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| 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) |
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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 50th 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.
Darlene Little
Executive Vice President
Rubloff Residential Properties
| (Inman News) While the “R” word — recession — has been tossed about frequently in economic discussions, a quarterly economic forecast maintains that the word need not be a part of the dialog, at least in the short term.”Now there are countless prognosticators throwing around recession. That may be the best indicator that a recession is not coming soon,” stated Ed Leamer, director of the University of California, Los Angeles, Anderson Forecast.
“Better remember a recession is not measured by the frequency with which the newspapers use the ‘R’ word. To have an official recession commencing anytime soon, we would have to experience a rapid rise of the national unemployment rate” from a level of 4.6 percent to about 6 percent by the end of 2008 — a loss of about 2 million jobs.
Not to say there is not risk of recession — Leamer’s report states that “there really is some significant recession risk out there.”
While the construction sector has been losing jobs, that alone won’t be enough to tip the scale toward recession, Leamer states in his latest forecast report, titled, “Nervous: Why this time is really different and why we will survive the near recession experience.”
While past U.S. economic cycles have featured a fattening and trimming in manufacturing jobs, this time around there has been no such fattening. Manufacturing jobs have been in a slow decline.
Leamer states, “The bad news is that we lost 3 million manufacturing jobs in 2000-01 but the good news is that there aren’t many more to lose.”
His forecast is that employment in sectors other than manufacturing and construction should hold up, though it notes that overall expansion in employment has been weak — gaining only 6 percent since the last major economic downturn in 2001.
Some economists had said that home prices would not tumble and foreclosures would not surge without job losses stemming from a recession because that would be unprecedented.
But “innovations of the subprime mortgages in the form of greatly reduced lending standards created a new class of borrowers who are now walking away from their homes, not because they lost their jobs but instead because they cannot afford their homes on their current incomes.”
In other words, there is now a disconnect in the housing market and jobs market.
“If we can get through another couple of quarters without rising joblessness, we will have completed the first and hardest part of the housing correction, and the drag that housing is creating for the economy will substantially abate,” Leamer stated.
Of course, the pain in the housing market will likely continue, with several years of price declines and depressed levels of new construction, Leamer predicts.
As for more Fed rate cuts, Anderson Forecast senior economist David Schulman said in his own report that he envisions a Fed Funds rate of about 3.5 percent or lower by mid-2008, with the 10-year U.S. Treasury bond trading in the 3.75 percent to 4.5 percent range.
“Should the Fed fail to ease significantly we believe our ‘no recession’ forecast would be at significant risk. Historically the markets tend to lead the Fed, not the other way around and before too long we suspect the Fed will follow.”
With deterioration in housing credit, losses on mortgages are estimated at about $400 billion, Schulman stated.
Even Freddie Mac is facing a “capital adequacy problem,” he said in the report — “So much for the government-sponsored credit entities becoming the proverbial cavalry to rescue the mortgage market.”
The collateral damage associated with the credit meltdown is widespread, Schulman states, reaching municipal bond insurance companies and impacting the cost of finance for state and local governments. Faith in credit-rating agencies has been “severely weakened,” he states.
A key to the Anderson Forecast’s “no recession” forecast is resiliency in the overall economy and stock market, and Schulman cautions: “there are more than usual uncertainties around the 2008 forecast than in prior years.
“For example, before 2008 is over the markets will have to overcome the anxieties associated with the presidential election and we may be even more concerned about both anti-inflation policy and the potential for a post-Beijing Olympics hangover in China.”
A separate Anderson Forecast report on California, prepared by economists Ryan Ratcliff and Jerry Nickelsburg, predicts that the state, like the nation as a whole, will avoid recession.
“The combination of real estate weakness, government belt-tightening and Hollywood labor disputes all create a sluggish economy for most of our forecast, but we still do not see enough systematic weakness for a recession,” the report states.
A quarterly Census report on employment and wages suggests that the state’s job market may be worse off than previously thought, and the financial activities sector lost 21,000 jobs in the state through first-quarter 2007 after peaking in May 2006.
State unemployment should peak at about 6.1 percent in late 2008, according to the forecast, which also predicts a 74,000 total peak-to-trough job loss in the state’s construction sector.
http://www.inman.com/InmanNews.aspx?ID=65435 |
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.
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