Real Estate - News

The real-estate industry is lobbying the Federal Reserve for modifications to a bailout program that the industry said may avert a wave of commercial-property defaults.

Real-estate owners and investors who have talked to the Fed predict the central bank will begin offering some five-year loans under the government's Term Asset-Backed Securities Loan Facility, or TALF. That is longer than the three-year loans being offered.

While it may be a small change, the length of loans is a critical matter to the Fed, which prefers to make short-term loans. Longer-dated loans could make it more difficult for the Fed to fight inflation, as the bank can't pull back the money injected into the economy.

Real-estate investors, however, said the longer-term debt is critical to saving the commercial real-estate business, which faces a record amount of debt coming due in the next three years. Industry observers are expecting the delinquency rate to double by the end of this year and go higher next year. Problems could be magnified if the credit drought continues and owners of even healthy properties are unable to refinance.

Fed officials declined to comment on details, and some people familiar with the talks said that no decisions have been made yet. Industry executives are hopeful that the Fed will announce the program modification and other details by the end of the month.

The Treasury Department also has said that the Fed is working to ensure that the duration of the TALF loans "take into account the duration of the underlying assets." TALF makes low-cost loans available to investors who buy securities backing everything from credit cards to auto loans.

Anticipating that TALF will be modified, a number of investment firms, including BlackRock Inc., Prudential Financial Inc. and ING Groep NV unit ING Clarion Partners LLC, are positioning themselves to use the TALF program to buy high-quality commercial mortgage-backed securities, or CMBS. Some of them aim to raise billions of dollars for that purpose.

Commercial-property debt is expected to be one of the most attractive TALF-eligible assets, because it is collateralized by office buildings, malls, warehouses and other income-producing real estate. It is perceived as less risky than consumer credit such as credit-card debt and car loans.

"We're gearing up to raise funds" to tap into the leverage offered by TALF to buy highly rated CMBS bonds, said Steve Switzky, a managing director and portfolio manager at BlackRock.

Industry executives hope that the TALF effort will resurrect the CMBS market. In 2007, about $230 billion of securities were sold. That number dropped to zero by last summer. The dearth of financing has frozen sales and sent values plummeting, setting the stage for another wave of defaults that could cripple some banks and other lenders.

The first TALF-eligible deals, involving securitized car loans and credit-card cash flows, began in March, but investor response to the program has been anemic. Investors applied for just $1.71 billion in loans on Tuesday in the second round of TALF, according to the central bank. That follows applications for $4.71 billion last month.

Obama administration officials have been promising for weeks that the TALF would be expanded to include commercial real estate. But details have been sketchy and have been a subject of debate between policy makers and the private sector.

"We're continuing working with market participants," said a New York Fed spokeswoman, who declined to comment on any specifics.

The $700 billion market for existing CMBS, which is as big as the markets for securitized auto loans, credit cards and student loans combined, has rallied in the past two weeks on hopes for TALF. Yields on the highest-quality CMBS bonds have fallen to 12% from 14% one month ago, according to Trepp LLC, which tracks the commercial-property debt market.

Bringing down the yields on existing debt is critical to spark new lending, said market participants, because investors can buy top-rated CMBS bonds that offer yields close to that of junk bonds. Those higher yields crowd out the market for new issues.

"With triple-A CMBS currently yielding as much as 15%, this doesn't bode well for property values," said Jim Higgins, chief executive officer at Sorin Capital Management, a Stamford, Conn., hedge-fund firm that is interested in participating in the TALF program.

Policy makers believe it is critical to get credit flowing to the $6.5 trillion real-estate industry. Defaults likely would rise if borrowers were unable to refinance loans as they become due.

But commercial real estate also has presented a conundrum for the Fed, because most real-estate loans are made for more than five years. Fed officials are hesitant to getting locked into long-term obligations. Earlier this year, the Fed reluctantly stretched the TALF's duration to three years from one.

The possibility of extending it further has made some regulators uneasy.

But in meetings and phone calls with New York Fed officials, who are leading the TALF effort, commercial real-estate executives and CMBS investors have pressed them to extend the program's term.

"TALF is going to be the first step in freeing up the liquidity and breaking the logjam" in the commercial real-estate debt market, said Gayle P. Starr, head of capital markets at AMB Property Corp., one of the nation's largest owners of industrial properties

Real Estate Industry - Finding Jobs in Real Estate

Up-market homes consistently sell above asking in a New Jersey suburb. Bidding wars break out in hot neighborhoods in Cape Cod, Chicago and Seattle. Short sales in some Florida and California markets draw as many as 40 bids.

It's a far cry from 2006, but brokers and agents across the country say multiple offers are once again the norm in specific corners of the market.

"The banks are purposely putting them on the market under value and creating a frenzy," says Kristi Townsend of Altera Real Estate in Mission Viejo, Calif., where dozens of cars recently lined up in front of one bank-owned house the day it listed.

In many areas with heavy short-sale and foreclosure activity, prices in the last few months have reached a point where investors and first-time buyers are clamoring for the best deals. Even in more subdued markets where prices haven't fallen as far, buyers face a competitive market for houses in hot neighborhoods at the right price.

Seattle broker and Realtor Sam DeBord says a couple recently made an offer on a house that was on the market for three days, only to be trumped by one of nine other offers. On their next try, they offered full price on a property that was on the market for two days and beat out two other bids to get the house.

"We've really seen pockets like that" in the last few months, DeBord says. Not all parts of town fare so well, but in his clients' Ballard neighborhood the median time on the market is only 12 days.

"When something comes on that's $300,000, everybody comes to see it the first weekend," DeBord says.

Property values in the Seattle area are down about 20 percent from their 2007 peak, according to the Zillow Home Value Index, and a National Association of Realtors report this month stated that the median price of single-family resale homes in the Seattle-Tacoma-Bellevue metro area fell 13.7 percent from second-quarter 2008 to second-quarter 2009.

And as prices fall, sales are ramping up. Inventories have shrunk in recent months and pending sales in the four-county Puget Sound region were up 21 percent in July compared to the same month last year, according to the Northwest Multiple Listing Service, a regional MLS.

Multiple offers seem to be making a comeback in a range of markets that lost value but remain highly desirable.

"Everybody and their dog is looking for a deal" among foreclosures and at prices under $200,000, says Heath Coker, broker-owner of the Cape Group in Cape Cod, Mass. For bank-owned, foreclosed properties (also known as real estate-owned properties or REOs), he traces part of bidding activity to banks' slow response to offers and price changes.

Even at the higher price points, Coker says he's seen bidding wars break out in certain locations, despite home values on the Cape at the beginning of the year falling 24 percent compared to 2008. ..

CNN. news for Real Estate - Foreclosure

NEW YORK (CNNMoney.com) -- The foreclosure plague continued to devastate last month.

There were more than 360,000 properties with foreclosure filings -- including default notices, scheduled auctions and bank repossessions -- an increase of 7% from June and 32% from July 2008, according to RealtyTrac, an online marketer of foreclosed homes. In fact, one in every 355 U.S. homes had at least one filing during July.

"July marks the third time in the last five months where we've seen a new record set for foreclosure activity," said James J. Saccacio, chief executive officer of RealtyTrac. "Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we're seeing significant growth in both the initial notices of default and in the bank repossessions."

The jump occurred as several foreclosure moratoriums phased out. They were initiated by many states to give the administration's foreclosure-prevention efforts time to work. But for many help did not come: The modification and refinancing programs have met with less success than hoped.

"It's starting to reach more and more people, but we have to do better and make sure the program reaches the millions of folks we intended it to reach," said Jared Bernstein, an economics adviser to vice president Biden.

The picture would be even worse, however, without the programs.

"Each of these programs nips away at the problem of excess supply," said Doug Duncan, cheif economist for Fannie Mae, "and fights against declining prices. ... The hope is that the aggregated programs will result in less loss than would happen in the free market."

Out of their homes
RealtyTrac statistics revealed that more than 87,000 properties were repossessed by lenders, effectively sending many families out of their homes. There have been a total of 464,058 repossessions -- or REOs in industry parlance -- so far this year (through the end of July).

"We're seeing more option ARM resets, triggering defaults and more prime loans, which are failing due to job losses," said RealtyTrac spokesman Rick Sharga.

That is resulting in more filings on higher priced homes, for two reasons: 1. option ARMs were typically used for more expensive properties; 2. borrowers using prime loans generally had better credit and were able to afford more expensive houses.

Best and worst
The worst hit areas continue to be in the "sand states," with California posting the highest number of total filings, 108,104, and Nevada posting the highest rate of foreclosure at one for every 56 homes.

The other hardest hit states are Arizona, at one filing for every 135 homes, and Florida, at one for every 154. Las Vegas, with one for every 47 homes, had the highest rate among metro areas. That's Sin City's 31st consecutive month topping the list.

These were bubble states, where home prices soared and banks financed mortgages for anyone who could fog a mirror.

"We're seeing the highest levels of foreclosures in the markets that had the highest appreciation [during the boom] and the worst lending practices," said Sharga.

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7 tips to finding lakefront properties for sale are as follows:

1. Decide on a location with historically low prices on waterfront properties and regularly check for sale listings there
2. Let friends and family members know you are in the market for waterfront properties and ask them for referrals
3. Find a broker that specializes in the sale of waterfront properties
4. If possible, find lakefront homes that are bank owned
5. Contact the bank and offer them a fair price for the property
6. If possible, find defaulted lakefront homes
7. Contact the owner of any lakefront properties in default and ask if they'd like to sell in order to avoid foreclosure and further damage to their credit

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