Items of Interest REAL ESTATE INVESTOR CAUGHT WITH PERCENTAGE DOWN Authorities charged a Manhattan real estate investor with allegedly selling an entire Bronx building in which he was only a minority partner for more than $5 million and sending part of the proceeds to accounts out of New York, says the Real Deal. Mark Benun, 35, was accused of fraudulently selling the property and sending some $150,000 to out-of-state accounts, according to the FBI and federal prosecutors. In June 2006, Benun legally bought a 25 percent share of 67-79 East 161 St. with a partner who purchased a 75 percent stake. Then in February 2009, Benun used false documents claiming he was the sole owner to sell the building for $4 million in cash and $1.96 million in a note that the buyer gave him, prosecutors said. Benun then sold the note for $1.46 million, they said. He faces up to 10 years in prison and a fine. ELECTRIFYING NEWS FROM THE PUBLIC SERVICE COMMISSION State regulators approved a $523.4 million one-year increase in Consolidated Edison’s rates for delivering electric service. Typical residential customers will see an increase in their monthly bill of about $6 in New York and about $8 in Westchester County. The increase compares with $819 million that the utility requested in September. It comes just over a year after Con Edison won a $425 million increase from the commission. That increase, last March, resulted in an extra $4.25 in the monthly bill for a typical residential customer in New York and $5.60 in Westchester. MANHATTAN RENTAL MARKET IS SHOWING SIGNS OF LIFE As expected, overall vacancy rates rose in the first quarter from the same period of 2008 - by just over one percentage point, according to Crain’s. But in March, a brokerage that specializes in rentals recorded a slight decline in vacancy rates from the previous month, something it hasn’t seen since May of last year. Vacancy rates decreased to 2.37 percent from 2.46 percent in February. Overall vacancy rates across all of Manhattan have been soaring since the second quarter of 2008. Next month marks the peak of the rental season and results are expected to indicate how the 2009 rental market will hold up in shadow of the recession. Most of the rental activity during the first quarter was driven by landlord incentives such as building owners offering to pay broker commissions, giving free rent for a month or both or more. Average rents for one-bedroom apartments in Manhattan dropped the most, falling 6.7 percent in the first quarter from the same period last year. Rents for studios fell 4.2 percent, two-bedroom apartments dropped 3.5 percent and three-bedrooms came down 2 percent from the first quarter of 2008. NYC RECORDS STEEP DROP IN BUILDING PERMITS
REAL ESTATE EXECUTIVES UNEARTH REASONS TO CHEER “Despite all the wrist-slashing statistics and pronouncements, the head honchos at the city's top brokerages see hope in these anxiety-inducing times,” says the New York Post. Yes, the market is encountering some dark days, the newspaper acknowledges, but here is what the writer defines as “five bright spots.” NEW YORK MAGAZINE GIVES ADVICE TO FIRST-TIME BUYERS Although much of what the author suggests may be debatable, conventional, risky or some combination, the advice runs the gamut from buy a wreck to “just make a bid.” The magazine also quotes a New York University study on neighborhoods to consider. In addition, the question is broached of whether this is the time to buy. IN NUMBER OF GREEN BUILDINGS, NEW YORK TRAILS OTHERS Despite intensifying efforts to grow greener, the Big Apple still ranks sixth when it comes to the number of green buildings, according to a new study cited by Crain’s. The study by the Center for an Urban Future think tank found that the city has 41 buildings with a LEED (Leadership in Energy and Environmental Design) rating. Chicago led the list with 70 of them, Portland, Ore. has 63 and San Francisco, 44. Manhattan, with 31, has the most LEED certified buildings in the city. In fact, New York may have topped the other cities if overall square footage of LEED buildings were measured, said Center Director Jonathan Bowles. THEY’RE BACK (BIDDING WARS) Falling home prices are starting to ignite bidding wars in a few parts of the U.S. as first-time buyers compete with investors for the same foreclosed properties, reports the Wall Street Journal. In most of the nation, the supply of unsold homes continues to swamp demand. Home prices in many markets continue to fall, and foreclosures, which slowed in late 2008 as mortgage companies delayed taking action against delinquent borrowers, are picking up again. But real-estate brokers say multiple offers on certain homes have recently become more common in parts of California and Arizona. Tamby Leonard of Santa Ana, Calif., southeast of Los Angeles, says she has been outbid four times since January when trying to buy a home for her family of five. The more appealing bank-owned homes in her price range, around $300,000, tend to be sold quickly to investors who can pay cash. The market for homes in the Santa Ana area in that price range is "blazing hot," says Ed Mixon of Altera Real Estate, Leonard's agent. FEDERAL AGENCY SAYS PRICES INCHED UP IN FEBRUARY U.S. home prices rose 0.7 percent on a seasonally-adjusted basis from January to February, according to the Federal Housing Finance Agency’s monthly House Price Index. January’s previously reported 1.7 percent increase was revised to a 1.0 percent increase. For the 12 months ending in February, U.S. prices fell 6.5 percent; the U.S. index is 9.5 percent below its April 2007 peak. The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. SALES TUMBLE OF PREVIOUSLY OWNED HOMES Existing-home sales eased in March, but first-time buyers are responding to low mortgage interest rates and tax credits, according to the National Association of Realtors (NAR). Including single-family, townhomes, condominiums and co-ops, sales were 3.0 percent below February’s volume and 7.1 percent lower than the preceding March. Although prices rose from February to March, the median price for all types of re-sale homes was only $175,200, down 12.4 percent from one year earlier. The price increase from February to March was 4.2 percent versus the typical 1.8 percent seasonal increase between those two months. (Distressed properties, which accounted for just over half of all transactions in March, typically are selling for 20 percent less than traditional homes.) Total housing inventory at the end of March fell 1.6 percent, representing a 9.8-month supply at the current sales pace in comparison with a 9.7-month supply in February. Single-family home sales were 2.8 percent lower than February and 5.7 percent below March 2008. The median was $174,900, 11.5 percent lower than a year ago. Apartment sales fell 4.1 percent behind February and 17.8 below a year ago. The median for condos and co-ops was $177,600 in March, off 18.7 percent from March 2008. NEW-HOME SALES ARE OFF 0.6 PERCENT FROM FEBRUARY The number of newly built, single-family homes on the market declined for a twenty-third consecutive month in March, according to U.S. Commerce Department figures. Inventory shrank to 311,000 units, a 10.7-month supply at the current sales pace. Sales were reported at a seasonally adjusted annual rate of 356,000 units. "In line with NAHB's forecasts, we continue to see evidence that the new-home sales market is bottoming out as historically low mortgage rates, attractive home prices and incentives like the newly created $8,000 first-time home buyer tax credit spur more interest among consumers," said Chief Economist David Crowe of the not exactly impartial National Association of Home Builders (NAHB). INDICES SHOW CONTINUED DECLINES BUT SIGNS OF HOPE Ten of the 20 metro areas surveyed by Case-Shiller had record rates of annual decline, with 15 of them reporting decreases in excess of 10 percent versus February 2008. For the first time in 16 months, however, the annual decline of the 10-City and 20-City composites did not set a new record. “While the declines in residential real estate continued into February, we witnessed some deceleration in the rate of decline in some of the markets,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s. “All 20 metro areas recorded a monthly decline in February, but 16 of the 20 metro areas saw an improvement in their monthly returns compared with January. Nine of the 20 metro areas showed improvement in their annual returns compared to their returns in January.” He expressed the need for a few more months of data before it can be determined whether home prices are finally turning around. As of February 2009, average U.S. home prices were similar to the third quarter of 2003. From the peak in mid 2006, the 10-City Composite Index was down 31.6 percent and the 20-City Composite, 30.7 percent. In February, Cleveland was the only metro area having a record monthly decline, returning -5.0 percent. Metropolitan Cleveland, Charlotte, New York and Washington were the only areas showing larger declines in home prices in February compared with January. Over the year, New York was off 10.2 percent and D.C., 19.2 percent.
At a time when consumers are the ones in the driver’s seat, in the words of David Crowe, a longtime economist for the National Association of Home Builders, they have the luxury of being more careful and discriminating in hiring a contractor than they might have been when demand exceeded supply. In fact, now that it’s the other way around, the New York Times advises that it may be more important than ever to follow some common-sense guidelines. THIS COULD BE THE LAST WAY YOU’D SPEND YOUR WEEKEND To remove a popcorn ceiling, first test it for asbestos using a kit available at some home centers or online, suggests the Washington Post. If you have asbestos, removal should be done by experts. If not, cover everything underneath, spray a small section at a time with warm water containing a little detergent, let it soak until the popcorn softens, and then scrape it off with a wide drywall scraper. Possibly the most practical thing you could do with the ceiling is to leave the popcorn in place and have it covered with drywall. This solution encapsulates the popcorn and gives you a clean new ceiling that you can paint or wallpaper. Or call a contractor. A $50 MILLION PRICE CUT COULD PROVE TEMPTING. . . TO SOME It may be the biggest cut ever for a U.S. house, according to the Wall Street Journal. Now, for a mere $75 million, a buyer can snare the Greenwich, Conn., manor house of the late Leona Helmsley, complete with two pools, more than 13 bedrooms (six for servants), a walk-in silver closet and walls that would be great if they could talk. The original asking price was $125 million, and industry veterans can't remember a bigger dollar discount. Helmsley-estate representatives put the 40-acre property up for sale just over a year ago. In October, the estate slashed the price to $95 million. Called Dunnellen Hall, the 20,000-sf Jacobean-style brick mansion is set on a park-like property in the Greenwich back country with views of the Long Island Sound. Mrs. Helmsley and her husband Harry paid $11 million for the 1918 house in the early 1980s. They later bought more acreage. Walk, don’t run. REALTORS ARE A SHRINKING BREED According to National Association of Realtors (NAR) statistics, there were 1.12 million Realtors in the country as of March 31, down from 1.34 million in 2007 and a peak of 1.36 million in 2006. Iverson Moore, a spokesman for NAR, says the biggest losses in Realtor membership have been in states where subprime problems hit the hardest such as California, Nevada, Arizona and Florida. (The figures understate the number of real estate agents since not all agents are members of the advocacy organization.) U.K. MARKET MAY POSSIBLY BE TURNING AROUND Prospective buyers are returning to the market, but many are stopping short of making purchases, reports the Wall Street Journal. Some U.K. house builders have reported sales growth this year, and reports by the Royal Institution of Chartered Surveyors and others suggest that both sales and mortgage approvals recently rose slightly. More people also viewed homes in March, and prices have edged up. Lender Nationwide Building Society said the price of a typical house increased in March for the first time since October 2007, rising 0.9 percent. But industry observers said the rise in house prices could be temporary. Prices remain at historic lows, and there is little evidence that the market is stabilizing. "The surprise rise in house prices in March does not mean that the housing market correction is finished," said Seema Shah, an economist at Capital Economics, a research group in London. "Monthly house-price indices are volatile, so one month's increase is likely to be a blip in the underlying downward trend." THE NY TIMES’ DAVID LEONHARDT GOES TO AN AUCTION “I decided to go to an auction at a hotel ballroom in Washington - and to study the results of several others elsewhere - with an eye to figuring out whether prices may now be close to bottoming out,” the columnist writes. “That’s clearly a huge economic question. Last week, JPMorgan’s chief financial officer told Eric Dash of The New York Times that JPMorgan, and presumably other banks, would be under pressure ‘until home prices stabilize and unemployment peaks.’ As long as home prices are falling, foreclosures are likely to keep rising and the toxic assets polluting bank balance sheets are likely to stay toxic. There are reasons, though, to think that prices may be on the verge of stabilizing. Relative to fundamentals, like household incomes and rents, houses nationwide now appear to be overvalued by only about 5 percent. You can make an argument that the end of the housing crash is near. But that’s not what I found at the auctions.” THIS WAY TO THE EGRESS
CONDITIONS IN THE HAMPTONS ARE NOT SO SUNNY There were 201 sales in the first quarter, down 49.8 percent from 400 sales in the same period last year and 72.9 percent from the same period five years ago, according to the latest report from the Miller Samuel appraisal firm. The number of sales dropped 44.6 percent from the prior quarter. The first-quarter report attributed the amount of activity to the credit crunch, employment, compensation concerns on Wall Street and recessionary economic conditions. As a result of the decline in the number of sales listing, inventory expanded. There were 2,289 properties available for sale at the end of the first quarter, up 23.9 percent from the same period last year. The combination of rising inventory and declining sales resulted in a jump in the monthly absorption rate - the number of months to sell all existing inventory at the current pace of sales - to 34.2 months, from 13.9 months in the prior year quarter and from 17.2 months in the prior quarter. There’s far more detail in the whole report. FORECASTING FIRM SAYS U.S. HOUSING MARKET IS UNDERVALUED IHS Global Insight said in a report that prices have fallen 9.9 percent from their 2007 peak. Nationally, prices fell by 13 percent at an annualized rate and dropped in 92 percent of the nation's metro areas - 302 of 330. The rate of decline in the first quarter was the greatest in the current housing cycle, the study said, and the rates of decline have exceeded the fastest appreciation rates of the bubble years of 2004 and 2005. Price contraction continues to be most severe in the Southwest and Southeast, areas of the country that had once been the most overvalued. Extreme overvaluation was essentially nonexistent. Only Atlantic City, N.J., met that definition, compared with 52 metro areas during the peak of overvaluation in the fourth quarter 2005. Only the Pacific Northwest, extending into Idaho and Utah, remained overvalued across a wide region. Commented IHS executive James Diffley: "What is most worrisome about these sharp declines, and the general economic deterioration as 2008 ended, is that there is no sign of a bottom yet." For a PDF of the whole report, click here. TAX-CREDIT PROGRAM SEEMS TO BE ON TARGET Preliminary numbers from the I.R.S. suggest that 1.4 million taxpayers will claim the federal first-time homebuyer tax credit on their 2008 tax returns, meaning the program is likely to meet or exceed the 2 million target set by lawmakers before it sunsets on Nov. 30, says Inman News. A report by the Treasury inspector general for tax administration shows that 567,685 households claimed the tax credit by March 6, but 38,158 weren't eligible because they may have been homeowners in the last three years. If those trends hold up for all 140 million tax returns the IRS expects this year, about 1.4 million households will claim the first-time homebuyer tax credit, but approximately 94,000 will be disqualified. The credit is equal to 10 percent of the purchase price of the home and is capped at $8,000 for homes purchased this year. UNSURPRISINGLY, AMERICANS MOVED AT A RECORD LOW RATE The U.S. Census Bureau says that the national mover rate declined from 13.2 percent in 2007 to 11.9 percent in 2008 - the lowest rate since the bureau began tracking the data in 1948. By region, people in the South (13.5 percent) and in the West (13.2 percent) were likeliest to move in 2008. The Midwest and the Northeast had mover rates of 11.1 percent and 8.2 percent, respectively. Among those who moved in 2008, 65 percent moved within the same county, 18 percent moved to a different county within the same state, 13 percent moved to a different state and 3 percent moved to the U.S. from abroad. Principal cities within metropolitan areas experienced a net loss of 2 million movers, while the suburbs had a net gain of 2.2 million movers. ALSO UNSURPRISINGLY, HOME OWNERSHIP RATE SLIPS Although the Wall Street Journal reports that the national home ownership rate fell in the first quarter to its lowest level since 2000, the U.S. Census Bureau, which issued the statistic, calls the decline statistically insignificant compared with either the prior quarter or the first quarter of 2008. The biggest drops were among younger buyers, who benefited from the easy credit that helped fuel the housing boom. The seasonally-adjusted national home ownership rate was 67.5 percent in the first quarter of this year, down half a percentage point since the first quarter of 2008. The home ownership rate among people under 35 fell 1.5 percentage points, to 39.8 percent, in the first quarter from 41.3 percent in the first three months of 2008. The home ownership rate among 35-to-44-year-olds fell 1 percentage point to 65.7 percent in the first quarter. The sharper drop among young people indicates that many first-time homebuyers were financially unequipped for the investment, avers Thomas Lawler, of Lawler Economic & Housing Consulting. AGING IN PLACE, BOOMERS LIKE RETIREMENT COMMUNITIES TOO Although most Baby Boomers are choosing to "age in place," a new study finds that a large and growing number - more than 1.2 million households – are heading for communities designed to meet their needs. The study by the National Association of Home Builders (NAHB) and the MetLife Mature Market Institute (MMI) calls the data significant because Boomers will represent one quarter of the U.S. population by 2010. The research showed that while most 55-plus consumers prefer to stay in their current home as they age, an increasing number (3 percent in contrast to 2.2 percent in 2001) will opt for an age-restricted community designed to attract "active adults" with a heavy emphasis on lifestyle. The analysis also confirmed that while most consumers were generally happy with their current homes, residents of age-restricted active-adult communities had the highest satisfaction rates. IT’S HARD TO GET A MORTGAGE FOR A SECOND HOME Lenders are demanding particularly large down payments from people shopping for a vacation home or an investment property, says the Washington Post. Low-down payment loans backed by the Federal Housing Administration are limited to primary residences. And the private mortgage insurance required of borrowers who can't afford a 20 percent down payment is nearly impossible to find in areas where home prices are declining. Because second-home buyers have always been perceived by lenders as a bigger risk, they tend to pay a higher interest rate on their loans, anywhere from a quarter to half a percentage point. And buyers who plan to rent out their units have even more hoops to jump through than those who don't, says Steve Calem, president of Capital Funding Group, a mortgage consulting and advisory firm. For instance, they must get an appraisal that assesses the rental rates in the area in addition to the usual paperwork, he notes. STRICTER STANDARDS AND FEES ARE NOW THE RULE A series of underwriting and appraisal changes is throwing new obstacles in the way of borrowers and loan officers, notes Kenneth R. Harney in the Washington Post. Fannie Mae’s and Freddie Mac's add-on fees for loans purchased after April 1 are, in some cases, costing applicants extra fees of 3-5 percent because of the type of property they want to buy or refinance, their credit scores or the size of their down payment. Some major lenders that sell loans to Fannie and Freddie are going further. For example, as of April 6, Wells Fargo imposed a minimum FICO credit score of 720 on all conventional loans purchased through its wholesale system that have less than a 20 percent down payment. It also began requiring a total-debt-to-income ratio maximum of 41 percent, down from the previous 45 percent. Fannie Mae now has a mandatory fee of three-quarters of a point on all condominium loans, no matter how high the applicant's credit score. APPLICATIONS SLUMP FOR MORTGAGES The Mortgage Bankers Association (MBA) reports that mortgage loan application volume for the week ending April 24 fell 18.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the decrease was 17.4 percent compared with the previous week, but activity grew by 62.7 percent over the same week one year earlier. Refinancings dropped 21.9 percent below the previous week, and purchase applications were off 0.6 percent. The refinance share of mortgage activity declined to 75.3 percent of total applications from 79.7 percent the previous week, while the adjustable-rate mortgage (ARM) share rose to 2.1 percent from 1.4 percent. ARE YOU READY TO GAMBLE ON MORTGAGE SECURITIES If you're looking to buy a mortgage note as an investor, or if you want to sell, two new online auction sites could be extremely helpful, reports Kenneth R. Harney in Realty Times. LoanMarket.net and BigBidder.com both have gone live in recent weeks, and they offer competitive listing opportunities for note sellers and potential bidders on hundreds of individual home loan notes up for auction right now. SENATE DEFEATS MORTGAGE MEASURE FOR CONSUMERS The Senate handed a victory to the banking industry, defeating a Democratic proposal that would have given homeowners in financial trouble greater flexibility to renegotiate the terms of their mortgages, says the New York Times. The mortgage provision garnered only 45 votes in the Senate, falling well short of the 60 votes necessary to break a threatened filibuster to a measure sponsored by Sen. Richard Durbin, D-Ill., that would give bankruptcy judges greater flexibility to modify mortgages. In recent weeks, major banks and bank trade associations worked closely with Senate Republicans to stop the measure. Twelve Democrats joined all the Republicans in voting against it. The House bill contains the provision, but the Senate’s defeat of the so-called bankruptcy cramdown measure all but makes certain it will disappear from the final bill. RATES TIE RECORD LOW, 1.6 POINTS BELOW OCTOBER’S PEAK The 30-year fixed-rate mortgage (FRM) averaged 4.78 percent for the week, down from last week’s 4.80 percent and 6.06 percent last year at this time, according to Freddie Mac. The 30-year FRM now equals the record low set the week of April 2, 2009; it has never been lower in Freddie Mac's survey, which goes back to 1970. The 15-year FRM this week was unchanged at 4.48 percent, also tied with Freddie Mac’s record, and was 5.59 percent a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.80 percent in comparison with last week’s 4.85 percent, the lowest that the five-year ARM has been since Freddie Mac began tracking it in January 2005. A year ago, it was 5.73 percent. Commented Chief Economist Frank Nothaft: "The housing market may be edging towards a bottom." THE TROUBLES FOR BORROWERS WHO SELL SHORT MAY PERSIST Some homeowners are finding that when they sell their homes for less than the outstanding mortgages - a so-called short sale - their mortgage companies are going after them for some or all of the difference, notes the Wall Street Journal. Mortgage companies also are sometimes taking legal action to recover unpaid amounts after a foreclosure is completed. In a growing number of cases, holders of mortgages or home-equity loans are requiring borrowers in short sales to sign a promissory note. Real-estate agents and attorneys say they have seen an increase in requests for promissory notes as mortgage companies look to short sales as an alternative to foreclosure. SUCH BORROWERS MAY FACE UNEXPECTED TAXES TOO Say you paid $200,000 years ago for a principal residence that you could now sell for a net sales price of $300,000, the Wall Street Journal proposes. Unfortunately, you also have $350,000 of first and second mortgages against the property because you took out a big home-equity loan a couple of years ago at the top of the market, when the home was worth $500,000. You'll have a $100,000 gain for tax purposes if you sell because the net sales price exceeds the tax basis of the home: $300,000 sales price minus $200,000 basis equals a $100,000 gain. You'll probably be able to exclude the $100,000 gain for federal income-tax purposes, thanks to the federal home-sale-gain exclusion break. If so, you won't have to report the $100,000 gain on your Form 1040. You may or may not qualify for the same favorable treatment on your state income-tax return. And if have a short sale where the net sales price is less than your tax basis in the property, a loss on a personal residence is considered a nondeductible personal expense. Most states follow the same principle. SENIOR REAL ESTATE EXECUTIVES SEE SLIGHT IMPROVEMENT They anticipate that access to capital may improve slightly in the next 12 months, according to the Real Estate Roundtable Sentiment Survey for the second quarter of 2009. Yet they indicate that current conditions in the income-producing real estate sector - encompassing office buildings, shopping malls, warehouses, hotels and apartment buildings - continue to erode. “If current conditions are allowed to weaken further, the possibility of widespread commercial real estate loan defaults will transform today’s threat into an ominous reality,” said Roundtable CEO Jeffrey D. DeBoer. “But from the depths of today’s market, our second quarter Sentiment Survey suggests a glimmer of hope.” When asked to compare today’s market conditions versus those they expect in one year, a majority of the more than 120 respondents says conditions will be “somewhat better.” This view is implied by a slight uptick in the Overall Q2 2009 Sentiment Index, which registered 41 on a scale of 100, up from last quarter’s score of 38 and its low point of 33 six months ago. RATINGS FIRMS SEES NO STABILIZATION UNTIL 2010 Home prices won’t stabilize until late 2010 and will fall another 12.5 percent from the end of 2008, according to a Fitch Ratings analysis, says the Wall Street Journal. The projection revises a 10 percent decline that Fitch had forecast from the second quarter of 2008. The Fitch report cites limited refinancing opportunities and weak unemployment as the primary forces behind the deteriorating forecast. The new estimate puts home prices falling to early 2002 levels, while they’re currently at values seen in mid-2003. Home prices have already declined by 27 percent nationally, according to the ratings agency, and the revised estimates would create a 36 percent decline from the housing market’s peak in 2006. HUD SECRETARY EXPECTS HOUSING RECOVERY IN 2009 Secretary Shaun Donovan said he was optimistic that housing markets would recover this year and that the Department of Housing and Urban Development (HUD) was seeing early signs that some of the hardest-hit housing markets were stabilizing, reports the Wall Street Journal. Donovan, who was New York City’s housing chief, said at a news conference that he expects home prices to recover “certainly by the end of the year, if not earlier.” He added that HUD was seeing early signs that some of the hardest-hit housing markets were stabilizing. Nearly half of all troubled borrowers have a second mortgage, and the administration’s Making Home Affordable effort to modify loans hadn’t yet addressed the thorny issue. ECONOMISTS SQUABBLE OVER THEIR FORECASTS
MR. TOLL OF THE BROTHERS NOW SOUNDS HOPEFUL CEO Robert Toll told Jim Cramer that he “definitely” sees things differently now and that about 80 percent of the nation is on its way back. He cited as evidence an increase in “expressions of interest” over the five weeks prior to his interview; those are refundable deposits that start the home-buying process. The number of those deposits is better than any other time over the past year, he said. “Now last year stunk,” Toll acknowledged (ungrammatically). “But then again, it sure feels good to be doing better rather than worse.” He added that the trend was “pretty much nationwide, except for a couple of markets that are still deader than doornails and probably will be for another year or two.” BUBBLE’S DEFLATION SEEN BY END OF 2009 While prices are still declining at an extremely rapid rate, there is “some evidence” in the February data that the rate of price decline may finally be slowing, says Dean Baker, director of the Center for Economic and Public Research in his weekly commentary. For example, in San Diego, prices fell by just 0.9 percent in February, bringing the annual rate of price decline over the last quarter to 15.6 - down from a 22.9 percent price decline over the last year. Similarly, in Los Angeles, prices fell by 1.7 percent in February, bringing the annual rate of decline to 20.2 percent in comparison with a 24.0 percent decline over the last year. Nominal prices in Los Angeles are now back to their October 2003 level. Nominal house prices in San Diego have fallen back to their September 2002 level. Adjusting for inflation in both cases, prices would be down to mid-2002 and mid-2001 levels, respectively, Baker writes. In some of the other former bubble cities such as San Francisco, Las Vegas, Cleveland, Detroit and Phoenix, there is “a serious danger of overshooting on the downside,” according to Baker, whose column also includes caveats and much more detail. THE DONALD PONTIFICATES, SOUNDING BULLISH It’s one of the best times to buy real estate, Donald Trump maintained in an interview with CNBC. “It’s an amazing time to buy,” Trump said. “This is the best time I’ve ever seen to buy both real estate and probably other things. This is one of the great opportunities." Yet, he acknowledged that banks are unwilling to lend money to its customers unless they are willing to consider purchasing foreclosed homes. “If you want to buy a house, only deal with the bank,” he said. “Go to the bank and take one of the hundreds of thousands of [foreclosed] houses away from them, and they’ll provide the financing." SHE MUST BE ONE GAY DIVORCEE AFTER THIS TRANSACTION An oceanfront home in Sagaponack belonging to the ex-wife of New Jersey Gov. Jon Corzine recently rented for $900,000, real estate sources tell Newsday. The lease, which runs from Memorial Day to October, is for a 6,200-sf six-bedroom, five-and-a-half-bath home on a gated property. The 6.64-acre estate includes a heated gunite pool, a Har-tru tennis court and more than 500 feet of ocean frontage along Gibson Beach. The house was signed over to Joanne Corzine in 2002 as part of her divorce settlement. HE LIVES THE SWEET LIFE EVEN WHEN HE’S NOT AT WORK In 2006, chocolatier Jacques Torres abandoned his two-bedroom Manhattan apartment and moved into a sparkling white 39-foot-long Bayliner, which spends most of its time moored in Jersey City, gushes the Wall Street Journal. On a balmy Saturday, his boat sped past Gravesend Bay to Brooklyn's Coney Island, cutting the calm waters at a steady 15 knots and dwarfing nearby vessels. "Yes! We go fishing!" yelled a grinning Torres, 49. The 300-sf two-bedroom, two-bath interior includes a tiny galley kitchen opposite two seating areas. The bathrooms are tiny and there's barely room to walk around Torres's queen-sized bed. Torres still owns his two-bedroom apartment in Manhattan but lives on the boat almost year-round, using an electric warming mattress in the winter. He visits his apartment occasionally to pick up the mail or when his wife Hasty is in from Los Angeles. PERHAPS HER NEW ABODE IS 10 TIMES BETTER THAN 30 ROCK Tina Fey and her husband Jeff Richmond have a new Upper West Side apartment to call home, reports Cityfile. The couple picked up a co-op at 300 West End Ave. for $3.4 million, substantially less than the asking price of $4.1 million. The fourth-floor apartment features four bedrooms, eat-in kitchen, living room with wood-burning fireplace, library, private elevator landing, and a view that includes "a peek of the river." FASHION GURU GIVES STAMP OF APPROVAL TO THE UWS Fashion consultant and Project Runway advisor Tim Gunn bought a two-bedroom Upper West Side penthouse for $1.5 million, says the Real Deal. The 1,765-sf apartment in the Manhattan Tower Condominium, at 203 West 90th St. at Amsterdam Avenue, includes a 527-sf terrace, and was listed for $1.595 million. Critiqued in “Out and About” here some months ago, the place has a weird and wasteful layout with views of any park blocked by surrounding buildings. Gunn closed on the purchase March 31. HE’S SINGING A HAPPY TUNE James Gandolfini, flourishing in "God of Carnage," is in contract for a $7 million, 3,000-sf duplex penthouse at the Fairchild building at 55 Vestry St., according to the New York Post. NOT ON THE ROAD, HE WON’T BE ON 7th AVENUE EITHER Charles and Jean Osgood, who accumulated their sprawling apartment piece by piece in the Osborne at 57th Street and Seventh Avenue, diagonally across from Carnegie Hall, have put the 5,100-sf co-op on the market for $7.9 million, the New York Times reports. The couple, who reared their five children in Englewood, N.J. and in southern France, has decided to downsize. The apartment has 12 rooms, including six bedrooms (counting a room now used as a very large closet), as well as five full baths. The two staircases going to the fourth floor add a sense of mystery. “It is like a town house in an apartment building, Osgood, 76, told the Times. A TOP FASHION DESIGNER BOUGHT LOW AND SELLS LOW Adrienne Vittadini has sold her 1.9-acre Water Mill South estate for $5 million, real estate sources tell Newsday. The home originally went on the market in 2007 for $7.6 million, and the most recent asking price was $6.495 million. Vittadini purchased the estate and its five-bedroom, five-bath mansion in 1997 for $1.47 with husband Gianluigi. The 4,500-sf Mediterranean style house has a media room, fireplace and two-car garage. The master bedroom has two decks, a Jacuzzi and pond views. On the property, as well, are a heated gunite pool and a pool house. PERHAPS THEIR HOUSE HUNTING DOES NOT CREATE GOODWILL Ben Affleck and Jennifer Garner have bought movie producer Brian Grazer's Los Angeles house for roughly $17.5 million, according to two people familiar with the deal, reports the Wall Street Journal. That's about 40 percent less than Grazer's original asking price, $27.5 million. In the Pacific Palisades neighborhood, the cliffside residence has a 9,000-sf main house designed in the 1940s and views of the city and the Pacific Ocean. The interiors were designed by Michael S. Smith, who is decorating the Obama White House. Grazer, who runs Imagine Entertainment, and his ex-wife, author Gigi Levangie Grazer ("The Starter Wife"), bought the property in 1992 and expanded the home to roughly 20,000 square feet, including a new two-bedroom guest house with a screening room. They first listed the home about two years ago and took it on and off the market several times. Whether Grazer is thrilled with the sale price was not disclosed. TEAR DOWN THESE HOUSES AND BUILD A PYRAMID THERE Three of disgraced attorney Marc Dreier's Hamptons homes are being rushed to market in hopes of attracting a buyer looking for an "ideal vacation property," says the New York Post. A Manhattan federal judge approved plans for a bankruptcy trustee to sell two neighboring beachfront houses in East Quogue "as soon as possible, before the summer, in order to maximize the proceeds." A March report from a court-appointed receiver said real-estate agents in the Hamptons believe the properties on Dune Road could be sold together for $12.5 million or more. Dreier, who is set to plead guilty next month to selling $700 million worth of bogus promissory notes, bought the plush properties for a total of $11.6 million in 2004 and 2005. CHEF LEAVES BAD TASTE IN CONDOMINIUM ASSOCIATION’S MAW Chef David Bouley owes the Mohawk Atelier condominium on Duane Street $18,900 in unpaid common charges on the apartment that he bought for $3.15 million in 2007, according to the New York Post. Bouley owes another $30,000 to the same TriBeCa condo association in past charges for his two retail units, where he operates his new Bouley restaurant. There's a $5 million mortgage on the retail spaces and another of $2.52 million on his apartment, but the Post didn’t know whether he was up to date on those obligations. Neither Bouley nor a building manager responded to requests for comment. OTHER NATIONS ARE EASING RULES AGAINST NONRESIDENTS As property markets fall worldwide, some governments have become more open to nonresident property owners, according to the Wall Street Journal. A growing number of them are considering loosening or temporarily suspending foreign property-ownership restrictions in a bid to stimulate their real-estate markets. In January, for example, Beijing issued a one-year suspension of a one-year residency requirement for foreign nationals buying a house. The Cayman Islands and Australia also have recently relaxed their rules. And the issue is being discussed in numerous other countries, including the Philippines. In 2005, India began letting foreigners invest directly in Indian residential and commercial real-estate development. In late 2006, the government lifted a required 10-year lock-in period on repatriating property sale proceeds, although it's limited to $1 million a year. Restrictions on foreign ownership exist mainly in emerging property markets. Most Western European countries, including the U.K., France and Italy, don't restrict foreign nationals from owning real estate, though Switzerland and Austria have quotas in some ski towns. UN BANCO IN SPAIN IS SELLING PROPERTY AT A DISCOUNT Grupo Santander is about to launch a Web site on which it will sell as many as 950 new homes to the public at a 20 percent discount to market prices, says the Wall Street Journal. That comes after the Spanish bank sold 350 homes to its own employees on the same terms. The Spanish bank picked up some 1,300 homes last year when developers to which it had loaned money defaulted on their loans; the bank agreed to swap debt for the property. At the end of 2008, Santander, including Banesto, its Spanish retail bank, had property valued at some €3.8 billion ($5 billion) on its balance sheet, most of that originating from debt-for-equity swaps. ¡Que bien! THERE’S NO PLACE LIKE ROME, BUT FORBES PUTS VIENNA FIRST Vienna is noted for its arts and cultural institutions such as its famed opera house, parks and continental architecture that line the Danube, the magazine says. Skies are so sunny that international human resource consulting company Mercer ranks the city No. 1 for having the world's highest quality of life and cites the city's harmonious political and social environment as a reason why. Using a long list of criteria, Mercer evaluated cities on an index where New York City was 100. Vienna scored a 108.6, while Zürich came in second at 108, Geneva was next at 107.9 and Vancouver finished fourth at 107.4. At the bottom, shockingly, were Baghdad, at 14.4; Bangui, the politically corrupt capital of the Central African Republic at 29.3, and N'Djamena, Chad, notable for it's difficult pronunciation and constant rebel attacks, at 31.3. You’ll find ratings for more than 400 cities here. AND BUSINESS WEEK SAYS THE TIME TO INVEST COULD BE NOW For those willing to invest for the long term, 2009 could be the year to pick up property bargains worldwide, contends Business Week. The severe contraction in credit has left developers with thousands of homes, apartments and chalets on their books, forcing them to slash prices by up to 60 percent. Additionally, the dollar's renewed strength against other currencies means properties in far-flung places have now become more affordable for U.S. buyers. No doubt, the global recession adds further risk to any investment, “but there still are good deals to be had for courageous investors,” the magazine says. “From European hot spots in Croatia and Montenegro to less exotic investments in Florida and the Southwest U.S., now may be the right time to buy.” Emerging countries, especially Brazil and India, carry the prospect of continued economic growth despite the downturn while offering properties costing as little as one-eighth the price of the average U.S. home. The magazine goes into extensive detail. If You Can’t Stand the Cold. . . . . . Well, then, get out of the kitchen. Or, at least get away from the refrigerator. All a refrigerator does is keep food cold. Just as a stove does nothing but make food hot (but that’s for another time). Yet many consumers believe that not any refrigerator will do: It’s a Sub-Zero that that sends chills up the spines of potential buyers. That is akin to asking for Armani, pining for a penthouse and going bonkers for Burgundy wine. Those things are trendy, they’re expensive and they’re enviable. Why the Sub-Zero helps populate such a universe is open to a question that will be explored here, though the popularity of the brand assuredly is beyond doubt. Incorporated in 1945 in, of all places, Madison, Wis., Sub-Zero claims to “make the ultimate built-in, integrated, and undercounter refrigerators and freezers, and the ultimate wine storage.” The company says that “hidden refrigerators is an idea we invented,” but it takes no responsibility for prices that are stratospheric. “For hundreds of designers and hundreds of thousands of homeowners, a kitchen is neither right nor complete without a Sub-Zero.” No argument there. Priced at thousands of dollars above most other refrigerators, with as much as 50 percent of the work on each product done by hand, Sub-Zeros are marketed to America's wealthiest households and are found in the homes of many celebrities. The company is privately held by the family of founder Westye Bakke. In addition to refrigerators, Sub-Zero also manufactures freezers (which Bakke’s little factory originally turned out at the rate of three a day) plus those wine storage products. Several factors seem to have occurred at once to invigorate Sub-Zero. The reorganization of the company, with a new emphasis on professional marketing, happened just as the Sun Belt of the southwestern United States was beginning to explode with new housing, especially for affluent buyers. President Bud Bakke, who succeeded his late father in 1973, gave television celebrity Dinah Shore a Sub-Zero to use on the cooking segment of her show, providing exposure that set the product on the road to being the refrigerator of the stars. In time, Johnny Carson owned several Sub-Zeros, as did Bob Hope and Danny Thomas. Politicians, too, adored the Sub-Zero: Richard Nixon and Henry Kissinger each had one. Michael Jordan had 13 installed in his mansion. The list of celebrities who owned Sub-Zeros grew and grew, and before long, the Sub-Zero was the highest status appliance that a home kitchen could boast. The Sub-Zero was considered to be an exceptionally high-quality machine, with two compressors - one for the refrigerator and one for the freezer - and patented door and shelving systems. The refrigerators were finished at the factory with a simple white coat of paint, but customers paneled them to match their kitchen cabinets or ornamented them with etchings, murals or mirrors. There was no other refrigerator, no matter how costly or technologically advanced, that didn't look like a refrigerator. Designers and architects loved the Sub-Zero because it was not a big, ugly metal box. In the mid-1980s, a Sub-Zero cost around $3,000, which was about $2,000 more than the top-of-the-line Amana refrigerator. In fact, the Sub-Zero was in a class by itself, and in its market niche, price was not a consideration. In terms of total refrigerator market share, Sub-Zero took up only one to two percent. Envious manufacturers attempted to imitate Sub-Zero. By the mid-1980s, Whirlpool was introducing a similar product, and Sears began manufacturing a built-in refrigerator made for it by Sanyo. But Sub-Zero's president, Homer Price, sniffed in a March 3, 1986 Business Week profile of the company that “none of our customers would set foot in a Sears store.” By 1990, sales at Sub-Zero had surpassed $100 million. The majority of its sales - 65 percent - came from the East and West coasts. The typical Sub-Zero customer was a 45- to 50-year-old college-educated professional with a salary of at least $100,000 and a home worth at least $400,000. (That, of course, was then.) While the 1980s had been a period of conspicuous consumption, by the early 1990s spending had declined, and Sub-Zero struggled to maintain a steady growth rate. Despite its best efforts, by the mid-1990s Sub-Zero was no longer the only high-end refrigerator, as General Electric and Whirlpool had managed to position products to appeal to Sub-Zero's market. At the same time, Sub-Zero retained a sprawling 70 percent of the upscale refrigerator market, and its sales were still growing at twice the pace of the refrigerator market overall. The company expanded its facilities in 1993, building a new 60,000-sf building next to its Madison headquarters. Sub-Zero employed roughly 600 people, with about 400 in Wisconsin and the remainder at a second plant in Phoenix, Ariz. While the company had grown dramatically in sales and expanded its manufacturing facilities several times, it had not significantly modernized the basic construction of its products. About 50 percent of the assembly work on each Sub-Zero was still done by hand. As a result of market research, Sub-Zero released a new series, the 600, with more feature options in 1998. The 600s used advanced microprocessors that adjusted the temperature setting inside the unit and employed “fuzzy logic” to make changes based on the temperature in the room and how often the refrigerator door was opened. The electronic processor also ran a self-checking program and could instruct service technicians in making repairs. Some units offered a Sabbath mode that allowed the refrigerator to be programmed to perform certain chores for Jewish customers who abstained from any semblance work on their observed day or rest. The company began building a huge warehouse near Madison in 1998. The 200,000-square-foot building was split between a distribution center and new manufacturing facilities. By that time, Sub-Zero was making 30 different models of refrigerators, and it anticipated further growth. The company had been looking for a line extension for some time (though President James Bakke remarked in an April 8, 1996, article in Forbes that the Sub-Zero name just didn't work on a stove). But Sub-Zero acquired the domestic appliance line of Wolf Range Corp., the California-based manufacturer of professional-style ranges, cooktops and grills for both home and commercial use. Galt, a company that rates a wide range of products, notes that both Maytag and Sub-Zero have “less than stellar repair histories” in their side-by-side refrigerators, while Whirlpool scores the best for reliability. Whirlpool comes out as the best brand for top and bottom freezers with and without ice-makers as well. And Consumer Reports - which tested over 70 models from 20 brands for temperature control performance, energy efficiency, noise and capacity/storage, and then rated them for features such as water dispensers and stainless steel finishes – mentioned problems with the Sub-Zero built-in models. The biggest drawback to built-in refrigerators is that they are very pricey and at the same time prone to repairs, says the Galt Internet guide. The top rated built-ins per Consumer Reports were the Sub-Zero 650F ($6,500), the GE Monogram ZICS36ONR ($6,400) and the KitchenAid KBFC42F ($6,800). The Sub-Zero built-in is the cheapest of the three but also gets “terrible repair ratings.” At 37 inches wide, the Sub-Zero provides plenty of storage space and rates high for temperature performance. Some owners have said the icemaker is problematic and that the drawers don't come out far enough. Other owners complain about leaks. Still other owners of a Sub-Zero are less temperate, if likely unrepresentative of all owners, in their comments. Said one Ramona Sauk City, Wis. Individual in a 2006 posting quoted verbatim: “Subzero model 550 refg purchased in 1993, had nothing but problems. Froze up in freezer compartment. Service man ran wire to use heat off compressor to remedy. Then appliance froze up in refrigerator part. 4" block of ice formed across bottom shelf. Service man sent out again. This happened SEVERAL times, costing me time off work, only to have the problem reoccur almost immediately after service man left. “Complained to appliance store where purchased, Kennedy Hahn, also complained to Subzero direct. Only remedy they would offer was yet another worthless service call. Problem went on for 13 years. “Finally this spring, 2005, company rep came to house. Unit moved out and found frozen to WALL!!!! Water had been periodically leaking badly accross the kitchen floor all during this time. Rep from Subzero would not make any offer other than to "let me buy yet another" refrig. to replace this. No money offered, nothing all during this time. Appliance store would not answer my phone calls or letters of complaint. Refrigetator cost $4000 !!!!! and was nothing but junk!” A review of the Consumer Reports Web site produces the following complaint by the owner of a $7,600 model: “Have needed to replace motor, but under warranty. Service tech said he has observed high-efficiency motor is more trouble-prone, so he ended up installing the older less efficient motor (after TWO motors failed).” Another owner declared that the reliability of the individual’s Sub-Zero was “abysmal.” Said that owner: “Service is poor even under warranty. They come out and have a look and then come out again. Everything breaks and they say this refirg will last forever; that's because they want to keep replacing the parts which each cost as much as a new refrigerator. It's always running. The gaskets mildew. Hinges rust. The freezer gasket is heated! Go figure?!? The entire machine is a generation behind the 36" wide conventional refrigerators. ...And don't get me started on the creeps who work for their customer service. I have had (have) two Subzero refrigerators. One used and the other new when I remodeled my kitchen. The name says it all when it comes to the rating... the rating is less than zero!” Whether it’s the reputation of the refrigerators or, much more likely, another cause, the company says it plans to lay off up to 350 local employees this month or a bit later, according to the Wisconsin State Journal. Sub-Zero’s announcement follows the January layoff of 79 employees at the Wolf Appliance division in Madison. Chuck Verri, the company’s vice president of human resources, blamed the layoffs on the recession and market slowdown in housing and remodeling. "It’s a continuation of the low demand for new housing," he said. "Existing homes are not selling. A large part of our business is kitchen remodeling and that has slowed also now." Help them out! You can buy online a 48-inch model with glass doors and four drawers for just $13,800. It weighs only 800 pounds. Oh, and shipping is extra. The line between status and quality of style and operation is hard to draw. But it isn’t hard to find out which of the numerous available products keeps food cold best and most efficiently. Whether hard times suggest a rejection of the values that Sub-Zero represents is a matter yet to be resolved. But if the admiration and envy of your friends, family and neighbors is what you most want, then caveat emptor if you want your cottage cheese to be well-preserved. Even apartments without Sub-Zero refrigerators are critiqued below; these recently visited properties have been listed by various brokers:
Classic 7s on West End Avenue
Some of Manhattan's Latest Listings Please click here to view a sampling of newly listed properties. To see more of them or to obtain more information, please don't hesitate to be in touch. Click Here to Sign Up For Your Free Issue of Realty Digest!
©
2008 Service You Can Trust |
||
The Department of Buildings issued building permits for 576 residential units in 133 buildings citywide in January and February, 20 percent fewer than in the same period of 2008. This year’s numbers represent just 13 percent of the units that were permitted in January and February of 2007. By far the biggest declines in potential housing starts were experienced in Manhattan and Brooklyn. In January and February, permits were issued for 38 units in three Manhattan buildings in comparison with 220 units/22 buildings in 2007 and 272 units/9 buildings in 2008. In Brooklyn, permits were issued during the first two months of the year for 14 buildings, totaling 83 units. President Richard T. Anderson of the New York Building Congress commented that "the numbers do not bode well for the coming years.” He said annual construction could fall below 20,000 units for the first time since 2002 - a more than 40 percent drop from last year.
HERE’S A REMINDER ABOUT CHOOSING CONTRACTORS
The owner of circus entrepreneur James Bailey's 1880s mansion in New York has cut the price to $6.5 million after listing the home in November for $10 million - a drop of 35 percent in less than half a year. The rare free-standing house in Harlem, whimsical and turreted, measures 12,000 square feet and has original stained-glass windows and mahogany paneling. Bailey was one half of the Barnum & Bailey Circus, which Ringling Bros. bought in 1907. Marguerite Blake, a former funeral-home director, has owned the home since 1951 and most assuredly helped people to their exits. In D.C., price cutting also affected two properties – the 3.58-acre Evermay estate, Washington’s most-expensive home listing, which has been reduced by 20 percent, to $39 million, and Halcyon House, the second-priciest home for sale, down 35 percent, to $19.5 million. 
Yale University economist Robert Shiller has often dazzled audiences with a chart showing home prices from 1890 to the present, notes the Wall Street Journal. But now another economist, independent consultant Thomas Lawler, says Shiller's chart is "bogus," contending that Shiller cobbled together data that are inconsistent and sometimes unreliable. In response,Shiller defends his work and accuses the former Fannie Mae economist of making "wild allegations." In a March 30 report, T2 Partners, a New York hedge-fund manager, drew on the Shiller chart to conclude that, on average, U.S. home prices need to drop another 13 percent to get back in line with the long-term trend. But after Lawler created an adjusted version of the Shiller chart, backing up his view that house prices already are nearing a bottom in much of the country, a T2 partner called Lawler's critique "valid." The various S&P/Case-Shiller indexes are limited to 20 metro areas and lately have been heavily affected by sales of foreclosed homes, whose prices reflect banks' need to dump assets quickly. At the same time, the Federal Housing Finance Agency, or FHFA, index is based only on homes financed with loans owned or guaranteed by government-backed mortgage investors Fannie Mae and Freddie Mac; that excludes most homes recently bought with subprime loans, understating the damage.
