Foreigners snap up property in Atlanta and elsewhere

Thanks to a weak dollar, Americans have grown used to seeing Europeans on shopping sprees in the States, grabbing up cheap Levis, cheap iPods and enough cheap luggage to carry it all home in.

But now Europeans are buying something else as well — houses.

"We have had an overwhelming number of Europeans within the last six months asking about the Atlanta market," said Heather Stanton, an agent at Starate Real Estate Associates in Stockbridge.

"With the mortgage industry in the United States becoming so stringent with loaning money, the rental market is really increasing, and thus allowing investors from other countries to buy cheap and lease quickly," she said.

The sheer speed of the dollar's decline against major foreign currencies has been instrumental in sparking recent interest.

The British pound has jumped 34 percent against the dollar compared with five years ago, including 10 percent in the past 12 months. The euro has made even bigger strides, rising 47 percent since 2002.

As a result, European investors have more purchasing power in the U.S. market and so are increasingly on the lookout for dream property deals on this side of the pond.

Adding to the appeal is the fact that the U.S. housing market has been hit hard by the credit crisis, which has made properties even more attractive for Europeans stunned by sky-high house prices in their home countries.

In a mid-2007 survey, the National Association of Realtors found that Florida led the nation in foreign home buying, accounting for 26 percent of all international purchasers. California was next at 16 percent, followed by Texas at 10 percent.

Particularly popular overall are hotel condominiums in warm-weather destinations.

The survey found that 34 percent of Realtors in Florida have worked with an international client in the past year.

Some 34 percent of the foreign home buyers in Florida were from Latin America. An additional 21 percent were from Britain. About 9 percent came from Canada and 8 percent from Germany. The rest were from Asia, Eastern Europe and other areas.

According to the Florida Association of Realtors, the Miami-Fort Lauderdale area remains the top destination, attracting 27 percent of foreign home buyers. An additional 14 percent buy in the Orlando area, with 12 percent purchasing homes in the Tampa-St. Petersburg area.

John Krol, a Realtor with Realty World Top Producers in Naples, Fla., said he's seen strong interest in properties in his area from British buyers in particular.

"Britons who were once just interested in Orlando are now interested in Naples because they like the beaches here," he said. "We see some people buying second homes they don't rent out and some buying homes they do rent out."

In Florida, some 39 percent of foreign buyers purchased homes for vacation property. About 37 percent were swayed by both vacation and investment motives. Still an additional one-fourth purchased property for investment and rental purposes.

Most appealing, Krol said, is that buyers can get a nice home for less than $300,000.

He said he recently sold a three-bedroom, 1,700-square-foot townhouse with a huge porch for just over $220,000.

"These buyers have a lot of negotiating power, and they know they might not have it next year at this time," he said.

One buyer who understands his leverage is Steven Toumbas, an equities investor from London, who has just purchased a $1.2 million apartment in the luxury Trump Soho development in Manhattan.

"I'm buying property at bargain prices in New York City, which I think is the most stable market in the States," he said.

Even so, there are still plenty of Europeans who are maintaining a wait-and-see attitude when it comes to the U.S. housing market.

One reason is that it's still not clear whether the market has bottomed out.

"I think there are lots of Europeans who are holding off and waiting for prices to go down even further," said Steve Barker, another Realtor in Naples. "I'm getting a lot of calls from places like the U.K., but they're not yet rushing over here to buy.

"Many people are trying to figure out when the prices will bottom out," he said. "There is a huge pent-up demand as everyone waits to see what happens."

Jennifer Giraldi, an agent at Solid Source Realty in Roswell, also warned that mortgages for foreign nationals are also hard to come by, "so unless foreigners have cash, it can be tough for them to get a home."

Source: Atlanta Journal-Constitution, 12/01/07

US housing starts rebound

US housing starts rebounded 3.0 percent in October after falling sharply in the prior month, a government survey revealed Tuesday in a rare bit of positive news for the struggling sector.

The pace of new home and apartment construction last month struck an annualized rate of 1.229 million properties, the monthly Commerce Department report said.

The rebound in home building defied the forecast of most economists who had expected housing starts to fall to 1.175 million properties.

The Commerce Department revised up its reading for housing starts in September slightly to show a rate of 1.193 million properties compared with an initial estimate of 1.191 million.

Although housing starts rebounded in October, starts have declined steadily in the past 12 months amid a widespread housing slump. Starts have fallen 16.4 percent from October of 2006 as property sales have slowed and home foreclosures have surged.

"The bounce was nice, but it does not seem to be habit-forming. The economy still faces all of its challenges and nothing in this report looks watershed, certainly not the ongoing drop in single family home starts," said Robert Brusca, an economist at FAO Economics.

Breaking down the report, construction of new free-standing homes declined 7.3 percent in October, while apartment construction showed an increase of 46.5 percent.

The housing market entered a downturn in early 2006 following a years-long boom. Big Wall Street banks have revealed multibillion dollars losses from soured mortgage investments in recent months.

The government report showed building permits, an indication of future construction activity, fell 6.6 percent to a weaker-than-expected annual pace of 1.178 million in October.

Demand for building permits has fallen sharply in the past year, dropping 24.5 percent from October a year ago.

Building permits fell to their lowest level in October since July 1993, or over 14 years, when demand was 1.174 million.

Housing starts fell in the south, but showed signs of improvement in other regions of the United States.

Economists have warned, however, that the housing market is likely to remain depressed well into 2008 in part because of the glut of unsold homes flooding the market.

Source: AFP, 11/20/07

Foreign cash could boost housing market

The weakening dollar has caused many problems for consumers, but it may also be providing the fuel for one unintended — and very welcome — benefit: a rally in the struggling housing market driven by foreign investors.

For an individual or developer trying to sell a home, interested buyers are just as likely to already have a place in London or Paris as they are to be first-timers new to the market.

"European investment is likely to pick up," said Mark Vitner, chief economist for Charlotte, N.C.-based Wachovia Corp. "Now is the time to come over and take advantage."

The theory goes that foreign investors step in and replace first-time home buyers who have been squeezed out of the housing market during the recent downturn. These new investors in turn allow current homeowners to sell and trade up to larger homes.

That will help restart owners moving up the housing ladder, a process that had been key to economic growth in recent years.

Some mortgage brokers are already seeing a boost in inquiries about buying property from overseas. Dan Green, a certified mortgage planning specialist and author of TheMortgageReports.com, said the number of inquiries he's received from outside the U.S. is probably five to 10 times larger than it was a year ago.

A boost in the number of homebuyers would provide needed relief for the beleaguered housing market.

Home sale prices fell every month in 2007 through August, according to the S&P/Case-Shiller index. Existing home sales have declined for eight straight months through September, according to the National Association of Realtors.

As the housing market has plummeted, the dollar has also sunk to record lows compared to other currencies, such as the euro, meaning more spendable cash in the U.S.

"The dollar is on sale," said Susan Wachter, a professor of real estate at the Wharton School at the University of Pennsylvania.

Today, a foreign buyer would need only 34,100 euros to make a $50,000 down payment on a house. At the beginning of the year, the same buyer would have needed 37,920 euros to make the same down payment.

The influx of foreign investors can help set a floor for the real estate market, Green said.

Because lending guidelines have been so restricted in recent months due to rising delinquencies and defaults, it is more difficult for U.S. customers to get a home loan. First-time homebuyers are especially being squeezed right now, Green said, and that is where the foreigners can provide support.

For investors from countries like Ireland, the exchange rate is providing a boost in spending power, said Phillip Hegarty, the sales director for Castleroc Estates, a Dublin, Ireland-based firm that works with Irish investors to buy residential and commercial real estate in the United States.

"It's an enticing investment," Hegarty said.

Hegarty said there is plenty of demand for investment in locations like Chicago and New York, and often that demand exceeds supply.

But New York and Chicago are not the only locations likely to provide popular options for foreign investors. Places like Florida and California are likely to see a surge in foreign investment.

"In a market with great turmoil, (the weak dollar) is one factor supporting some key markets," Wachter said of the weakening dollar.

Wachter said markets like Miami and San Francisco, which are under pressure from the U.S. slowdown, are increasingly being supported by foreign investors.

Source: Associated Press, 11/10/07

House-hunting on two wheels

House-hunting can be a difficult and time-consuming process in which it often feels like you spend more time in a real estate agent's car than you do viewing houses. Pedal To Properties has come up with a novel concept whereby agents offer customers the chance to check out properties and neighbourhoods in a more healthful and leisurely fashion: via bicycle.

The free—and environmentally friendly—service is completely optional for clients, but those who choose to can tour through neighbourhoods and visit properties by cruiser bike. Boulder-based Pedal To Properties's agents meet clients with a few of the company's small fleet of cruiser bikes attached to the back of their car. An immersing ride can follow, giving potential buyers an alternative way to experience a neighbourhood and view multiple properties in an area without the hassle of getting in and out of a car.

Launched by real estate professional, avid cyclist and Ironman triathlete Matt Kolb, Pedal to Properties combines health and fun with the home-buying process, providing a hyper-localized feel for neighbourhood vibes that could never be attained by car. The company is currently licensing its model to realtors across the United States, but the concept is simple, and could be applied virtually anywhere (reminds us of City Running Tours, which combines sightseeing and exercise). Of course, Boulder is an exceptionally fit kind of town, so realtors and other service providers in similarly health-conscious areas: this one's especially for you.

Source: Pedal to Properties, 10/4/07

Developers still skeptical about going green

Del Sur is going green.

Developers of the subdivision in Carmel Valley plan to install solar panels on 20 percent of the project's eventual 4,500 homes. The community's sales office/information center is the only building in San Diego County to achieve a LEED Platinum rating, the highest given by the U.S. Green Building Council for sustainable, energy-efficient design.

Yet when potential home buyers face the choice of paying $15,000 for solar panels or spending a similar amount on granite countertops, they almost always go with the granite, said Fred Maas, chief executive of Black Mountain Ranch LLC, the developer of the project.

This illustrates how advocates for green building – perhaps the hottest trend in the construction industry – still have some convincing to do.

The case for going green was the subject of a forum this week at the University of San Diego's Burnham-Moores Center for Real Estate, which featured developers, builders, consultants and academics.

The conclusion of many of the speakers is that green building is getting easier as more contractors gain experience doing such projects. But many developers remain skeptical about whether the benefits pay off.

Homeowners worry about the aesthetics and maintenance of solar panels, Maas said. They're also concerned about paperwork hassles for government rebates and dealing with utilities.

Meanwhile, some commercial developers doubt they'll be able to charge high enough rents to recover the higher costs of constructing a building certified through LEED, or Leadership in Energy and Environmental Design. A LEED building can cost 1 percent to 7 percent more to construct than a non-LEED structure, according to current estimates.

Research is beginning to suggest the payoff exists for building green – at least for commercial structures.

Norm Miller, a professor and director of academic programs at the Burnham-Moores Center, conducted a study that found green buildings nationwide enjoyed a substantially higher price when they sold than their nongreen counterparts – in the range of 30 percent higher per square foot.

More work needs to be done on the study, which used data from real estate research firm CoStar of Maryland to compare Energy Star-rated buildings with non-Energy Star rated buildings, Miller said.

“The premium is outrageous and we're going to have to continue to study it,” Miller said. “What this shows is nongreen buildings are going to go obsolete much faster today.”

Energy Star is a voluntary program of the U.S. Environmental Protection Agency. Buildings achieve an Energy Star rating if they're in the top 25 percent for energy efficiency.

Miller's study, which focused on top-quality, multitenant office buildings, also found higher occupancy and rental rates in green structures. “Two years ago they were very close,” he said. “Now they're starting to differentiate.”

Although cars get the bulk of the blame for greenhouse gas emission, buildings have been getting more attention lately for their energy use.

Ed Mazria, a Santa Fe architect and founder of the Architecture 2030 movement – which seeks to make buildings greenhouse gas neutral in the next 23 years – said homes and commercial structures account for almost half of the energy consumption in the country, based on U.S. Energy Information Administration data.

That's because buildings are occupied for much longer than cars, said Mazria, who spoke at a different event in San Diego this week.

“The number I think is important is 43 percent of all greenhouse gas emission is attributed just to buildings – the heating, lighting, cooling and plug load,” he said.

Chris Day, a vice president at Swinerton Builders in San Diego, said the cost of green construction does not have to be significant if buildings are designed in an environmentally friendly way from the outset.

Moreover, Day thinks the benefit in increased employee productivity from such things as natural lighting and cleaner air will more than make up for any additional construction costs.

“What is going to make sustainable design and construction fly in the long term is the environment it creates for the people who work there,” he said.

Source: Union-Tribune, 11/1/07

Home builders: Worst is yet to come

The battered markets for real estate and home building still have farther to fall, according to a range of economists who spoke Wednesday at a forecast conference sponsored by the National Association of Home Builders.

The economists agreed that the problems with home finance markets will continue to hit housing into next year, and that even when there is a recovery, it will be a slow process that will see weakness continue into 2009.

While most said they believed the overall U.S. economy can weather the housing downturn, several saw significant risk of a recession. Mark Zandi, chief economist of Moody's Economy.com, said that large areas of the country will fall into recession, if they haven't done so already.

The economists also admitted to being surprised by how bad the housing downturn has become, and all said that making forecasts of a recovery is difficult due to the problems in the credit markets.

"This time, we just don't know how it's going to pan out because the securities markets have become so much more important," said David Seiders, chief economist with the builder's trade group.

The conference was held in Washington, D.C., on Wednesday, as another trade group, the National Association of Realtors, was reporting the lowest pace of existing home sales since it started using current measures to track those sales since 1999. The sales of existing home sales slowed to the slowest pace since 1998, while the supply of homes on the market rose to its highest level in 12 years.

Zandi estimated that the excess inventory of homes on the market is close to one million, and he added that the glut could get worse if mortgage defaults and foreclosures increase, as it now appears they will.

"We're awash in inventory," he said. "I don't think this [credit] crisis is over. It's less stark than it was four to eight weeks ago. But I wouldn't be surprised if the embers which are smolder catch on fire again."

Thomas Lawler, a former Fannie Mae official who is now a private housing and finance consultant, said the easy financing terms of the boom years have been replaced by an overly restrictive lending environment. But even when underwriting standards return to more normal conditions, it won't be enough to lift demand and prices back to peak levels, he added.

"There's a part of the mortgage market that is gone for at least a while, and it should be because it should never have been there," Lawler said. "But that will slash demand. If the pace of building doesn't continue to fall, we'll see even worse price declines." He's now projecting prices down another 6 or 7 percent next year, on top of declines of that amount this year.

"The fact that building wasn't cut as early as it should have been is one of the reasons that that prices continue to fall," he said.

Still, Michael Moran of Daiwa Securities said he puts the chance of a recession at only about 30 percent, as employment and income should stop the housing market from going into a free fall.

"I think it's a blow the economy should be able to absorb," he said. "The housing prices are holding up reasonably well. If you look at the traditional determinants of housing demand, they're not that bad."

And Bernard Markstein, a National Association of Home Builders economist, said that the fact that home building isn't seen as coming back to 2005 levels or even 2006 levels for the foreseeable future isn't a bad thing.

"The real comparison should be to 2002 to 2003, back when we were meeting our needs, not to 2004 or 2005," Markstein said. "That's when we were overbuilding - we don't want to be there."

Source: CNN Money, 10/24/07

Housing Downturn Takes Toll on Cities’ Revenue

CHICAGO, Oct. 17 — Suddenly everyone wants more from Chicago’s taxpayers.

Mayor Richard M. Daley asked last week for a 15 percent jump in the property tax. Todd H. Stroger, the president of Cook County’s board, called on Wednesday for increases in sales, gasoline and parking taxes. And all that does not even begin to address ways of keeping the financially troubled bus and train systems running.

While Chicago’s case may be extreme, it is by no means unique. Across the country, local governments are feeling a financial strain driven largely by the nation’s real estate downturn. City finance officers predict slowing revenue even as they remain under pressure to keep spending, especially in areas like health care and pensions, according to an annual survey by the National League of Cities.

To handle budget deficits they now expect, many cities are increasing fees for services, and some are considering raising property taxes, said the report, to be released Thursday.

“We know what’s coming here,” said one author, Christopher W. Hoene, director of policy and research for the National League of Cities. “If the housing market continues to flatten out or even decline, we’re in for some tough times for cities.”

The signs are all around, in flattening property assessments (which mean flattening property tax revenue) as well as rising mortgage foreclosures, which also bode poorly for revenue collections.

In Milwaukee, where a new budget proposal would cut the number of firefighters on some ladder trucks, the value of residential property had been increasing an average of about 13 percent a year since 2001. But those increases slowed sharply during 2006, said Mark P. Nicolini, the city’s budget and management director.

In Palm Beach County, Fla., foreclosures rose to 4,830 in 2006 from 3,049 in 2005. And in just the first eight months of this year, the number hit 7,544, said Sharon R. Bock, the county’s comptroller and clerk. Vacant job positions in Ms. Bock’s office are going unfilled, and “it could get worse,” she said.

In Cleveland, revenue from building permits has fallen about $450,000 short of projections this year. Further, foreclosures have limited the city’s ability to borrow money, because municipalities borrow against the assessed value of their property base, said Sharon A. Dumas, the director of finance. Cleveland had hoped to borrow about $45 million this year for capital projects, Ms. Dumas said, but now the number will most likely be closer to $35 million.

For the moment, she said, the city is finding relief in an unlikely place: baseball. Taxes on tickets for the Cleveland Indians’ postseason games against New York and Boston could bring in more than $1 million.

In interviews, some city and county budget officials said the direct effects of the housing downturn could have a lag time of several years when it comes to local government revenue, whose level depends on property reassessments. Some pointed to factors particular to their cities — a loss of state aid, perhaps, or legislation limiting local property tax collections — as more dire.

“In some respects, this may be a correction,” Mr. Nicolini, of Milwaukee, said of the real estate decline. “If the job market stays relatively strong, it’s less of a concern. But if the trend were to continue, then it gets worrisome.”

Even in New York, where revenue has soared the last several years, officials have been predicting a slowdown and are preparing for belt-tightening. The anticipated falloff is due in large part to lower expected profits on Wall Street and a projected decline in real estate transactions, rich sources of tax revenue.

“The good times don’t go on forever,” Mayor Michael R. Bloomberg said Tuesday, “and while I don’t think we’re going to have a recession in this city, I think it’s probably true that we will have a slowdown in economic activity, a slowdown in tax revenues.”

The report from the National League of Cities was based on responses from finance officers in 359 cities, all with populations of 10,000 or more, from April to June. It found that 7 in 10 believed their cities were better able to meet fiscal needs during 2007 than in 2006, but that many were quite pessimistic about the years ahead. In the Midwest, the picture was already grim: almost half reported that their cities were less able to meet their financial needs this year than last.

Some local and state governments built up large surpluses in recent years, which, they hope, will cushion them now. Next month, the United States Conference of Mayors meets in Detroit to look at the real estate downturn and its effects on residents and municipal budgets.

In Chicago, meanwhile, Mayor Daley confirmed Wednesday that he was pondering yet another way to raise money: selling or leasing city parking meters to a private company. Questioned about the notion, Mr. Daley pointed to everything he must pay for.

“How are you going to do all this?” he said.

Source: New York Times, 10/17/07