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Dallas Real Estate: 4214 Manning Finally Under Contract

Because I truly believe that homes have souls, I just love it when they finally find a family.  4214 Manning is one of my favorite bittersweet new construction stories out there. The builders were trying to go outside the box, build a unique home with a strong New Orleans-style slant. Might have worked had the market not turned south. And so this lovely southern belle went into foreclosure even with all her bells and whistles. What was it, $3 million, then $2,050,000 and I said I would have gone in at $1.5. I mean, look at this breakfast room!

Altos Says Dallas Home Prices Fell 2% From August

Steve Brown reports that home sales increased fractionally, yes, thanks to the now-extended and expanded First-time home buyer credit. Which gives us hope for the future, but only for homes up to $800,000, which should be plentiful in our market. Credit is still tight, tighter, in fact, than ever. Don’t think it’s Miller Time yet. Checking the Altos Real Time Housing Market Update, Dallas prices actually decreased 2% from August, though our inventory continued to decrease as well, by 7.4%. Here’s the Altos recap:

“The 10-City Composite Index was down 0.4% during October and 0.9% for the most recent three-month period. The Index started the year in January at $470,017 and reached $509,030 in July before falling to $501,377 in October. The downturn would likely have been worse were it not for historically low mortgage rates and the federal government’s $8,000 first-time home buyer tax credit which is likely to be renewed in some form. Listing prices fell in 23 of 26 markets during October. The largest monthly decline occurred in Salt Lake City with asking prices down by 3.3%. Prices fell by more than two percent in Phoenix and Los Angeles. The rate of decline has slowed in Las Vegas but that market continues to show the largest decline during the downturn. In October, 2007, the median asking price was $354,347 but fell to $169,958 in October, 2009 – a drop of over 52%. Asking prices increased in just 3 of 26 markets. Prices rose at the fastest rate in the Bay Area markets of San Francisco and San Jose which experienced increases of 1.1% and 1.0% respectively. Prices in the Miami market were effectively flat with an increase of just 0.3%.
The Altos 10-City Composite presents the most current perspective on housing market conditions across the country. The Composite median price fell by 0.4% in October 2009.”

Dallas Real Estate: Higher Gas Prices Mean Higher Mortgage Rates?

Dan Green seems to think yes, actually: rising gas prices foreshadow rising mortgage rates.

Potential Abuse From First Time Homebuyer $8K Credit Program?

Apparently, so. The IRS is investigating more than 100,000 suspicious claims for possible abuse of this program that has helped prop the entry level real estate market over the past few months, so says the Wall Street Journal. And as I heard from Ebby Halliday herself last week, the real estate industry is lobbying for an extension of the program. One proposal would stretch the date ’till June, 2010, and also raise the income ceiling on participants:

“One proposal by Sen. Johnny Isakson (R., Ga.) and others to extend the credit and make it available to all home buyers through June 2010 carries a price tag of about $16.7 billion. That proposal would raise the income ceiling for eligible home buyers to $150,000 per year for an individual and $300,000 for a couple. Currently the credit phases out for individuals earning more than $75,000 and married couples earning more than $150,000.”

Of course, there is the usual whining from those who claim this program, as well as the standard mortgage deduction, is nothing more than welfare for the middle and upper classes.

Dallas Realtors tell me the program has helped keep our local market hopping, particularly with affordable homes and in such entry-level neighborhoods as Little Forest Hills and others bordering Lakewood, east of Central.

“The under $300K market is really showing improvement,” said David Brown with MetroStudy. “The biggest weakness is in the $500,000 and up market, because there’s no secondary market for jumbos.”

Don’t Faint: A Shortage of New Construction In Dallas Real Estate?

That’s what Steve Brown wrote Friday, but this little quote peeped right out at me because I’ve had this nagging fear —

“Tim Jackson, a Collin County custom builder who is president of the Home Builders Association of Greater Dallas, predicts new-home prices will rise next year unless starts increase.

“We just can’t get the funding to start new houses,” Jackson said. “I’m fortunate to have a good relationship with a local lender, and they allowed me to start a speculative home four or five months ago.

“But I doubt they would allow me to start another one,” he said. “Even if we have a customer who wants to build, they are oftentimes finding it difficult to find construction financing, too.”

What’s my fear? That all the elements putting the brakes on the market — in effect, constipating it — will ultimately raise prices on construction costs, new homes, taxes, closing costs, materials and labor so much that homes will be out of the average or lower-income individuals grasp.

Dallas Real Estate Round Up: Bottomed Out, Getting There or Way to Go?

Residential Strategies’ Ted Wilson tells Steve Brown we are close, all depends on how much inventory gets sucked up… which depends on the credit market, MAYBE extension of the first time home-buyers tax credit, though that sure has not helped the higher end market. But the story outside of Texas continues to rain doom and gloom: in 2005, about 1.25 million homes were destined for foreclosure. Now an analyst has set the number at 7 million, using data from the Mortgage Banker’s Association. Look at this:

“Ms. Goodman uses data from the Mortgage Bankers Association to estimate there are 55.9 million American homes with mortgage debt. She notes that at the end of the second quarter, an MBA survey found that more than 13% of single-family home mortgages were at least 30 days delinquent or in foreclosure.

Then Ms. Goodman looked at “cure” rates, the percentage of delinquent loans that return to current status. Those cure rates lately have been puny. The report assumes that about 99% of loans that are 90 days or more overdue will result in homes lost to foreclosure. The assumption for those 60 days or more delinquent is that 96% are toast, and for 30 days or more, 72%.  All in all, she estimates that 12.4% of the mortgages outstanding as of June 30—representing about 7 million homes—are going to end up changing hands on the courthouse steps.”

Thought: using 1.25 million during the peak of the real estate boom may not be the greatest of benchmarks, however: 7 million homes in foreclosure is almost mind-boggling. That’s like one whole city the size of Chicago of foreclosures!

Dallas Real Estate Relatives: An Evans Give His Take On Commercial Real Estate

Very interesting Bloomberg video here talking about how low the price of commercial real estate will go — down to $310 per square foot in some parts of Manhattan. Talk of how the credit crunch is really hurting the market, and how we may be flashing back to the 80’s when foreign investors swooped in and bought up U.S. commercial  real estate, like Rockefeller Center. (Remember the fuss?) All the talk coming from a Wharton professor and a really cute Colliers ABR commercial real estate expert who just happens to be… my brother in law!

Update: Looks like Bloomberg knows how to monetize their site — the video has a shelf life that has apparently run dry!

Real Estate Stimulus Pen

Dallas Commercial Real Estate Woes

Are growing. When real estate agents host economists and other experts to give us the city’s financial pulse, I get dirty looks whenever I ask about commercial real estate because it’s not considered positive news right now. On Monday, W. Michael Cox did say this:  residential real estate has a sort of safety net — homes are politically touchy-feely, and politicians don’t want to see folks kicked out of their homesteads. But don’t expect the federal government to start rescuing shopping centers or office buildings.

Update: Time posted a story on the looming commercial real estate crisis yesterday.

State Of The Dallas Market: We May Not See Mega Leverage For 50 Years

W. Michael Cox is the Director of the O’Neil Center for Global Markets and Freedom at the Cox School of Business at SMU, and a Chief Economist for the Federal Reserve Bank of Dallas for the past 25 years. Cox, appraiser Brad Edgar, and economist Britt Fair (Hexter-Fair Title Company) spoke to a group of Realtors today about the Dallas market. Couple highlights:

No inflation is going on right now, the government is trying to stop de-flation. Almost all the experts agree that we may see eventual inflation because of the economic stimulus — that money pumping into our systems. We may have a window of about 12 to 16 months before interest rates will have to rise to control it.  The Fed can and will monitor inflation tightly 24/7 and may in fact want to see a bit of inflation, say 2 to 4%, anything but hyperflation or deflation.

The banks still aren’t lending, what will it take to move them? Maybe higher interest rates. Cox doesn’t think you can pass laws forcing banks to lend money.

“When the risks and rewards are in balance, they will lend,” he says.

Our day of reckoning for the stimulus package will be when we convince China and Japan that treasuries are worth buying.

Why are the banks doling out TARP funds to the “troubled” banks rather than the solid banks, so the solid banks could lend the funds?

Good question, said Cox.

Unemployment is starting to affect everyone, even in the higher net worth classes. Though Texas thankfully lags the nation in unemployment, layoffs may not be over yet. Two solid businesses now: healthcare and education.

And these men think Americans’ spending habits have changed dramatically, maybe forever for a generation. Just as they did after the Great Depression, people are tightening their belts. Whether they keep them tight and how many years they live lean depends on how affected they are by this economic downturn, how long it lasts. We may not see mega leverage for another twenty years.

Higher taxes may force people out of states like New York and California, and we could see another wave of  sunbirds heading here for our sensibly valued homes. Watch: commercial real estate failings. Be glad we live in a city that continues to attract business and generate jobs as well as technology (intelligent medical systems being developed at Texas Instruments) and varied corporate headquarters. Buffalo, New York was home to the largest number of wealthy individuals in the U.S…  once upon a time.

Friday Report: Foreclosures Up, But Good Prognosis For Dallas Real Estate

Steve Brown reports that while foreclosures are up — 15% in Dallas County from May 2008, up a whopping 45% in Collin County — the numbers may be so large because lenders have taken off their self-imposed moratoriums and are no longer being the nice guys. While that may make for an even gloomier Friday, this report by real estate expert John Burns in Builder ought to bring out the real estate sunshine: Burns asked national real estate experts to select five cities (and states) that will be the first to recover and Dallas, “an affordable market that continues to churn out good jobs”, was right on that list! (He even says we will do better than Houston.) As for Texas, Burns says we added 155,000 new jobs last year, most in the oil and gas industry. Great news, after hearing Fareed Zakaria speak this noon at the World Affairs Council luncheon: the energy industry, he said,  is most certainly not going bye-bye.

I’m almost bullish.

The Credit Noose Gets Tighter?

Implode-Explode reports that Guarantee Bank and National City (PNC) are exiting their warehouse lending lines of credit. In other words, no more “securitizing” of loans. I ask, is this a good thing, bad thing… or might it lead to higher interest rates?

Home Ownership, Canadian Style

I had the pleasure of having lunch today with Bob Schlegel, Chairman and CEO of PAVESTONE, the Grapevine-based manufacturer of concrete pavers and building products, and his darling daughter, Kim Schlegel Whitman. We discussed home ownership in Canada versus the U.S. Canadians cannot deduct the home mortgage interest from their taxes. (Which does not steer them away from home ownership in the least.) President Obama is looking to limit that deduction for high net worth individuals to recoup additional revenue. With our Wall Street meltdown, many folks are looking closely at our rock solid neighbor to the north where the banks are not hemorrhaging and socialized medicine is the health plan. Canadian mortgages, says Bob, are higher. Schlegel told me his first home in Canada cost about $25,000 in the mid 70’s and held a 12% interest rate. Since you cannot deduct home mortgage interest in Canada, he says, the incentive is to hurry up and pay off that mortgage and own the home, which he and his wife Myrna did. Business interest is deductible, so Canadians tend to pay off their homes and take out other loans with deductible interest. The end result — more paid-off homes. From the perspective of good conservative fiscal living, says Bob, that’s what happens in Canada.

What Price Home Does An Annual Salary Of $250,000 Buy?

I’m just saying here — looking ahead to how much house someone who earns $250,000 a year will be able to buy as we re-distribute the wealth. Not saying it shouldn’t be re-distributed, not saying it should. (Thain’s should.) OK, $250,000 in the 28% income tax bracket. That leaves $180,000. Or a monthly income of $15,000. Lots of money. We had a car lease of $1,000 on that Beamer, and maybe a little college loan out there. We are down to $13,000. We charge about $4500 a month — we pay that off. We donate and/or fritter another $1000. Did I forget anything? That leaves us $7500 for PITI — house payment, taxes and insurance.

I ask you: what price range home can you afford with $7500 a month?�

More Troubles For Highland Capital

$745 million more in troubles. Meantime, here are the homes for sale in Dallas that I am told by sources are backed by James Dondero, one head of the firm — each home appears to be it’s own limited liability partnership: 3500 Beverly, 4223 Bordeaux, 4041 Grassmere . These are exquisitely built and designed by Andrew Merrick Custom Homes, just waiting to be loved by a homebuyer.

RE: Just So We Don’t Blame Bush

Vital point from a commenter:

“Regardless of political mudslinging, the crux of the discussion is this section
“Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a
conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes
his or her monthly payments on time for two years, the one percentage point premium is dropped.”

So Candy, how many of the current defaulters used that program? I am sincerely asking the question. Is it 1% of the current defaulters, 10%, 50%, 0%? What is it?

Don’t go pointing fingers without having some answers.”

Anyone have the answers?

Just So We Don’t Blame Former President Bush For The Housing Crisis

Lookie what I found.

$275 Billion Home Stimulus Plan At First Blush

I know the reports are preliminary, but I am already getting ulcers over President Obama’s cure for our housing woes. Here’s my first report card:

A -$8000 tax credit for first-time buyers, l like very much. Assuming this will work like a section 179 deduction and come right off the taxes, not add 5 more pages or 6 hours of CPA billable hours to the tax return, essentially using tax dollars to help fund the home purchase. 

F- Revamping U.S. bankruptcy rules, giving judges the power to reduce mortgage payments and set lower interest rates. Excuse me, but I think part of our problem was that banks got too big, unregulated and complex. So now we are going to let judges play banker? This will slow down lending and banks will have to recoup their losses from somewhere —charge more to the customers who pay their bills, or higher PMI or PMI for everyone or higher interest rates.

Not fair, folks.

C – The government will match reductions lenders make to keep borrowers home payments at 31% of their income. What income — stated income? Does that include alimony?

Incomplete – Flushing Fannie Mae and Freddie Mac with $900 billion.

Allen Stanford: Son Of Mexia

Sheryl Jean at the Dallas Morning News went down to Mexia to probe the roots of accused global financier now AWOL Allen Stanford. What is it about Mexia that produces people who crave high net worth — first Anna Nicole Smith, now Stanford.

Downturn: Show Us The Money

Extra fees making it harder for consumers to borrow — I call it credit constipation.

TARP is Lousy, Says Banker

I’ve heard this echoed right here in Dallas, especially that funds were forced on banks who didn’t even ask for them.

Stoneleigh Heritage Gets Help From P.O’B Montgomery

P. O’B Montgomery & Company, a respected Dallas real estate and development firm, is now working with the Prescott-Apollo partnership that owns the on-hold Stoneleigh-Heritage Residences. (Or whatever they are now called.)  Mission: figure out what to do with that sad residence shell looming behind the Maple Avenue hotel. Early December, Prescott brought Montgomery into the picture to study all market options as an advisor, not investor. Apollo and Prescott have sought financing for the Stoneleigh project since their credit source ran dry in the fall due to the Wall Street financial meltdown.

“We are looking at doing whatever makes sense,” Phil Montgomery told me today, when asked if the residences would resume construction. “The market has clearly changed.”

Prescott’s Jud Pankey says the garage is complete and open, and construction attention will now focus on the courtyard. This month’s Architectural Digest feature on the hotel and colorful designer, Carleton Varney and his mentor, Dorothy Draper, has generated national interest in the project; Varney is coming back to Dallas in the spring to create more buzz.

If another developer were going to be engaged for this project, the most likely time would be when construction financing is being negotiated, said Pankey by email.

“Phil Montgomery introduced me to Apollo almost ten years ago, and we all try and assist each other when faced with a challenge,” wrote Pankey.

What we are doing, said Montgomery, is fairly routine.

According to sources, Al Coker is no longer handling marketing for The Stoneleigh Heritage Residences; Cynthia Pharr is handling media relations.

Attention All Real Estate Shoppers Who Bought In 2006

Zillow tells us that nationally, home values have slid 17.5 % from their values in 2006, which most experts agree was pretty much the peak year of the market. According to Zillow’s tabulations for the Dallas/Fort Worth area, our prices are — up 1.5 % ? Is that what this is saying?

So Whatever Happened To P.M.I???

Did PMI have PMS? I actually had a dream last night about P.M.I. — that is, private mortgage insurance. (The trillion dollar bail-out is so mind-boggling I am dreaming about it.) I recall when we bought our first house we had to buy P.M.I. which was a sort of default insurance that would pay off the mortgage loan in case we didn’t. The bigger our equity has become over the years, the less we have had to pay.

But what about people who bought with zero down? Didn’t they have to pay P.M.I? Or were they, instead, encouraged to get second mortgages so that instead of having an insurance policy on default, they would screw over two banks instead of one?

May I make a modest suggestion: whoever initiated the dumping of P.M.I. helped make a significant contribution to the mortgage crisis and current financial meltdown. Agree?

Shocking News: I’ve Stopped Buying Pillows

My way of cutting back, and I am not alone. My favorite quote from this story on how the Wall Street/financial meltdown has trickled down to hurt the home furnishings industry:

“If you’ve got less in your pocket and you’re worried about putting food on the table, you’re not going to be buying new throw pillows just because Pottery Barn has a new color.”

Or new faucets, or even placemats. Thursday I’m having lunch with someone from our Design District to see what gives in the Dallas design world. Meantime, Gerald Peters is shuttering and Laura Kostelny reports that At My Table in Snider Plaza is calling it quits.