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Sneak Peak Inside Bailey’s Prime Plus Park Lane

Little “private luncheon” there yesterday and I was honored to meet the proprietor, Mr. Ed Bailey himself. He told us he wants Prime Plus to be the sort of steakhouse where ladies would feel at home for lunch with the girls as well as going out with the boys to devour a huge, juicy steak. (As a Chicago girl, let me tell you, there is nothing better.) I ooohed and ahhhed over the design, while lunch will necessitate the addition of two inches to my Mama wedding frock: the food was fantastic! (Click here if you like Food Porn — warning: House Porn has fewer calories.) The restaurant is huge — 12,000 square feet — in the new Park Lane development at Park and Central.

Sensationalizing Math: Could Underwater Mortgage Reports Be Flawed?

This is going to be a long one, and I’ll be late for lunch, as usual. I just got off the phone with Gwen Moritz, Editor of Arkansas Business in Little Rock. Gwen took a look at a scintillating report in Saturday’s Arkansas Democrat-Gazette that said 25% of Arkansas mortgages are “under water”. Steve Brown ran the same report Friday and I parroted, our number in Dallas being 30% underwater. Every media outlet in America ran the piece since it was wisely sent out localized and sensational. The study was made by a California company called First American CoreLogic. Gwen read the story and it nagged her — 25% of Arkansas mortgages under water? How can that be, she asked.

Now when I read the story, I too had my doubts, for this reason: if the reports CoreLogic used included HELOCS — home equity lines of credit — why would 30% of Dallas mortgages be underwater? In Texas we are limited to 80% loan to value home equity ratios. That would mean that if someone maxed out their HELOC in Texas, they’d have to have lost 20% of the value of their BRAND NEW 100% FINANCED home and then some to be underwater. Or maybe they’d be flat. Whatever, I thought, as I usually do, who am I to question the brainpower and computers of these geniuses in California? God, we are all so bad!

Well, Gwen questioned them. She did what I should have done and picked up the phone and said, you know, this just doesn’t look right. Artkansas never had a housing bubble. Neither did Texas. She did some research on CoreLogic’s methodology and found out — hold the presses!!! — the company’s numbers may be biased on the HIGH SIDE . In other words, giving us facts that are worse than they really are.

Most of the mortgages used in the study are less than six years old — really? Did the whole world re-finance in the last six years? When she called CoreLogic, Gwen got them to admit actually 85% are less than six years old.

The study assumes that the borrower owes the balance of the mortgage when they took out the loan — in other words, it does not take into account monthly mortgage payments made against that balance. Why? Because of the way CoreLogic gets it’s information — it aggregates information from lenders, matching total mortgaged amounts in geographic chunks, like how much was loaned in a specific area or zip code. Then the computers whiz out numbers against property values. (Obviously I over-simplify.) They get this proprietary info from the lenders and use original loan amounts from public data records. But they base it on the original loan amount — they never get to come into our file cabinets and see how much money we’ve actually paid down on that mortgage or home equity LOC.

See where I’m going with this?

Gwen also found out the study includes the HELOCs but again, uses only the maximum credit figures since that is all the information that is available. So it looks like every one’s HELOC is at the max. Don’t know about you, but I have to pay down on mine every month and in fact, ours is almost paid off.

So if you are using figures that assume homeowners still owe every penny in debt they ever took out on a loan, figures that give no credit to what homeowners have in fact paid, then Gwen asks, maybe that study could over-estimate the number of folks whose mortgages are underwater.

“It’s biased to the high side,” says Gwen. “We need to be a little more skeptical of these studies.”

No kidding.

(Note: Thanks to Gwen Moritz for not only questioning the CoreLogic report but notifying the Alliance of Area Business Publishers of her query via email, which Glenn Hunter, editor of award-winning DCEO, then forwarded to me.)

Dallas Real Estate: Let’s Say I Am A Wee Bit Late On My Mortgage Payment…

It happens to the best of us — like when I found last month’s bills under the seat of my car once… maybe thrice. My husband’s office manager was 3 weeks late on her mortgage payment — plumb forgot it. When she discovered this, she pronto wrote a check for the payment, then, to show she was not really a scofflaw, wrote out two more future-dated payments, put sticky note instructions on each one, popped them in the envelope and rushed them to her bank. She says that in the past, the bank has taken her post-dated checks and held them until the date due. And that’s what she thought was going to happen.

Yesterday, she learned that all three mortgage checks had been cashed, her mortgage now pre-paid,  and her checking account severely overdrawn. Not only that, she was hit with $350 in bank fees. Her bank officer called her — (”I didn’t even know I had a bank officer,” says she) and said gosh, this is so weird, your account has never been overdrawn in 15 years!

I am researching her recourse on the bank’s actions. They have refunded half the fees. But they would not reverse the payments. My lawyer daughter tells me to always, always write your bank account number on the back of a check or else, if the bank credits it to another account accidentally, they may not be liable. But I wonder how far the instructions on a check go — future dating — and sticky notes? My son (financial advisor) says banks cannot cash checks bearing future dates. But for best results, I have advised getting that mortgage set up on an auto-draft because Texas is a non-judicial foreclosure state.

Which leads me to a theory — would love your opinion on this. When you pay a creditor on an auto-draft, you significantly decrease any collection expenses they may encounter. In fact, you all but eliminate them. I think that banks and mortgage companies should give us a discount if we sign up for auto-draft. Or at least go back to handing out free toaster ovens! Calling Sheila Bair…..

New Way To Market Dallas Real Estate? Coupon Cutting For One Million Dollars Off

That’s what a Fort Myers, FLA agent is using to lure buyers into buying an almost $7 million dollar, 15,000 square foot Italian Villa home on the coastal canal just completed in 2009. Can you imagine a one million dollars off coupon? Wonder if there’s an expiration date? Wonder if transferable to other cities and properties? Wonder when we’re going to see these in Dallas?

Could HP’s Salary Cuts Further Erode Plano Real Estate Values?

I’m speculating here, but one reason why I am still wearing Debbie Downer glasses.

Dallas Real Estate Market Comeback: Let’s Hold The Champagne For A Few Hours

Good morning! I know, everyone is getting all revved up over last weeks’ improved reports on home sales. Newsweek has called the recession officially over, and pundits are celebrating the turn-around of our real estate market, end of the recession. In Dallas, June new home sales rose 11 percent. Texas had more homebuilding permits than California and Florida combined, and Standard and Poor’s’ Case-Shiller report, God’s real estate tablet for investors, informed us national home prices rose a half a percent from April to May, the first monthly increase since 2006, the year considered by many to be the peak of the national housing boom.

That’s right, we are getting delirious over one-half percent.

Like the caboose of a train, a little behind everyone else, I think our Dallas market peaked in 2007/early 2008.  I was in California last January when evidence of the bust was already showing.  Of course, our prices never ballooned the way the hot markets like California, Nevada, Phoenix and New York poofed up, one reason why our contraction has been much less painful.

But I am not drinking Moet just yet. Homes are selling because sellers are slashing prices — DFW home prices today more closely resemble those in the years 2003/2004. Except for buyers with large cash reserves (flush from pre-bust sales) and near perfect credit scores, loans are not flowing. Credit is still constipated. Stringent new appraisal laws are blowing many real estate deals at a time when we need them most The first time home buyers are leading most of this upturn, but the $8,000 stimulus ends January 1 — Congress would be smart to extend it one more year. Not to be Debbie Downer, but spring is like Christmas for the real estate industry. Most people who need to buy or move do so in spring and early summer, usually families who want to get settled as soon as the kids are out of school.

I think the real test will be in the fall. Autumn is when the bottom feeders come out and swoop up the bargains, especially towards the end of the year when third-quarter reports yield more depressing news and property taxes are coming due. Commercial real estate is like a Jenga tower, and my sources tell me we are in for a tsunami of commercial foreclosures. Oh and get this: commercial loans were also securitized by the Ivy League geniuses on Wall Street. (Question while I’m on the rampage: where was McKinsey & Co., that powerhouse of knowledge, when subprime etc. hit the fan?) Unemployment still haunts, despite what Al Coker told Steve Brown.  Sweeping health care legislation could sweep out even more jobs, which is the number one reason now for home foreclosures: people losing jobs cannot pay mortgages. And foreclosures — if not in Park Cities or Preston Hollow — will further erode home prices even more in areas like Duncanville, Frisco, and Little Elm.

Which could, of course, bring out even more fire-sale buyers. IF they can get mortgages. Some experts out there are saying that the Fed is keeping us from knowing the awful, ugly truth – that a whole lot of the big banks are as wobbly as the soils in Farmers Branch. I would still like to know why more TARP funds have not trickled down to the consumers for home loans.  And consumers, well, they are not really letting loose. I was at Neimans Last Call this weekend and when the 65% markdowns came on, a few bought. One clerk told me the mall was crowded with more lookers than buyers.

My most trusted financial advisors are calling it bottom. Mortgage companies are starting to work with delinquent borrowers, finding it economically more advantageous to make a deal and keep them in the house rather than add to their burgeoning inventory. (Besides, it is so hot on the courthouse steps.) Builders are slashing as much as half a million off prices and every new home start I see has an owner — the spec home is dead. We might as well carry a casket like the Hippies did at Haight-Ashbury at the end of the 60’s. I remember Della Lively telling me in 2007 that Dallas builders were living on Moet, it was really running in the streets of Park Cities and Preston Hollow. Even the teenagers were drinking it.

Now, she says, they’re all drinking beer. 

This week I’m going to ask several Dallas real estate experts if they think we have seen the bottom and when they think the upward climb will begin. Comments are open, what do you think: has the Dallas housing market hit bottom from the Great Recession of 2008?

Or will we — gasp — get even lower? Bottoms up!

Should Mom And Dad “Gift You” With A Down Payment For A Home?

OK, let’s face it: many of us got a little help from mom and dad when we bought our first homes back before zero-down loans. Guess what, it’s 1980 all over again. Tough Love in lending and we are back to ten,  twenty percent down payments,  tough for kids fresh out of school, loaded with education debt, to come up with. No wonder lenders are seeing a surge in kids asking M&D for help with down payments. Keep in mind, the help cannot be a loan and you must document the down payment gift with a “gift letter.” My fave mortgage blog has all the details on the right way to do a gift letter, and will even email you a sample. To satisfy underwriter’s increasingly unsatiable appetites, you’ll need the gift letter, the gift in a cashier’s check, and no co-mingling of funds on deposit. 

This is not new: the tradition at Romanian weddings was to pin money on the bride (a tradition I’d like to revive), that money going to help the couple buy their first home. There are also many ways parents can help their children buy a home without giving them a chunk of cash. For example, we let my daughter and her fiance live with us while they saved up for a down payment. You can also cover the cost of property improvements on the new home once they move in.

Call me Debbie Divorce Downer, but I am a member of the 50% divorce rate generation: what do you do if the marriage doesn’t last? Let’s say you “gift” Johnny and Susie $20,000 for a down payment on a cute M Streets cottage. They split after two years. Texas is a community property state, home is to be sold and equity split. My take: you have just gifted your son-in-law $10,000. Am I correct?

Dallas Home Price Performance

Today Steve Brown tells us that, even though our home values have taken about a 15% price hit from the highs of 2007, Dallas home prices are projected to remain constant over the next twelve months while they are expected to continue to decrease nationally by 6.6 percent, all this according to yet another home price consultant guru, North Carolina-based Local Price Monitor. At a real estate event last night — so fun,  commercial brokers had to dress up in tuxedos and serve the ladies wine — I heard tale upon tale of buyers coming in with low-ball offers. At least one agent said, if you don’t have to sell your house, why would you have it on the market now? Getting back to the North Carolina study: yesterday, Steve quoted the folks at Harvard, who I personally find morbidly doom and gloom in their reports, as saying our home values were back to 1990’s values.  (CNN says new home sales in May down a third from 2008 levels.) While today’s report seems to contradict that report, I guess this means it still is not as bad as the 1980’s.

Dallas Real Estate Market Report: When Will The Sun Come Out?

Not ’till 2010, according to Wells Fargo Economics senior economist Eugenio Aleman, and well into 2010, when the job markets start to stabilize. (Austin’s job market is healing, but Austin job recovery may take even longer.) What we don’t need about now is rising interest rates, which have crept up lately. Rates over 7 and 8 percent could stifle any small gains we’ve made in this spring market.

Speaking of Hosed:The Cost Of Marketing a Mega Mansion

1851 Turbeville Road has now come full circle: Briggs Freeman actually had the very first shot at selling Champs D’ Or, when it was listed for $48 million, the home plus the same 25 acres now listed by Joan Eleazer for $27m. But in the words of Robbie Briggs, the world of real estate has changed, as has the way agents market properties. An interesting side story of this mega manse is the marketing costs to the various brokers who have tried to get it sold. Briggs had it first — and shelled out at least $100,000 in marketing/advertising costs. Next up: Doris Jacobs and Allie Beth Allman: another $100,000. About three years ago, Greg Cagle at Ebby tried to sell it, hosting one of the be$t partie$ I’ve ever been to, then it hopped across the office aisle to Elaine Whitfield and Matthew Edwards of Dave Perry-Miller, an Ebby company. Off the record sources have told me Ebby dished out almost $150,000 trying to sell the Goldfield’s field of dreams. Three of the creme de la creme of Dallas’ top brokers, $350,000 to try and sell a mega mansion.

This time, however, the marketing campaign at Briggs will be far less slick.

“We’re going to keep it simple,” says Robbie Briggs, “marketing it through the internet and ingenuity. The buyer for this property will be a rare person, likely international.”

Or a consortium looking to turn the Dream manse into a spa or resort/surgery center where,  for example, celebs could jet into Dallas (D/FW is only 30 minutes) get nipped, tucked,  have fat removed or replenished,  and recoup at Champs D’ Or in 35,000 French-inspired square feet, meander up to the Hall of Mirrors-inspired ballroom and check out your eye-lift,  sip healing tea in the Tavern-On-The-Green inspired tea room, sit under the hair dryer in the salon off the Chanel closet and master bedroom where, for top dollar, you can sleep off the Vicodan.

Goldfield has more than $36 million in the house. At least one sharp agent told him years ago to dump the whole place for under $30 million. But no. 

“I think the timing is right,” says Robbie, “We can’t fix a man’s dream, we cannot transport this home to a different location.”

Not to Beverly Drive, because then buyers would not be getting quite such a bargain: at $27 million, the buyer will be getting 2/3rds of the home, and all 25 acres, for free.

Such a deal!

Dallas Home Sales

Here’s a real shocker: Dallas home sales are down from last year — but prices down just an itty bit. But wait. Didn’t Trulia just say that Dallas has one of the highest price reduction rates in the country? When I saw that story, first thing came to mind: how in the Beejesus does Trulia know anything about anything in an undisclosed price state? Beats me. As we told you in last week’s Real Estate Round Table, that $8000 first-time home-buyer’s credit – you have to have not owned a home for at least three years and must earn less than $120,000, although higher salaries can be pro-rated — is really getting first time home buyers off the fence, into the homeowner’s pool. I’ve been interviewing a few first time home buyers to gather thoughts — stay tuned.

Has The D/FW Market Bottomed Out? Our Web Video Blue-Ribbon Panel Says…

The 8-ball says all signs point to yes: sellers are cutting deals, and the threat of rising interest rates has unleashed the gates. One agent tells me he had 55 people stomping through his Midway Hollow open houses this past weekend. And that is basically what our blue-ribbon panel of experts said at last week’s Real Estate Roundtable.

Highland Park Village Sale: What’s Coming, What’s Going?

At a private celebratory party last night, Ray Washburne was crowned the King of Highland Park Village at his Mi Cocina’s, the second floor so crowded a June Bug couldn’t fit in. HPV passes from one illustriou$ family to another. Breathe a sigh of relief: Ray Washburne tells the DMN that HPV is in good hands with its new owners, all locals who care deeply about the historical shopping center. Vince is coming — no word on rumors that Apple and Lela Rose or other new vendors will be nipping close behind. Stay tuned.

Warren Buffet’s Take On The National Real Estate Market

The Oracle of Omaha was not exactly bullish on appreciation at his shareholder’s meeting this weekend.

Auction Update

Promised you a post on how Sunday’s auction turned out at the Great Wolf Lodge in Grapevine: Radius Management says it was a huge hit, and they walked out with more than 30 homes under contract. Details forthcoming. But I neglected to tell you the latest about the Chicago  house that auctioned off some pricey Centrum units two years ago — thankfully Glenn Hunter has it covered on Frontburner.  The auction business is not hurting; Sheldon Good cites financial problems related to  Steven Good, who tragically committed suicide in January.

Going Going Gone: Buying Dallas Real Estate At Auction

In this market, would you buy a home at auction? Dallas real estate market research guru Residential Strategies has it’s eye on a newbie called Radius Management, thinking folks might warm up to the idea: in 1999, $49.5 billion worth of real estate was sold by auction in the United States, and the National Association of Realtors projects that 30% of all U.S. real estate will be sold through auctions within eight years. NAR even provides links to more than 100 auction companies, which may sound surprising but there’s a protective caveat — auctioneers must either have a real estate license themselves or hire a real estate licensee to handle sales in all 50 states.

Live auctions are a $270.7 billion dollar industry with positive growth. The fastest-growing segments are real estate – land, agricultural, commercial and industrial. And with the continued dismal news about our market, sellers and agents love the quick turnaround potential: one man’s poison could be a buyer’s bargain in five minutes – that’s how long the average auction takes. Live auction real estate revenue has grown 5.3% since 2006.  

Jean-Paul Puryear, Warren Barreto and Butler Nooner are banking on that. Their Dallas auction company, Radius Management, aims to change the way real estate is sold in Texas.

(more…)

Earth Day and the Ag Exemption

If you love trees and tree farms, then you should love what the Texas agriculture exemption has done for them. In honor of Earth Day, here’s an out-take from my recent post on  farms and suburbs for the national land-use website The New Geography, an interesting aside relayed to me by Phillip Williams, developer of Montgomery Farm in Allen:

Margaret Crow thought that cows stank. Margaret was the elegant wife of Trammell Crow, Jr., a  Dallas property developer who created the Dallas Design District, Dallas Market Center, Atlanta’s Peachtree Center and San Francisco’s Embarcadero Center.

The problem was that without any cows, Mr. Crow would not be able to obtain an agricultural exemption on his extensive properties and would instead pay full Texas property taxes. How the hell, he asked, can you get an ag exemption without any cows? He posed the question to a young CPA at Arthur Young, Crow’s accounting firm, who shot back a memo to Crow saying sir, you can have your agricultural exemption: plant a tree farm.

 That CPA was young Philip Williams.

 ”By 1988,” says Williams, “Every major real estate developer in Texas had a tree farm.”

Marketing Your Property: Make Sure The Camera Is In Focus

Not exactly the photo you want the world to see when you are marketing your home for sale. You’d think the agent would have known better, but the buck always stops with us, the homeowners. Of course, maybe the problem is that this home happens to be on Margarita Drive

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.

Always A Bridesmaid, Never A Bride: 3229 Wentwood Plus Dowry

This baby’s been on the market FOREVER, reduced to $1,999,950 from $2,250,000 and now the agents, Charles Gregory and Jennifer Miller of Dave Perry-Miller, an Ebby Halliday Company, are throwing in a dowry.

$40,000 luxury car with purchase of this home.

The roadster will be a Mercedes or other vintage auto valued at $40,000, your pick of the fleet from Benny Black’s Platinum Motorcars.

I tell you, the agents are getting mighty creative out there trying to get buyers off the fence.  As one buyer told me, the houses north of LBJ and in the boonies are practically free, south of LBJ they all but buy you a diamond ring. I can hardly wait!

Sold! 5117 Ursula

Listed for $5.6 million, closed today. So if you think things are slow going in the Dallas real estate market, well,  here’s a big one that just moved. The buyers are moving off the fence.