento and Antioch, it doesn't mean we won't feel the effects of the real estate maelstrom anyway.

E-mail Carol Lloyd at surreal@sfgate.com.

 

Reserve Auctions Failing to Bring Qualified Buyers

Many sellers anxious to realize the etheral profits of past years are turning to auctions as a 'silver bullet'. Many are desperate, others simply want to cash out, and even some merely want to sell to get on with other life plans. All good reasons to sell - but not necessarily at the price they think is the fair market.

Auction firms across America are suddenly seeing an glut of properties coming to the auction market, but with little planning or sensible monetary formulas. The auction is not a silver bullet that shoots down ghosts or brings about magical outcome. Auctions are a long respected and viable mechanism to sell assets at 'current market value".

Market value may not be what a seller desires. This is being expressed in real estate auctions throughout America that are failing to bring qualified bidders in any number to 'reserve - or minimum bid' auctions. Most reserve auctions of real estate are in fact registering no bidders what-so-ever. Many times when the reserve is a realistic figure.

Buyers have quickly learned that the only true auction is the Absolute or No Minimum price auction. At Absolute Auctions, buyers are assured that their efforts will not go unrewarded at the end of the day. For the seller, he can find appreciation at getting his asset sold - for the maximum value of the day.

Market Value - True Market Value is not some hopeful appraisal that has been written for a 'fee involvement'. It is also, not the seller's idea of what his property 'should' be worth. It is the expression of a willing seller and a capable buyer coming together - both under no special influence - to establish the value of an asset when buyers express their monied opinions as legally binding offers or bids.

 

Best Commercial Markets for 2008
� By Camilla McLaughlin for REALTOR� Magazine Online

Keep an eye on commercial real estate markets in metros that position themselves as 24-hour cities with a global pathway to international markets, says the Urban Land Institute (ULI) in a rating of the top commercial real estate markets for 2008.

The hottest commercial real estate market in the country? New York City, where vacancies are in the mid-single digits and rents have skyrocketed. ULI dubs the Big Apple, �America�s 24-hour city.�

Prices for industrial and office space might be at an all time high, but according to the report �the weak dollar means the city�s �monster� prices look cheap to foreign investors who are �pouring and parking money into Manhattan real estate.�

All the markets to watch have similar attributes to New York. All have a major international airport and/or shipping port and walkable residential neighborhoods.

Each has also �made a concerted effort revitalize downtown areas or close in urban hubs that make them magnets� for corporate headquarters, business elites, and a highly educated work force and also capotes the largest share of investor dollars, says ULI in their annual report, Emerging Trends in Real Estate.

Seattle, where a concentration of mixed use development draws residents to new downtown neighborhoods, is another standout. A strong and highly diversified economy resulting from a large number of corporate headquarters and the city�s position as an important hub on Asian commerce routes contribute to its top ranking on the commercial markets to watch.

Other top commercial markets to watch, according to ULI, are:

• Washington, D. C. �The government never stops and the ever churning Washington real estate market cushions against abrupt downturns,� concludes the report.
• Los Angeles. Office markets in Orange Country might be softening but ULI says those in West LA have never been stronger. LA/Long Beach remains the nation�s top port
• San Francisco. A resurgence of technology business is propelling the market in this city. View space commands over $1,000 a square foot.
• Boston. Investors are keeping a close eye on this market, says ULI, even though new industries recycle office spaces left vacant by recent corporate headquarters departures
• San Diego. �A leading indicator for a market correction,� says ULI.
• Denver. A retooled downtown has created what ULI calls an �urban burb,� a hip and exciting urban core in the midst of a sprawling suburban area connected to downtown via light rail.

Smaller markets to watch include: San Jose, Calif.; Honolulu, Hawaii; Austin, Texas; Raleigh-Durham and Charlotte, N.C.; Portland, Ore.; Sacramento, Calif.; Las Vegas, N.V.; Orlando and Tampa, Fla; Salt Lake City, Utah, Jacksonville, Fla.; Nashville, Tenn.; and Minneapolis, Minn.  

At least 8 bidders win condos at auction

 

By Marla Matzer Rose

THE COLUMBUS DISPATCH

Eight buyers got what one real-estate agent called "great values" on condos in the Carlyles Watch building at an unusual auction of some of the lofts at the 100 E. Gay St. building.  An additional 21 bidders will find out by the end of today whether their bids for the units, originally priced between $205,000 and $450,000, will be accepted.

The partners in Urban Loft Ventures, the building's owners, said they held the auction to pay off lenders and move units that have been slow to sell. More than half of the building's 54 units were offered at the auction Sunday, although the number that end up being sold that way could end up being less than a dozen.

With winning bids still well above $100,000, the condos didn't exactly go for bargain-basement prices. But the auction was closely watched by many as an indicator of the health of the Downtown residential market.

"There's still a stream of buyers, but there's so much to choose from right now," said real-estate agent Marilyn Vutech, whose Vutech & Ruff team is part of Real Living. Vutech, who attended the auction at the Columbus Renaissance hotel, said she doesn't see the auction as an ominous sign for the market overall. "I think it's very project-specific. There are other buildings that are selling out quickly," Vutech said.

Michael Berland conducted the auction, said yesterday that gaining visibility -- as well as a read on market prices -- was part of the plan. "There were probably 400 or 500 people in attendance," Berland said. "We really captured the attention of the market and created enthusiasm where there was none."

Berland would not disclose the amounts of the eight winning bids from Sunday. He called reports that units typically went for 40 percent to 50 percent below asking price "inaccurate," but said there were "some significant discounts."

As for his reaction to the prices, Berland said: "The market spoke. We'll come out in the next week with post-auction pricing on any remaining units. This showed us what the market is."