The Housing Bubble

The Desert Sun reports from California. “Home sales in February dropped 25 percent across the Coachella Valley compared with the same month in 2006, with sales of new homes tumbling nearly 43 percent and fueling the overall decline, a new report shows. The valley’s overall median home price dropped 4 percent to $393,000, brought down by a 7 percent decline in the median price of condos to $350,000 and a 10.6 percent decline in the median price of new homes to $370,000.”

The Press Enterprise. “Inland builders and industry trade groups say they are cautiously watching the new-home market for signs of softness amid concerns about late payments on subprime loans and a national study showing that builders’ confidence is waning.”

“The National Association of Home Builders released its monthly study, showing the West region, which includes California, the index also registered a 36, which was down 30 points from the 66 seen in March 2006.”

“‘We recognized that the market was showing signs of slowing six months ago,’ said Jim Rex, Inland regional president for Hovnanian Homes.”

“Fred Bell, executive director of the Building Industry Association’s Desert chapter, said builders are watching the mortgage market, saying they ‘don’t want to deal with a bunch of cancellations’ on new-home orders. Pricing could see slow to flat appreciation this year, as the Coachella Valley deals with a glut of new and resale homes for sale.”

The Visalia Times Delta. “Acknowledging that potential home buyers remain on the sidelines, a spokesman for Centex Homes, one of Tulare County’s largest homebuilders, confirmed that the company laid off 18 employees late last week.”

“It was the company’s second wave of layoffs in recent months. In late 2006, blaming lagging sales, the Dallas, Texas-based company cut its Central Valley workforce by more than 10 percent.”

“‘Things have slowed down,’ said Mike Wyatt, division president. ‘The investors that had been coming in and creating all of the frenzy have disappeared.’”

“Wyatt said there is a five-month supply of standing inventory in the new-home market. The company also has been affected by recent turmoil in the so-called ’subprime.’ ‘We did have about 25 percent of our buyers last year going with subprime loans,’ Wyatt said. ‘We’re staying away from that area now.’”

“Centex, which now employs 234 people in the Central Valley, has laid off nearly 20 percent of its workforce in Visalia, Bakersfield and Fresno in the past three months.”

The Recordnet. “The number of building permits for single-family homes in San Joaquin County (is) down from a year ago. The real test is forward - whether tightening down on financing standards because of the current rash of foreclosures will knock many people out of the buyer’s market because they can no longer qualify for loans.”

“Some builders are reporting deals falling through with people who initially qualified to buy but then fail to get final loan approval under stiffer qualification requirements, said Greg Paquin, president of a real-estate information and consulting service in Folsom.”

From Reuters. “People’s Choice Home Loan Inc., a California-based mortgage lender to people with poor credit histories, filed for Chapter 11 bankruptcy protection Tuesday, according to court papers.”

“The Irvine, California-based unit of People’s Choice Financial Corp. became at least the fourth large U.S. subprime lender to seek protection from creditors in the last three months. Its parent, a real estate investment trust, also filed for Chapter 11.”

“New Century Financial Corp., a struggling mortgage lender to people with poor credit histories, said Tuesday it can no longer sell mortgage loans to Fannie Mae or act as the mortgage financier’s primary servicer of mortgage loans.”

“In a filing with the Securities and Exchange Commission, New Century said Fannie Mae terminated ‘for cause’ a mortgage selling and servicing contract with its New Century Mortgage Corp., citing alleged breaches of that contract and others.”

The Orange County Register. “The subprime mortgage industry saw two key developments Monday, both of which touch Orange County.”

“Fremont Investment & Loan told many workers currently on leave from its Brea-based lending unit, Fremont General Corp., that their employment will end May 18. And regulators said the chief of New Century Financial in Irvine is one of several industry leaders being asked to testify before Congress.”

“Dan Hilley, a spokesman for Fremont, said the Brea unit employs 2,400 workers nationwide. He said ‘many’ workers were previously sent home on paid leave and they are all being let go.”

The Contra Costa Times. “Wells Fargo & Co. said Tuesday it will eliminate 514 jobs, including 71 in the East Bay, at operations that specialize in high-risk home loans.”

“‘Because of the tightening of credit standards, loan volume has been impacted, and staffing has been impacted,’ said Chris Hammond, a Wells spokesman.”

The Voice of San Diego. “During the month of February, San Diego saw 1,386 new notices of default (NODs), which are filed when homeowners neglect to pay their mortgages. This is more NODs than were delivered in any month during the housing downturn of the early 1990s.”

“Even adjusted for population growth, the number of NODs last month was higher than at any time throughout the prior housing bust except during the brutal spring of 1993, which was the only year not to experience a springtime rally.”

The San Francisco Chronicle. “Recent home buyers, many seduced by too-low-to-last teaser loan rates, are finding that all good things must end. For more than a million, they could end in foreclosure, according to a study by First American CoreLogic.”

“Unlike a lot of other research about mortgage risk that has roiled Wall Street during the past couple of weeks, the First American report didn’t find the problems with risky loans to be limited to subprime borrowers, or people with poor or little credit.”

“The largest group of loans likely to go into default are those that started with extremely low teaser rates regardless of whether borrowers had high or low credit scores, the report finds.”

“‘This isn’t just subprime,’ said economist Christopher Thornberg. ‘This problem is starting to occur in most of the adjustable- rate mortgages. Even for prime borrowers, we’re seeing a big spike in delinquencies among adjustable-rate mortgages.’”

“The Bay Area will be hurt less than other parts of California and the country as a whole, said Christopher Cagan, the study’s author. Borrowers in the Central Valley, where the market is saturated with new homes, are more likely to lose their homes than those in the Bay Area, according to a separate analysis for the California Association of Realtors that Cagan did last year.”

“Thornberg said that the First American analysis fails to take into account the relationship between the housing market and the economy as a whole. Defaults are rising at a time when the job market is stable, a highly unusual occurrence.”

“‘This would be normal in the context of a labor market that was weak, but the labor market is quite strong,’ Thornberg said. ‘These problems indicate that this is just the tip of the iceberg.’”

“Thornberg says he expects that the economy will weaken in 2007, leading to more foreclosures. ‘You can’t look at this in a vacuum,’ he said.”

The Daily Bulletin. “Trash lines both sides of East Jackson Street. Graffiti sullies everything from concrete to fences and even trees. Many of the buildings are in need of repair - and of tenants. A number of the four-plexes have ‘For Rent’ signs in the windows.”

“‘It’s in the hands of the owners if they want to turn that area around,’ said John Dutrey, the city’s housing manager.”

“At a recent monthly meeting of East Jackson Street owners, Richard Fleener, a consultant the city hired to help form the association, described what the street would look like if the improvements are made.”

“But achieving that vision will rely heavily on the cooperation of the owners, many of whom live in other counties or who have little expertise owning and managing property. ‘A lot of these people are running out of money,’ said building owner Judi Potvin.”

“Even during a quick walk up and down the street it’s hard to miss the number of ‘For Rent’ signs.”

“The vacant units are costing the owners money, especially because many bought their buildings when the real-estate market peaked, Potvin said. ‘They’re going under fast,’ Potvin said of the owners.”

Chicago Business reports from Illinois. “Slumping home sales are showing the first signs of hurting Chicago-area banks, which are reporting an increase in bad construction loans. Problem construction and land development loans by local lenders increased 58% at the end of 2006 to $169.4 million from $107.2 million at the same point in 2005, according to Federal Deposit Insurance Corp. data.”

“The primary culprit, bankers say, is the housing-market contraction, exacerbated by an increase in mortgage defaults and foreclosures. ‘It’s another manifestation of the housing recession we’re in,’ says Paul Kasriel, chief economist at Northern Trust Corp.”

“Sales of new Chicago-area homes fell more than 30% in 2006 from the year before, according to real estate consultant Tracy Cross & Associates Inc.”

“Chicago’s Cole Taylor Bank, which lends to homebuilders in the city and suburbs, has seen fallout. ‘If there are fewer homes being sold, it reduces the demand for your developed lots and undeveloped lots,’ says Robin VanCastle, chief accounting officer of holding company Taylor Capital Group Inc. ‘That’s the first impact.’”

Reuters reports from Michigan. “With bidding stalled on some of the least desirable residences in Detroit’s collapsing housing market, even the fast-talking auctioneer was feeling the stress. ‘Folks, the ground underneath the house goes with it. You do know that, right?’ he offered.”

“Even with the steep discounts on Detroit-area properties, some buyers handed over their deposits with a wince. ‘I’m not sure it’s congratulations,” said Kirk Neal, a 55-year-old auto body shop worker who bought a ranch in the suburb of Oak Park for $34,000. ‘My wife is going to kill me.’”

The Toledo Blade from Ohio. “A Reuters wire story starts with an account of a ‘fast-talking auctioneer’ under pressure to sell a house for which bidding came to a standstill. ‘After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: ‘The lumber in the house is worth more than that!’”

“My hair curls because of the regional prevailing wisdom. You do know what that is, right? As Detroit goes, so goes Toledo.”

“I know a guy who sells real estate in this town. His name is Tony Bassett. ‘Here’s what I want to know, Tony: How many houses are for sale in Toledo that are listed under, let’s say, $30,000?”

“So Tony noodled around on his computer with that MLS database, and then I got my answer. ‘I’m coming up with right around almost 300,’ he said. ‘And that’s just in the Toledo Board of Realtors [multilist database]. It doesn’t include people trying to sell by owner, or anything for sale by a bank that’s not using our MLS. So really, it might easily get to 300… [325].’”

“The Board of Realtors, meanwhile, said somewhere close to 3,060 houses are on the market in Toledo - meaning right around 10 percent of the houses up for sale in this city cost less than a run-of-the-mill new car.”

“‘Inventory’s high. There are tons of foreclosures everywhere,’ Tony said. ‘We’re showing [foreclosed] houses in Sylvania, Maumee, Perrysburg, and they’re competing with the regular listings. But that’s everywhere [nationally] too.’”

The Chicago Tribune reports on Ohio. “Cleveland, with a rapidly growing stable of vacant and boarded-up homes, is known for mortgage foreclosures. Between 1,200 and 1,300 foreclosure filings land every month on the desk of Cuyahoga County Treasurer Jim Rokakis –including a recent one for his childhood home, which his family sold years ago and was auctioned off last week for $19,000.”

“Perhaps no place in the Midwest has been hit harder by foreclosures than Cleveland. In Illinois, Cook County reported a total of about 4,260 foreclosure filings in January and February, about 1,700 more than Cuyahoga County, over the same time period. But Cook County, with 5.3 million residents, has roughly four times the population of Cuyahoga County, which includes Cleveland.”

“‘This just empties out the city,’ said Rokakis, who is scheduled to testify Wednesday in Washington before a congressional subcommittee on foreclosure prevention. ‘For a lot of neighborhoods, the tipping point has passed.’”

“Ohio has an estimated $24 billion in subprime loans, and Rokakis said about 40 percent of those could go bad. Rokakis speculated that 30 percent to 40 percent of the mortgage loans in Cleveland are subprime.”

“Council member Anthony Brancatelli estimates that 60 percent to 70 percent of the foreclosures in his ward involve people who tried to manipulate the subprime mortgage system and bought several homes with the intent of renting or quickly selling, or people grasping for their piece of the American Dream, without the financial means of making regular payments.”

The Plain Dealer from Ohio. “You might think the evaporation of high-interest loans is good news for a region where thousands of people have lost their homes to foreclosure. But the timing could not be worse, Cuyahoga County Treasurer Jim Rokakis says.”

“High-interest mortgages are often the only option for people who are rebuilding their credit. If the supply disappears when many houses in Northeast Ohio are vacant and begging for owners, it might cause a glut and depress values for years, Rokakis said.”

“‘Look out below,’ he said. ‘It’s going to get ugly.’”

“Critics, including Rokakis, say sub-prime lenders have fed Northeast Ohio’s foreclosure epidemic by locking people into deals they don’t need or can’t afford.”

Some housing bubble reports from Wall Street and Washington. “Housing starts rebounded from a nine-year low in February, according to the latest government reading on the battered home-building industry, but ongoing weakness led builders to pull back on plans for more housing. The February starts were 28 percent below February 2006 numbers, and were the fifth weakest reading since the beginning of 1998.”

“Permits for single-family homes fell to a nine-year low and are now down nearly a third from year-ago levels. ‘With the weather volatility, I think the permits is a better representation of the true trend,’ said David Seiders, the chief economist for the National Association of Home Builders. ‘I think we’ll see a drop off in starts in March, and certainly no take off after that.’”

“Builders reported seeing some effect from the rising problems in the subprime mortgage sector. ‘A surprising number say they’ve noticed some negative impact of the tightening of lending standards on their sales,’ said Seiders. ‘I don’t expect the builders to be cranking out the starts on a sustained basis for a while. The mortgage market problems only are likely to add to that.’”

From MarketWatch. “‘We are more interested in permits as they are much less weather-affected than starts,’ said economist Ian Shepherdson. He noted that single-family homes, fell at a 17.7% annualized rate in the three months to February from the previous three months. ‘This is a less rapid drop than in [the second half] of last year but it is still clearly a decline,’ Shepherdson said. ‘Excess inventory is still a huge problem.’”

“The trouble in the mortgage market could spread beyond the subprime sector with tighter lending standards cutting demand for new homes by as much as 15% and further squeezing home-builder profits, according to an analyst following the industry.”

“‘We expect lending standards to tighten further, based on our expectation of further [home] price declines in 2007,’ wrote Banc of America Securities analyst Daniel Oppenheim.”

“A big issue facing residential home builders is the oversupply of homes on the market after the speculative bubble. The inventory glut combined with lower demand resulting from stricter lending standards ‘will lead to lower prices and likely exacerbate mortgage delinquencies and foreclosures,’ Oppenheim said. ”

The Associated Press. “The Securities and Exchange Commission is investigating a number of companies that operate in the troubled market for subprime mortgage loans, the agency’s top enforcement official said Monday.”

“Comments by SEC Enforcement Director Linda Thomsen on Monday were the first public acknowledgment that the agency was involved in a broad examination of the subprime sector within the mortgage industry.”

“‘We’re looking at subprime,’ Thomsen told reporters following an address to an investment conference. ‘As with anything, we’re going to look at all the actors and their roles.’”

“The role of major Wall Street investment firms in the subprime market debacle is under scrutiny. In Massachusetts, the state’s top securities regulator said last week that he had issued subpoenas to two major firms, UBS Securities LLC and Bear Stearns & Co. Inc., as part of an investigation into whether their analysts’ research ignored subprime lenders’ mounting financial problems.”

From Reuters. “U.S. Senate Banking Committee Chairman Chris Dodd said on Monday he asked executives at five big subprime mortgage companies to testify at a Thursday hearing and explain their lending practices.”

“Officials with the Federal Deposit Insurance Corp., the Federal Reserve, the Office of the Comptroller, and the Conference of State Bank Supervisors also were asked to testify.”

“‘At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits, and what steps are needed to fix this pressing problem,’ Dodd said.”

“Dodd has said that regulators bear some responsibility for the recent downturn in the subprime mortgage market, vowing to bring them before the Senate panel to explain how the subprime market has arrived to this point.”

From Bloomberg. “Banks are picking up the baton from the Federal Reserve, restricting access to credit months after Chairman Ben S. Bernanke stopped raising interest rates.”

“‘The market is definitely tightening standards, and to the degree the market controls the flow of capital, the Fed does not have to,’ said Carl Tannenbaum, chief economist at ABN Amro Holding. Officials have kept their tightening bias at the past five meetings, meaning any policy shift is likely to be a rate increase.”

“Fed officials may discuss the tightening in mortgage lending and its impact on the economy, already slowed by a housing recession, at their two-day meeting that starts today.”

“The Fed may alter its language to reflect the tumult in subprime mortgages. On Jan. 31, the Federal Open Market Committee said ’some tentative signs of stabilization have appeared in the housing market.’”

“‘That might be a little bit of a stretch’ this time, said Diane Swonk, chief economist at Mesirow Financial in Chicago.”

The Hartford Courant. “Mitch Heffernan is involved in starting a new mortgage business, but his old company, the now-defunct Mortgage Lenders Network, could land him in plenty of trouble with the state for not paying wages earned by his former employees.”

“The state Department of Labor confirmed Monday that it has applied for an arrest warrant in Superior Court in Middletown that would charge Heffernan’ the former president of Middletown-based Mortgage Lenders’ with 61 counts of failing to pay wages.”

“Mortgage Lenders, once touted as a model for adding financial services jobs to the state, imploded as troubles in the so-called subprime market accelerated late last year.”

The Chicago Tribune. “Corus Bankshares Inc. on Thursday warned investors that its stock holding in troubled subprime lender Fremont General Corp. is now ‘materially impaired,’ and that as a result the Chicago-based bank holding company will have to absorb a hefty first-quarter pretax charge that could be $14 million or even higher.”

“It said company officials have concluded that Fremont General’s troubles are so extensive that, under generally accepted accounting rules, Corus must treat its Fremont investment as an ‘other-than-temporary’ impairment and take a charge to mark down the value of the asset.”

The LA Times. “The shakeout in the sub-prime lending industry continued Monday, with more people losing their jobs and a prominent lender losing its name on a baseball stadium.” “Fremont General Corp. of Santa Monica said it had told ’significant numbers’ of its 2,400 home-loan employees to expect pink slips in two months.”

“The Orange-based parent of Ameriquest Mortgage Co. and Argent Mortgage Co. announced large but unspecified layoffs last week. On Monday, Ameriquest said that its name was coming off the Texas Rangers’ baseball stadium in Arlington, Texas.”

“‘You almost can relate this to the aerospace industry, when they had those massive layoffs’ after the end of the Cold War, said Jack Williams, president of the California Mortgage Brokers Assn.”

“Williams, a Brea mortgage broker, said most of the companies that remained in business were scaling back their operations. That reflects not only the shrinking volume of loans but also the fact that the riskiest sub-prime loans were no longer being offered.”

“‘When you take the products away, you no longer need the underwriter for them or the supervisor for that line,’ he said.”

“The housing slowdown is prompting Wells Fargo to ax 191 workers at its mortgage operations in Tempe, Ariz, the Phoenix Business Journal reported this week.”

“The San Francisco bank said the layoffs, are due to the tighter lending policies reducing the level of subprime mortgages extended to those with tarnished credit records or high debts in relation to income.”

“‘As a result of changing market conditions, such as moderating house price appreciation, effective Feb. 16, we tightened our credit policy for a portion of our nonprime lending business,’ Lynn Greenwood, a senior VP in the Wells Fargo home and consumer finance group, told the Phoenix newspaper.”

“‘This decision directly impacts our nonprime loan volume, which in turn impacts staffing levels in the areas devoted to managing these loans,’ Greenwood said.”

“Wells Fargo is not alone. Bank of America, Countrywide Financial, Washington Mutual and Ameriquest Mortgage have all cut jobs in Arizona in response to the housing slowdown.”

From Builder Online. “David W. Berson, chief economist for Fannie Mae is predicting a drop of 7 percent to 8 percent in new-home sales for the remainder of 2007 but says the worst declines have passed.”

“With subprime loans dominating the news recently, Berson explains that the ease of getting the loans contributed to the recent troubles that New Century Financial Corp. and Accredited Home Lenders Holding Co. are facing. There would have been 850,000 fewer home sales in 2006 if it weren’t for subprime loans, Berson explains.”

“‘We will see what happens in the subprime market and whether regulators eliminate the subprime market,’ he says.”

“Berson says he agrees with former Fed chief Alan Greenspan’s recent assessment that there is a chance that the nation could go into a recession.”

“‘If we have a recession, it will be bad for the industry,’ Berson comments. ‘We better hope the economy keeps growing or things could get very bad.’”

The Wilmington Star reports from North Carolina. “A rising number of people in Brunswick County risk losing their homes to foreclosure, according to statistics from the N.C. Administrative Office of the Courts. So far this year, the repossession man is knocking more frequently, especially in Brunswick, which has had almost a third of last year’s total in just the first fifth of 2007.”

“‘It had been a long time since we saw anything close to the water,” said (realtor) Pam Wooddell, who has had several repossessed listings in Oak Island as well as on New Hanover beaches.”

“She recently represented a foreclosed home three blocks from the ocean in Kure Beach. The owners had started it on the market for $789,000 with no takers. The bank listed it for $300,000 less, she said. It closes this week at close to that price.”

“What she finds disturbing is how many of the properties facing foreclosure were bought just last year, raising the possibility of predatory lending.”

“‘It certainly would appear that perhaps some loan fraud or predatory lending went on and got people into houses perhaps they shouldn’t be in,’ she said.”

“In boom years, distressed property owners could count on a quick sale or refinancing to bail them out before the lender started foreclosure. ‘That’s simply not happening now,’ said agent Clinton Howlett who specializes in foreclosed properties, adding that even oceanfront properties have gone through foreclosure without being bought by an investor, a sign of how slow some beach markets have become.”

The Sun Sentinel from Florida. “South Florida has has a higher rate of loans to borrowers with shaky credit than the national average. Meanwhile, the troubles of New Century Financial Corp., the nation’s second-largest subprime lender, have affected local offices of one of its subsidiaries.”

“Home 123 Mortgage, which has offices in North Palm Beach, Boca Raton and Plantation, has stopped funding existing loans and accepting new business, as has New Century.”

“Subprime lending has a much bigger share of the South Florida market than the nationwide average of 14.7 percent of all mortgage loans outstanding at the end of 2006.”

“In Broward County, 18.4 percent of mortgages are ’subprime,’ while Palm Beach County has 13.3 percent of its mortgages in that category, according to First American LoanPerformance, a San Francisco-based mortgage data company. Miami-Dade has the biggest share of subprime mortgages in the region, 23 percent.”

“Christopher Cagan, director of research for First American CoreLogic, expects South Florida to be hit hard by foreclosures because prices rose quickly, causing people to stretch to buy expensive homes using ‘teaser-rate’ financing.”

“‘Two years ago, the rules were gone and everything was perfect,’ Cagan said. ‘This is the other side of the boom.’”

The St Petersburg Times. “So long, paycheck. Citing growing woes of its subprime mortgage unit, Fremont Investment & Loan told several hundred Tampa employees Monday it will lay them off May 18.”

“Fremont’s troubles are also taking a toll on the local employment scene. Tampa is one of its residential mortgage division’s four regional hubs, and hopes that the staff here would keep their jobs under a new acquirer have faded.”

The News Journal. “As a real estate slowdown began tightening its grip on the local economy last summer, average wages in Flagler County dropped below $29,000, a 9.2 percent slide from the mid-2005 level, the state reported Monday.”

“Flagler County, heavily dependent on housing construction and sales for its livelihood, serves as a coal miner’s canary for Volusia County, said Rick Michael, Volusia’s director of economic development.”

“‘Flagler’s economy is so based on housing that we watch the Flagler market as a pre-warning of the Volusia market,’ Michael said.”

“Michael estimated Volusia’s work force of 254,000 has shed about 5,000 jobs. Unemployment, which had been hovering around 7,300 last year, rose to about 9,200. ‘We were surprised by the loss of 400 to 500 jobs in business and professional services,’ Michael said. ‘We had been growing in that area every month.’”

“Flagler’s construction industry has lost about 150 jobs, slipping below 2,000, said Sharon Warriner, spokesman for the Workforce Development Board of Flagler and Volusia. More significant, she said, was a ‘huge’ cutback in Flagler’s real estate and mortgage industry, shrinking from nearly 2,000 workers in September 2005 to 532 the following summer.”

The Orlando Sentinel. “More than 15,000 condo-hotel rooms could flood Central Florida during the next several years in one of the biggest, and possibly riskiest, building booms ever to sweep the region’s lodging industry.”

“‘If all these rooms are built, the Orlando market would have the greatest concentration of condo hotels in the country,’ said Jack McCabe, a Deerfield Beach real-estate consultant. ‘The investment potential of these things is really in question. What kind of appreciation, or depreciation, will we see on these units? No one knows.’”

“Condo-hotel developers walk a fine line when they market their projects, often to the high end. Because the units are condominiums, security laws prohibit sellers from marketing them as business investments — for good reason. Hotel-room rates and occupancy levels can fluctuate, making a rate of return hard to forecast.”

“Rob Risman, an attorney from Cleveland who specializes in real-estate development, bought a unit at Mona Lisa at Celebration, a condo hotel being built near Walt Disney World.”

“‘Condo hotels are a lifestyle purchase,’ Risman said. ‘I really don’t look at it as an investment. It is a second home that we don’t need to decorate, and they take care of everything.’”

“Risman said buyers need to understand that condo hotels will only work if the hotel is viable. ‘At the end of the day, I don’t think anything will work as an investment if it doesn’t work as a good hotel,’ Risman said.”

“Condo hotels have been around for several decades, but they only recently gained mainstream status. According to Smith Travel Research, one in 10 hotel rooms being planned or built in the United States is a condominium.”

“Orlando has 15,518 of the rooms in the development pipeline, second only to Las Vegas, which has 30,032. More condo hotels are planned for Florida than any other state.”

“Some proposed projects, including The Blue Rose and Palazzo del Lago are megaresorts, each with more than 1,000 units. And the cost of those units is high. At The Blue Rose, prices start at more than $300,000.”

“Blue Rose developer Camilo Aguirre said sales have gone well since the project was announced a year ago, but he acknowledged things are getting tougher. ‘The market isn’t what it was two years ago or even a year ago,’ Aguirre said.”

“A slowing real-estate market might delay or scuttle some condo-hotel plans. But market experts say the condo-hotel market has other limitations, including an uncertain resale market and management issues that could complicate ownership.”

“‘From the investors side, there are a lot of other places to put your money,’ said Scott Smith, vice president of PKF Consulting in Atlanta. ‘It is risky. You have to wonder how deep the market is.’”

“Bill Haberman, a partner in the company developing Mona Lisa at Celebration, said the number of people willing to pay several hundred thousand dollars for a hotel room is limited, but he said the model works for some. He had a word of caution for anyone hoping to defray ownership costs with room-rental income.”

“‘If this is done properly, it works out as a better version of a vacation rental for some people,’ Haberman said. ‘But other people want to go beyond that. They hope that these things will make a lot of money.’ Haberman said buyers shouldn’t count on that.”

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