Housing Slide Yet to Hit Bottom

 

By Noelle Knox, USA TODAY

An earlier version of this story had a higher figure for the percentage of homes sold by lenders in Akron from February to August.

 

The latest evidence of a decaying real estate market came in a government report Thursday that new-home sales in August hit their lowest point in seven years.

But for a more vivid illustration, look at Akron, Ohio. In 10 of that city's hard-hit neighborhoods, a report given to the city council this week said 51% of all homes sold from February to August this year were unloaded by lenders for a fraction of their value. In Akron, as elsewhere in the USA, the dumping of foreclosed homes on the market has squeezed both builders and sellers who must compete against additional properties

MORE PAIN: Housing likely to continue to flail

BUILDER POSTS LOSS: KB Home also warns of worsening market

 

Last month, as builders slashed prices and held "deal of the century"-style blow-out sales to move unsold inventory, the median-price new home fell to $225,700, a 7.5% decline. That was the largest percentage drop in 37 years.

 

"This is just hideous," said Ian Shepherdson of High Frequency Economics. "Housing is nowhere near bottom; neither is its wider impact." With a bloated eight-month supply of new homes for sale, it's clearly a buyer's market. Yet, many would-be buyers are having a harder time qualifying for a mortgage. The average rate on the 30-year fixed-rate mortgage crept up to 6.42% this week, according to Freddie Mac.

Loans for people with tarnished credit have virtually vanished. Lenders are demanding higher down payments and more proof of income and assets. And rates for "jumbo" loans — those above $417,000 — are hovering near 8%.

 

From July to August, sales of newly built homes fell 8.3%, to a seasonally adjusted pace of 795,000, the Commerce Department said. That's down 21% from August of last year. "The big thing that's happened here is the progressive meltdown of the mortgage finance system," says David Seiders, chief economist for the National Association of Home Builders (NAHB). Seiders doesn't expect home sales to hit bottom before early next year.

 

In an NAHB survey this month, 62% of builders said the mortgage crisis was having some or a substantial impact on their business, up from 33% in March.

Underscoring that point, KB Home said Thursday that it lost nearly $36 million in its fiscal third quarter, and that 58% of buyers canceled their contracts.

"We see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins," says Jeffrey Mezger, CEO of KB Home. "Rising foreclosure rates are intensifying surplus inventory and will likely drive further home-price reductions."

 

The National Association of Realtors, which reported Tuesday that sales of existing homes fell last month to their lowest point in five years, expects more dismal figures for September, given the crisis in the mortgage industry. This week, Foxtons, a real estate company in West Long Branch, N.J., said it will close because of the slumping housing market and lay off 350 of its 380 workers, The Asbury Park (N.J.) Press reported.

 

U.S. Housing Chill Grows
Worse, Bites Consumers

By Sudeep Reddy and Michael Corkery
From The Wall Street Journal Online

The housing market is going into a deeper chill, and consumers are starting to shiver. Sales of existing homes in August fell sharply, and home inventories by one measure soared to an 18-year high, according to data released yesterday. One major home builder, D.R. Horton Inc., is auctioning homes this weekend with starting prices for some units at 50% off an earlier price.

The housing market is worrying consumers, raising fresh concerns about economic growth. Consumer confidence fell this month to its lowest level in almost two years, a new survey showed. Retailers such as Lowe's Cos. and Target Corp. said they're feeling the pain. Both reported softer-than-expected sales Monday.

"The combination of all this is indicative of an economy that has lost quite a bit of momentum," said Joshua Shapiro, chief U.S. economist at the consulting firm MFR Inc., an economic forecasting firm that advises investors. Wall Street seems unconcerned for now. Broad stock indexes moved little yesterday, and the Dow Jones Industrial Average is just a few hundred points from its all-time high.

Optimists believe the Federal Reserve's aggressive move last week to cut interest rates will help keep the economy out of recession. Also, exports are rising, thanks to a weaker dollar, and business investment is holding up.

Still, the pace of housing's downturn is accelerating, surprising even some bearish analysts. Lennar Corp., the nation's second-largest home builder by market value, reported a net loss of $514 million for the quarter ended Aug. 31. That was nearly six times the loss Wall Street analysts on average had expected, and compared with net income of $207 million a year earlier. The company was forced to write down the value of land and write off deposits for land it no longer wants to build on. The write-downs totaled $847.5 million in the quarter. Lennar said it has cut its work force by 35% since last year.

Lennar shares fell 4% and have lost more than half their value this year. Chief Executive Stuart Miller said the problems are broad-based and stem from an oversupply of homes, turmoil in the mortgage market and weak consumer confidence. "We have not only not seen evidence of any of these items resolving, but instead we have seen further deterioration," Mr. Miller told investors and analysts during a conference call.

Overall, sales of existing homes tumbled 4.3% in August to an annual pace of 5.5 million, the slowest in five years, the National Association of Realtors said yesterday. More worrisome: The number of homes for sale is enough to satisfy 10 months of demand at the current pace. Two years ago the figure was below five months. Analysts cite excess supply in forecasting that an upturn in sales and prices may not come until 2009.

Home prices in July fell 3.9% from a year earlier, according to the S&P/Case-Shiller home-price index. The index, which tracks prices in 20 U.S. metropolitan areas, hadn't measured that big of a decline since just after the 1990-91 recession. The bottom is "not yet in sight" for housing, said Mr. Shapiro, the economist. He said the growing number of unsold homes "argues for accelerating declines of prices."

The worsening housing slump and turmoil in the credit markets is beginning to take a toll on retailers. Lowe's Chief Executive Robert Niblock, addressing analysts and investors at a conference in Charlotte, N.C., yesterday, refused to hazard a guess on when the housing slowdown will bottom. "The only thing that is consistent is the inaccuracies of the economic forecasts," he said. Late Monday, Lowe's reduced its earnings outlook for this year and 2008. Its shares fell 6.7% yesterday.

Other well-regarded retailers are missing forecasts. Target on Monday lowered its estimate for September sales. In August, Costco Wholesale Corp.'s sales at stores open at least a year rose just 1%, much lower than its original forecast. It cited weakness in California, which has been hard-hit by the housing slowdown. Target mentioned soft sales in the Northeast and Florida.

The Conference Board said yesterday that its index of consumer confidence dropped to 99.8 in September from 105.6 in August, putting it at the lowest point since November 2005. The survey ended on Sept. 18, the day the Fed lowered interest rates by half a percentage point. The share of consumers reporting jobs as "hard to get" rose to 22.1% from 19.7%.

"Looking ahead, little economic improvement is expected," said Lynn Franco, who directs the Conference Board survey. Builders are divided on how drastically to cut prices to put a dent in supply. Earlier this month, Hovnanian Enterprises Inc. held a 72-hour weekend sale nationwide, dubbed "The Deal of the Century," and offered discounts of up to 30% on certain homes. The company sold 2,100 homes during the promotion, about 10 times the usual weekly number. Hovnanian executives said that demonstrates buyers will come if the price is right.

On Saturday, D.R. Horton is using an auction to sell 53 homes in San Diego. The starting bid for some units will be as much as 50% lower than previous prices, according to the auction Web site. On a one-bedroom unit, the starting bid is $149,000, down from a previous price of $309,990.

Lennar's Mr. Miller questioned the wisdom of deep discounts, saying he's not willing to match some of the incentives offered by competitors. He said some recent price cuts were "just unrealistic and maybe even ridiculous."

Lennar's average home price nationally declined 6% in the third quarter to $296,000 from $316,000 from a year ago. Its average incentive per home -- a figure that includes extra amenities and price discounts -- increased to $46,000 from $36,000 a year ago.

Individual home owners have been slower than builders to bring down their prices to match demand, but that may be changing as the housing slump worsens. "The existing-home market is moving much more rapidly to adjust downward," Mr. Miller said.

The National Association of Realtors reported yesterday that the median national home price was $224,500 in August, up 0.2% from $224,000 in August 2006. Those numbers can be skewed by the mix of homes sold in a particular month. Economists say the Case-Shiller index is less vulnerable to that distortion because it tracks the sales of individual homes over time.

Mortgage companies are scaling back loans to people who have poor credit or can't document their income, while looking to make more loans that can be insured by the Federal Housing Administration.

That trend showed up in Lennar's figures. In the third quarter, 25% of buyers using Lennar's in-house mortgage company used an "Alt-A" mortgage, a category between prime and subprime that often requires little documentation, down from 41% a year earlier. The proportion of FHA-insured loans rose to 25% from 12%.

"The days of no verification, no down payment and low credit scores are past," said Lennar's chief financial officer, Bruce Gross

 

Is Florida Over? By CONOR DOUGHERTY- WSJ September 29, 2007; Page A1 Tampa, Fla. "Own Your Own Home in Florida for $350 down. Total Price $4,950 includes house and lot. It's Pompano Beach Highlands on the famed Florida east coast!" --Advertisement in Life magazine, 1955 "It's just not the place I originally moved to. You've got overcrowded roads. The utilities are higher now. Taxes are unreasonable. Everything in Florida is more expensive." --John Cypherd, retiree, who left Florida last month for North Carolina For almost a century, Florida has been a magnet for mobile Americans. The state's plentiful sunshine and open space has attracted "snowbirds" fleeing winter, retirees living out the last chapter of their lives and down-on-their-luck workers in search of jobs. A steady flow of newcomers has kept the state's population growing faster than the nation's, often much faster, since the 1920s. But for Americans on the move, Florida has become a less-appealing destination. Moving company Atlas Van Lines brought 6,700 families into Florida last year and took 8,000 out, the first time it has moved more out than in. The number of people from other states who switch to a Florida driver's license is down more than 8% from last year. And the state's crowded schools actually lost students last year, prompting many counties to cut back on their construction schedule and, in some cases, look to close schools. While foreigners continue to arrive at a rate of about 100,000 year, migration from inside the country is slowing. Florida's pull has been weakened mostly by rising costs. Though real-estate prices are now falling, the median price for an existing single family home, at $231,900 remains 64% more than five years ago. That kind of price appreciation has increased property taxes, especially for newcomers and for snowbirds, whose primary residence is out of state. Florida is also recovering from a spate of hurricanes that have pushed up already high property-insurance rates. A two-tier tax system hits newcomers and part-time residents harder than long time homeowners. Florida is also dealing with new competition. Looking to tap the economic boost seniors can give, many of the South's less-expensive, relatively warm states have been reaching out to seniors and fiddling with their tax laws in the hope of grabbing more retirees. Georgia Gov. Sonny Perdue is pushing to exempt all retirement income from taxation as a way to attract and retain retirees. "Instead of everyone making the assumption that they're going to move to Florida, now it's more of an open playing field," says Dave Schreiner, national vice president at Pulte Homes' Del Webb communities. Florida has been soaking up migrating Americans since the 1920s and has had one of the fastest-growing populations ever since. The most prominent group, retirees, started pouring in after World War II. Just as Americans started living longer lives, with shorter work weeks and fat union pensions, developers responded with trailer lots and tract houses sold with slogans like "We Give Years to Your Life and Life to Your Years." Some Americans came to stay year-round, but about one million live in Florida just part of the year and return North to avoid the steamy summer. Long before Disney World opened in 1971, tourists drove down to see aquatic theme parks with dolphin shows and roadside alligator pits. Last year, about 85 million people visited the state. Many of those tourists have later made Florida their permanent home. "Growth is what Florida is known for," says Carl Hiaasen, the novelist and Miami Herald columnist. "Florida is in the business of cramming people into real estate for absurd prices." Florida's reality has always been seamier than its sun-kissed image. In the 1950s, flim-flam men peddled mail-order real-estate schemes. In 1980s, the drug trade was celebrated in "Miami Vice." The state's lenient bankruptcy laws have long made the state a destination for debtors on the run. Florida's unrestrained growth has destroyed mangrove swamps and drained large swaths of the Everglades. But growth has transformed Florida from an agricultural backwater to a key player on the national stage. Florida had just 10 electoral votes when John F. Kennedy was elected in 1960; he didn't carry the state, but won anyway. In 2000, Florida delivered the presidency to George W. Bush with 25 electoral votes. A few months ago, Randy Quinones, a retired plumber in New Hampshire, was gearing up to leave the chilly Northeast and live out his days in Florida -- just like millions of retirees before him. He got ready to put his home on the market and told his buddies that he'd be in Florida soon. But Florida housing prices caused him to look elsewhere. "It didn't fit our budget, so we didn't do it," he says: Instead of Gainesville or Ocala where prices were $250,000 to $300,000, Mr. Quinones moved in May into a home outside Knoxville, Tenn., that cost $207,000. Then there are the so-called "half-backs," northeasterners who move to Florida and then move halfway back home. Faith Cohan moved to Florida from Rhode Island in 1982, with dreams of living on the beach and opening her own business. With the proceeds of their house sale, Ms. Cohan and her then husband moved to Florida and opened a store near Naples. Two years ago, Ms. Cohan and her husband divorced. Ms. Cohan had planned on staying in their condominium, but after Hurricane Wilma, condo fees jumped to $3,200 from $1,220, reflecting higher insurance costs for the building. The couple sold their condo for $280,000 and split the proceeds. But instead of looking in Florida, Ms. Cohan paid $140,000 for a townhouse in Simpsonville, Ky. "I just couldn't stay another year and pay those kinds of fees by myself," she says. After years of nonstop growth, many Florida cities have been caught off guard by slowing growth. Between 2000 and 2005, the Tampa Bay region, with its 2.7 million residents on Florida's west coast, grew 10%, adding about 242,000 residents. The number of single-family-home permits doubled, as new residents flooded in, buoyed by subprime and no-down-payment mortgages. Tract homes on the outskirts of the county, in a town called Ruskin, have blossomed on land that was once set aside for oranges and tomatoes. The supply of new housing had everyone from the school district to local churches gearing up for years of booming growth. But all this has slowed. Two years ago, Father Tracy Wilder, rector at Ruskin's St. John the Divine Episcopal Church, envisioned his parish growing 10% a year for the foreseeable future. He asked a church volunteer to do a feasibility study for an elementary school. That's now been shelved. Father Wilder says the number of new members has declined precipitously. When he first arrived in 2001, the church was signing up 70 new members a year. This past year there were 15. "We had to scale back some of our plans," he says. Few organizations have been as rattled as the local public-school system. In recent years, the schools have added an average of about 5,400 new students a year, and have put overflow classes in portable trailers. This year, through the 20th day of school, Hillsborough County schools have between 400 and 500 fewer students than last year. Last year, the school district opened a new high school in the Ruskin area, one of five new schools built to relieve the crammed classrooms and address projected growth. But on the first day of school, Lennard High School had about 1,028 students, half of capacity. Every teacher in the school has a dedicated classroom plus an unused classroom where they've put copy machines and are storing computers and extra chairs. "We're not seeing the growth we anticipated," says Principal Denny Oest. The school district now projects flat attendance for at least three years and has shelved plans for yet another high school as well as two elementary schools. A decline in migration trends could spell broader trouble for Florida's economy. In addition to tourism, the influx of retirement savings and Social Security checks are a big driver of the state's economy. This, in turn, creates a huge stock of service-oriented jobs -- one reason why some of Florida's best-known businesses include homebuilding companies and restaurants like Outback Steakhouse and the Olive Garden. Florida is always in need of doctors and nurses as well as civic employees like teachers. Over the past five years Florida has created 846,000 jobs, more than any U.S. state, and about as many as California and Arizona combined. The growth has helped out communities even beyond Florida: The state's demand for new workers has acted as a sort of a pressure release valve for many rust belt states that have seen unemployed workers leave for better opportunities in the South. Michigan, Ohio and Illinois have long been among the biggest contributors to Florida's population growth. Yvette Thomas moved to Tampa from Dayton, Ohio, in 2002. In Ohio, Ms. Thomas had been working as a full-time substitute teacher in an elementary school, but had to move to a charter school after the teacher she was subbing for came back from maternity leave. Then came a spring break vacation to Tampa. It was cold in Ohio; balmy in Tampa. Ms. Thomas and her future husband hung out on the beach, saw dolphins from a boat and ate fresh grouper. On a whim, they stopped by the school district's recruiting office. A recruiter called them the next day, and a few months later they were looking for a new apartment. "It was very easy for us to come in the system," she says. Five years later, Ms. Thomas has her mind set on going back north. With the aid of a no-money-down mortgage, Ms. Thomas and her husband bought a $168,000 house. The mortgage, with property taxes and homeowner's fees, comes to about $1,500 a month -- more than half a month's pay. To supplement her income as a middle-school teacher, Ms. Thomas teaches night school two days a week. "There is no way I could raise a family here," she says. Next year, she plans to sell her home and move north, perhaps back to Ohio. "I thought it would be like a vacation," she says. "It turned out to be a hurricane." Florida has been through this before. In the early 1990s, economic weakness and failures in the savings-and-loan industry pushed the state's unemployment rate to among the highest in the nation. Immigration slowed and some metropolitan areas had a net outflow of residents. The state recovered and the next boom came along. Many economists believe that this lull, too, will be temporary. Despite a 41% drop in home sales in the past year, Florida's economy has so far skirted recession, and unemployment remains a low 4%, though joblessness has been rising. While domestic migration from other states to Florida has slowed, it hasn't turned negative. Last year, domestic immigration contributed 166,000 people to Florida's population, down 19% from the five-year average of 206,000, according to the census bureau. Those figures don't reflect the most recent trends. But there are some signs of trouble in the economy. In July, retail sales declined 2.5% statewide from the same period a year earlier, compared with a 0.5% gain nationally. Car retailer Auto Nation Inc. reported a dip in second-quarter revenue because of "a decline in new-vehicle retail sales especially in California and Florida." Over the past few months, retailers, including Wal-Mart Inc., Target Corp. and Lowes Inc. have all reported sluggish sales in Florida. A Florida rebound would likely require housing prices to fall further than they already have. With the help of subprime and no-money-down mortgages, the state became a place for rampant speculation that more than doubled prices in a four-year period. The price appreciation fueled a refinancing boom that gave consumers access to billions in home equity, and they spent it. Research firm Moody's Economy.com estimates the real-estate sector has been responsible for one in three new jobs over the past few years, everything from mortgage brokers to Home DepotInc. stockboys. But the rise in prices also locked out a lot of prospective migrants from other states. While home prices were doubling, the state's personal income rose just 31%. That made it tough for anyone living on Florida wages to crack the real-estate market and recent declines haven't offset that. What's more, as Florida's population has swelled, the state has created a two-tiered tax system that hit newcomers and part-time residents harder than longer-term residents. For tax purposes, permanent residents receive a $25,000 "homestead" reduction in the assessed value of their home, which reduces their property taxes. A 1992 amendment to the state's constitution caps the annual increase in residents' assessed home value at 3% a year or the rate of inflation, whichever is lower. The effect is that over the past few years, as home values have soared, newcomers have paid higher tax bills. For instance, the owner of one North Tampa house assessed at $214,764 paid $1,992 in taxes last year, according to the Hillsborough County property appraiser's office. A new owner, who made it his primary residence, would pay about $3,820 in taxes next year, assuming the house doesn't decline in value. Rising insurance rates prompted by hurricanes are also eroding Florida's appeal. The average premium for homeowner's insurance in Florida was $929 in 2004, the fourth-highest of any state in the country. In Hillsborough County, rates on a five-year-old $150,000 house range from $940 to $2,313 a year. Florida is now scrambling to reduce property taxes and the cost of homeowner's insurance. Over the summer, Gov. Charlie Crist signed a bill to roll back property taxes to last year's level. Next year, Floridians could vote on a constitutional amendment that would lower property taxes by increasing the tax exemption given to permanent residents. New legislation also requires the state-run Citizens Property Insurance Corp. to freeze rates in 2007. The idea is to keep other insurers from raising their prices. But none of that makes a difference to Mel Graves. He sold his New Hampshire software and advertising systems support company and moved to Florida in 2002. He spent $275,000 on a house near Sarasota on the Gulf Coast. In 2004, when Hurricane Charley bore down on their home, Mr. Graves and his wife left for their son's place in Tennessee. When the hurricane was past, Mr. Graves returned to Florida and sold the house for almost double what he paid for it. "My wife said 'No way am I staying here,'" he says. The Graves have decided to settle in Tennessee.

 

 

D R HORTON - San Diego Properties go to Auction!

By Emmet Pierce
UNION-TRIBUNE STAFF WRITER

September 28, 2007

SAN DIEGO – D.R. Horton, the nation's largest builder, is limiting attendance at its planned auction Saturday of condominiums at two local developments, according to the firm it hired to run the event. Late Friday afternoon, the auctioneer said that only registered bidders with $5,000 in cash or cashier's check would be permitted to attend.

“We are going to be closing the auction to the press tomorrow,” said the seller. “We are only allowing registered bidders in. We are not allowing cameras, photography, press, media. It is not our choice.”

The San Diego event has been advertised on the Web as a “public home auction.” Earlier, Schack had said that anyone could attend but that bidding would be limited to registered participants. Schack declined to give a reason for the restrictions. He referred questions to the builder's corporate office in Fort Worth. Officials there didn't return phone calls to The San Diego Union-Tribune.

The ban marks the first time an auctioneer has closed a home auction to the news media, Schack said. “This is their choice,” he said of D.R. Horton. “It is on a private premises and we can exclude whoever we want.”

The auction, which has drawn national attention because of its connection to a major builder, is scheduled to start at 1 p.m. Saturday at the Doubletree Hotel in Mission Valley. It will include 35 new units at the La Boheme in North Park and 21 at Esperanza town home development in Encanto. Registration begins at noon.

 

A recent auction in Bonita Springs more than doubled the higest price of all homes sold during the past 10 days! 

In the face of a declining real estate market - especially in the Naples - Ft. Myers area, a recent auction conducted by Jon Foege of Exclusively Auctions drew a handsome crowd and accounted for an early and quick sale that more than doubled the escrows of recent note.

Clik this Link to see a front page recap of the sales.

 

Real Estate Auctions are taking the market by storm.

Here are some recent news clips about auctions happening today in America. Compare the State and National scene against the marketplace of the Exclusively Auctions team. Clik the below links for immediate viewing. Note some will require a high speed connection.

CBS - TV  Auctioning Your House Online 

Florida CBS Newscast - 50% Condo Auctions 

View YouTube Broadcast Now.

CNN - TV  Putting a House on the Block

 

Builders Use Splashy Campaigns, Auctions, To Clear Out Inventory

September 21, 2007: 08:05 PM EST

Sep. 21, 2007

With slogans like "Deal of the Century" and "Mission: Possible," home builders are launching campaigns to sell off a large backlog of houses. Luxury builder Hovnanian hov attracted the most attention with a three-day sale earlier this month that combined incentives and discounts, effectively slashing prices by as much as $100,000.

Standard Pacific spf, meanwhile, was offering free 42-inch plasma TVs and low 30-year fixed interest rates in a bid to sell 200 homes in the 10 days to Sept. 23.

Let's Make A Deal

Inventories of unsold homes have spiked as the subprime crisis forces lenders to tighten their standards, shrinking the pool of potential buyers. And rising foreclosures of risky loans are threatening to put even more homes on the market, leaving builders with little choice but to cut their losses.

"Builders are quite worried," said Celia Chen, director of housing economics at Moody's Economy.com. "They need to move houses off their balance sheets." Hovnanian sold more than 2,100 homes during its nationwide Deal of the Century sale that ended Sept. 16. The builder said that exceeded its expectations.

Analysts say Hovnanian's promotion was unusual because it included steep price discounts. Previous sales had primarily offered non-cash incentives such as free cabinets, granite countertops and other upgrades. They expect more companies to follow Hovnanian's lead.

"I think there'll be more and more (such sales) to move inventory because Hovnanian's efforts have been pretty successful," said Gopal Ahluwalia, vice president of research at the National Association of Home Builders. In Southern California, Standard Pacific (NYSE:SPF) reportedly sold about 70 new homes in the first two days of its Mission: Possible campaign that was set to end Sunday, almost half its goal of 200 total sales. In addition to non-cash incentives, the campaign featured "special pricing" and a daily raffle that gave visitors a chance to win $500.

Other major builders, such as Beazer Homes bzh, Centex (NYSE:CTX) ctx and Pulte Homes (NYSE:PHM) phm, have held sales promotions in recent months, but many have refrained from outright price cuts due to concern for buyers who had earlier purchased nearby homes at higher prices.  But that attitude is changing.

"Generally, you strive to keep the pricing steady and offer additional incentives to move unsold inventory, such as offering lower-priced options or some form of assistance with closing costs," said Mark Marymee, director of communications at Pulte Homes.  "But in today's environment, with high inventories of both existing and new homes for sale, that's not always possible," he added.

Selling at discounted prices will allow home builders to raise cash, but it doesn't bode well for profits, which have already taken a big hit. The nation's top six builders -- Lennar len, D.R. Horton (NYSE:DHI) dhi, Centex, Hovnanian, KB Home (NYSE:KBH) and Pulte -- all posted losses in the latest quarter.

But waiting has it's costs.

Profits could fall further if builders wait too long to unload their properties, as buyers remain on the sidelines waiting for prices to drop even more. Competitors are likely to respond with even bigger discounts, so deals for home buyers are likely to get even better," Daniel Oppenheim, an analyst at Bank of America (NYSE:BAC) , said in a report after Hovnanian's sales event. To move property quickly, some builders are turning to auctioneers.

Revenue from housing auctions grew 12.5% to $16 billion last year. That's a small fraction of the $1.74 trillion annual housing market, but residential real estate auctions were the fastest-growing auction sector from 2003 to 2006, according to the National Auctioneers Association. On a recent Sunday, about 100 bidders attended an auction for 11 new townhouses in eastern Pennsylvania. All were sold that day at an average price of $350,000, said Max Spann.

"If you're a builder and you can accelerate your sales, you can sell at a price that makes business sense," Spann said. "It's an easy way to determine market value on a real-time basis." In addition, buyers have become more comfortable with bidding on homes, he says. "The advent (NYSE:AGC) of eBay (NASDAQ:EBAY) ebay and people understanding bidding as a way of purchasing things" has helped the real estate auction business, Spann said.

In fact, eBay lists more than 1,400 homes for sale, about a fifth of them in Florida, one of the states hardest hit by the subprime lending crisis.

Analysts say the Federal Reserve's half-point 14terest-rate cut last week will help stabilize the housing market, which has dragged down U.S. economic growth for more than a year. But it will take time to clear out the backlog of unsold homes. "The Fed's cut sets the stage for a recovery, but we still have to go through some pain," said Chen of Moody's Economy.com.

 

 

Downtown Miami's Crane City Turns To Auction Block

David Sutta
Reporting

(CBS4) MIAMI If you have looked at the downtown Miami skyline recently, you've noticed a lot of activity. In the next year, more condos will be completed downtown than in the past 5 years. The Miami skyline has changed over the years. In 1987, the Centrust Tower lit up downtown. Twenty years later, it has a new name and it’s surrounded by dozens of skyscrapers.

Now that the real estate market is diving, what’s going to happen to all those high-rises under construction?

CBS4's David Sutta spoke to downtown resident Terry Whitmer about the skyscrapers going up in the downtown area."It seems like they are going up everywhere. I don't know 20, 15. They're everywhere," said Whitmer.

Actually the number is more than 50, according to the Downtown Development Agency. They are coming online as South Florida real estate is diving.

Developer Alex Redondo built the 119-unit Platinum Condominiums, which boosts a very modern infinity edge pool and Jacuzzi but he still has 20 units that he can’t sell. "I thought I was going to be out before this all this happened," said Redondo.

For each day these units sit empty, Redondo is losing roughly $5,500.

In a moment of desperation, he decided to put the 20 condos up for auction. “The highest bidder will get it," said Redondo. Other developers will be watching the price closely.

The city estimates there are more than 21 thousand units under construction in Miami, nearly triple what's been built in the last five years. Developers are slowing down, but for projects like Platinum, online a full year late, it may be too late.

According to Dana Nottingham with the Downtown Development Agency, "The condo units will be filled. The people will be coming to Downtown Miami." Nottingham heads up the agency responsible for bringing all of these developers downtown. He is confident in 5 years auctions won't be necessary.

"More than half the people on the planet are moving to urban areas and we are at the forefront of that trend. When we look out at the future in the next 5 to 10 years, even right now, the urban experience that people want is here, it's visible," said Nottingham.

Nottingham points out while residential is in a downward spiral, downtown's commercial districts are improving dramatically. Some 50 new businesss have come online. In areas of midtown, it's having an impact. For Redondo's Platinum he says, "It's going to take time to sell."

But the question remains, will developers be able to stick around to see that impact through. If you're in the market for a condo, the auction is going to be a good measuring stick of what the market value is. It could be bargains for buyers and a reality check for developers.

 

How To Buy 200 Houses A Year
by Peter G. Miller

For many people it's not the best time to be in real estate. Markets have slowed or declined in most local areas and financing is tougher to get than a year ago. Chicago's Joseph Varan is also cutting back -- this year he expects to buy no more than 200 homes.

Varan is the president of a brokerage based in Woodridge, IL, just outside Chicago which deals in bulk sales and foreclosed properties. Varan is a bulk real estate purchaser and what's known as a "third party buyer." As a wholesale real estate purchaser he buys homes by the bunch from lenders who want to get rid of REOs -- real estate owned by lenders, insurers and investors which did not sell at foreclosure auctions. Varan is also believed to be the largest "third party buyer" in Chicago, meaning that Varan bids at foreclosure auctions, looking for discounts and bargains.

Varan started in real estate as an agent in 1982 and within a year made his first REO purchase -- a HUD foreclosure property. By 1986 he had his first successful auction bid. Varan explains that before 2002 he rarely was in the market to buy, however since then he has purchased more than 1,500 properties, typically 250 to 300 units per year.

Varan is the king of foreclosures in the Chicago area, and at first it might seem as though he fits the mold of no-money-down buyers hawked in get-rich-quick seminars. But Varan has been in the real estate business for a quarter of a century, has more than 50 employees, evaluates thousands of properties every month and requires substantial amounts of investor capital to underwrite his purchases. Why does Varan need large amounts of financing? One reason is to buy properties for cash, but Varan also has other costs such as property protection, insurance, property taxes and losses -- that's right, not every property is a winner and most produce only marginal profits. If you're a real estate investor with insufficient capital then a single weak purchase can doom your entire enterprise.

This year Varan expects to make fewer bids.

"Although I'm always buying, this year I am holding back on purchasing marginal deals to see what happens to the market," says Varan. "We are still buying, but on track for about 175-200 units for the year. I always need to adjust my pricing based on what the market is doing. I purchase on a scavenger basis and 90 percent of my inventory is sold to investors on an as-is basis who then repair the property and market it on a retail basis."

Foreclosures for the first six months were up 55 percent over the same period a year ago and one of every 134 homes is now in the process of foreclosure. These numbers are central to understanding turmoil in the mortgage marketplace -- and change in the new world of loan servicing.

Loan servicers have a key role to play in the foreclosure marketplace. Loan servicers typically collect mortgage payments and pay out property tax and insurance payments. In effect, they manage the practical side of mortgage debt for investors who own such paper.

However, loan servicing becomes enormously important when borrowers have financial problems. Should the servicer work out a loan modification with the borrower or foreclose? If the property is foreclosed and does not sell at auction, then what? Should the servicer sell the property "as is" or fix-it-up to get a better price? Meantime, who protects the property, takes care of utilities, orders title work, etc?

The Five Star conference attracts loan servicers as well as an array of people who work various part of the business -- big property owners, specializing brokers, lenders, lawyers, title experts, foreclosure services and wholesale buyers such as Varan. Given the growth of the foreclosure marketplace during the past few years, the Five Star is the epicenter of the loan servicing world.

Sale prices in the Chicago area as of the second quarter were actually up, says the National Association of Realtors. Its figures show that the typical home in Chicago/Naperville/Joliet was priced at $283,200, 1.7 percent above a year earlier.

More recently, however, real estate activity in the Chicago area has begun to turn. "The market has dramatically slowed down," says Varan. "In fact, the total number of sales for the last six months is down about 20 percent. The numbers for the most recent month have been dropping down to as low as 23 percent. Additionally, the inventory supply is now at 10 months."

People usually lose their homes because of illness, accidents, divorce or the death of a spouse. But for Varan, there are now new factors in the marketplace: Fraud and get-rich-quick investors. "Most homes that I purchase are already vacant, and I often do not know the reason for foreclosure," he says. "It appears, however, that many of these properties were involved in some type of fraud. The reason for this conclusion is that the previous sales prices of the properties are substantially above the area's market price. Furthermore, the loan(s) have usually been taken out in the last year or so. The other type of property that I frequently buy at foreclosure is one that has tenants; namely, homes that were bought for investment purposes and end up having negative cash flow. While some foreclosures are caused by illness, accidents or death, in my experience, those loans do not have a great impact on the foreclosure rate of the homes that I purchase."

Varan's marketplace strategy is dictated by investor requirements, investors who allow him to purchase properties for cash. Most want to re-sell a property within six months. As to Varan's buyers, they could be people who just want a residence, but typically they're investors who buy homes in "as is" condition, fix 'em up and then rent or re-sell them. A look at property for sale by Varan as of this writing shows prices that range from those requiring an initial bid of $10,000 to a commercial property priced at $3.5 million.

Looking toward the future, Varan says "buyers will continue to exercise the 'wait and see' approach. Consequently, values and sales will continue to decline. It will take some time for the economy to absorb the consequences of the mortgage industry overly extending itself. With the Fed's assistance, however, including lowering rates, the mortgage market will have more liquidity, and therefore, money available to loan out."

 

The new land grab | Private equity firms and hedge funds are snapping up cheap land in markets where real estate has gone from boom to bust.

 

By Katie Benner, Fortune reporter

 

(Fortune Magazine) -- Picking off land from over-leveraged homebuilders during crashing real estate markets was once the purview of local developers. This time, however, global players, including D.E. Shaw, Apollo Real Estate Advisors, and the Rockefeller Group, are eyeing land in Florida, Colorado, California, and other subprime-ravaged states.

Their plan is obvious in the wake of the real estate meltdown: buy these hard assets and wait until the markets bounce back. "The Rockefeller Group is actively researching Florida properties that may become available for purchase," a spokesman for the New York-based investment and real estate firm told Fortune. "There are definitely opportunities for homebuilders to sell some of the land they acquired when the residential market was very strong."

 

Year-old fund plans to invest $200 million to $400 million in land; so far, has looked at 300 deals and bid on a handful in Florida. The explanation for this hot money pouring into land has to do with the fact that firms and funds have been raising capital for real estate purchases for the past decade, putting it to work whenever opportunity strikes. Land just happens to be a value play at this moment. 

 

Private equity's black sheep

"Anywhere from two years to 18 months ago, the smart people saw prices, costs, and construction going through the roof. They knew they couldn't just finance builders," says Tom Shapiro, who runs real estate private equity firm GoldenTree InSite Partners. He adds that typical real estate funds, which invest in more than just land, have serious war chests to put to work.

Last year Apollo raised a $700 million Real Estate Opportunities fund that it has used to buy land in Arizona. And last month the Carlyle Group closed a $3 billion fund earmarked for U.S. real estate investments.  

 

Then there are the specialists: Cypress Creek Capital Florida Land Investors, whose sole purpose is to bank land, plans to buy $200 million to $400 million worth over the next few years. The fund has looked at more than 300 deals and made several offers, says executive vice president Steven Beauchamp. He thinks it will be possible to buy at a discount as low as 40 cents on the dollar compared with what the current owner paid.

 

In Florida representatives for Goldman Sachs and Michael Dell's MSD Capital have also been looking at land investments since early this year, according to Jack McCabe of McCabe Research & Consulting, a residential research firm based near Boca Raton. "The home and condo builders bought big tracts at prices based on the height of the market," he says. "They can't sleep at night now because they're going down like the Titanic, so eventually a loss on a sale doesn't seem so bad."

 

Fortress and Carl Icahn are playing here too. In July, Fortress acquired Florida East Coast Industries, whose assets include a railway and a real estate development group that controls more than 4,000 acres of undeveloped land. Since January, Icahn has been agitating for control of Florida condo builder WCI, whose coastal land holdings some analysts say are worth as much as the book value of the company. Icahn won board seats in August.

 

In Colorado, land once owned by national homebuilders is changing hands at a steep discount. Mike Kboudi, a land broker at Denver real estate firm Fuller Co., says he has made land sales for Centex (Charts, Fortune 500) and Lennar (Charts, Fortune 500) for as little as 50 cents on the dollar. But brokers in all these states say investors are waiting for prices to fall further. "Buyers believe prices haven't hit bottom," says Peter Zalewski, a longtime Florida broker. "When prices stabilize, we'll see a flood of deals." Brokers say most investors expect to see a return on investment in five to ten years.

 

In California, Forestar Land Partners, a joint venture between real estate investment firm Starwood Capital and developer Foremost Communities, is emerging as a buyer to watch. Run by local building veteran Steve Cameron, Forestar was formed in June to buy $250 million worth of land in Southern California over the next several years. The national-local hybrid is a popular approach. Local partners can soften the blow as Wall Street opportunists head into troubled regions. They can also act as intermediaries between banks looking to avoid foreclosures on loans and developers that want to avoid the black eye of unloading inventory at public auctions.

 

"They're all Ivy League MBA guys who are sharp and rich, but they're not experts on this market," says McCabe of the new investors on the Florida scene. Sure, the arrival of private money gives this unfolding real estate cycle a different flavor, but once prices bottom out, the players hope the basic recipe remains the same. Low interest rates will eventually revive the market, and builders will return to bid up land prices. The vultures ostensibly may be buying land, but they're really investing in the idea that humans never learn.

 

The king of real estate repo

09:19 PM PDT on Tuesday, September 11, 2007
By JOSEPHINE CHENG / Evening Magazine

You wouldn’t believe Boyd Watkins is a millionaire from his small, slightly run-down house in Burien, Wash. “It’s obviously got some dry rot on this deck,” he says. But this is one of the 180 houses Watkins owns.

See, Watkins is the king of real estate repo. He buys repossessed properties at government auctions. He started out in the 1970s and, within a few years, went from being loaded with debt to just plain loaded. “We’ve been doing well,” he says.

Watkins says he can turn almost anyone into a millionaire the same way. All you need is a computer.

Each Friday the Federal Housing Administration and Veterans Administration post new listings of foreclosed properties, now for sale to the highest bidder. Owner-occupant bidders have priority in the opening round, but that leaves plenty for investors.

So how does Watkins decide which houses to buy? Check out the video to find out.

 

Auctioneer Opens Permanent Office in Ponte Vedra Beach and Naples Florida

Exclusively Auctions - operating via the webname "MyNextAuction.com" has opened a permanent office in both Ponte Vedra Beach Florida and Naples Florida.

This past year, Exclusively Auctions, headed by Nicholas Varzos, a 25 year career auctioneer, and Elaine Casteleyn, a Luxury Homes and Who's Who broker in Lake Tahoe NV, ran several preliminary auctions in the northeastern portion of Florida.

Specifically, they focused on very difficult to sell properties that had listing times of over 1 year on their MLS rosters. The first of these homes on Roscoe Boulevard sold at $1.76M - above the appraised value of $1.52M. Both the buyer and seller were ecstatic in the face of the animated auction. (video clips available at www.MyNextAuction.com)

The next home was a Condo on Jacksonville Beach. It was appraised at approximately $500,000 and sold in about four minutes for $555,000. Another sale, later held on Roscoe Boulevard sold at approximately $1.3M after lingering some 500+ days in the stale Florida market.

Due to these, and other significant auction successes, Exclusively Auctions Inc has selected Mr. Dennis Doheny of the Doheny Group to lead their brokerage operation in Florida. Dennis has been prior running commercial brokerage transactions in the Boca Raton area of Florida.

As part of their successful strategy, Exclusively Auctions uses highly visible local brokers to co-op their marketing strategy. In Ponte Vedra Beach, Mr. Gerard Soriano, the accelerated marketing manager for Ponte Vedra Beach Realty (Kim Davis, Broker), has acted as the auction showing agent on several of the successful test auctions.

As to the very soft Naples market, it is being headed by Mr. Jonathan Foege and Carmen Badan. Their first effort into the difficult Naples market was for a broker client, who was a past president of the local MLS Board. His home was marketed with the unique and high level style that Exclusively Auctions has developed in the western United States. In the face of a difficult and almost antagonistic MLS Board, these young directors brought their first sale in less than 30 days for a whopping $2.1M.

Mr. Varzos, a prior president of the AAF (American Advertsing Federation) on the west coast, suggests that there are still plenty of people with both money and a desire to purchase - especially in the face of falling prices. As such, the problem his company has defined is to speak to the most qualified people possible and to bring them the opportunity to purchase a 'market value' - all within a marketing budget that is less than 1% of the value of their property!

Exclusively Auctions can be found on the internet at www.MyNextAuction.com - Their direct phone is 888-826-7310. Exclusively Auctions is a member of the NAA (National Auctioneers Association).

 

 [USPRwire, Sat Aug 11 2007] Auctions are quickly transforming the nation's real estate market. No longer the last resort of homeowners seeking to dump distressed properties, auctions have become the sales method of choice for savvy sellers and buyers. In fact, the National Association of Realtors projects that 35% of all real estate sold in the U.S. over the next several years will be done so through auctions versus conventional real estate brokers.

Increasingly, homeowners from all economic backgrounds are embracing auctions, preferring the many advantages this method provides such as the:
• Quick disposal of a home;
• Ability to present the property to a large number of pre-qualified buyers at one time; and
• Elimination of long negotiation periods
Former General Electric chairman Jack Welch sold two homes using the auction method. Welch turned to the auction method after trying unsuccessfully to sell his home for three years through traditional real estate channels. When he decided to sell another home, he immediately went the auction route.

Wayne Greer, president of Washington, DC-based Wadsworth Steele Auctions, has seen a dramatic increase in home sales through auctions. “More and more homeowners---wealthy, upper middle class and middle class--are choosing an auction over negotiated treaty (traditional real estate method)." For example, Greer tells of a current client, a frustrated retiree now living in Trinidad who owns a 2,056 sq ft home on 1.72 scenic acres in Pennsylvania’s Pocono region. "She had her home up for sale a year without receiving a single offer. Like a lot of people in her position, she turned to us and we're very optimistic that her home will be sold at auction later this month," he explains.

For prospective buyers, auctions offer significant benefits too.
• Auctions reduce time to purchase property
• The buyer knows the seller is committed to the sell
• Properties are usually purchased at fair market value through competitive bidding

"We think it's important to educate the public about the benefits of real estate auctions," explains Greer. Later this month on August 25th, the company will auction off the Pocono property. While the auction is expected to attract savvy buyers seeking an investment property, a second home, or a vacation getaway, Greer also encourages first-time homebuyers and those unfamiliar with the process to attend.

"Real estate is the foundation of wealth in this country, and more and more Americans are successfully using auctions as a way of securing their financial futures. It's important that property buyers and sellers be aware of all of their options" notes Greer.

 

Developer Says Real Estate Buyers Are Too Worried
 
Serene Branson
Reporting

(CBS13) WEST SACRAMENTO Developer John Leonard is banking on a quick auction to unload new homes. Local modern townhouses are top of the line, are within walking distance to downtown, and on the growing West Sacramento riverfront. Three have sold since last fall. The problem is, the remaining 22 have simply sat.

"People are waiting for permission to go back into the market," said Leonard.

Leonard says the gloomy real estate market has scared buyers off. Many are waiting for the market to settle and the forecast to brighten up.

"Buyers need to have comfort making a good decision they're relying on input of people they trust parents, friends and family right now the common theme is wait," said Leonard.

He's right to some extent.

"I think the bottom would stop a year from now if I was going to buy I think another year I'd wait," said Bill Gloor, who's waiting to buy real estate.

But Leonard argues that kind of attitude goes out the window when you're buy is a bargain.

"Our thinking is if we tell them that were going to give away and the highest bidder gets in then there's a reason to come out of the woodwork and do the deal," said Leonard. "We didn't cut any corners all the details are here all the amenities are here. Now it's time to sell."

Leonard is not being forced to sell. He is current on his loan, but wants to move on, he says. The auction will take place on September 22, at Sacramento's Double Tree Hotel.

 

Efforts to lure Gen Xers, Canadians are under way

Jodie Snyder
The Arizona Republic
Jul. 13, 2007 12:00 AM

For the second consecutive year, Arizona is getting a record number of tourists and their travel dollars. In 2006, Arizona's 34 million visitors spent $18.6 billion. That's up 6 percent from the previous year.

On average, tourists spent $50 million a day in Arizona, the bulk of it in Maricopa County. The numbers were part of a state-of-the-industry review given Thursday by the Arizona Office of Tourism.  During the event, the Arizona Governor's Conference on Tourism outlined some of the industry's opportunities and challenges.

The biggest reason for Arizona's record numbers was out-of-state leisure travelers, who increased 5 percent over 2005, said Melissa Elkins, research manager for the state Tourism Office. About a third of those travelers are from California.

State tourism officials are trying to increase the number of Generation X travelers coming to the state for fun.  It's not clear whether the strategy is working, although the average age of an out-of-state leisure traveler is 49, down from 51 in 2005.

The Gen X group, which includes those in their 30s and early 40s, is an interesting market to tap in to, state Tourism Director Margie Emmermann told conference members. "You know that these travelers have the uncanny ability to completely ignore traditional advertising," she said.

In response, the state Tourism Office is trying unconventional marketing methods, including advertising in California gyms and yoga studios and handing out free mats with the phrase "Arizona: Room to Roam" on them. International travel to Arizona in 2006 remained flat, following a national trend. State tourism officials attributed the leveling off to U.S. entry procedures and politics and changes in global travel patterns and populations.

One such change is a move by China to become a destination spot for international travelers. Macao, a former Portuguese colony handed over to China, is now working to surpass Las Vegas as an entertainment mecca, said AnnDee Johnson, director of research and strategic planning for the state Tourism Office. However, there is good news on the global tourism front. A surprisingly bright spot for international travel in Arizona is the Canadian market. Preliminary reports show a 17 percent increase in visits from Canadians in 2006.

 

Forty acres and a pool
By Matthew Engel

Financial Times - LONDON

The blonde weathergirl on Channel 3 said the temperature would peak at 110 that afternoon. The American attachment to fahrenheit somehow makes these numbers more dramatic than if she had said 43 degrees centigrade. But she didn’t bother with the drama. This was a July Sunday in Phoenix, Arizona, and the weathergirl gave her report the emphasis forecasters in most cities would bring to “a little light shower”. It was the 55th day over 100 in 2007, and there were plenty more to come.

Still, people like to know. The local paper, The Arizona Republic, gives the temperature for 252 cities worldwide. Only two of them beat Phoenix that day: Bullhead City, up near the California state line in Arizona, and Riyadh, both on 113. Baghdad was 110, a dead heat. By midweek, Phoenix had gone clear of the pack, at 114. And the other places all fell below 90 at night, an intermittent occurrence in mid-summer Phoenix. There is a more significant difference: the world is not flocking to Baghdad or Bullhead City or Riyadh. It is to Phoenix.

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In 1950, the city had 106,000 inhabitants, making it the 99th most populated in the US. It now has 1.6 million, and has just moved ahead of Philadelphia into fifth place. But Phoenix is merely the centre of a 70-mile-long built-up stretch along the desert floor. Greater Phoenix has almost doubled its population since 1990, and is nudging four million. Phoenix itself might one day be rivalled by its own satellites – suburbs such as Mesa (already bigger than Atlanta) and its westernmost exurb, Buckeye. “When I got here, that was just a drop of spit at an intersection,” said one relative newcomer. Buckeye is now talking of reaching a million by 2050.

All over the desert south-west the trend is similar. Nevada (from a much lower base) has in some years seized the title of fastest-growing state from Arizona, and the suburbs of Las Vegas march across the desert floor in phalanxes. Albuquerque, New Mexico, has multiplied tenfold since the second world war. Tucson, Arizona’s second city, is booming too; soon motorists won’t know where Phoenix ends and Tucson begins.

Migration is the biggest political issue here. Down on the border, vigilantes try to help the hard-pressed patrols stop Mexicans from illegally entering the US. Success is thought to be limited. But the Mexicans constitute a small proportion of the numbers arriving. The real hordes are coming from much further away, but legally, from inside the US – especially the great population centres of the old Midwest: Chicago, Detroit, Cleveland. It represents one of the biggest unforced migrations in history. Yet it is not a matter for debate in Arizona, or even much comment.

These migrants are moving to an area that is not just hot, but dry. In late summer there arrives what is laughably known as the Arizona monsoon. Talk about a drop of spit. Phoenix gets seven inches of rain all year: a real monsoon might deliver as much in a day. Objectively, this place is only slightly better equipped to support human life than the moon.

Furthermore, it is getting hotter. “The south-west is a region where all the computer models predict warming,” says Robert Balling, professor of climatology at Arizona State University (ASU). “It’s a very good bet the area will be warmer by 4-7ºF by 2050.” The slightly better news, he adds, is that most of that warming should affect winter and night-time temperatures, rather than the monstrous summer maxima. All the locals say the summer nights are already hotter than they were in their childhood.

But Balling’s figures take no account of what climatologists call the urban heat island effect (UHIE): the mega-development itself adds more warming, because the concrete and asphalt do not absorb the sun’s rays the way the desert did. You can feel it. In the city, the heat bounces around off the walls and the road so that shade provides no respite. And the occasional puff of wind feels even hotter than the stillness.

This vast megalopolis lay very still indeed that Sunday. The streets were deserted: occasional figures scurried from their cars to the nearest climate-controlled sanctuary. Here, there are no lazy, hazy, crazy days of summer. The big Sunday event was the baseball game (the Arizona Diamondbacks versus the San Diego Padres) and at the ballpark there was plenty of soda, pretzels and beer, with no risk of sunstroke – the retractable roof stayed firmly shut.

Weekdays are not that different: no one lingers outdoors unnecessarily. Native Arizonans complain constantly about the heat (“I’ve just got back off vacation,” one government official told me, “and I don’t know how anyone lives in this place.”) But I never heard any of the newcomers moaning. After all, summers in Detroit and Chicago aren’t that mild either, and the winters are extreme. No one here has to shovel snow off the driveway.

The marketing department at ASU does not have to work too hard to attract suitable students, who can of course skip the summer heat. “In November, one of our football games will be on TV with all the spectators in shirtsleeves,” Balling explained. “We invite prospective graduate students to come in February. We show them our outdoor swimming pools, and they’re all packed. They seem to like that idea.”

Conditions may be extreme, but they are untheatrical. Arizona does not have earthquakes, tornadoes, hurricanes or blizzards; floods are so rare that some pioneers built houses not just in the flood plains but in the dried-up river beds (which was pushing their luck). Here is the American dream in action: the same dream that powered the original conquest of the west. This, for many, is new, improved California – even more sunshine (320 days a year), reduced fear of disaster, lower crime, more jobs and cheaper land. Some of the newcomers are indeed refugees from southern California, who sell up and buy houses twice the size. It seems like a virtuous spiral: the construction boom, which provides a third of the jobs in itself, and the general employment boom (winter tourism, aerospace, semiconductors, electronics, back-office work) chase each other upwards.

But there are parts of the dream that merge into fantasy, even delusion. One is the notion that the unhappy can heal themselves by moving. “I had things in Cleveland I needed to put behind me,” one incomer told me. He didn’t look happy. Another is the American belief that they can always conquer difficulties just by force of will, which is why they are seeking happiness in this unpromising terrain.

Arizona achieved statehood (number 48) 95 years ago. So no one is worrying much about 2050 – it’s an aeon away in Arizona time, and they might have a dome over the whole state by then. Hardly anyone would be here but for air-conditioning, which first enticed the elderly (in the 1950s and 1960s) keen to evade northern cold and damp, and then their children and grandchildren. I tried to find some households living without it, and was advised not to bother. Even the poorest get by with a primitive version known as a swamp cooler.

Then there is water. Like astronauts, Arizonans survive by importing it. This isn’t new: the Hohokam Indians started a network of irrigation canals around 300BC, and by AD1000 had a sophisticated agriculture-based civilisation. But, in the words of Patricia Gober, an ASU geography professor and author of Metropolitan Phoenix, the seminal study of the city, the Hohokam “were not, in the end, able to manage the extremes of their natural environment”, and their civilisation disintegrated. And there were only about 40,000 of them, without flush toilets or manicured golf courses.

The water politics of the western United States are complex, but come down to one fact: there is not enough. Life depends on the Colorado River, renewed each spring by the snowmelt from the Rocky Mountains. Phoenix’s future depends not on its own paltry rainfall, but on the continuation of snow in Wyoming, nearly 1,000 miles away. Snow: the very thing the folks from Chicago came here to escape.

The share-out of water between the states is governed by the Colorado River Compact, drawn up on highly optimistic estimates of river-flow. And if crisis point comes, Arizona would be towards the back of the queue. “There is no rational reason for a city to be where Phoenix is,” says Phil Clapp, head of the Washington-based National Environmental Trust. There is no problem yet. It is a curious fact that all the toilet-flushing, pool-using, golf-playing inhabitants of a new subdivision still use less water than an irrigated field of cotton or alfalfa occupying the same space.

The modern equivalent of the Hohokam’s canal system is the Central Arizona Project, built between 1973 and 1993 to pump river water to Phoenix and Tucson. Though Tucson (with even fewer resources of its own) is now starting to push its limits, Phoenix continues to expend water, well, like water. The weather page of the Republic, along with its 252 world temperatures, tells residents how much water is needed each day to keep their lawns green. It seems like incitement.

There are 300,000 swimming pools in Greater Phoenix, with 20,000 being added each year. If left alone, they would almost entirely evaporate inside a year. “I am ecologically friendly in other areas,” said Katherine Christensen from the Ahwatukee Foothills, “but not so much as it relates to the pool.”

There is a fashion now for “xeric” gardening, planting to replicate the desert which has been destroyed. But the older suburbs such as Scottsdale still resemble County Tipperary, maintained by sprinklers. So do the area’s 80 golf courses (air-conditioned carts a speciality). Bars waft water vapour into the air to encourage outdoor drinkers. “Rainy cities such as Seattle and Portland have a more stringent water conservation plan than we do,” said Chad Campbell, a former Sierra Club activist turned state legislator, “because we have nothing.”

One gets the feeling that some newcomers would be shocked to discover they had moved to the desert. Mike Stephens, editor of the Republic’s edition serving the exurb of Chandler (1980 pop: 29,000; 2007 pop: 240,000), wrote a blog entry saying he had been stung by one of Arizona’s long-standing residents, a bark scorpion. There was a large and horrified response from readers. But the takeover of the bark scorpion’s territory in Chandler is nothing compared to events next door in Gilbert, another of Maricopa County’s 27 separate communities, and named in 2003 as the fastest-growing place in America. This year, Mayor Steven Berman said sadly, it has dropped back to fifth.

Some of that growth is organic. Gilbert’s 200,000 inhabitants are largely Catholic and Mormon, religions that encourage enthusiastic breeding. “We have the highest proportion of married couples in the country,” said Berman, again with a hint of sadness, since he is single himself.

It is not clear how a non-churchgoer might meet anyone in such a place. The old American tradition of open gardens has vanished out here (pools need safety measures), and everyone swims and barbecues behind 6ft walls. To an outsider, it seems dismal and conformist. But the crime rate is paltry, the schools are good, there is no snow shovelling – and the people keep coming.

“When I first ran for office in 1987, my campaign platform was to stop the growth,” Berman recalled. “It didn’t work. I was in a primary with nine candidates and eight advanced to the next round. I came eighth and my running-mate was ninth. So being the good salesman I am, I changed my pitch.” He says he could not stop Gilbert’s expansion anyway. “We have property rights in this country. We stole it from the Indians fair and square, and people feel strongly that if you own land you can build what you want on it. So there is no legal way you can stop the growth. We have zoning, but if you have 20 acres of land, and I said, ‘I’m the mayor, and I say all you can do is look at it,’ you’d take me to court, and you’d win.”

There are a few dissidents. Gilbert once grandly styled itself “the hay capital of the world”. And Julia Rempel of Ranchos del Sol Feed and Seed still sells hay to a diminishing customer base. “Gilbert, Arizona,” she muses. “Not even a speck on the map when we moved here 37 years ago. Our lifestyle has totally changed. We used to get on the horse and ride all round. Now there’s no place to ride except on the highways.” Many of her customers have gone, too. Some sold their land in Chandler and Gilbert and moved across to the dusty outpost of Buckeye to make money on the next wave. And they are finding plenty of takers. “I love it,” said Rhonda Costa, who came to Buckeye from Tennessee to escape the humidity. “It’s so quiet.” Of course it may not be quiet for long. “Buckeye still offers that small-town appeal of moral values,” realtor Jim Parker told me.

“But it won’t have that if a million people live here,” I protested. “I imagine we will pick up some other lifestyles,” he replied. Buckeye has annexed huge tracts beyond the White Tank Mountains to achieve its dream of being the new Phoenix. No one imagined 20 years ago that people would be living beyond the White Tanks. Now, nearly 40 miles from downtown Phoenix is Tartesso, its status as the uttermost outpost of the city seemingly backed up by the first street sign you see: 293rd Avenue.

In the vicious midday sun, Tartesso seems despairingly bleak. Surely this is where the Arizona dream will finally shrivel: there is not even a mad dog to be seen along with the visiting Englishman – just the Mexican builders, working uncomplainingly, and Juan the ice-cream man. He gets good business from the builders, and insists plenty of families are moving in, and that his year-round trade is booming. “You can’t come here and say it’s the middle of nowhere,” said Charlie Patrick of Hacienda Homes, “because four years from now it won’t be the middle of nowhere any more.” He may be right: his Tartesso houses start at $174,990, which wouldn’t buy a matchbox in San Diego.

So where does it end, if not in Tartesso? No one knows. Arizona’s government is acutely aware of all the issues, including the difficulties of ferrying Buckeye’s commuters to the city on an already crowded highway. But Arizona law gives the state little leverage against either the communities or the individual.

Democratic Governor Janet Napolitano’s environment chief, Steve Woods, was once Al Gore’s chief of staff, and he is working on a strategy of “smart growth”. But, as he admits, it’s a little late. “Growth here is inevitable. The issue is the type of growth. The chance was there to stop Phoenix becoming another Los Angeles. Not only have we not stopped it, we’ve done everything we can to become another Los Angeles.” Greater Phoenix currently has a quarter of Greater LA’s population in half the acreage.

But Woods insists that things are changing. “A county can now deny a developer the right to build in the desert if there’s no water there. That’s a major revolution in Arizona, and there was a big fight in the legislature.”

But too many livelihoods depend on continued expansion for it to stop. “If the worst impacts of climate change come to pass in the second half of this century, then it is very unlikely that these cities can maintain their current population levels, never mind their predicted levels,” says the environmentalist Phil Clapp. “The resources available in water and power are likely to shrink. At the minimum, life there will become massively more expensive or uncomfortable.”

An Arizonan would say the green lobby has cried gloom and doom before now, and that American ingenuity and inventiveness has found a way through.

“Is anyone completely opposed to further development?” I asked Woods. “Yes,” he said, “my 15-year-old son.” An outsider might see young Woods as the sanest voice in the state – and it is, after all, the kids who will have to cope.

 

 

'Underpriced' at $100 Million
Five houses are vying to be the most expensive ever sold, market slump notwithstanding.
Ben Casselman and Christina S.N. Lewis handicap the race.

By BEN CASSELMAN and CHRISTINA S.N. LEWIS
August 24, 2007; Page W1

It might seem foolish given the recent news from Wall Street, but a group of homeowners is holding firm on an ambitious goal -- to break the record for the most expensive home sale in American history. The price to beat is $103 million.

Two years ago, at the peak of the real-estate boom, only a handful of homes in the U.S. had ever been listed for $75 million, let alone $100 million. Even the highest residential sale to date -- investor Ron Baron's $103 million purchase earlier this year of a 40-acre compound in East Hampton, N.Y. -- was never publicly listed. The deal was so secret that the brokers weren't named.

Fleur de Lys: The L.A. mansion is modeled mainly after the 17th-century palace of Louis XIV's finance minister.
 
Maison de l'Amitié: The seven-acre, Palm Beach, Fla., compound features 475 feet of ocean frontage.   

Tranquility: This nine-bedroom compound sits on 210 acres in Zephyr Cove, Nev., overlooking Lake Tahoe.

There are five contenders for the current prize, including a Beverly Hills compound once owned by William Randolph Hearst and Marion Davies that's listed for $165 million; the Aspen home of Saudi Prince Bandar bin Sultan, which has been visited by the past three U.S. presidents ($135 million); and an estate overlooking Lake Tahoe with a staircase modeled after the one aboard the Titanic (a dark horse at $100 million). All have come on the market since summer 2006.

To drum up interest, brokers for these properties are working like political operatives -- issuing press releases, leaking news about potential buyers and making personal appeals to billionaires. They admit to looking through SEC filings to vet interested parties. Robert Kass, who is co-listing the fourth contender -- a Los Angeles chateau for $125 million -- recently spent a month traveling to London, Moscow, Istanbul, Dubai and the Côte d'Azur, meeting with potential customers. "There are buyers that could be in Pakistan," says Shari Chase, who is handling the Tahoe estate.

Brokers and owners say they aren't involved in a footrace but they do admit to keeping tabs on the competition. Donald Trump, whose Palm Beach estate rounds out the list at $125 million, dismisses Prince Bandar's $135 million asking price as a case of "some character putting on a price just to try to top Trump." (Prince Bandar declined to comment. ) As for the $165 million Beverly Hills listing, Mr. Trump calls it "a joke." ("If Donald Trump owned it, it would be the best house in the world," says the property's broker, Stephen Shapiro.)

While the top of the real-estate market has been thriving, fueled by Wall Street bonuses and foreign cash, buyers at this level aren't immune to wobbly markets. Pat McPherron, a housing analyst at Moody's Economy.com, says banks may want to see more cash on hand, even from billionaire borrowers.
 
Historic grand homes  
Then there's the question of whether anyone will pay these prices. "One hundred million is an insane amount to pay for a house," says Jim Clark, the billionaire co-founder of Netscape. Joan Waitt, the wife of Gateway co-founder Ted Waitt and the owner of multiple homes including a San Francisco mansion on the market for $25.9 million, says she has no plans to write a check in excess of $100 million for a house. "It's kind of a ludicrous number," she says, "unless you're buying an island."

Record asking prices haven't always guaranteed record sales -- or sales at all. Executors of the estate of oil- and film-industry billionaire Marvin Davis originally listed his Beverly Hills home for $70 million, but people familiar with the deal say it sold in 2005 for roughly $45 million. Manhattan's most expensive listing, Martin Zweig's $70 million penthouse atop the Pierre Hotel, has been on the market for more than two years. (Listing agent Elizabeth Lee Sample says that she's had offers at the asking price but didn't think the prospective buyers could get past the building's rigorous co-op board.)

Nonetheless, Suzanne Saperstein, owner of the $125 million Los Angeles chateau, says she has no plans to cut her price. "I'm in no rush," she says. And more contenders are on the way. Developer Frank McKinney is building a house in Manalapan, Fla., that he plans to list for "at least" $135 million, while land baron Tim Blixseth is asking $155 million for a yet-to-be-built Montana estate. Entertainment billionaire David Geffen has quietly shopped his historic 9.4-acre Los Angeles estate for $100 million, according to a broker who has shown the property.

This Beverly Hills compound, once owned by William Randolph Hearst and Marion Davies, lists for $165 million.  The U.S. doesn't have a monopoly on extreme listings -- or extreme sales. The international home sale record is thought to be held by a London property that sold in 2004 for £70 million (about $128 million at the time). A Paris home is on the market for €100 million, or roughly $135 million.

As for the current domestic contenders, the jury is out. Mr. Trump's property includes valuable Palm Beach ocean frontage, but some agents call the house a "teardown." Los Angeles brokers are unanimous in their opinion that the Hearst estate is overpriced -- by some accounts by as much as $100 million. And while Ms. Chase says she believes the Tahoe property is "underpriced" at $100 million, others point out that it isn't even on the lake.

So which one, if any, will break the $103 million U.S. record?

 

The NAA Auction Industry Research Study has been updated and is now available online. Just click here to check it out.

NOTE: This file is large (6MB) and may take a few moments to download depending on your internet connection speed.

 

Auction Industry Report Projects Continued Positive Growth

 

July 23, 2007, Overland Park, KS - During the "State of the Industry" forum at the 58th International Auctioneers Association Conference and Show in San Diego, the National Auctioneers Association (NAA) unveiled industry projections for 2007.  The industry survey was conducted by MORPACE International and projected the industry to grow $7.6 billion in 2007. If the current trend continues, analysts project industry revenues to reach $264.8 billion by the end of the year.  This is the fourth consecutive year that the live auction industry has witnessed growth. In 2006, the total value of goods and services sold at auction totaled $257.2 billion, an increase of 7.1% from 2005.

 

The MORPACE survey tracked growth within individual auction specialty areas.  The largest auction specialty segment with estimated gross sales of $87.3 billion in 2006 was automobile auctions.  The fastest growing auction specialty is real estate. Residential real estate auctions grew 39% between 2003 and 2006. During this same time period, land and agricultural real estate grew 33% and commercial and industrial real estate grew 27%.

 

The MORPACE quarterly survey compiles data from NAA members and non-NAA members.  Forty-one percent of respondents reported an increase in gross sales receipts through the first half of 2007, with twenty-nine percent reporting "no change", and thirty percent reporting a decline.  Thirty-four percent of NAA members say they have conducted more auctions in the first half of this year compared to last year.  The survey also highlighted growth in the real estate sector with thirty-six percent of respondents reporting increases in residential real estate sale receipts and a twenty-three percent increase in commercial real estate.  Charity auctions were also reported on the rise. Since 2003, total growth of this auction segment has increased 16.3%. 

 

To view video of the "State of the Industry" forum and James M. Leiman's, Ph.D, MORPACE presentation visit www.naameeting.org.

 

Wet, White or Warm
By Jennifer Martin

Vacation homes in waterfront, ski and desert areas remain a hot commodity. If the devastating hurricanes of 2005 have slowed down the market for second, third or fourth homes, youd never know it. In desert, ski and waterfront markets, sales of vacation homes are soaring, and Realtors are scrambling to keep up with the demandeven in coastal areas. Its been an unbelievable summer.

Maybe the lack of hesitation is rooted in the fact that buyers of multiple homes, by definition, have at least one other residence to which they can retreat should any damage befall their investment property. In fact, many buy their second and third residences with cash and some dont even bother buying insurance. A lot of them are just self-insured; they take their chances, White said. I think people understand that hurricanes are just a way of life down here, the way blizzards and tornadoes are in other areas.

Desert Homes

Tucked away in the desert of southern Arizona is a hidden gem luxury owners are discovering: Tucson, pop. 486,699. Newer homes alongside golf courses are available for $1.5 million to $2 million, an unheard-of price in other areas of the country. And while home prices are appreciating 10 to 17 percent per year, theres not even close to a bubble here. We're still experiencing a lot of buyers coming here from other parts of the country, especially California. In some cases, Californians can double the size of their homes and get better amenities for less money.

Others are using Tucson homes as winter havens. People are selling their $7 million properties in Seattle, downsizing to a condo there, and living here five months of the year. Many even stay through the summer. At 2,600 feet above sea level, Tucson is 5-to-10 degrees cooler than Phoenix, on average. Its surrounding mountain ranges create spectacular views, and with its range of five-star spas, Tucson has been rated the number-one spa destination by the Zagat Survey.

Cox believes many people come to Tucson because of the lighter population base. Traffic is relatively easy to navigate, and at the areas international airport, lines are short. Its easy to commute to Mexico, being so close to the border, she said. There are many direct flights into Cabo St. Lucas, resorts where people can play tennis and enjoy the sun, Cox said.

Scottsdale is also drawing is perennial share of vacation home buyers, and there's now a shortage of exclusive properties available. Buyers frequently spend months looking for homes in the $2 million to $5 million range with great views, newer construction, upscale amenities and 4,000 to 5,000 square feet of space. The buyers don't always have the selection they'd like to see, she said.

Part of the problem is that home sellers also are looking for a new residence at least as attractive as theirs. Or theyre planning to build a new house, and it takes longer to accomplish because of the higher cost of lumber and concrete, Bradley said. Landscapers and pool labor are also growing more expensive. And the construction prices will probably increase even more this year because of Hurricane Katrina.

Still, there are some hot real estate trends in Scottsdale. Many people, including younger ones in their 40s, are moving to gated communities such as the exclusive Silverleaf enclave in the northeast part of Scottsdale. They like the 24-hour security, adding there's one more bonus they enjoy: Some are getting older, and they like to be where the golf courses are.