Greed Overcame Logic And Rational Behavior
A report from Arkansas Online. “The River Market Tower in downtown Little Rock is having a tough go of it. Only 23 of 134 condominium units have been sold, according to public records. The developer, Moses Tucker Real Estate, announced in July 2007, when construction began, that 27 units had been presold, adding last July that 11 more were under contract. Jimmy Moses, a principal at Moses Tucker, which owns the $60 million highrise, said this week that the numbers on record at the Pulaski County tax assessor’s office are ‘way off.’”
From Tulsa World in Oklahoma. “Tulsa’s seen a lot of retail development in the last decade. Still, there have been plenty of others that were planned but never broke ground. The River District, Location: The west bank of the Arkansas River, south of the Creek Turnpike in Jenks. Original plans: Lynn Mitchell and the River District Development Group were going for 852,000 square feet of upscale and unique shopping with a price tag of $1 billion. It would also include a host of restaurants, office space, condominiums, hotels and a performance fountain. The 300-acre site was cleared a year ago, but nothing has happened there since.”
“Steve Walman, managing broker for Walman Commercial Real Estate Services and a real estate agent for the project, said the slumping economy and a lack of capital have slowed the project down, but it’s still making progress. ‘We are working with the owners, and continue to do pre-development work.’ Walman said they’re now shooting for construction to begin in 2011, though the scope of the project may change.”
The Oklahoman. ” It doesn’t get any starker than this: ‘There is no retail sales market at present.’ Thus begins the bleak summary of 2009 investment sales of stores and shopping centers in Oklahoma City. There was none, at least none over 25,000 square feet, the minimum size tracked by Price Edwards & Co. The most prominent local retail property destined to sell at a discounted price, of course, is Crossroads Mall, which landed in the hands of the Federal Reserve as a result of the April 2008 merger of Bear Stearns Cos. Inc. and JPMorgan Chase & Co.”
“Price Edwards is marketing Crossroads Mall with an asking price of $24 million, less than half its assessed value in 2008.”
The Associated Press. “Foreclosures and the depressed real estate market have contributed to drastic reductions in the prices of condominiums on the Mississippi Gulf Coast. The downturn has left some projects on hold. And investors who bought in a hot market have in some cases walked away from their units as values declined.”
“Before Katrina, selling condominiums was easy work as the nation’s housing bubble continued to swell. Mike Boudreaux, president and CEO of Gulf Coast Investment Developers Inc., said his team could sit back and take condominium orders. Units were cheaper here than in Florida, and a year-round tourist season created by casinos was another selling point. After that fateful August 2005 storm, sales were literally gone with the wind.”
“‘After the storm, there was a huge fear of being on the water,’ Boudreaux said. ‘Katrina instilled a fear in buyers that being on the water just wasn’t a safe thing to do.’”
“‘Real estate is such a valuable commodity if you can pick it up at the right price,’ said Tashia McGinn, real estate agent on property at Beau View condominiums in Biloxi. ‘If you have the money to buy, it’s the right time to buy. The cost of construction right now would be double the cost of a unit.’”
From WWLTV in Lousiana. “In the most visited neighborhood in New Orleans, home sales have been anything but brisk in the past year. The signs are up around the French Quarter, showing a number of condominiums for sale at a time when home sales have seen a slowdown. One of the units up for sale is a one bedroom, one bath home on Ursulines, going for just under $300,000. It’s been on the market since August and the home has already seen one price reduction of more than $10,000. It is a second home for the owner, who lives out of town.”
“‘There is excess inventory right now, which is an advantage for buyers and that you will probably find someone who is ready to sell and ready to negotiate,’ said Michael Wilkinson, a realtor who specializes in French Quarter home sales.”
From Amarillo.com in Texas. “An economic big rig ran down Amarillo’s economy in 2009. It’s flat now and won’t likely pick up until the latter half of 2010, according to Amarillo National Bank’s annual economic forecast. Job losses and fear about what lies ahead have created a ‘bunker mentality’ that has consumers saving, rather than spending, said ANB Assistant Vice President William Ware. ‘They’re scared of not having a job in six months.’”
“Amarillo saw drops in employment of 1,000 to 2,500 workers each month in 2009 in every sector, with losses more dramatic last spring than later in the year, according to the analysis.”
The Star Telegram in Texas. “Fort Worth-based Atlas Properties bought 56 condos in the 96-unit Piazza Siena development in Dallas’s Oak Lawn area from the Chicago bank that foreclosed on the units last year. The property was built in 2001 as apartments, but Chicago-based Tria Properties bought it in 2007 for a condo conversion. Piazza Siena is near several transitioning neighborhoods, including the popular Uptown area, where condos sell for as much as $500,000.”
“Of the 56 condos Atlas Properties acquired, 47 are leased and nine are vacant. The remaining 40 condos in the development are owner-occupied. Adam Blake, Atlas Properties president, said the deal came at a deep discount because the bank wanted to sell before the end of the year. As a result, savings will be passed along to buyers, he said. One-bedroom condos will start at $99,000 and two-bedroom units at $135,000. The condos sold for about $240,000 in 2008, Blake said.”
The American Statesman in Texas. “Austin-area office vacancy rates and rents edged down in the fourth quarter from the previous year, new figures show, and 2010 is expected to look like a repeat of 2009, with no significant increases in overall occupancy, local experts said. Office leasing is usually tied to job growth, and the Central Texas region lost 4,300 jobs during the 12 months that ended in November.
“The only way you’re going to lease up existing vacant office space is with job growth, so until we start having positive job growth, the market’s not going to have a lot of leasing activity,” said Karen Judson, vice president of marketing and research in Austin for a national commercial real estate firm. ‘All the experts keep talking about a jobless recovery. That’s bad news for office leasing.’”
“Downtown had the lowest Class A vacancy rate with 16.8 percent, compared with 12 percent in the fourth quarter of 2008. But some suburban areas aren’t faring nearly as well: Round Rock’s vacancy rate for Class A space was 58.2 percent, and the rate was slightly more than 29 percent in far Northwest Austin, where some new complexes are empty or barely occupied.”
“Some of those landlords are offering free rent for as long as a year for tenants who sign long-term leases, said Ford Alexander, a partner with Oxford Commercial.”
My San Antonio in Texas. “Local builders started 7,132 homes in 2009 — about 1,000 of which were probably directly due to the availability of the federal tax credit, Jack Inselmann, vice president of the U.S. Central Division of housing research company Metrostudy, told more than 600 people at the Greater San Antonio Builders Association’s housing forecast. Inselmann estimates that as many as 1,500 of 8,330 sales of new homes in San Antonio were thanks to the credit.”
“In addition to the tax credit deadline, home buyers this year also face a possible rise in mortgage interest rates. ‘Mortgage rates have never been this low in my lifetime,’ said Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University, who spoke at the SABOR forecast.”
“But many economists expect that rates will rise soon, particularly in the second half of the year, Dotzour said. At the end of March, the Federal Reserve plans to stop buying mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. It’s a change that would push mortgage-backed securities onto the private market — and likely raise mortgage rates by a point or more, Dotzour said.”
“But as long as people are secure in their jobs, Dotzour said he is encouraging people to pull the trigger on home purchases to snag the ultra-low rates and the tax credit, if they qualify. ‘Mortgage rates should never be this low,’ he said. ‘It’s a gift from the government.’”
The hh in Texas. “The pace of area home building is picking up. Taylor Morrison said Friday that it plans to build 270 homes in Telfair, a 4-year-old master-planned community in Sugar Land. Last month, Parkwood Builders said it was starting to build on one-third-acre estate lots in Firethorne, a 1,400-acre planned community in the Katy-Fulshear area. The company’s 3,000- to 6,000-square-foot homes will start in the $350,000s.”
“In the northwest part of the area, Trendmaker Homes and Newmark Homes are building in Towne Lake. That 2,400-acre development with a 300-acre lake has homes priced from $180,000 into the millions.”
“The increased building is being driven by low interest rates, a federal tax credit for homebuyers and a resurgence in local consumer confidence that slumped after Hurricane Ike and in the national financial crisis, said David Jarvis, Houston director of research firm Metrostudy. Even though mortgage lending standards remain tight, ‘there’s a lot of people subjecting themselves to that,’ he said.”
“The upscale Montage apartment tower across from Hermann Park fell into foreclosure this week, just months after its twin — The Mosaic — suffered a similar fate. It’s the latest turn of events for the high-end residential project built in the second half of the 2000s. With nearly 800 units in the twin towers combined, real estate observers expressed concern after the project was announced that there would be enough demand in a city where high-rise living isn’t the norm.”
“Both 29-story buildings originally were planned as for-sale condominium towers. The ambitious real estate development was announced in 2005 in what was a much better real estate market. When condo sales started to soften, the developer decided to make the second building a rental property.”
“Then about a year ago, the entity formed to develop Mosaic, the first tower, filed for Chapter 11 bankruptcy protection after defaulting on a $76 million construction loan with Corus Bank. Corus ultimately foreclosed on all of the unsold units.”
“A long-standing feud between Rice-area bar owners and their neighbors in a high-rise condo has escalated from egg throwing, water spraying, laser pointing and name calling to assault lawsuits. Just off Kirby Drive on Quenby a small wooden one-story pub and adjacent beer garden named Hans’ Bier Haus cozies up to a three-story parking garage attached to the upscale 16-story 2520 Robinhood Condominiums where a two-bedroom unit is now available for an average $365,000.”
“‘Nestled between the city’s most prestigious, well-kept neighborhoods,’ reads a Web site for the high rise. Ads for available units note they are immaculate, pristine and have fabulous views. ‘Quest for the Holy Ale’ reads an inscription on the beer garden’s aging painted Jeep, a veteran of the Art Car Parade that also once sported an arrow pointing to the condos reading ‘Tower of Evil.’”
“The culture clash between these unlikely neighbors culminated last month. Bar co-owner Bill Cave was charged with misdemeanor assault for his behavior in trying to stop water spraying on his Christmas party. A few days later the condo association and homeowners became subject to a restraining order keeping them from tossing produce, water or anything off their garage onto the bar patrons and bocce ball court below.”
“Paul Kellogg, a commercial lawyer and co-owner of the bar with Cave, said he’s sorry it came to this. ‘There’s a small group of home owners who are intractably opposed to our very existence,’ he said. ‘It’s a shame they didn’t notice we were there when they moved in.’”
The Southwest Farm Press. “The worm has turned. It may be a slow crawl for some time yet, says Texas AgriLife Extension economist Charlie Hall, but the news is not all bad at the moment and recovery from recession seems to be in progress.”
“Hall offered an assessment of the U.S. economy and the potential for agriculture during the annual Texas Plant Protection Association conference last December in College Station. He says all segments of the U.S. and the world economies may not show signs of robust recovery yet, but some elements that are still struggling seem to be ‘getting less bad.’ Unemployment, for instance, remains at 10.2 percent to 10.8 percent and is focused primarily in the center of the country.”
“Hall said the recession may have been worse than usual because ‘we had to battle a number of difficulties at the same time. We’ve had 11 recessions since 1948 and they are part of the business cycle, necessary to restrain the inflation rate.’ ‘The boom in the economy created a lot of instability,’ Hall said. ‘Greed overcame logic and rational behavior.’”
“He said the belief that everyone is entitled to own a home, regardless of the ability to pay for it, created a crisis in the housing market. ‘We saw a lot of hubris in the financial world and in the monetary policy. We saw a failure of corporate governance and we know that households saved too little and borrowed too much. We underestimated the risks in the financial markets.’”
