Archive for December, 2009
Mike Ousley joins Truckee, Calif.-based appraisal management company (AMC) Clear Capital as executive vice president and head of the firm’s appraisal group.
In his new role, Ousley will oversee the direction and growth of Clear Capital’s appraisal team, which includes 28 staff appraisers, quality assurance and customer service professionals; and an independent network of 10,000 licensed contract appraisers.
“Mike’s reputation throughout the industry fits who he really is: honest, innovative, hard working and most impressively, he puts the interests of others first,” said Clear Capital CEO Duane Andrews.
“We're excited Mike has joined Clear Capital. He has built a successful career by finding ways to integrate technology to achieve efficiencies that benefit everyone in the loan transaction process,” Andrews added.
Ousley 30-year career includes the founding Foster Ousley Conley in 1989 and Appraisal Enhancement Services (AES) in 1994. He has also served as vice president at California Federal Savings Bank.
His professional organizations involvement includes the Title/Appraisal Vendor Management Association (TAVMA) and the Mortgage Bankers Association’s (MBA) quality assurance subcommittee. He also served as chairman of the Chief Appraiser’s Council and president of the California Association of Residential Lenders.
Write to Austin Kilgore.
US housing prices increased 0.6% on a seasonally adjusted basis from September to October, according to the Federal Housing Finance Agency’s (FHFA) monthly house price index.
The increase comes after the FHFA adjusted the index’s August to September reading from no change to a 0.4% decline. For the 12 months ending in October, prices fell 1.9%. The index is 10.8% below its April 2007 peak.
The index is a gauge of purchase prices of homes financed by mortgages sold to or guaranteed by Fannie Mae (FNM: 0.00 N/A) or Freddie Mac (FRE: 0.00 N/A).
Regionally, the Pacific census division experienced the greatest month-over-month increase at 3.7%, followed by the Middle Atlantic (1.8%), East South Central (1.6%), Mountain (0.8%), West South Central (0.5%) and West North Central (0.2%). New England was flat month-over-month, and the South Atlantic and East North Central divisions experienced month-over-month declines of 1.1% and 0.6%, respectively.
For the 12 months ending in October, no division experienced an increase. The West South Central division remained flat. The Mountain division experienced the greatest decline at 7.5%, followed by the South Atlantic (4.1%), East North Central (1.9%), New England (1.8%), Middle Atlantic (1.6%), West North Central (0.7%), East South Central (0.4%) and Pacific (0.3%) divisions.
Write to Austin Kilgore.
The author held no relevant investments.
Homebuilding in Southwest Florida and two metros in North Carolina are proof that growth can vary greatly from market to market.
Florida could be showing signs of recovery as Neal Communities, a private builder in Southwest Florida secured 24 new contracts for homes in seven different communities in November.
An October report put together by Manatee Association of Realtors found that the supply of new homes on the market continued to decline every month since October 2008. Prices in the area have remained affordable, leading to a recent upward trend. Neal Communities is based in Manatee County.
“The Florida housing industry has been hit particularly hard by the economic downturn, but we have been extremely encouraged by recent indications that the local market is beginning to correct its course,” said Pat Neal, president of Neal Communities.
But not all markets are behaving similarly. North of Florida, two cities in North Carolina are showing widely different outlooks, according to a report from John Burns Real Estate Consulting (JBREC).
Charlotte, North Carolina has emerged a major finance market since NationBank’s acquisition of Bank of America (BAC: 7.29 -0.14%) in 1998 and Wachovia’s nationwide expansion. But after both institutions fell into distress, unemployment and the housing market have since suffered in Charlotte.
Raleigh, North Carolina rallied a new technology oriented employment base around its three universities: Duke, University of North Carolina and N.C. State. According to John Burns, Raleigh’s market will outperform Charlotte over the next few years.
Jobs are leaving Charlotte on a 12-month pace of -5.7%, double Raleigh’s -2.4%, translating to 49,000 lost jobs in Charlotte compared to 13,000 in Raleigh.
Homebuilding companies in Raleigh are finding work like Neal Communities in Florida. Several small, private companies headed by former division presidents will grow new business by putting affordable homes up for sale on lots purchased at discounted prices. HousingWire recently attended an auction put on by Hudson & Marshall in Dallas, Texas to see how low the mark-downs could get. One vacant lot sold for $450.
Builders in Charlotte are not recovering at the same levels in Raleigh.
Write to Jon Prior.
The author held no relevant investments.
Demand for commercial real estate should rebound by the summer of 2010 as the labor market improves, according to analysts from Barclays Capital (BCS: 14.09 +1.15%), although “it depends on how delinquencies and defaults will ramp-up next year,” Barclays' Aaron Bryson told HousingWire.
But, according to Barclay’s report on the 2010 outlook for commercial mortgage-backed securities (CMBS), the labor market is showing encouraging signs in recent months, which is the best indication of growing demand in commercial space. Barclay’s analysts forecast “sustained positive job growth” beginning in Q110 and an addition of 2.3m jobs by the end of the year. This translates to a 9.1% unemployment rate at the end of 2010, which is not yet healthy but a sign of recovery.
Since the middle of 2008, demand for commercial real estate has slipped into a freefall but should turn positive by the end of 2010. Supply, however, will maintain its current levels as new completions will stay “extremely low,” according to the report.
As far as when vacancies will disappear, during the last two recessions, the lag time between job growth and rent growth usually lasts 2-to-3 years. Analysts do not expect national office net operating income to reach positive levels until 2013 or early 2014.
On the pricing side, Barclay’s analysts expect commercial real estate prices to reach a bottom in 2010 as transaction activity picks up and cash returns to the market. According to Moody’s CPPI Index, which measures pricing, values sit 43% below the market’s peak in October 2007.
All of the talk of “recovery” in the commercial space hinges on collateral performance and recent vintage loans.
“Our biggest concern heading into 2010 is not the well-publicized loan maturities and funding gap, but instead the income gap – that is, the growing pressure on legacy loans to cover mortgage payments and avoid default,” according to the report.
Through December, 30-plus day delinquencies jumped 6.5% across fixed-rate loans. Another 3% are in special servicing and need modifications. According to the analysts, most delinquencies in 2009 came from aggressive underwriting not a lack of cash flow. This is not the case of hotels, which continues to suffer from a lack of business.
Recent data shows an increase in the pace of delinquencies as 30-plus day delinquencies jumped 69bp in December for 2005-plus vintage loans, compared to an increase of 41bp in the previous three months. For this reason, analysts expect defaults to rise sharply. For the 2005-plus vintages, defaults, including modified loans, will double to almost 13% by the end of 2010.
These expectations, if they come to pass, could overshadow the fragile growth in the job market.
Write to Jon Prior.
The author held no relevant investments.
While existing-home sales were up 7.4% amid a surge of last-minute first-time homebuyers looking to close on purchases before the original expiration of the $8,000 tax credit, the national housing inventory hit a nearly four year low, according to the National Association of Realtors (NAR).
The seasonally adjusted annual rate of existing home sales, including single-family, townhomes, condominiums and co-ops transactions, was 6.54m in November. That’s up from 6.09m in October and 44.1% higher than the rate of 4.54m in November 2008. The sales rate is the highest its been since February 2007, when it was 6.55m.
“We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010,” said NAR chief economist Lawrence Yun.
Housing inventory declined 1.3% at the end of November to 3.52m existing homes available for sale. That’s a 6.5-month supply of homes at the current sales pace, down from a seven-month supply in October. The national housing inventory is down 15.5% from where it was last year and the lowest since April 2006, when there was a 6.1-month supply.
Yun said nearly all markets experienced a solid sales gain from one year ago, with the lone exceptions being the California cities of San Diego, Riverside, and Sacramento, where a shortage of lower-priced homes is limiting sales.
The national median price for all types of existing homes was $172,600 in November, 4.3% below November 2008.
Regionally, the Midwest experienced the greatest increase in existing home sales rate at 1.13m in November, an 8.4% increase from October and up 52.7% higher than November 2008.
In the West, existing-home sales increased to an annual rate of 1.46m in November, up 10.6% from October and 28.1% from one year ago.
The rate in the Northeast increased 6.6% month-over-month to 1.13m in November. That’s 52.7% higher than in November 2008.
The smallest regional increase was in the South, where the rate of 2.39m in November was up 4.8% from October and 44.8% higher than last year.
Write to Austin Kilgore.
Nearly 40% of existing homes purchased in November used a Federal Housing Administration (FHA)-insured mortgage, according to a National Association of Realtor (NAR) survey of 3,161 real estate agents' perceptions of conditions on the ground in residential real estate.
And while this trend may not change immediately into 2010 lending, the FHA is recently defending the program, saying that it is well enough capitalized to avoid any major losses in case of surging defaults.
For the NAR survey, president Vicki Cox Golder called FHA a critical part of American housing, especially for those trying to get on the housing ladder. “FHA helps provide affordable mortgage financing to homeowners, particularly first-time home buyers who are so important in drawing down inventory to help stabilize the current housing market,” she said.
Despite the NAR accolades, earlier this month, Department of Housing and Urban Development secretary Shaun Donovan was before Congress defending the FHA, and ensuring the House Financial Services Committee that the single-family insurance program is “not the next subprime.”
The increase in demand caused the capital reserve ratio at the FHA to drop below the Congressionally mandated 2% minimum, leaving HUD and the FHA scrambling to ensure the FHA program’s soundness.
A number of options are up for consideration, including an increase to lender accountability, raised insurance premiums, minimum FICO requirements and minimum required down payments.
Last week, HUD issued a ruling that borrowers are ineligible for a new FHA mortgage if they pursued a short sale agreement “to take advantage of declining market conditions” or to purchase another property at a reduced price.
Other results from the Realtors confidence index (download here) showed first time homebuyers accounted for 51% of all transactions and are actively competing with investors for distressed properties, which accounted for 33% of sales.
Distressed properties aren’t just affecting transaction price, however. Many survey respondents indicated the presence of distressed properties is influencing buyers’ perceptions of other homes for sale and many buyers have pricing expectations that treat every property as if it were in foreclosure.
Write to Austin Kilgore.
Due to the "herculean" and "unprecedented" efforts of myriad Fed bailouts, Barclays Capital is reporting that, going into the New Year, the systemic risk posed by the securitized markets will be much lower, although the agency mortgage-backed securities (MBS) market remains a concern.
Further, increased investor due diligence, the implementation of stress testing and the realization of losses on these investments by banks, will all help create a much less risky securitization market, from a systemic point of view.
"2010 promises to be an exciting year," they write. "It will just not be the heart-pounding, spine-chilling excitement that we saw in early 2009; and for that, we should be thankful." With all of this taken into consideration, the analysts are predicting the 2010 rate of growth, above Fed predictions, at 3.5% to 4%.
There are some down sides to the report: "For example, while mortgage rates are near all-time lows, mortgage credit has tightened in the past year, blunting the benefits of record low rates," write the analysts in their outlook for the secondary market. "Losses in non-agency loans are set to be a drag on bank balance sheets for the next few years, and we expect commercial mortgage losses to pick up steam from 2010."
They add that the expect rates to begin to climb, and the Fed to begin to walk away from asset purchases come March. They also expect rising demand from banks to help offset the resulting $1.7trn in duration demand.
This creates a picture of stability as long as inflation can be kept in check, according to economist who contributed to the report.
"That is why we are calling for a relatively mild sell-off; the forecast shows the 10-year Treasury rising only to 4.5% – a 100bp move over 12 months," they write. "This kind of rate move should not unduly distress securitized investors."
Real estate investment trusts (REITs) face a number of challenges going into 2010 and Fitch Ratings is maintaining its negative outlook on the sector.
Fitch’s negative outlook reflects a fragile stabilization of the US economy, weakening property-level fundamentals, strengthening liquidity, driven by more accessible unsecured debt capital markets, slightly elevated leverage levels, lower coverage metrics, limited development pipelines and a slow asset sales environment.
While there are very early signs of some US economic improvement, Fitch remains concerned about future declines in US gross domestic product (GDP), unemployment levels exceeding expectations, property-level fundamentals weakening beyond current assumptions, and increased pressure on coverage metrics, Fitch analysts wrote in a REIT outlook report.
While Fitch projects US GDP growth to be 1.8% in 2010 and 2.5% in 2011, occupancy and rent growth is expected to lag a broader economic recovery. Fitch did not rule out revising its negative outlook if conditions improve.
“If liquidity and access to capital remains strong, expect more rating affirmations and fewer downgrades and downward Outlook revisions that characterized 2009,” said managing director and US REIT group head Steven Marks.
“Conversely, less access to capital and increased use of secured debt will put a strain on liquidity,” which Marks added will lead to a more circumspect view of the sector.
The multifamily REIT division is projected to outperform the sector due to limited supply and continued access to low-cost financing from Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A). Healthcare REITs are also projected to perform better driven by “demographic trends that continue to benefit the health care sector, portfolio diversity and limited supply,” Fitch said.
However, office REITs won’t improve until employment numbers do and slow recovery will also hurt industrial REITs. Retail REITs will under perform on lagging consumer retail demand.
“Overall retail sales in 2010 will be flat to up modestly from 2009 levels, translating to soft consumer demand due to high unemployment levels, continued challenges to consumer credit, and ongoing US household deleveraging,” Marks said.
Write to Austin Kilgore.
The author held no relevant investments.
Freddie Mac (FRE: 0.00 N/A) director Barbara Alexander will not seek re-election to the company’s board when her term expires in March, the government-sponsored enterprise (GSE) announced Monday.
She is only one of three directors that remained on Freddie’s board when the Federal Housing Finance Agency (FHFA) took over as conservator in September 2008. Since conservatorship, Alexander has worked to recruit new board members and a new management team. She also chairs the Business and Risk Committee and sits on the Compensation and Executive committees.
Alexander will serve as director through Freddie’s March 19, 2010 board meeting.
“Barbara has provided an invaluable service to this company during a particularly challenging five-year period for Freddie Mac and the housing industry,” said John Koskinen, chairman of Freddie Mac's board of directors. “Her leadership and knowledge of the company was especially helpful in providing transition and management continuity this past year while the company has been in conservatorship.”
Koskinen will head the search for Alexander’s replacement.
Alexander is currently an independent consultant. Before that, she was a senior advisor to UBS Warburg and managing director of the North American construction and furnishings group in the corporate finance department of UBS and held various positions at Salomon Brothers, Smith Barney, Investors Diversified Services, and Wachovia Bank and Trust.
Write to Austin Kilgore.
The author held no relevant investments.
A judge in Ireland ordered a commercial property developer to repay €16.5m (US $23.6m) in loans given to him for his firm after he could not provide an adequate reason as to why he didn’t repay.
According to a report in The Irish Times, Dermot O’Rourke of Naas, a town of 16,000 located 18 miles west of Dublin, had no arguable defense to the summary judgment application brought against him by Bank of Scotland – Ireland (BoSI).
The bank originated the loans to O’Rourke in July 2007 and February 2008, including a €15m facility. O’Rourke was to have repaid the loans in full by August 27, 2009.
The commercial court judge refused an application by O’Rourke’s lawyers to postpone the order pending a Supreme Court appeal.
Earlier this month, O'Rourke sued three business associates after he claims he agreed to provide Thomas Considine, Patrick Sweeney and Gerard Prendergast with a €10m loan for a land purchase deal. According to the Irish Independent, O’Rourke claims the loan was to be repaid by August 9, 2009. O’Rourke claims the defendants now owe him €21.9m in unpaid principal and interest.
Write to Austin Kilgore.
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