British realtor Mia Wilkinson stands in a two-bedroom apartment with a view of the Chicago skyline and Lake Michigan, Wednesday, Dec. 19, 2007. More foreigners are investing in homes in the U.S. thanks to the weak dollar, housing turmoil in the U.S. and sharp increases in home prices abroad. Wilkinson, who has been in the U.S. six years, has bought property in Chicago herself. (AP Photo/Charles Rex Arbogast)

By LESLIE WINES – 1 day ago

NEW YORK (AP) — Panden Rota, a Nepalese producer of fine rugs, is about to become a Manhattanite, the owner of a sumptuous apartment in the luxurious downtown neighborhood of Battery Park City.His primary residence will remain Katmandu, but his new home will allow him to spend more time at U.S. showrooms that display his rugs and with a brother and sister in New York. “I looked at many places and I decided that a Manhattan apartment will always hold its value,” he said.Rota is part of a growing wave of foreigners who buy second homes in the U.S. for work and play and as an investment.Cosmopolitan cities like New York and Miami have long served as second homes for affluent and accomplished foreigners. But the trend is growing. One in five American realtors has sold a home to a foreign investor in the past year, according to the National Association of Realtors.The events of 2007 have made the U.S. much more affordable for international home buyers. Severe dollar declines against the euro and pound have made U.S. homes much cheaper for Europeans. But even foreign buyers without that sort of currency advantage are benefiting from sharp drops in housing prices at a time when problems in mortgage lending are keeping many Americans out of the market.At the same time, many foreign real estate markets, especially in Europe, have experienced sharp increases in home prices.“There are markets like Paris and London and the South of France where some home values have gone up 100 percent,” said Christian Voelkers of the Hamburg realtor Engel & Volkers Group. “At the same time, U.S. prices have either stayed put or come down.”Volkers’ firm is eager to take advantage of this opportunity. Engel & Volkers, which caters to wealthy clients, plans to open 300 residential sales offices across the U.S. in the next few years. So far, it has offices in Florida, Connecticut and two in New York. The company said it is on track to open 30 more locations on the East Coast by the end of 2008.The currency advantage is greatest for British citizens, given that each pound is worth well over $2. By contrast, the euro currently is worth about $1.45 while the Canadian dollar in recent weeks is hovering near parity with its U.S. counterpart.“At this point the English are more actively looking in Manhattan than American buyers,” said Ivan Hakimian of New York’s Itzhaki Properties.Mia Wilkinson, a transplanted Englishwoman who works for Rubloff Residential Properties in Chicago, deals often with British and other foreign executives transferred to the U.S. for a few years. “Before, people would stay in corporate rentals,” she said. “But now these same people are turning around and buying properties.”Wilkinson, who has been in the U.S. six years, has bought property in Chicago herself.The expansion of foreign real estate investment in the U.S. also means that areas that once were not popular with international buyers are now receiving interest. Doug Aitkin, who works for North Carolina’s World Trade Center, said the Research Triangle area — comprising the cities of Durham, Raleigh and Chapel Hill — is now getting inquiries from French and Scandinavian home buyers, a new phenomenon.Constantine Valhouli, a principal with Boston’s Hammersmith Group, which advises real estate developers, said foreign home buying appears to have varied drivers in different cities. In Boston, property purchases by foreigners are strongly linked to the city’s booming biotechnology and life sciences industries. In addition, Boston venture funds are drawing large numbers of German, Swiss and Irish workers, some of whom take advantage of favorable dollar rates against the euro to help buy some real estate.Even some foreign students at Boston’s large collection of colleges and universities are able to join the ranks of home buyers. “There are some Boston neighborhood where it makes sense for students to buy and some where it does not,” Valhouli said. For instance, many one-bedroom apartments in attractive neighborhoods near the colleges rent for $1,300 to $1,800 a month, which equals the mortgage payment on a condo worth $200,000 to $300,000.Similarly, Charlie Jefferson, a Philadelphia developer, was surprised when two units in a new development in the University City area, home to the University of Pennsylvania, were purchased by foreign students. “We had never seen that before,” he said. “In the past we didn’t see foreign students with that kind of money.”In Los Angeles, demand from wealthy South Koreans for attractive condo towers and mid-level rise buildings has helped revitalize the once forlorn downtown neighborhood, according to Johanna Gunther, a senior vice president with the Ryness Co. there. “Downtown has not been an attractive urban residential market until recently, but Korean demand has been a big factor in the change,” she said. In recent years, the South Korean government has loosened restrictions on foreign exchange transactions, facilitating a large rise in Korean purchases of U.S. properties.And Scottsdale’s phlegmatic residential real estate market reportedly is getting a boost from Canadian buyers eager to enjoy Arizona’s dry warm climate.The National Association of Realtors found that 7.3 percent of the houses sold last year in Florida were sold to foreign buyers. Miami in particular is a magnet for buyers from throughout Latin America and Europe, helping to mitigate the fallout from the area’s housing slump.Despite the news waves of foreign buyers in many U.S. markets, few suggest international investors by themselves can entirely offset the nation’s housing crisis, brought on by the failure of many subprime mortgage loans made to home buyers with weak credit histories. Hammersmith Group’s Valhouli stressed that the fact that international investors are helping to prop up some troubled housing markets only emphasizes the level of stress in residential real estate.“Relying on foreign real estate investors is fundamentally as risky as relying on subprime mortgages,” he said, noting that both phenomena distort demand and can conceal the depths of the problem U.S. home buyers and sellers face. “Foreign buyers aren’t going to save the U.S. housing market. They’re just a temporary fix like a finger in the dike. Fundamentals matter.”

The weather outside is frightful, and the economy may not seem much better, but the sky is not falling. Putting the current real estate market in perspective may help you enjoy the holidays a little better and hopefully will help you motivate yourself for 2008:

• Although inventories of new and resale homes have risen overall in 2007, the trend shows that they are now beginning to fall. Housingtrends.net shows that the inventory of single family homes and condos for sale in the entire Chicago area rose to an all time high of 70,784 units in July 2007 and has now fallen to 61,770 units currently.

• Prices in the Chicago metro and suburban area have gone down 5% in the last 12 months, but are still 32.5% higher than 2003 and 12.6% higher than 2005.

• As of Nov. 2, 2007, the current unemployment rate of 4.7 percent is lower than that of the 60’s, 70’s, 80’s and 90’s.

• The October 2007 jobs report marked the 50^th consecutive month of employment growth, a U.S. record 

• The Dow has grown so much that a 300 point drop sounds like a big deal but in today’s market its just 2 percent

• Oil prices are at record highs, but they do not have the negative effect on our economy that the media would have us believe. U.S. manufacturers and consumers are twice as fuel-efficient as we were in the 1970s.  Today Americans spend just 4 percent of their disposable income filling up the tank, compared with 6 percent in 1980

• Except in select categories corporate revenues are near record highs

• The single biggest component of the economy is retail sales, which surged during November, making a surprisingly strong, broad-based climb that suggests the economy is not as weak as feared

• Rubloff Residential Properties experienced one of the most successful years in company history in 2007, second only to the record-setting sales seen last year

It’s hard to believe, but it’s that time of year again.  The holiday season has come upon us full force, announcing its arrival with music, lights, decorations, and seemingly unending “To Do” lists.  There are meals to cook, parties to attend, halls to be decked, stockings to be hung, and, of course, gifts to be given.  This year, several Rubloff agents have decided to give gifts that, at the same time, give back to the community.

Misericordia (which means “heart of mercy” in Latin) is a charitable organization that offers a wide range of exceptional programs for over 550 children and adults with mild to profound developmental disabilities.  One of the most well-known programs at Misericordia is the Hearts & Flour Bakery, which employs more than 35 adults with developmental disabilities and tailors the responsibilities of running a bakery to each person’s unique abilities.  This year, many Rubloff agents have chosen to purchase gift boxes from the Bakery for family and friends, benefiting not only the recipients of the gift (who get to enjoy a variety of tasty treats), but the Misericordia organization, as well. 

Rubloff has long been a supporter of Misericordia’s cause in part because of the personal connection that a few of our agents have to the organization.  I am an avid volunteer and member of the Women’s Auxiliary.  My daughter, Stacy Gorgan, lives in a group home connected to Misericordia and works in the bakery.  I am so proud of her accomplishments and I am proud of the caring sales associates at Rubloff who help support such a wonderful organization.  We also have a sales associate in our office, Mary Ann Genellie, who serves on the Women’s Board.

Our founder, Arthur Rubloff, was widely known for his beneficence to a great number of organizations and charities throughout Chicago.  We aspire to carry on his legend of benevolence.

I wish you health, happiness, and fulfillment for the upcoming holiday season.

 Very interesting Inman article — Is this really a valid way out?

Bills could provide incentives for rate-freeze plan

Critics worry about increased costs for lenders

Friday, December 07, 2007

By Matt Carter
Inman News

Washington, D.C., lawmakers have bills in play that could provide a carrot — or a stick — for lenders and loan servicers to participate in the Bush administration’s rate-freeze plan.

Legislation that would allow bankruptcy judges to modify the terms of Chapter 13 debtors’ mortgage loans could serve as a stick for lenders to conduct their own workouts, rather than have them imposed on them by a court.

The Center for Responsible Lending supports that approach, saying it has the potential to help more borrowers than the Bush administration’s voluntary rate-freeze plan, announced Thursday (see Inman News story). But the mortgage lending industry argues that changing the bankruptcy code to allow judges to conduct “cram downs” would raise the cost of borrowing for all.

Another recently introduced bill would shield loan servicers who engage in workouts with borrowers from lawsuits by investors in securities backed by loans.

One motivation for the Bush administration’s agreement with the “HOPE NOW” coalition of major lending industry companies was to address the reluctance of some loan servicers to modify loan terms to prevent foreclosures because of the fear of such lawsuits.

But federal regulators questioned whether one bill’s attempts to provide such protection are desirable or enforceable.

Both proposals were the subject of separate House and Senate committee hearings this week.

Bankruptcy “cram downs”

The Senate Judiciary Committee Wednesday debated legislation that would amend the bankruptcy code to allow judges to rewrite the terms of mortgage loans on owner-occupied homes.

Senate Bill 2136, introduced Oct. 3 by Sen. Richard Durbin, D-Ill., would amend federal bankruptcy law to allow judges to modify loans secured by a Chapter 13 debtor’s principal residence, allowing them to make payments at a fixed annual percentage rate over a 30-year period. Durbin’s bill would also allow bankruptcy judges to “strip down” the amount of a mortgage to the value of the home without the consent of the mortgage holder.

A similar bill, HR 3609, was introduced in the House on Sept. 20 by Rep. Brad Miller, D-N.C., and is also opposed by the lending industry (see Inman News story).

Sen. Arlen Specter, R-Penn., has introduced a competing bill to Durbin’s, SB 2133, which would require the lender’s consent to reduce the amount owed on a mortgage.

Bankruptcy courts already have the power to restructure troubled borrower’s auto loans and credit card debt. But critics like the Mortgage Bankers Association say allowing bankruptcy judges to rewrite the terms of mortgage loans would undermine confidence in the ability of lenders to collect payments, and increase interest rates on mortgage loans by up to 2 percent. 

Unlike a car loan — in which the property serving as collateral for a loan decreases in value over time — mortgages are backed by property that, in the long run, tends to appreciate. So lenders argue that a judge’s decision to strip down a mortgage loan to reflect the current value of a bankrupt debtor’s home would amount to a “taking” of their collateral.  

Durbin’s bill could also encourage more borrowers facing foreclosure to file for bankruptcy, critics said, increasing the case burden of bankruptcy judges and forcing them to deal with complex issues such as home valuations and mortgage interest rates.

But supporters of Durbin’s bill said bankruptcy judges are already proficient at rewriting the terms of auto loans and credit card debt, and that stemming the tide of foreclosures is in the best interest of lenders and the economy. 

Mark Zandi, chief economist of Moody’s Economy.com, said he expects 2.8 million mortgage loan defaults in 2008 and 2009, with 1.9 million homeowners going through the entire foreclosure process and ultimately losing their homes.

Zandi said Durbin’s bill could allow 570,000 homeowners to avoid foreclosure, a number based on an analysis of homeowners who face a first payment reset through the end of the decade and who meet the new, tougher requirements for Chapter 13 bankruptcy protection adopted by Congress in 2005.

“The housing market downturn is intensifying and mortgage foreclosures are surging,” Zandi said, warning of a “self-reinforcing negative dynamic” of mortgage foreclosures, house price declines, and more foreclosures. “The odds of a full-blown recession are very high. There is no more efficacious way to short-circuit this developing cycle and forestall a recession than passing this legislation.”

Zandi dismissed arguments that the bill would raise the cost of borrowing or disrupt the secondary market for mortgages, saying lenders stand to lose more if the loans that would become eligible for modification by bankruptcy judges were to foreclose instead.

“Given that the total cost of foreclosure to lenders is much greater than that associated with a Chapter 13 bankruptcy, there is no reason to believe that the cost of mortgage credit across all mortgage loan products should rise,” Zandi said.

U.S. Bankruptcy Court Judge Jacqueline Cox, who adjudicates bankruptcy filings in Northern Illinois, said that the disparate impact of the mortgage crisis on African Americans and Latinos makes passage of the Durbin “critical.” She said bankruptcy court judges would not be overwhelmed by the process of modifying home loans, which would include determining the current market value of each home.

Thomas Bennett, a federal bankruptcy court judge in Alabama, testified that the changes proposed by Durbin would not help borrowers who were not willing or able to file for bankruptcy, and could have broader, unintended consequences on credit markets.

Bennett urged lawmakers to step back for 60 to 90 days and “leave everything where it is” in order to get a broader picture. He said a temporary moratorium on foreclosures or an interest rate freeze could give them time to consider the bill’s implications.

‘Safe harbor’ from lawsuits

At another hearing Thursday, the House Financial Services Committee debated a HR 4178, a bill introduced Nov. 14 by Rep. Mike Castle, R-Del., to protect loan servicers who engage in workouts under criteria established by the bill.

The bill would provide a “safe harbor” from lawsuits for loan servicers or other note holders who work with borrowers to restructure subprime loans in default, or loans where default is “imminent or reasonably foreseeable.” The safe harbor would also apply when workouts would maximize “net present value” of a loan.

The bill would apply to subprime loans made after Jan. 1, 2004. The retroactive application of the bill “could create additional anxiety in the mortgage markets about the reliability of legal obligations upon which investors’ expectations are based,” said Comptroller of the Currency John Dugan in his prepared testimony.

He questioned whether the bill would create new qualms for investors in mortgage-backed securities. “A loss – or even a significant diminution – of investor confidence in this market could adversely affect the flow of funds for housing credit for some time to come,” Dugan said.

FDIC chairman Sheila Bair called the bill’s goal of stimulating loan modifications by providing legal protection for loan servicers “laudable.” But Bair said that as written, the bill could be challenged on Constitutional grounds, as it “would appear to override existing contracts.”

Bair said that if Congress is determined to pass such a bill, it should contain language stipulating that “servicers have a duty to maximize the net present value of a loan pool for all investors and parties having an interest in the pool, not to any individual party or group of parties.”

http://www.inman.com/inmannews.aspx?ID=65458

The “Big Three” classified advertising categories — automotive, recruitment and real estate — are expected to have a 37.7 percent share of all online ad spending in 2008, and to have an 18.3 percent share of total ad spending, a research and consulting company reported today.

Borrell Associates, in a 2008 forecast report released today, also expects real estate to have an 8.7 percent share of the total online advertising market in 2008, and a 4 percent share of all advertising.

About 23.5 percent of the anticipated $12.3 billion real estate ad spend in 2008 will be spent online, compared to 48.9 percent of recruitment ad spending and 9.4 percent of automotive ad spending.

And the total spend on online real estate advertising is expected to grow 12 percent in 2008 compared to 2007.

Total spending on local online advertising is expected to rise 48 percent in 2008, to a total of $12.6 billion, according to Borrell’s “2008 Outlook: Local Online Advertising” report.

Local online advertising is expected to total $8.5 billion this year, up from $6 billion in 2006, $4.6 billion in 2005, and $2.8 billion in 2004.

Local-search advertising is expected to more than double in 2008, to $5 billion, with locally placed online video tripling to about $1.3 billion.

Locally owned real estate businesses are projected to spend about $3.5 billion on all advertising types this year, with about $702 million of that amount, or 20 percent, going to online ads.

Real estate services companies are projected to spend $8 billion on advertising in 2012, with about $3.3 billion, or 40.9 percent of this total, spent on online ads, according to a table in the report.

That would represent a 41.2 percent increase from the projected 2007 real estate ad-spending level.

Credit and mortgage services companies are expected to spend about $24.2 billion on all ad types in 2012, with $2.9 billion, or 12.1 percent, devoted to online ads. And financial services companies are expected to spend $6.4 billion on all advertising in 2012, with $952 million, or 14.8 percent, going to online ads.

Pure-play Internet companies are projected to account for about 43.7 percent of local online ad revenue this year, with newspapers taking in 33.4 percent, directories accounting for 10.1 percent and broadcast television pulling in 9.3 percent. Magazines, other print publications and radio have a small share of the pie.

“We … expect that 2008 will bring more announcements about network affiliations between the pure-play Internet companies like AOL, Yahoo and others as these larger sites hit a wall in national sales,” the report states.

“This trend began more than a year ago when Yahoo and Google started forming relationships with newspaper companies and television stations to drive both national and local online sales. Formerly sworn enemies are seeing the wisdom of combining their strengths to increase revenues for both sides.”

Local advertisers, according to the Borrell report, “are becoming less willing to purchase mass advertising on the Internet and are much more inclined to try paid search and video advertising formats,” and, “The decade-long era in which the banner ad ruled the Web appears to be drawing to a close.”

Twice as much online video advertising will be placed locally compared to nationally, the report states, and “newspaper companies are at the forefront of online video sales.”

Online banner advertising is forecast to slow to single-digit growth in 2008 as video and paid-search ads gain steam, according to the report.

***

Story Tools E-mail Story Printable Version Comment on Story Reprint Rights Online real estate ad spend projected to reach $8 billion in 2012 Report projects 48% growth in total local online ad spend in ‘08 Friday, December 07, 2007 Inman News The “Big Three” classified advertising categories — automotive, recruitment and real estate — are expected to have a 37.7 percent share of all online ad spending in 2008, and to have an 18.3 percent share of total ad spending, a research and consulting company reported today. Borrell Associates, in a 2008 forecast report released today, also expects real estate to have an 8.7 percent share of the total online advertising market in 2008, and a 4 percent share of all advertising. About 23.5 percent of the anticipated $12.3 billion real estate ad spend in 2008 will be spent online, compared to 48.9 percent of recruitment ad spending and 9.4 percent of automotive ad spending. And the total spend on online real estate advertising is expected to grow 12 percent in 2008 compared to 2007. Total spending on local online advertising is expected to rise 48 percent in 2008, to a total of $12.6 billion, according to Borrell’s “2008 Outlook: Local Online Advertising” report. Local online advertising is expected to total $8.5 billion this year, up from $6 billion in 2006, $4.6 billion in 2005, and $2.8 billion in 2004. Local-search advertising is expected to more than double in 2008, to $5 billion, with locally placed online video tripling to about $1.3 billion. Locally owned real estate businesses are projected to spend about $3.5 billion on all advertising types this year, with about $702 million of that amount, or 20 percent, going to online ads. Real estate services companies are projected to spend $8 billion on advertising in 2012, with about $3.3 billion, or 40.9 percent of this total, spent on online ads, according to a table in the report. That would represent a 41.2 percent increase from the projected 2007 real estate ad-spending level. Credit and mortgage services companies are expected to spend about $24.2 billion on all ad types in 2012, with $2.9 billion, or 12.1 percent, devoted to online ads. And financial services companies are expected to spend $6.4 billion on all advertising in 2012, with $952 million, or 14.8 percent, going to online ads. Pure-play Internet companies are projected to account for about 43.7 percent of local online ad revenue this year, with newspapers taking in 33.4 percent, directories accounting for 10.1 percent and broadcast television pulling in 9.3 percent. Magazines, other print publications and radio have a small share of the pie. “We … expect that 2008 will bring more announcements about network affiliations between the pure-play Internet companies like AOL, Yahoo and others as these larger sites hit a wall in national sales,” the report states. “This trend began more than a year ago when Yahoo and Google started forming relationships with newspaper companies and television stations to drive both national and local online sales. Formerly sworn enemies are seeing the wisdom of combining their strengths to increase revenues for both sides.” Local advertisers, according to the Borrell report, “are becoming less willing to purchase mass advertising on the Internet and are much more inclined to try paid search and video advertising formats,” and, “The decade-long era in which the banner ad ruled the Web appears to be drawing to a close.” Twice as much online video advertising will be placed locally compared to nationally, the report states, and “newspaper companies are at the forefront of online video sales.” Online banner advertising is forecast to slow to single-digit growth in 2008 as video and paid-search ads gain steam, according to the report. ***

It has often been said that the top end of the market is the last to cool off and the first to rebound in a housing cycle.  I thought it might be interesting to look at the statistics in the Chicago marketplace (city of Chicago) to see if there is a story to be told.  I looked at sold properties for the full year of 2006 and compared them to the 2007 sales to date.  For the purpose of this study we are defining high end homes at $1,000,000+.

In 2006  there were 434 single family homes sold with an average sale price of $1,673,223 with an average market time of 149 days.

In 2007 so far there have been 388 single family sales with an average sale price of $1,716,713 with an average market time of 179 days.

So the single family home sales for 2007 have followed the headlines somewhat in that it has taken about 20% longer to sell 10.5% fewer homes but at an average of 2.5% increase in sale price.

We find a more optimistic story in the condominium market:

In 2006 there were 373 condos sold with an average sale price of $1,757,204 with an average market time of 210 days.

In 2007 so far there have been 393 condo sales with an average sale price of $1,636,726 with an average market time of 208 days.

So the condo market has been healthier in number of sales (up 5.3% so far) and quicker sales (2 days faster) but has seen the average price ease by 6.8% so far in 2007.

The active inventory of single family homes stands at 533 at this date. This represents 16 1/2 months of inventory at the current rate of absorption.  Anything over 6 months inventory is a bearish factor that weighs on the market place.  Also, actual available numbers of homes are usually under reported at this time of year and we should expect that number to increase significantly after the first of the year.

The active inventory of condos stands at 685 at this writing.  The represents almost 21 months of supply at the current absorption rates.  This is also a bearish predictor for the condo market in the near term.

Current list prices for single family homes average $2,038,824 which indicate they are listed over 16% higher than average sale prices which should necessitate price reductions to achieve sales.

Current list prices for condos average $1,883,868 which also shows a spread of a little over 13% to sale price which indicates a downward pressure should be coming on list expectations.

Current market time for active homes is already  8% longer than the sold average but the market time for condos is at 291 days-an amazing 40% longer time than successful solds!

Put his all in your crystal ball—I think that there will be more side movement in prices with increasing inventories and lengthier market times before we turn the corner on this housing cycle.