Live auction industry exceeds $270 billion in 2007

Residential real estate auction revenue increase 5.3%

despite housing market downturn

 

Overland Park, Kan - In 2007 the gross revenue from goods and services sold at live auction grew 5.3% to $270.7 billion. In 2006, the auction industry sold $257.2 billion in goods and services at auction, an increase of 7.1% from 2005. The annual report was compiled by Morpace, Inc. on behalf of the National Auctioneers Association (NAA) which surveys auction professionals to determine the state of the industry, as well as track key auction specialties within the industry. 

 

While traditional real estate professionals continue to face the challenges of a housing market downturn, the real estate auction market continues to be one of the fastest growing auction sectors generating $58.4 billion in 2007.  Within the real estate segment (i.e. residential, land/agricultural, commercial/industrial), residential real estate auctions witnessed the largest growth, increasing 5.3% from 2006.  Accounting for 32% of the total live auction industry, automobile auctions continue to be the largest sector of the industry generating $87.8 billion in sales.  Charity auction revenue grew from $15.6 billion in 2006, to $16.2 billion in 2007, an increase of 4.1%.  The overall number of live auctions conducted in 2007 increased by 4.6%.

 

"The live auction industry continues to grow at an amazing pace," said NAA president Tommy Williams, CAI. "More and more consumers are realizing the benefits of buying and selling at live auction. Consumers are now buying or selling their homes, purchasing art and antiques, or raising capital for charitable causes through auctions."

 

To assist consumers interested in real estate auctions, the NAA launched the first real estate auction multiple listing service (MLS) in 2007. Prospective bidders from across the world can access www.auctionmls.com to view upcoming real estate auctions ranging from residential, to farm/agricultural real estate.  In addition to launching the first auction MLS, the NAA partnered with the Auction Network to develop the first 24/7 multi-media network devoted to the auction industry.  Everyone from the enthusiast to the casual bidder can participate real-time in a wide variety of auctions taking place worldwide.

 

 

# # #

 

2007 Revenue Estimates by Auction Specialty Areas

- Gross Revenue (Billions)

Art, antiques & collectibles - $13.7 (+3.9%)

Automobiles - $87.8 (+0.6%)

Agricultural machinery & equipment - $18.2 (+0.7%)

Commercial and industrial machinery & equipment - $13.0 (+7.3%)

Livestock - $17.4 (+0.0%)

Land and agricultural real estate - $25.9 (+2.5%)

Commercial and industrial real estate - $15.7 (+4.2%)

Residential real estate - $16.9 (+5.3%)

Personal property - $9.7 (-3.5%)

Intellectual property - $0.2 (+5.1%)

Other (Non-Charity) - $2.2 (-1.9%)

Charity - $16.2 (+4.1%)

 

DENVER � The tough housing market has some home sellers going to auctioneering school to develop a fast way to move properties. Ask Shelly St. John of Denver if she ever expected to be practicing the rapid-fire verbal pacing of an auctioneer and she would have laughed.

"Never in a million years," she said. "Never."

Friday afternoon, she participated in the Bid Calling Boot Camp at the Colorado Auctioneers Association Convention at the Four Points Sheraton in Denver. She practiced her diction, delivery and crowd-interaction style.

St. John is not alone.  According to the National Association of Auctioneers, real estate is the fastest-growing segment of the auction business. Residential property auctions accounted for $16 billion in sales in 2006.

"As the real estate market has changed, traditional agents are coming to the auction people to look for different ways to move properties because the traditional method is becoming very slow," said Walt Partridge, president of the Colorado Auctioneers Association.

Sellers worried about their homes sitting on the market for a year or more are asking auctioneers to move them faster, according to Partridge. He says the average time from listing to closing on a residential property auction is 60 to 90 days.

The galloping cadence of the auctioneer doesn't sound like traditional real estate sales. That's what St. John thought until she decided to give it a try. Now she's sold. The big question here is - does fast talking equate to selling? OR is it really more of a question of total accelerated marketing that matters?

 

Here at Running of the Bulls, we have been venerable bears on residential real estate for some time. Too long, in fact. It was a few years before the top in the housing markets that we started sending out alarms about the real estate nuttiness around the world. But, as never seems to amaze me, what gets stupid can get even more stupid, much more so than one might think.

Perhaps then, ignoring the lessons of the recent past, it is time to start looking for a bottom in the housing market, which I believe will occur either this year or next, though later is more likely than sooner in my opinion.

I do believe we are near a bottom in the homebuilder stocks.

About a year ago, when looking back at where the homebuilders bottomed at in 1991, I calculated that the SPDR Homebuilders ETFwould bottom in the $15-$18 range. I think we still have one more cathartic sell-off to come in the new year, perhaps triggered by the news of a major bankruptcy. However, a move from $19 to $15 is still a 20% decline but most of the pain is done for the homebuilder stocks. For an investor, one should be looking to buy rather than sell.

Anyways, here is a round-up of all things bad in housing from the past month.

Check out this cool real estate map of America.

The forecasters cheerleaders at the National Association of Realtors were basing their forecasts on the red continuing in the above map, falling into the predictable forecasting trap of basing one's prognostications on the rear view mirror. Slate anoints NAR as The Worst Forecasters Ever, though those of us who lived through the Tech Bubble might disagree.

[W]ithin the fraternity of financial and fiscal forecasters, the seers at the National Association of Realtors ��longtime chief economist David Lereah and his successor Lawrence Yun ��may be uniquely ill-equipped to deliver sobering forecasts. They work for a trade group whose mission is to buck up the spirits of real-estate brokers. And real-estate brokers" ��who live to sell, promote, and market" ��are constitutionally disinclined to hear anything but good news. Indeed, as I noted last summer, Lereah's penchant for putting out positive spin on dismal housing numbers inspired a blog and led critics to dub him the Baghdad Bob of real estate. Lereah has moved on. But Yun has picked up where he left off. ...

In addition to claiming that the sun is shining brilliantly even as rain pours down from the heavens in a mighty stream, Lereah and Yun have also hazarded optimistic, educated guesses about the future. In February 2005, Lereah published a book that is my candidate for Longest Title Ever: Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue To Climb Through the End of the Decade �And How To Profit From Them. Naturally, the boom busted soon after publication, and property values began to descend.

On the other side of the spectrum is Gloomy Gus Robert Shiller:

Question: So how rich can you get on real estate?

Answer: From 1890 through 1990, the return on residential real estate was just about zero after inflation.

Question: Excuse me? That's all? Hasn't it been higher lately?

Answer: Since 1987 it's been 6 percent [or about 3 percent a year after inflation].

Question: So real estate doesn't go up roughly 10 percent a year?

Answer: It can't be true that homes rise 10 percent a year. If they did, in the long run no one would be able to afford a house.

Question: Let me grab a calculator. If real estate really rose 10 percent a year, a $25,000 home in 1957 should be worth roughly $3 million now.

Answer: And that flies in the face of common sense. In fact, I'm inclined to think there's a good chance that the return on real estate will be negative, substantially negative, over the next 10 years because all booms reverse in the end.

That common sense seems to have, unsurprisingly, escaped NAR.

The Fox Street Journal has a great interactive presentation on the housing market, via Barry Ritholtz. This is the house price to rental ratio.

How far do prices have to fall? According to Fortune, housing prices are going to decline by 15% from June levels.

click to enlarge

A 34% decline to come in Orlando! That's gotta hurt.

In fact, prices have almost certainly declined more than list prices imply as incentives lower the net price received by sellers. And yes, incentives are abundant in the market.

As the housing market slump deepens, disguised discounts are making it harder to tell exactly how much people are paying for homes.

Buyers, sellers and other market participants typically monitor fluctuating home values through sale records that legally have to be listed with county clerks. But incentives offered to buyers -- ranging from free cars or furniture to cash rebates -- are making those prices less reliable as a sign of what buyers actually paid, netting out the giveaways. And that may be misleading lenders and people shopping for homes, some real-estate lawyers and appraisers warn.

KB Home (KBH) in January sold a new townhome with green siding in the Denver suburb of Parker for $196,000, according to the deed recorded with the Douglas County clerk. But a disclosure form provided to the buyer and seller of a particular property, which isn't part of the public record, shows that home builder KB paid $27,600 to another company, which made a cash payment to the buyer. Netting out that effective discount, the price was $168,400. ...

One risk of these transactions is that they can mislead other buyers into overpaying for similar houses nearby, or give owners of nearby properties an exaggerated notion of their home equity. Lenders can make loans on the basis of an artificially high value, increasing the danger of losses from any default.

The national builder Lennar Corp. (LEN), for instance, last year offered buyers in certain Florida communities vouchers to purchase Mustangs from a local dealership. Lennar said the voucher was deducted from the recorded sales price of the homes. A few months ago, a small builder in Tacoma, Wash., offered a $20,000 Harley-Davidson to buyers of a $479,000 home. One buyer skipped the Harley and instead took a $20,000 incentive from the builder, which reduced the sales price of the home. But in other cases, " the incentive is not always public knowledge," said an agent involved in the sale, Jeff Jensen of Windermere Professional Partners, Tacoma.

It is a vested interest of many parties to keep the stated price higher than the actual market clearing price. However, the more impediments there are in order to reach the clearing price, the longer the crisis will drag on.

Seven percent of homeowners owe more than their house is worth. Or, at least they did a year ago. Today, the proportion is almost certainly higher.

Last March, First American CoreLogic, a housing- and mortgage-data supplier in Santa Ana, Calif., calculated that nearly 7% of 32 million U.S. households studied as of December 2006 owed more than their homes were worth, based on computer estimates of the property values. The homes studied had mortgages originated in 2004 through 2006, around the peak in the housing market.

The Dallas Fed has a good article on the housing market.

And, as the Dallas Fed notes, resets will not peak until 2008.

As you know, the government created a bailout plan for submerging prime borrowers. However, it will unlikely have much of an effect. In fact, it may exacerbate the situation.

Although there are mountains of uncertainty as to how the plan will be structured and implemented, there is no question that as lenders factor in the added risk of having their contracts re-written or of being held liable for defaulting borrowers, lending standards for new loans will become increasingly severe (higher down payments, mortgage rates, and required Fico scores, lower loan to income ratios, and perhaps the death of adjustable rate loans altogether). The result will be additional downward pressure on home prices, despite the fact that in the short term fewer homes will be sold in foreclosure than what might have been without the rescue plan.

Most homes temporarily saved from foreclosure will continue to depreciate as new buyers fail to qualify for loans. As a result, lenders will be on the hook for more losses than had the foreclosures taken place sooner.

Even if those who qualify take the help, many will wind up in foreclosure anyways.

The recidivism rate for non-credit-worthy borrowers is high, according to Rosner. Even during the boom in housing prices, the re-default rate on subprime and Alt-A loans (one step above subprime) two years after a modification was 40 percent to 60 percent, he said.

Thus, the plan merely delays the market reaching its clearing price, delaying the eventual recovery, like what happened in Japan in the 1990s.

The rate of foreclosures may have already peaked.

Foreclosure filings for November surged 68% from a year ago but dropped 10% from October, another sign that foreclosure activity overall may have peaked for the year, a foreclosure-listing service said.

RealtyTrac Inc. Chief Executive James J. Saccacio said that November's 10% drop from October was the first double-digit monthly decrease observed since April 2006.

However, the level of foreclosures has almost certainly not peaked. I mean, 68% growth isn't exactly comforting.

What else may add to foreclosure woes? Try option ARMs.

In a report issued last week, Merrill Lynch economists called option ARMs "ticking time bombs" that will start "ticking louder next year." Merrill estimates that losses on option ARMs could total $100 billion, on top of an estimated $400 billion in losses on subprime and other mortgages.

Option ARMs generally carry a low introductory rate -- in some cases as low as 1% -- and often have high prepayment penalties that make it expensive to refinance. With lending standards getting tighter, refinancing may be impossible in any case. ...

A small number of borrowers with option ARMs are already facing resets that require them to make payments covering interest as well as some principal. The numbers are set to rise sharply: Nearly $156 billion in option ARMs will face payment resets between 2008 and the second quarter of 2012, according to Lehman Brothers estimates, with resets peaking in 2010 and 2011. For more than $90 billion of those loans, borrowers would owe as much as their home is worth or more, according to Lehman, which assumed that home prices will fall 6% both in 2008 and 2009.

Though option ARMs are a smaller market than submergingprime, there are more ticking time bombs out there, as an insider in an excellent interview with Herb Greenberg notes.

[S]ub-prime loans were only a small piece of the mortgage mess. And sub-prime loans are not the only ones with resets. What we are experiencing should be called The Mortgage Meltdown�� because many different exotic loan types are imploding currently belonging to what lenders considered ��qualified� or ��prime�� borrowers. This will continue to worsen over the next few of years. When ��prime�� loans begin to explode to a degree large enough to catch national attention, the ratings agencies will jump on board and we will have ��Round 2. It is not that far away. ...

Sub-prime aren'��t the only kind of loans imploding. Second mortgages, hybrid intermediate-term ARMS, and the soon-to-be infamous Pay Option ARM are also feeling substantial pressure. The latter three loan types mostly were considered ��prime�� so they are being overlooked, but will haunt the financial markets for years to come. Versions of these loans were made available to sub-prime borrowers of course, but the vast majority were considered prime�� or Alt-A. The caveat is that the differentiation between Prime and ALT-A got smaller and smaller over the years until finally in late 2005/2006 there was virtually no difference in program type or rate. ...

Most sub-prime loans in existence are refinances not purchase-money loans. This means that more than likely they pulled cash out of their home, bought things and are now going under. ...

The second mortgage implosion��, ��Pay-Option implosion�� and ��Hybrid Intermediate-term ARM implosion�� are all happening simultaneously and about to heat up drastically. Second mortgage liens were done by nearly every large bank in the nation and really heated up in 2005, as first mortgage rates started rising and nobody could benefit from refinancing. This was a way to keep the mortgage money flowing. Second mortgages to 100% of the homes value with no income or asset documentation were among the best sellers at CITI, Wells, WAMU, Chase, National City and Countrywide. We now know these are worthless especially since values have indeed dropped and those who maxed out their liens with a 100% purchase or refi of a second now owe much more than their property is worth. ...

The �Pay-Option ARM implosion�� will carry on for a couple of years. In my opinion, this implosion will dwarf the ��sub-prime implosion�� because it cuts across all borrower types and all home values. Some of the most affluent areas in California contain the most Option ARMs due to the ability to buy a $1 million home with payments of a few thousand dollars per month. ...

In Northern California, a household income of $90,000 per year could legitimately pay the minimum monthly payment on an Option ARM on a million home for the past several years. Most Option ARMs allowed zero to 5% down. Therefore, given the average income of the Bay Area, most families could buy that million dollar home. A home seller had a vast pool of available buyers. Now, with all the exotic programs gone, a household income of $175,000 is needed to buy that same home, which is about 10% of the Bay Area households. And, inventories are up 500%. So, in a nutshell we have 90% fewer qualified buyers for five-times the number of homes.

In California, the median home price has fallen by 12% from last year.

Home sales decreased 36.2 percent in November in California compared with the same period a year ago, while the median price of an existing home fell 11.9 percent, the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.) reported today.

The New York Times has a good article about the bubble in Florida.

FLORIDA real estate has long been synonymous with boom and bust, but the recent cycle has packed an unusual intensity. The Internet made it possible for people ensconced in snowy Minnesota to type "��cheap waterfront property"� into search engines and scroll through hundreds of ads for properties here. Cape Coral beckoned speculators, retirees and snowbirds with thousands of lots, all beyond winter'��s reach.

Creative finance lubricated the developing boom, making it easy for buyers to take on more mortgage debt than they could otherwise handle, driving prices skyward. Each upward burst brought more investors as� some from as far as California and Europe, real estate agents say. ...

Builders were happy to arrange construction loans, then erect houses in as little as six months. Real estate agents promised to find buyers before the houses were even finished.

"��All you needed was a pulse,"�� Mr. Carey said. "��The price of dirt was going up. We took that leap of faith and put down $10,000." ...

There is a four-year supply of homes in Palm Beach county.

That's because the same issue that forced sellers to pull their properties off the for-sale market now dogs them in the rental market: inventory. There are nearly 35,000 residential properties for sale in Palm Beach County alone, according to Illustrated Properties Real Estate. That's a staggering four-year supply at the current pace of sales.

I see that the real estate market is falling over on its own weight in red-hot Alberta, even with oil prices pushing $100.

Edmonton home prices dropped an average of 6.5 per cent in November from October.

Single-family houses fell 5.3 per cent to $376,267 while condos were down four per cent to $252,277.

Edmonton house prices now are down $50,000 from their May peak of $426,028.

It is too early to call the peak in Alberta, but the laws of economics have not been suspended north of the border. At least not permanently.

Think the problems are limited to the U.S.? Well, when the implosion of the housing market is effecting public offerings in Algeria, you know that the world is truly integrated.

Algeria has suspended the first ever privatisation of a bank in the North African nation due to continuing troubles in global financial markets.

A number of business deals have come unhinged in recent weeks as the cost of borrowing money has risen due to problems in the U.S. housing market.

Algeria was planning to auction off 51% of Credit Populaire d'Algerie.

The finance ministry said that the sale would resume when the "impact of the mortgage crisis" became clearer.

In Asia, it's only a matter of time.

Many Chinese families are already deep into speculating on property, a main driver of the surging prices that have Chinese authorities worried that a bubble might be forming. New apartments north of Shanghai's famous Bund waterfront are selling for a record $17,000 per square meter.

Yi Xianrong, a prominent economist at the China Academy of Social Sciences, a government think tank, is one of those sounding the alarm.

He contends that China's housing loans are riskier than those in the U.S., because he said most loan applicants give false information about their assets and income.

Because China lacks a comprehensive credit data system, borrowers often qualify for loans using false information, Yi says. He thinks the quality of property loans in China might be worse than the risky mortgages that are causing so much trouble in the U.S.

"I estimate that the large majority of mortgage holders would not meet the standards for even subprime loans," Yi said in an interview with the state-run magazine Oriental Outlook.

Fascinating stuff.

What seems obvious to me is that here in America, dirtbags were selling this garbage to people who clearly did not need it, in particular to seniors on fixed incomes.

Some loans were more predatory than subprime, with features so onerous that borrowers refinanced their way out of the American dream, losing their houses � and substantial equity� to mortgages they never stood a chance of repaying.

Lenders persuaded one borrower, a 79-year-old janitor, to obtain 10 subprime refinances over nine years.

Taylor refinanced her home three times in just three years. Those loans stripped away more than $50,000 of her home equity in fees alone and eventually obligated her to mortgage payments that were nearly three times her monthly Social Security check of $761.

Her loans, like many subprime mortgages, came with hefty fees, prepayment penalties, and interest rates that adjusted upward.

Targeting homeowners for mortgages based solely on the financial stake they have in their homes is universally regarded as predatory lending and is illegal under state and federal laws. But experts say that hasn't stopped lenders from doing just that.

I would love to see some of these scumbags do hard time in prison for what they have done, but I doubt that will happen.

Too bad.

 

141 homes sell for a total of $65 million at real estate auction
Monday, December 17, 2007 

Housing - With 96 percent of the houses going for below the reserve price, "we lost money," says the builder

Roger Pollock said he wanted to sell a lot of homes at his two-day auction this weekend -- and he did just that. Pollock said he sold 141 homes for a total of $65 million at the Oregon Convention Center in what was one of the largest real estate sell-offs in Oregon history.

Pollock's Buena Vista Custom Homes had advertised more than 240 homes to sell at auction. By comparison, one auctioneer, had never done a home builder's auction larger than 60 homes.

Pollock turned to the auction when the housing market slowed this fall and his sales turned to a trickle. Rather than pay interest on his construction loans for a year or more until the homes sold, Pollock opted for the auction.

Westside homes in Beaverton and Hillsboro sold best, Pollock said. None of the 29 Bend homes sold, and homes that are now rented didn't sell well, either. Pollock said the sales also will generate about $250,000 for charity.

Although the homes looked especially attractive with super-low starting bids, some brokers were concerned that the homes had a higher, undisclosed "reserve price" that was the lowest Pollock was obligated to accept. But Pollock said about 96 percent of the homes he sold went for below the reserve price. The reserve price, he said, was equal to his costs.

"We didn't make any money on these homes," Pollock said. "We lost money."  "There's been this perception that this wasn't aboveboard," said Pollock, noting that each home has a one-year warranty, standard for Buena Vista's homes. "But I think the results speak for themselves. I did what I said I would do."

About 1,900 people turned out for the auction.

 

Foreclosure auctions gain steam

Dec. 16, 2007 12:00 AM

Last weekend, 2,000 people showed up to bid at, or at least to watch, an auction for more than 200 Valley homes on which lenders had foreclosed.
The two-day auction at the Mesa Convention Center could be the start of a trend. Not only are foreclosures climbing, but so is the number of homes going back to lenders.

Before last year, most of the homes in default sold at trustee auctions on the steps of the Maricopa County courthouse. Now there are few bidders for those auctions because many of the houses are worth less than what is owed on them.

 

Auction firms handled the recent auction in Mesa. Values of the houses to go on the block ranged from $100,000 to $600,000. All had been taken back by big U.S. lenders. More than three-fourths of the properties sold for prices ranging from $75,000 to $465,000.

There weren't a lot of bidding wars, and prices didn't soar. 

Another auctioneer conducted another home auction for 21 Arizona properties Tuesday, including houses in Anthem, Casa Grande, Queen Creek and the West Valley.  Prices started low. The opening bid on a relatively new three-bedroom, 2 1/2-bath house in Goodyear started at $80,000.

The median price of a Valley home is slipping, but it's still $240,000, according to realty studies at Arizona State University. More foreclosure auctions of Valley homes are planned early next year.

Unfortunately, there's plenty of new inventory because 1,344 homes were foreclosed on in metropolitan Phoenix last month. Also, almost 3,500 homeowners who are behind on their mortgage payments got notices that their lender was about to start foreclosure proceedings.

Commercial values rise

Third-quarter figures show the overall value of metro Phoenix's commercial real-estate market increased 1.8 percent, according to the National Council of Real Estate Fiduciaries and supported by ASU commercial real-estate indices.

That compares with a 3.4 percent drop in the housing market's value, said Anthony Sanders, professor of finance at the W.P. Carey School of Business at Arizona State University. The industrial market was the big winner, with a 4.5 percent increase in value. The apartment sector had the smallest gain, at less than 1 percent.

Lower prices, bigger homes

The median price of a Valley home dipped in November, but the homes sold were bigger. Some market-watchers believe the size of homes can skew median figures for an area. For example, if the majority of homes that sell in an area are smaller than the month before, the area will have lower median prices, and vice versa for bigger homes with higher prices.

In November, the median home price for the Valley dipped to $240,000, compared with $259,000 for the same month a year ago. The median size of a home sold last month was 1,750 square feet, compared with 1,650 square feet in November 2006.

 

National Association of Realtors Finally Figures it out!

Property auctions are seeing more action than at any time in the recent past. The proof that auctions are not merely for �stigmatized� properties is in the numbers: Nationally, residential real estate auctions generated some $16 billion in sales during 2006, a 12.5 percent jump from the year before, according to the National Auctioneers Association.

Residential auctions are now the fastest-growing segment of the auction industry, which expects to gross nearly $265 billion in revenue this year. Sellers who need or want to avoid high carrying costs are finding that the bidding process may be the best way to find a qualified buyer fast. Buyers can often land a great price since they�re dealing with highly motivated sellers.

Don�t overlook the vital role a realtor can play on either end of the transaction. On the buyer�s side, realtors can register clients and earn a commission if their bid is successful. In most cases realtors need to accompany the buyers to both pre-auction events and the auction.

Working with sellers, the options are even broader: Realtors can earn a referral fee from an auction company simply by bringing in a new client � or you can essentially cobroker the deal with the auction house. Negotiate your commission with the auctioneer based on your level of involvement.

�Brokers shouldn�t look at auctioneers as a threat to their business,� says Maverick Commins, an auctioneer with Exclusively Auctions, Arizona. �You�re helping clients get the job done, and you get some income out of it. Auctions are simply another option for doing business.�  

Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks.

Quote of the Day

"The market isn't close to hitting bottom. Many people looking to buy can't because of tightening credit conditions, and those that can, are holding back for fear of buying a depreciating asset.'' - Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. (Bloomberg, Nov. 29th)

Real Estate Investment and Sentiment

• In Housing Downturn, A New Uncertainty Factor, (Christian Science Monitor, Nov. 29th): "The last time the economy experienced a real estate downturn, in the early 1990s, the reasons were straightforward: an economic slowdown in regions of the country, rising interest rates, and a growing reluctance by banks to issue new loans. This time... investor jitters are playing as much of a role as banker worries... Investors have sped up the downturn and could deepen it... They have created widespread uncertainty because... bad mortgages [no longer] fester in bank portfolios, the risks are now spread among investment firms, insurance companies, and others. No one knows how broad or deep the losses are."

• Report: Online Real Estate Ad Revenue to Eclipse Newspapers by 2012 (Media Info, Nov. 26th): "Newspaper Association of America: Real estate ad revenue plummeted 24.4% to $1 billion [this year]. Borrell Associates report: By 2012, newspaper real estate ad revenue will hit $3.2B while online real estate ad revenue will surpass that at $3.4B. So far this year, total ad spending on real estate dropped 3%, but online advertising soared 25.8% to $2.6 billion most likely due to a shift of those dollars from print to online. The rate of online growth is expected to slow over the next year -- estimated at around 12% but it should still eclipse newspaper real estate ad revenue.

• Housing Markets Roil Online Advertising Marketplace (Inman News, Nov. 26th): "Sam Sebastian, director of classifieds at Google, observed that newspaper realty ads had "gone off a cliff" and that data suggested the conventional wisdom of increased ad expenditures [in down times, to get more exposure] was "not a valid argument." Sebastian... speculated that realty marketing dollars would "sit on the sidelines" for perhaps six to 12 months while brokers and agents "recalibrated" and "put some dollars in their pockets." After that, he suggested, the market shift could be an important and significant catalyst for growth in online realty advertising."

• Web Bidding Help Drives Live Auctions (Yahoo! Finance, Nov. 24th): "A National Auctioneers Association study found residential real estate auctions have grown 39% since 2003, agricultural real estate grew 33%, and sales of commercial and industrial property surged 27%. Car auctions increased by 10.5% and charity auctions rose 16.5%... Auctioneers were slow to embrace the Internet because it was considered competition, said Ina Steiner, editor of AuctionBytes, a trade publication for online merchants... There are specialty sites like Bid4Assets for real estate and IronPlanet for construction equipment."

• The Upside to the Downturn (Wall St. Journal, Nov. 23rd): "The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees... more homeowners will renovate their kitchens this year -- 7.57 million, up from 7.44 million in 2006 -- but they will spend a lot less, $96.2 billion compared with $127 billion, according to the National Kitchen & Bath Association. Bathroom renovations this year are expected to rise by 5.3% to 10.9 million from 2006, while spending on them will grow 3.8% to $70.2 billion from 2006, the trade group projects. One reason some renovations will cost less this year is the falling price of many key building materials [like] lumber [and] drywall."

 

SOTHEBY'S FAILS TO BRING 40% ON MAJOR AUCTION SALE

By JAMES THORNER, Times Staff Writer - TampaBay.com

SARASOTA - Selling a home these days is tough. Some people try warm cookies and helium balloons. Others give away free washers and dryers. But what if you own million-dollar properties? The kind where you don�t ask about a mortgage because there is no mortgage?

Here�s the answer from a luxury real estate auction held in Sarasota Friday by SKY Sotheby�s International Realty: If you want to move waterfront mansions in a hurry, it�s best to settle for 40 cents to 70 cents on the dollar.

�The current market has been dysfunctional,� said SKY president Chad Roffers, whose company offered up 79 homes worth about $200-million in a giant lawn tent at the private Long Boat Key Club. �Homeowners learned what fair market value is. We had 400 buyers from four countries and 18 states. The market was here.�

Homeowners also learned the limits of auctions, a method gaining favor this year to provide an amphetamine rush to a slumbering market. About 30 of the 79 properties sold on Friday. Some were auctioned, but required a minimum bid, while others were sold �absolute� - best offer takes the property.

While Roffers proclaimed the day a triumph, none of the three Pinellas and Hillsborough County properties on the block ever passed Go. One 5,200-square-foot waterfront house at 6161 51st St. in Bayway Isles in St. Petersburg, originally listed for sale at $2.4-million, couldn�t rustle up a minimum $800,000 bid.

Another of the higher-end waterfront properties, listed at $11.9-million on Longboat Key�s Gulf of Mexico Drive, also failed to sell. Considering their ability to toss around tens of millions of dollars, many of the buyers were a secretive lot. Participants paid a $10,000 deposit just to win use of a blue bidder�s paddle. If they won, they had to write a check for 10 percent of the purchase price on the spot.

�It�s the aftermath of irrational exuberance,� said one anonymous millionaire with a British accent from Southeast Asia who - no doubt enjoying the weak U.S. dollar bargain effect for foreign buyers - scooped up four properties for about half their recent value. His son chimed in: �This is a market wake-up call. Forty to 50 cents on the dollar: I think this is the new reality.�

Despite the bargains, the auction set a record for a single home sale in Sarasota. It was the $14-million sale of an estate called Sugar Bay on Casey Key. The castle-like mansion was built of imported South American coral stone and came with a guest house and 200 feet of beach. But even that was originally listed for $20-million.

Trophy homes like Sugar Bay, those with special locations and attributes, outperformed. Another such winner was a three-story Georgian mansion of 11,000 square feet in Osprey. A bidding war erupted over the house, which sold for $6-million. The losing bidder had been eyeing the house for two years, but never pulled the trigger on a deal. �That one I really wanted. It�s just bad luck,� he said, hugged his friends goodbye and tossed his bidder�s paddle in the trash.

Auctioneer , spent most of the four-hour auction trying to flog interest in the properties that didn�t sell. A house in Apollo Beach�s MiraBay was one such no-sell. It was originally listed for $1.25-million but couldn�t attract an acceptable opening bid. �Five hundred!� the auctioneer bellowed from the stage in the auction tent, seeking half-a-million dollars for the MiraBay. �Four hundred to get it started? Four hundred, anybody?�

By the end of the auction, interest had waned to a trickle. No-sale followed no-sale. Blue bottles of Saratoga spring water littered the floor along with glossy auction booklets. �Looks like there�s a lot of money in this auditorium,� the auctioneer told a dwindling crowd. �But you guys aren�t spending it.�

Millionaires who didn�t land the home of their dreams could have snagged a consolation prize outside the auction tent. Actor Nicholas Cage�s black Ferrari convertible was up for charity auction. Anyone for a minimum opening bid of $315,000?

 

No Slowdown in Foreclosure Filings

Hardest-hit cities are on coasts and in Rust Belt, according to a new survey

By Les Christie, CNNMoney.com staff writer

Nov. 14, 2007

NEW YORK - California, Florida, and Ohio continue to dominate new foreclosure filings, as most of the nation saw increases in the third quarter, according to a new survey. During the period ended Sept. 30, 77 out of the nation's 100 largest metropolitan areas reported rises in delinquencies compared with the previous three months, cited an online marketer of foreclosure properties.

The three most affected states reveal the two main causes of mortgage payment problems: economic weakness, as exemplified by Ohio, and speculative excess that led to high home prices and unaffordable mortgages, as represented by California and Florida.

In the past few months, the foreclosure story has become a tale of two regions. Some of the hardest-hit states have traditionally been in the Midwest, where plant closings and job losses have hit the economy there hard. The other region is the Sun Belt, which is showing even more significant foreclosure growth as out-sized price increases in the first half of the decade led to virtually unchecked real estate speculation.

According to the Center for Responsible Lending, 7.2 million households have subprime mortgages, and more than 14 percent of those are in default. It projects that one of every five of those loans issued in 2005 and 2006 will end in foreclosure, with 2.2 million families losing their homes.

Not every state has been clobbered, according to James Saccacio. "There continue to be pockets of the country - most noticeably metro areas in the Carolinas, Virginia, and Texas - that have thus far dodged the foreclosure bullet," he said in a statement. But, nationally, foreclosure filings, which include all three main stages of foreclosure, default, or late payments, auction and real estate owned (properties reacquired by lenders and now being resold), were up 30 percent compared with the previous three months.

Among metro areas, the highest delinquency rate was in Stockton, Calif., which totaled 7,116 filings during the three-month period, one for every 31 households. Second was the Detroit area with one per 33 households and a total of 25,708. Half the cities in the top 10 were in California.

Several Massachusetts cities experienced huge delinquency jumps during the quarter. Boston filings soared 146 percent to one per every 220 households, Springfield's increased 151 percent (one per 172) and Worcester 122 percent (one per 150).

Filings in the Providence, R.I./ New Bedford, Mass. area climbed a whopping 295 percent, albeit from a low base, to one for every 549 households. The metro areas least affected include Greenville, S.C. (one per 3,289), McAllen, Texas (one per 2,185) and Baton Rouge, La. (one per 2,074).

 

Canadians get edge in real-estate buys

Peter Corbett
The Arizona Republic
Nov. 17, 2007 12:00 AM

Who knew that the loonie would come to the aid of Scottsdale's tepid real-estate market? The loonie refers to the Canadian dollar, which is giving our neighbors to the north increased buying power. Realtors here say that Canadian buyers increasingly are showing interest in houses here as winter residences and investments

"We had three Canadians in one day we were showing around," said Don Matheson, an agent with Re/Max Excalibur Realty who moved here from Canada in 1995. The loonie was worth about $1.03 earlier this week in the United States. That may not sound like much, but $500,000 Canadian was worth $516,168 American.

"The dollar for us is just incredible," said Gordon Ewasiuk of Edmonton, Alberta, a client of Matheson's. "It was worth it to come down." Ewasiuk and his wife, Wanda, bought a house in McDowell Mountain Ranch and a condo. They previously sold a condo they bought four years ago that increased in value by more than 50 percent.

Ewasiuk, who runs a mechanical contracting business, said that his Canadian friends and family are buying property here, including a business associate who bought a house in DC Ranch.  Jane Blacke said that a colleague recently sold a Gainey Ranch home to a Canadian buyer.

Of course, Canadian and other foreign buyers will not turn the local market completely around, but they could help eat away at the big inventory of unsold homes. Karl Stauffer noted that as of Nov. 9, Maricopa County and northern Pinal County had 47,565 resale homes, including 7,285 in the northeast Valley.

Like many Realtors, Stauffer says the market is not as bad as skeptics portray it. People are moving here, commercial building is strong, and financing is cheap, even if some buyers are having trouble qualifying for loans, he said. f Nov. 9, Maricopa County and northern Pinal County had 47,565 resale homes, including 7,285 in the northeast Valley.

Like many Realtors, Stauffer says the market is not as bad as skeptics portray it. People are moving here, commercial building is strong, and financing is cheap, even if some buyers are having trouble qualifying for loans, he said.

 

 

Some S.F. neighborhoods are solid despite meltdown

Carol Lloyd

Sunday, November 11, 2007

Carol Lloyd

Surreal Estate

Note:This column appears Fridays on SF Gate and Sundays (abridged) in the Chronicle.

F rom the mortgage meltdown to the plunge in home sales, dark clouds continue to threaten San Francisco's seemingly endless real estate summer. And yet remarkably, local Realtors I know seem as cheery as ever.

"It doesn't look slow to me," says Bonnie Spindler of Zephyr Real Estate. "I keep telling people it's not a buyer's market, but they don't believe me until they get into the trenches." She says she'd heard that the softest sector of the market was entry-level properties, but a recent open house of a six-unit tenancy-in-common building with units ranging from $500,000 to $590,000 challenged even that generalization: "I had 100 people go through the house and seven or eight requests for disclosure packages. Many of the buyers were already preapproved with loans."

Alexander Clark, whose blog theFrontSteps ( www.thefrontsteps.com) and newsletter (links.sfgate.com/ZBMW) offer similar testimonials from the real estate front, agrees that in the city, the sky is far from falling.

"The inventory for good properties is very low and there's a multitude of buyers for good homes," he says. "For turnkey places with good remodels, priced properly, they are going fast with multiple offers."

In an attempt to explain these discrepancies, Clark's recent newsletter featured a "walk down Lake Street" - a description of recent sales activity on one street in San Francisco. "If you look at numbers, our market has slowed month-to-month and year-to-year, but Lake Street - though a tiny pocket of San Francisco - is representative of what's going on in whole city," it said.

"Literally on the same street there are places that sold with multiple offers and flew off the shelves and there's stuff that's not selling or getting big price reductions." The difference between them? Alexander mentions all the usual suspects: overpricing, lack of staging, homes with no parking, a bad layout or an unfortunate location.

Are these tales of multiple offers, bids way over asking, and legions of eager buyers waiting for a halfway decent home simply the provenance of professional optimism? Not exactly. The same rosy stories radiate from the San Francisco sellers I know.

One couple I know who bought a Victorian worker's cottage two years ago sauntered away from its recent sale with an extra $200,000 and an annual appreciation rate of about 10 percent. Buyers describe the same surreality from the opposite perspective: "We had to overbid"; "There were already three offers when we saw it"; "It's a fixer, but it's all we could find in the neighborhood."

But of course, a few anecdotes do not an economy make.

The federal, state and regional numbers paint an altogether different picture. Two weeks ago, DataQuick released a report under the headline "Bay Area home sales plummet amid mortgage woes." The release noted that Bay Area sales hadn't been so low in two decades and had declined 40 percent since last year, mostly because buyers were finding it increasingly difficult to obtain jumbo loans. (Jumbo loans have since become more available.)

The median price paid for a Bay Area home in September also dropped 4.6 percent, to $625,000, compared with $655,000 in August. A week later, DataQuick said California was experiencing record foreclosure rates - jumping 166 percent for the third quarter over the same quarter of 2006. Some of these homes no doubt are on the auction block: This week, 200 homes from a range of cities - from nearby Oakland and Richmond to farther-flung Tracy and Antioch - will be sold to the highest bidder.

Last week, an ABC News story noted that Antioch and nearby Alamo embody the striking inequities of the current real estate bust. Quoting Prudential California research, the article said home sales in Antioch have dropped 58 percent since last year, while Alamo's have risen 58 percent.

Details on the San Francisco market provide clues as to why some Realtors and homeowners are not feeling the gathering storm. Although sales are off 17 percent compared with last year, the relative lack of inventory means that demand still exceeds supply.

Compared with last year, the median price edged up 1.9 percent to $773,500. And so far, the city hasn't been hit by foreclosures' influence on home prices. According to DataQuick, mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties.

As someone who has been weighing real estate statistics against anecdotes for years, I still sometimes find the whole situation confusing. So I called Ryan Ratcliff, an economist with the UCLA Anderson Forecast and author of its recent California Report, to learn how he makes sense of the apparent contradictions in the market.

"We've noticed that the hardest hit areas are those like Sacramento, where there's been an abundance of new construction," he explained. But in areas like San Francisco, where there's mostly existing housing, he says homeowners set prices based on their desires and aren't in a hurry to sell, which keeps prices high. "But builders don't look at things this way," he added. "For them, housing is inventory, like toys are at Toys R Us, so they cut prices to move homes."

Ratcliff says it's also the more modestly priced areas that have the most foreclosures. "Foreclosures have been most intense in areas where people took out adjustable rate mortgages to buy moderately priced homes," he said. "It's where first-time home buyers really stretched."

Thus, San Francisco real estate has remained relatively unscathed because existing housing immunizes it against builders' deep discounting and its affluent population is less threatened by foreclosure.

Like many people, I tend to fixate more on home prices than home sales as the meaningful statistic. After all, sales numbers may affect the real estate industry's bottom line, but not mine, right? Au contraire, says Ratcliff.

"Most people look primarily at the home prices, but for a lot of people it's just a number on a piece of paper," he explains. "The two primary influences of the housing market on the economy are in jobs: either construction-related employment or real estate and mortgage industry jobs. It's there that we expect the current housing crisis to drag down the California economy, staying sluggish through the end of 2008."

So, although San Francisco's housing market has not been hit hard like those in Sacramento and Antioch, it doesn't mean we won't feel the effects of the real estate maelstrom anyway.

E-mail Carol Lloyd at surreal@sfgate.com.

 

Reserve Auctions Failing to Bring Qualified Buyers

Many sellers anxious to realize the etheral profits of past years are turning to auctions as a 'silver bullet'. Many are desperate, others simply want to cash out, and even some merely want to sell to get on with other life plans. All good reasons to sell - but not necessarily at the price they think is the fair market.

Auction firms across America are suddenly seeing an glut of properties coming to the auction market, but with little planning or sensible monetary formulas. The auction is not a silver bullet that shoots down ghosts or brings about magical outcome. Auctions are a long respected and viable mechanism to sell assets at 'current market value".

Market value may not be what a seller desires. This is being expressed in real estate auctions throughout America that are failing to bring qualified bidders in any number to 'reserve - or minimum bid' auctions. Most reserve auctions of real estate are in fact registering no bidders what-so-ever. Many times when the reserve is a realistic figure.

Buyers have quickly learned that the only true auction is the Absolute or No Minimum price auction. At Absolute Auctions, buyers are assured that their efforts will not go unrewarded at the end of the day. For the seller, he can find appreciation at getting his asset sold - for the maximum value of the day.

Market Value - True Market Value is not some hopeful appraisal that has been written for a 'fee involvement'. It is also, not the seller's idea of what his property 'should' be worth. It is the expression of a willing seller and a capable buyer coming together - both under no special influence - to establish the value of an asset when buyers express their monied opinions as legally binding offers or bids.

 

Best Commercial Markets for 2008
� By Camilla McLaughlin for REALTOR� Magazine Online

Keep an eye on commercial real estate markets in metros that position themselves as 24-hour cities with a global pathway to international markets, says the Urban Land Institute (ULI) in a rating of the top commercial real estate markets for 2008.

The hottest commercial real estate market in the country? New York City, where vacancies are in the mid-single digits and rents have skyrocketed. ULI dubs the Big Apple, �America�s 24-hour city.�

Prices for industrial and office space might be at an all time high, but according to the report �the weak dollar means the city�s �monster� prices look cheap to foreign investors who are �pouring and parking money into Manhattan real estate.�

All the markets to watch have similar attributes to New York. All have a major international airport and/or shipping port and walkable residential neighborhoods.

Each has also �made a concerted effort revitalize downtown areas or close in urban hubs that make them magnets� for corporate headquarters, business elites, and a highly educated work force and also capotes the largest share of investor dollars, says ULI in their annual report, Emerging Trends in Real Estate.

Seattle, where a concentration of mixed use development draws residents to new downtown neighborhoods, is another standout. A strong and highly diversified economy resulting from a large number of corporate headquarters and the city�s position as an important hub on Asian commerce routes contribute to its top ranking on the commercial markets to watch.

Other top commercial markets to watch, according to ULI, are:

• Washington, D. C. �The government never stops and the ever churning Washington real estate market cushions against abrupt downturns,� concludes the report.
• Los Angeles. Office markets in Orange Country might be softening but ULI says those in West LA have never been stronger. LA/Long Beach remains the nation�s top port
• San Francisco. A resurgence of technology business is propelling the market in this city. View space commands over $1,000 a square foot.
• Boston. Investors are keeping a close eye on this market, says ULI, even though new industries recycle office spaces left vacant by recent corporate headquarters departures
• San Diego. �A leading indicator for a market correction,� says ULI.
• Denver. A retooled downtown has created what ULI calls an �urban burb,� a hip and exciting urban core in the midst of a sprawling suburban area connected to downtown via light rail.

Smaller markets to watch include: San Jose, Calif.; Honolulu, Hawaii; Austin, Texas; Raleigh-Durham and Charlotte, N.C.; Portland, Ore.; Sacramento, Calif.; Las Vegas, N.V.; Orlando and Tampa, Fla; Salt Lake City, Utah, Jacksonville, Fla.; Nashville, Tenn.; and Minneapolis, Minn.  

At least 8 bidders win condos at auction

 

By Marla Matzer Rose

THE COLUMBUS DISPATCH

Eight buyers got what one real-estate agent called "great values" on condos in the Carlyles Watch building at an unusual auction of some of the lofts at the 100 E. Gay St. building.  An additional 21 bidders will find out by the end of today whether their bids for the units, originally priced between $205,000 and $450,000, will be accepted.

The partners in Urban Loft Ventures, the building's owners, said they held the auction to pay off lenders and move units that have been slow to sell. More than half of the building's 54 units were offered at the auction Sunday, although the number that end up being sold that way could end up being less than a dozen.

With winning bids still well above $100,000, the condos didn't exactly go for bargain-basement prices. But the auction was closely watched by many as an indicator of the health of the Downtown residential market.

"There's still a stream of buyers, but there's so much to choose from right now," said real-estate agent Marilyn Vutech, whose Vutech & Ruff team is part of Real Living. Vutech, who attended the auction at the Columbus Renaissance hotel, said she doesn't see the auction as an ominous sign for the market overall. "I think it's very project-specific. There are other buildings that are selling out quickly," Vutech said.

Michael Berland conducted the auction, said yesterday that gaining visibility -- as well as a read on market prices -- was part of the plan. "There were probably 400 or 500 people in attendance," Berland said. "We really captured the attention of the market and created enthusiasm where there was none."

Berland would not disclose the amounts of the eight winning bids from Sunday. He called reports that units typically went for 40 percent to 50 percent below asking price "inaccurate," but said there were "some significant discounts."

As for his reaction to the prices, Berland said: "The market spoke. We'll come out in the next week with post-auction pricing on any remaining units. This showed us what the market is."

 

In Florida, foreign buyers help buoy high-end real estate market

By Geraldine Fabrikant
Published: October 26, 2007
MIAMI: All is not disaster in Florida, U.S.A.

Thousands of houses for sale are sitting empty across the southernmost state, and there have already been auctions of hundreds of foreclosed homes. But, in a situation typical of wealthy enclaves across the United States, the glistening waterfront glass towers on Miami Beach, the sprawling estates of Palm Beach and the clustered mansions in Naples continue to sell.

Indeed, Florida homes and condos with price tags of $1 million or more are still changing hands at roughly the same price, albeit not as briskly as they did a year ago, according to real estate data. And the rate of foreclosure for lower-income homes is far greater than for homes over $1 million.

"The very, very high end of the markets in communities such as the Bay area, Los Angeles, Manhattan, and Miami and to a lesser degree Chicago, Seattle and Washington that have global appeal have held up much better the rest of the housing market," said Mark Zandi, the chief economist at Moody's Economy.com. "The top end runs on its own dynamic that tends to be more immune to the ups and downs of the global economy. A recession would certainly not help the high end but it would not undermine it. And much of their buying is done with cash and not affected by the global financial turmoil and its impact on the availability of mortgage."

The Florida market not only continues to appeal to wealthy retirees and to second home buyers, particularly from the Northeastern United States. The state's temperate climate and low taxes have also for years drawn well-healed foreign buyers, which have helped buoy the market's upper end.

Ten percent of all foreign buyers bought homes for $1 million or more, according to the National Association of Realtors' study of home buyers in Florida in 2006. The study also showed that of the foreign buyers 21 percent are from Britain. The next major group is from Latin America: principally Venezuela - 11 percent, followed by Colombia at 4 percent.

On Fisher Island in Miami Beach, a tony private island that has its own golf course, tennis courts and spa, half the island's residents are French, Russian and South American and the balance are U.S. citizens.

The market's higher end remains healthy. In the Miami area, the median price for condos over $1 million is still holding steady at $1.5 million so far this year, according to the Realtor Association of Greater Miami and the Beaches. And the median price for single family homes has in fact risen to $1.51 million from $1.46 million.

Further north on the exclusive island of Palm Beach, the median prices for both condominiums and single family homes have risen this year, according to data compiled by the Palm Beach real estate lawyer Leslie Evans. In Naples, on Florida's west coast, at the very high end of the market, over $3 million, there have already been about 40 sales so far this year, compared to 46 sales for all of 2006 according to Tom Campbell, sales associate at Premier Properties.

But there are serious signs that even those markets are cooling. While median prices have held up, the number of units sold has dropped significantly in both markets. In the greater Miami Beach area, for example, the number of condos and single family homes sold through Oct. 3 fell 17.8 percent to 958 units from 1,166 units a year earlier. In Palm Beach the number of units sold has fallen 14.5 percent to 223 properties.

"Prices are not coming down, but there is more inventory in all price ranges," said Deborah Boza-Valledor, the chief operating officer for Realtor Association of Greater Miami and the Beaches. The high price points "are clustered in certain areas," she said. "They are waterfront properties, they are exclusive and people are willing to pay the price for those types of homes on Alton Road and Collins Avenue, for example. Buyers have a lot more choice, but sellers are not dropping their prices. They are less willing to take a discount and the buyers will pay for what they want."

Behind the rosy closing price figures, there are some other signs of weakness. List prices do not tell the whole story. Not only are there more homes on the market, but sellers "are making concessions," Boza-Valledor said. "They will offer a year's worth of paid maintenance fees to the buyer - or they will pay for the parking space or they will throw in country club fees that might be part of the expense of buying a home in a gated community. In Aventura, north of Miami Beach, there are condos that have the golf course and equity arrangements in the golf club. And on a $2 million condo, the maintenance can be $1,500 a month."

Those savings may not be enormous, but just a year ago, with buyers bidding against one another for properties, such deals would have been unusual. And in another sign that the feeding frenzy has slowed - if not ground to a halt, the highest price paid for a Miami-area condo last year was $16.9 million. So far this year it is $13.9 million.

Kevin Thomlison, a broker with EWM Realtors, an affiliate of Christie's, estimates that inventories are up by one-third and he thinks sellers are starting to get more realistic. "They are coming off their 2005 prices and are more in today's market," Thomlison said. "Two years ago, if you sold something at $3.5 million, the next listing in that building came at $4.2 million. Now it is more reasonable. It would come at $3.6 million." More broadly across the state, the president of Coldwell Banker, Clark Toole 3rd, said his firm had sold 1,222 condos worth at least $1 million through the end of September, and the average sales price is off by less than half of 1 percent from last year.

Eager foreigners, checkbooks in hand, are still showing up, according to the National Association of Realtors. Foreign buyers have buoyed the Florida market and they are more likely to be cash buyers than are Americans, according to Toole, who said that 29 percent of his firm's foreign buyers paid cash, while only 8 percent of U.S. buyers did. The picture while relatively rosy, is somewhat uneven. On Fisher Island, Lars Eckdahl, an agent who has worked on the island for 13 years, said that business has slowed drastically.

On the island where tennis player Andre Agassi visits and Oprah Winfrey once owned a home, 96 of the island's 700 units are for sale. At one point the offerings were down to 39 units. "The market has changed dramatically," Eckdahl said. "I didn't think it would affect us so much at Fisher Island with the dollar so weak and the euro so strong." One problem may be that cost of living on the island has risen substantially because of island dues and other expenses, and in a market where buyers have more choice, they may be getting pickier.

Meanwhile the schizophrenia of a two-tier housing market where foreclosures are at record rates but the top end still appears to be healthy is particularly evident in Palm Beach County. The island of Palm Beach itself has only 8,000 units and Evans said that his research shows 80 percent of transactions area for cash.
But just across the bridge in the somewhat less exclusive West Palm Beach, "there are buildings with 200 units and 80 of them are for sale and others where the building is nearing complete and sales will never close." Florida's richer realms seem relatively impervious. The question is: Will it last?

 

 

Buyers Pounce on Deals as Homes Go on the Block

 

By JOHN LELAND

Published: October 22, 2007

MINNEAPOLIS, Oct. 21 � In a down real estate market, they came to buy. They came early, they came in numbers and they came with bank checks for $5,000.

By 10 a.m. Saturday, more than 700 people filled a hall in the convention center here for what real estate agents say is the largest auction of foreclosed properties ever in Minnesota, with more than 300 houses or apartments for sale in two days. Opening bids ranged from $1,000 � for a three-bedroom house � to $729,000, for a five-bedroom house on 11.9 acres. The crowd was standing-room only, with more waiting to enter. Some were looking for homes, others for investments.

�It�s a symptom of the foreclosure crisis,� said Jim Davnie, a Democratic state representative in Minnesota. Mr. Davnie said he had concern that areas already hit by the foreclosure crisis would now be hit by investors buying properties to rent them out, �which makes neighborhoods less stable than owner-occupied housing.� But in the loud, overcrowded hall, the misery of subprime loans, exploding adjustable rate mortgages and slumping sales meant one thing: opportunity.

�Who�s got $150,000?� said the auctioneer,  motor-mouthing the sale of a four-bedroom house that he said was worth $234,000. �It�s a buyer�s market,� he urged. The auction, like others that have proliferated around the country this year, tapped the contradictory forces of the current real estate market, in which mass foreclosures and sinking home values, along with predictions of more pain to come, still stoke the urgency to buy right now, before it is too late.

�The market�s really low right now, so you can get a good price,� said Lori Crook, a food server at Keys Cafe who said she was looking for a place she could fix up and sell. �Even if you can�t sell it right away, if you just sit on it and sit on it, it will go up.� The auction involved a tiny fraction of foreclosures in the state. Julie Gugin, executive director of the nonprofit Minnesota Homeownership Center, projected statewide foreclosures at 20,000 this year, up from 11,000 last year, based on data from sheriffs� sales.

Representatives from two big lenders that have been hit hard by the collapse of the subprime mortgage market, Countrywide Financial and Bear Stearns, were on hand to provide mortgages � fixed, adjustable, jumbo or interest-only. Both have been criticized for giving loans too freely, leading to a wave of delinquencies and a rush to sell debt securities backed by those loans.

Countrywide and an affiliate of Bear Stearns were also among the lenders selling properties at the auction. Both have been hurt by defaults on mortgages. �This is such a stark and dramatic illustration of how serious the problem is,� said Ron Elwood, a lawyer at the Legal Services Advocacy Project, which lobbies in the interest of low-income residents. �The reality is, half the reason 300 homes are being auctioned off is that speculators tried to make a killing and failed to do so.� In Minneapolis, 55 percent of foreclosures this year involved houses not occupied by their owners, according to county records.

But instead of alarming buyers about the risks, the auction of so many foreclosures at once was an invitation to speculators, small and large. Some, including Bryan Kihle and Jim Casha, who bought a four-bedroom house for $145,000, bid without seeing the properties. �I just looked at the picture and thought if we got it cheap enough, we could rent it for a year, then sell it when the market goes back up,� said Mr. Kihle, a building contractor. One public interest housing group bought eight properties to restore for low-cost housing.

Others just saw a chance to enter the housing market. �It won�t always be low,� said Pearl Dobbins, who said she was willing to spend up to $50,000. �This is our chance to buy a home and start our financial future.�

What they all found was a mad scene. As men in tuxedos raced around, waving their hands at bidders and goading them to bid higher, Mr. Buleziuk delivered a nearly indecipherable sales pitch, amplified to exhausting levels.  Jeff Groskreutz, shouting to be heard, said it all felt familiar. �It�s just like any other farm auction I�ve been to,� Mr. Groskreutz, a former farmer, said.

 

More desperate developers selling homes through auctions

Carolyn Said, Chronicle Staff Writer

As Marcus Ison moved his belongings into his new townhouse in San Pablo's Devon Square development last week, he had mixed feelings. His excitement about buying his first home was tempered by a sobering reality: Outside, bright red signs announced that two dozen homes in the development would be sold at auction within days - with starting bids of $250,000, far below the $415,000 he had just paid for his three-bedroom-plus-den unit.

"For the sake of my property values, I'm fairly anxious about the upcoming auction," said Ison, an information technology consultant. "I'll cross my fingers and hope there will be numerous bidders to drive the price up. As a first-time home buyer, this has definitely been a bittersweet experience."

Fire-sale auctions of new homes have been virtually unknown during the past decade of real estate boom times. But they're making a comeback with the market slump as developers act aggressively to thin their inventory. Besides Devon Square, at least three other Bay Area developments have homes that will go under the gavel in the next three weeks. In Southern California, dozens of units have been auctioned in recent months.

Pulte Homes, which built Devon Square, said it decided to auction 24 units in the 74-unit complex because the development, located in a mixed industrial/residential area, is not readily accessible to house hunters.

"This is a tough community to get traffic to," said Steve Kalmbach, Bay Area division president for Pulte. "It's in an area where there are not a lot of other new-home projects for sale. We felt it's better to try to sell out sooner than try to drag on for the next however-many months. We decided to figure out a way to create some excitement and bring some energy."

Residential real estate auctions (including existing homes) grew 12.6 percent in 2006, according to research firm Morpace International. Chris Longly, a spokesman at the National Auctioneers Association, said residential real estate is the auction industry's fastest-growing sector, noting that such auctions grew 39 percent from 2003 to 2006. This year, they jumped 3 percent from the second to the third quarter. The upswing in new-home auctions follows a similar rebound in auctions of foreclosed homes.

"Now that the market has slowed, builders are looking at the auction method as an accelerated marketing program to move standing inventory,".

Winchell said auctions work well in a soft market because they ease buyers' concerns about overpaying. "In the market we're in now, buyers tend to resist making an offer because they don't know what will happen down the road with prices, incentives, how long it takes to sell a project," he said.

By contrast, he said, in an auction "people understand that the project will be sold out in one day. That leaves out a lot of those concerns. They see the price, they see it's below what they consider market, they bid competitively, see what other units sell for, know they're paying pretty much the same price as everyone else with small variances."

Some Auctions have minimum bids that are the actual minimums, as opposed to the "secret reserve" method where there is an unpublished minimum bid that must be reached for the property to sell. The auctioneer does not charge buyers premiums, so the winning bidders pay only their bid amount plus closing costs. (For Devon Square, Pulte will pay up to $5,000 of closing costs for bidders who use its preferred lender and close within 30 days.)

Some auctions take their commission from the seller is equivalent to what a seller's real estate agent would make, which is about 3-5 percent. Buyers' agents who accompany successful bidders receive up to a 2 percent commission. For potential bidders, the big question is: What do auctioned homes actually sell for?

The upcoming Bay Area auctions advertise minimum bids that are a good 40 percent below their original asking prices. But the actual discounts are likely to be less dramatic. In one recent auction, the final amounts ended up being 14 percent less than the lowest previous asking price.

In late August, Centennial Homes auctioned 22 townhomes at Santa Rosa's Chanate Village, with minimum bids of $260,000 to $330,000 on units that had originally been priced as high as $399,000 to $589,000. "We got 86 percent of our previous (lowest) asking price," said Jim Clifford, a partner in the Novato home builder. That lowest price takes incentives into account. For example, a unit that listed at $399,000 with $16,000 in builder incentives might have sold for $329,000, or 86 percent of $383,000.

With almost 200 registered bidders in the fray, the units went for one-quarter to one-third more than the minimum bids, he said. Clifford said he was delighted with the process, which he turned to after nothing else worked. "We tried everything," he said. "We spent tons of money on all different kinds of marketing; we had radio ads offering to give away free cars. It was just dead. We were sitting around one day trying to figure out what to do, and we got a cold call from (auctioneer) Kennedy Wilson. We went, 'Wow, we never thought of that.' We calculated this was the best way for us to go and we did it."

Clifford said the company made enough from the auction to pay off its loans and make "a little bit" of profit. Farther from job cores, the auction discounts have been steeper.

Last week, Anderson Homes auctioned off 34 single-family homes in its Paseo West subdivision in Manteca (San Joaquin County) with minimum bids starting at $285,000. The homes went for about $400,000, according to press reports - a 27 percent plunge from the most recent $550,000 asking price. Paseo West homeowners, many of whom had paid $600,000 and up, were incensed that their property values took an instant nosedive and organized to protest the auction in advance. The Bay Area auctions so far haven't inspired similar outrage.

Jeff Lawrence, Northern California regional manager for Watt Communities, which will auction 25 Rohnert Park townhomes Nov. 4, said that while some homeowners are disappointed, many realize it's to their advantage for the community to be fully sold.  "It's difficult for homeowners to compete with the builder if they want to sell their home," he said.  Lawrence said he has high hopes for the auction.

"The great thing about the process is that it's market-driven; it lets people decide what they want to pay; it lets us find out, what's it going to take to move some homes," he said. "From a business standpoint, I would rather discount homes and sell them than pay interest to the bank. The bottom line is if you sit and wait, you pay the interest and you're still sitting with the house."

Bay Area new-home auctions

Potential bidders must register in advance and be preapproved for financing before the auction.

Auction date	Development, location	Builder	Properties to be auctioned	Minimum bid	Web site
Oct. 21	Devon Square San Pablo	Pulte Homes	24 townhouses	$250,000	devonsquareauction.com
Nov. 3	Serita Pinole	DeNova Homes	7 single-family homes	$385,000	website
Nov. 4	Centreville Rohnert Park	Watt Communities	25 townhouses	$255,000	centrevillebywatt.com
Nov. 10	Highlands Benicia	Lennar Emerald	45 condos	$145,000	highlandsbeniciaauction.com

Source: Chronicle research

 

Auction Industry Projects Gross Revenues
to Reach $269.6 Billion in 2007

37% of Real Estate Auctioneers Reported Increase in Home Auctions

 

Overland Park, KS - The National Auctioneers Association recently unveiled its third quarter survey results conducted by Morpace, Inc., projecting continued positive growth in the auction industry. Initiated in 2003, the quarterly survey compiles data and tracks the growth of the industry in the United States.

 

In 2006, the total value of goods and services sold at auction totaled $257.2 billion, an increase of 7.1% from 2005. Gross revenues in the first three quarters of 2007 have increased nearly 5% from the same time period one year ago. Current projections for 2007 gross sales receipts total $269.6 billion.  Forty-seven percent of NAA members surveyed reported an increase in gross sales receipts in the first three quarters of 2007, with thirty-one percent reporting no change in sale receipts compared to the previous year. 

 

Residential real estate auctions continue to be one of the fastest growing segments of the live auction industry with an estimated growth of 3.1% since the end of the second quarter. During this same period, commercial and industrial real estate auction has grown 2.9%.  Thirty-seven percent of real estate Auctioneers surveyed reported an increase in real estate auctions, with thirty-two percent reporting no change.  Total real estate revenues for 2006 include: Residential Real Estate ($16.0 billion), Commercial/Industrial ($15.0 billion), and Land/Agricultural ($25.3 billion).

 

About the NAA

Headquartered in Overland Park, Kansas, the National Auctioneers Association (NAA) represents the interests of almost 5,600 Auctioneers in the United States, Canada and across the world. Founded in 1949, the mission of the NAA is to promote the auction method of marketing and enhancing the professionalism of its members through education and technology. To learn more about Auctioneers, auctions and the NAA visit: www.auctioneers.org.

 

About Morpace, Inc.

Morpace, Inc. is a full-service market research and consulting company headquartered in Farmington Hills, Michigan. Morpace's research and consulting staff provide in-depth understanding of research findings and actionable recommendations to a broad range of client industries including automotive, financial services, health care, and technology. Morpace has particular expertise in the areas of market definition and segmentation, product design and marketing, brand and image positioning, pricing and marketing strategy. Morpace also specializes in external and internal customer satisfaction, quality measurements and Customer Relationship Management (CRM).

 

 

Foreclosed Homes Tumble 21.5 % September Over August

SACRAMENTO, Calif.--(BUSINESS WIRE)--The real story in foreclosures today is NOT what�s up; it�s what�s down! Foreclosed homes dropped nearly 21.5 percent nationwide in September over August.

�Despite what some other data aggregators are saying, the big news is that many states, including some typically hit hard by rising foreclosures, actually saw a drop in the number of people who lost their homes to foreclosures last month,� says Alexis McGee.

Last month 30 states reported a drop in REO filings from August and one was unchanged. An REO (real-estate owned) filing is the final stage in the foreclosure process in which a property that does not sell at foreclosure auction reverts back to the bank or lender. Among the foreclosure leaders with declining numbers were:

• California (down 14.24 percent)
• Colorado (down 57.97 percent)
• Florida (down 14.18 percent)
• Michigan (down 21.13 percent)
• Ohio (down 29.22 percent)
• Texas (down 1.65 percent)

On a regional basis, across the board fewer REO filings were reported in September compared with August. ForeclosureS.com reports based on analysis of its data base of more than 3.5 million listings nationwide.

�These new numbers are in stark contrast to what have been staggering month-to-month increases in foreclosures virtually nationwide,� adds McGee, also author of the upcoming The ForeclosureS.com Guide to Real Estate Investing Secrets You Won't Learn Anywhere Else (Wiley, March 2008). �Year over year, of course, the numbers of foreclosures � per capita and actual filings � are up as reported in the majority of states. Given all the real estate and credit market turmoil of the past year, that�s not unexpected,� adds McGee.

Nonetheless year-to-date seven states reported solid decreases in the number of REO filings over the same time period last year, McGee adds. Those states include Massachusetts, Utah, Colorado, South Carolina, Oklahoma, Tennessee, and Pennsylvania.

On a quarterly basis, 15 states had a drop in the number of REO filings in the third quarter compared with the second quarter, as follows:

Nationwide REOs				Q2, 2007						Q3, 2007						Change
State		Households		Filings		Per Cap				Filings		Per Cap				Change
North Carolina		2,708,338		4,751		0.18		%		4,706		0.17		%		-1		%
Kentucky		519,279		504		0.10		%		499		0.10		%		-1		%
Indiana		1,227,550		4,338		0.35		%		4,174		0.34		%		-4		%
Georgia		2,064,706		8,297		0.40		%		7,979		0.39		%		-4		%
Utah		647,063		553		0.09		%		516		0.08		%		-7		%
Minnesota		787,594		1,263		0.16		%		1,162		0.15		%		-8		%
Ohio		4,089,437		11,808		0.29		%		10,674		0.26		%		-10		%
Wyoming		58,746		120		0.20		%		108		0.18		%		-10		%
Wisconsin		1,082,023		1,086		0.10		%		932		0.09		%		-14		%
Kansas		541,191		1,246		0.23		%		1,019		0.19		%		-18		%
Mississippi		80,530		258		0.32		%		207		0.26		%		-20		%
Arkansas		599,653		1,578		0.26		%		1,257		0.21		%		-20		%
South Carolina		1,257,934		1,765		0.14		%		1,396		0.11		%		-21		%
North Dakota		204,025		173		0.08		%		135		0.07		%		-22		%
Alabama		766,038		2,073		0.27		%		1,173		0.15		%		-43		%

�Don�t get too excited too quickly, though,� says McGee. �The foreclosure crisis isn�t over � far from it. Per capita and year to date plenty of homeowners still haven�t and won�t be able to extricate themselves successfully from escalating mortgage debt and have or will lose their homes to foreclosure as a result.�

So far this year, on a per capita basis five out of every 1,000 households or nearly 400,000 properties nationwide have been lost to foreclosure. That compares with 3.6 foreclosures per 1,000 households (285,826 filings) a year ago, according to ForeclosureS.com reports. Per capita can be a measure of the real impact of housing market trends.

�Those numbers will keep rising, too, as hundreds of thousands of ARMs (adjustable rate mortgages) continue to reset this year and next and leave homeowners with crippling and inescapable debt,� McGee adds. (See the Dollars and Cents of ARMs, Sidebar below)

�But for other homeowners across the country a different story may be evolving,� says McGee. �As mortgage markets stabilize, investors and lenders who had been scared away by August�s subprime lender implosion slowly are returning to the market. For homebuyers that means greater liquidity � the availability of more money to lend. Another bright spot is the recent introduction of FHASecure, the federal government-sponsored program (H.R. 1852, the Expanding American Homeownership Act of 2007) to give qualified subprime borrowers an affordable refinancing alternative to foreclosure.�

Add to the mix, says McGee, the fact that the nation�s overall economy remains sound and interest rates at 45 year lows � the Fed last month cut its benchmark rate � point to 4.75 percent. The result is that in some areas of the country that may have experienced less rampant housing speculation and/or rapid price appreciation, markets are slowing coming back.

A recent report from Business 2.0 and Moody�s Economy.com even singled out 10 major metropolitan areas with solid home price growth ahead. �It all is beginning to add up to a light at the end of the foreclosure tunnel,� adds McGee.

Not for everyone, however, and certainly not yet, she adds. Perhaps indicative of that, last month pre-foreclosure filings � including notice of default and notice of foreclosure auction � nationwide continued their steady climb upward toward what likely will be the one million mark by year end. That�s despite total September filings (98,298) that were down from August numbers (117,696). Year to date 11.5 pre-foreclosure filings were reported for every 1,000 households nationwide, up from just less than 10 for every 1,000 households as of the end of August and just 6 in 1,000 a year ago. So far this year nearly 809,100 pre-foreclosure actions have been filed, according to ForeclosureS.com numbers.

On a brighter note, comparing this year�s third quarter with second quarter pre-foreclosures, the Midwest region of the country actually saw its numbers of pre-foreclosure filings drop 3 percent (43,106 vs. 44,232) but that still represents 3.2 filings out of every 1,000 households.

Comparing third quarter to second quarter nationwide pre-foreclosure filings, 13 states reported a drop, as follows:

Nationwide Preforeclosures				Q2, 2007						Q3, 2007						Change
State		Households		Filings		Per Cap				Filings		Per Cap				Change
Pennsylvania		4,124,965		4,215		0.10		%		4,142		0.10		%		-2		%
Utah		640,982		2,579		0.40		%		2,515		0.39		%		-3		%
Massachusetts		2,443,580		5,802		0.24		%		5,650		0.23		%		-3		%
Texas		6,169,419		19,162		0.31		%		18,620		0.30		%		-3		%
Wisconsin		1,082,023		3,303		0.31		%		3,129		0.29		%		-5		%
Arkansas		479,880		1,405		0.29		%		1,301		0.27		%		-7		%
Georgia		2,844,661		11,383		0.40		%		10,461		0.37		%		-8		%
New York		4,790,180		13,711		0.29		%		11,796		0.25		%		-14		%
Illinois		3,925,947		23,040		0.59		%		19,502		0.50		%		-15		%
Colorado		1,610,490		10,591		0.66		%		8,492		0.53		%		-20		%
Connecticut		1,301,670		451		0.03		%		348		0.03		%		-23		%
Missouri		1,449,079		5,253		0.36		%		3,387		0.23		%		-36		%
New Mexico		440,300		1,574		0.36		%		863		0.20		%		-45		%

Let�s look at a few more numbers from ForeclosureS.com:

• Nevada had the most REO foreclosures on a per capita basis in the nation in September with 12.9 REO filings for every 1,000 households in the state in September. Year to date, it�s No. 2 also with 12.9 filings per 1,000.
• Nevada also leads the nation in pre-foreclosure per capita filings year to date with 34.7 out of every 1,000 households. Florida is No. 2 in pre-foreclosure filings with 24 filings per 1,000 households, and Colorado is third per capita with 18.1 filings per its 1,000 households.
• Several states with fewer REO filings in September vs. August remained among the top 10 on a per capita filings basis. Those states include Michigan (No. 2 with 12.3 filings per 1,000 households); Colorado (No. 5 with 10 filings per 1,000 households in the state); Ohio (No. 8, with 8.3 filings per 1,000 households), and Texas (No. 9 with 6.9 filings per 1,000 households).
• Leading the nation in REO filings year to date is Costilla County, Colorado with 265.5 filings for every 1,000 households. But that�s down almost 31 percent from per capita numbers a year ago.
• In contrast, in the No. 2 spot in REO filings is Valencia County, New Mexico with 81.7 filings for every 1,000 households, up nearly 1,157 percent from per capita numbers a year earlier.
• The top three counties in pre-foreclosure filings year to date include Lee County, Florida (50.5 filings per 1,000 households), Pinal County, Arizona (46.1 filings per 1,000 households), and Alpine County, California (45.5 filings per 1,000 households).

SIDEBAR

THE DOLLARS AND CENTS OF ARMS

Consider how an interest rate adjustment affects the monthly mortgage payment on an average $200,000 loan; 30-year term (not actual loan available, interest rates for example purposes only):

Fixed-rate Mortgage: 7.5%
    -- Payments: Years 1-5 and beyond: $1,598/month

2/28 ARM: (7% for 2 years, then adjusting to variable rate; 10%
maximum in Year 3, 11.5% maximum in Year 4, 13% maximum in years 5-30)

    -- Payments:

            -- Years 1-2: $1,531
            -- Year 3 (if rates don't change): $1,939/month
            -- Year 4 (if rates don't change): $2,152/month
            -- Year 5 (if rates rise 2%): $2,370/month

Source: Federal Register, Vol. 72, No. 156/Tuesday, August 14,2007/Notices

 

Homes of the brave?

British investors are staking their money on repossessed US homes

Suzy Jagger

AMERICA is under the hammer amid its worst housing slump for 16 years. For as the market slips, the real estate auction houses are experiencing a boom. Developers with unsold condominiums, corporations who have invested in real estate, and lenders whose mortgage borrowers have fallen into arrears are all relying on auction houses to sell property on their books before prices slide further.

Large unsold inventories and sellers unwilling to �cash out� at depressed levels have led to a glut of real estate, further weighing on prices. There are broadly three different types of auctions, all favoured by institutions because they allow property owners to sell their assets very quickly in a stagnant market. As Max Spann, the founder of a New York real estate auction house that bears his name, explains: �In an absolute auction, whether it sells for a dime or a dollar, that property will be sold on that day.�

Mr Spann has seen the amount of property sold through his business double over the past 12 months. �What banks and developers love about auctions is that they get a deal on the day. They get clarity. If a property developer can come in and auction all 50 of his unsold condos in one day, he can afford to take a discount on it because, projected out, it is better to retire the debt now and put yourself in a cash position than having to wait to sell the properties at some point in the future for what could be an even lower price. While he is sitting on those properties, he has to keep up payments to the bank, he has to pay to maintain the flats and he has to pay the marketing staff.�

Both Mr Spann and Richard Maltz Jr,  in New York State, point to the rising number of foreign investors buying properties through their businesses, in particular investors from the UK. The strong pound, depressed prices and the fact that bidders can take part in an auction live online has attracted British property investors. Part of the appeal may also be attributed to the large number of vacation properties � beach, mountain or lake homes � up for auction.

�None of us needs to have a vacation home, so when families begin to struggle it�s one of the first assets to be sold. The amount of vacation properties, particularly from the New Jersey shore and from Florida, is also, of course, exacerbating the oversupply in the market. There is real value out there if you have the cash.�

He pointed out that in the past month he has seen two to three-bedroom condominium apartments on the New Jersey shore, with an ocean view, priced at between $450,000 and $500,000. �That�s a 30 per cent reduction on where it would have been this time last year.�

Although vacation communities in New Jersey such as Wild Wood, Atlantic City and Seaside Heights are all having significant reductions, Mr Spann cited states such as California, Nevada and Florida � �all places that have seen wild appreciation and severe subsequent depreciation�.

Among the three types of real estate auction, a reserves auction allows bidders to make offers, but it is at the discretion of the seller whether to accept the price. An absolute auction allows a property to be sold, regardless of how low the price reached, with a sale secured on the day. There is also a hybrid auction at which the bidders are told a price below which the seller will not go, so the property can be sold only at or above that price.

The rules of auction houses vary from state to state but there are broadly similar requirements for a UK investor looking to buy real estate through a US auction. Typically, an auctioneer will demand that a bidder present a banker�s draft, made out to the bidder himself, for a sum resembling an estimated deposit. In some cases, that figure may be as little as $5,000. If a bidder was operating online, a pre-agreed sum would have to be wired into an auction house�s escrow (conditional) account. In the event that the bidder was unsuccessful, it would be wired back.

Bidders should also bear in mind two hidden fees: an auction house typically charges 10 per cent of the value of the property sold, so a bidder with a $200,000 budget should not look beyond a property priced at $180,000. Although each state sets its own taxes, most states charge a levy when a purchaser acquires a home.

Bidders who choose to join a property auction online at the portal would also be charged a fee to log onto the site. Mr Spann said: �It varies, but it is less than a round trip from the UK.� He insisted that online bidders are not disadvantaged by being physically absent from the auction: �We have representatives monitoring the computer throughout the auction, with live fiscal feeds, and they bid on your behalf once you have sent the instruction online. We don�t shut anyone out � no auctioneer is going to drop the gavel and leave an online bidder out.�

But is it safe to buy in a falling market? Richard Maltz suggests that in some states prices have still some way to fall. Two of the biggest US lenders are Mr Maltz�s clients. He adds: �What we were seeing a while ago was that banks did not want to face up to the fact that they were going to lose money on an asset. There was no movement from them. They are gradually coming back to us more and more. We are chasing a downward market.� Suzy Jagger is the Wall Street Correspondent for The Times

The national foreclosure rate in the US in August 2007 was one foreclosure for every 510 households. A foreclosure includes mortgage defaults, auction sale notices and bank repossessions.

There were 243,947 foreclosures in August, up 36 per cent on the previous month and up 115 per cent on a year ago.

The worst foreclosure rate is in Nevada: one in every 165 households is at risk of losing their property.  California has the second-worst foreclosure rate at one household in 224, a 48 per cent increase over July.  Florida has the third-worst rate, with one household in 243 foreclosing, up 77 per cent over July.