Wednesday, April 28, 2010

Commercial Real Estate Investing…Are you a Lion, Cheetah, or Hippo?

Copyright 2010 By Earl Allen Boek  All Rights Reserved
Commercial Real Estate Investing…Are you a Lion, Cheetah, or Hippo?

Last night I watched a very disturbing video on National Geographic

It was so horrible to watch,  there should have been a warning issued
in advance of the showing.   My description of it should be enough
warning to you, not to even look for it on the web,  unless you too,
want to replay those visions over and over in your mind like I’m doing…
even as I write this down.

It was a home movie filmed by tourist somewhere in Africa and it starts
 with a viewing of a pride of lions.  I would say nearly a dozen, then it
zooms in on a mother hippo and it’s baby hippo, tagging along beside

The mother hippo seems in shock and a closer view shows it has been
attacked repeatedly along It’s back and spinal area as it is covered in
blood with chunks missing from it, including the area on it’s blooding
rump behind and underneath it’s tail. The mother hippo appears to be
roaming aimlessly, almost stumbling as it goes. The baby hippo beside
her,  does not even appear to have a mark on it, yet.

Another  closer pan to the pride of lions shows their obvious interest
in the pair of hippos and you realize they are no doubt responsible in
someway for the plight and the shape we find the mother hippo in. 
Luckily for us we are spared the filming of what must have been hours
of multiple attacks and escapes by the mother hippo and it’s young
through the night.  This is confirmed for you as several of the lions get
up from the dirt and  begin stalking the hippos again, then finally
the entire pride joins in the stockings.

Quickly but carefully and mindfully avoiding the huge, hippo
mother’s teeth she flashes and bites out at each attacker,  but the
lions easily jump and avoid any damage to themselves and there
are far too many of them for her to concentrate on anyone of
them for long anyway.  They continue to bite what must be
huge mouthfuls out of the hippo’s  back as they try to destroy
her spinal column  in an attempt to bring the large animal to
the ground, even as she reacts, she still has the presence of
mind, or just in breaded nature, to keep her own body between
the loin attacks and her much smaller hippo baby.

Either one of the hippos might have been able to escape the
lions as the lions concentrate on the other, but neither would
leave the other alone.  It becomes more heart-wrenching to
watch as the mother finally gives up, her huge weight
slamming into the dusty earth,  and then to watch her baby
drop it’s head like a small bull and tries to fend off one of it’s
mother’s attackers, as she lies helpless under the combined
weight of several of the large animals.  The cowardly lion is
actually afraid and jumps away from the baby hippo’s attack
until the little hippo turns it’s attention back to it’s
mother than the coward lion returns and jumps on the baby’s
back from behind it.

Sobs from the tourist and screams from the animals and
gasps from those filming are recorded right along with the
video, as the baby hippos is filmed going down while
attempting to defend it’s mother’s life, finally,  the screen
goes blank.   I’m setting there in shock from what I’ve just

Our cameraman then comes on  and tells us all the cameras
on the tour vehicle were shut off voluntarily, at that point,
as it was too horrible to even continue to film the remaining
drama, with all the horrible screams from the baby hippo
And the entire tour group, many crying and in tears,  and
watching the horrible spectacle play out.

Another short video on the same program shows a similar
attack by a smaller group of lions against a cheetah.  The
cheetah, immediately fell on it’s back to protect it’s spine,
as it fought multiple attacks by the lions at once, using
all four of it’s claws and teeth in the process.  Finally the
cheetah, about 1/3rd the size of any of the lion attackers,
actually bit into the lead lion’s face and locked on it with
it’s powerful jaws.  That lion was happy to release and
stop it’s attack at that point, as did the other lions and
the cheetah was finally able to escape, what at first
appeared to be sudden death. The lion stood there with
blood rushing down it's face and chin and a look like
"what the hell just happened here."

Switch To Our Commercial Short Sale Serengeti

 Then it hit me, being in the commercial real estate business
I am meeting “would be, but won’t be associates, who
behave a lot like members of this pride of lions. 

This new breed of businessman (and maybe women too)
the lazy, self indulgent, pride-full, full of themselves,
over confident and under talented, for sure,  in
communication and interpersonal management and sales
skills, lacking I’m sure in other areas as well, which I
refuse to explore in more detail, greedy, pack mentality,
dishonest, bull shitting, selfish,  cowards. (I  reserve the
right to expand on these ideas later.)

Frankly, attempting to work with these “self-proclaimed
lions”  of the RE industry is quickly becoming boring
and rather distasteful to me. Thanks to God I only need
a few good deals to succeed in this business and I'm
not in such a big hurry that I cannot treat my customer,
my associates with a little dignity, class and respect.

I would rather hang out with the cheetahs and work
with the hippos. Let the lions all fight over
their next meal, I don't intend to be it.  Smile.

So the next time Mr. Lion, you check your way too
full plate, notice I'm no longer on your menu.

Thank you. EAB

Saturday, April 24, 2010

Commercial Short Sales, REO's Distressed Cities Top 10 Home Owner Slaugterhouses.

10 Cities Facing a Double Whammy of Default Risks

, On Friday April 23, 2010, 5:28 pm EDT
Nearly four years after the real estate market peaked, an alarming number of Americans remain in danger of losing their homes. A non-seasonally adjusted 15 percent of home mortgages were either delinquent or in foreclosure at the end of the fourth quarter of 2009, according to the Mortgage Bankers Association. That's the highest-ever tally in the history of the MBA's National Delinquency Survey.
Mike Larson of Weiss Research points to two key factors behind these high delinquencies. Sharply falling real estate values have put about 21 percent of homeowners underwater, meaning that they owe more on their mortgage than their home is worth. Property owners in this position--which is also known as having negative equity--may find it in their best interest to simply walk away from the home (even, in some cases, when they can afford to make their monthly payments). At the same time, an uncomfortably high national unemployment rate of 9.7 percent means that many Americans won't have the income they need to pay their bills.
[Slide Show: 10 Cities Facing Double-Whammy Defaults.]
Today, some particularly hard-hit markets are in the unenviable position of having both elevated unemployment and high concentrations of negative equity. "Clearly, those are the markets where you are going to see some of the worst metrics on the foreclosure side," Larson says. "You are going to see a lot of people walking away [and] you are going to see a lot of distressed inventory that's being dumped on the market." To pinpoint housing markets that are facing these twin default risks, U.S. News compared negative equity data from Zillow with unemployment figures from Moody's (All data refers to the fourth quarter of 2009.) Based on this data, here is a look at 10 cities that face a double whammy of default risks.
[See How Strategic Defaults Are Reshaping the Economy.]
1. Las Vegas: Speculators and exotic loans pushed home prices in this gambling Mecca dramatically higher during the first half of the previous decade. But after peaking in 2006, the real estate market's crash cleaned out investors and submerged an alarming portion of area homeowners. Through the fourth quarter of 2009, more than 81 percent of single-family home mortgages in Las Vegas were underwater. Meanwhile, the implosion of the housing sector has hammered the local labor market, says Larry Murphy, the president of SalesTraq. When the housing market was sizzling, construction emerged as a key job provider for Las Vegas residents. But as home prices tumbled, the jobs disappeared. "When the housing market goes in the tank, the construction market goes in the tank," Murphy says. "Then you have unemployment and those people can't buy [property] and so it's kind of like a death spiral." The unemployment rate in Las Vegas reached 13 percent in the fourth quarter of last year.
2. Merced, Calif.: California residents looking for alternatives to pricey big cities helped send home prices surging in places like Merced during in the early to middle parts of the last decade. Real estate values in this city of 77,000 residents, which is located east of San Francisco, increased at monster rates before running out of steam in 2006. The proliferation of exotic, adjustable-rate mortgages played a key role in this development, says John Walsh, the president of DataQuick. But the subsequent crash dragged more than 64 percent of area homeowners underwater through the fourth quarter of 2009. And the impact of the real estate bust stretched beyond home prices. "You go to places like Merced and you've got a real significant percentage of the population [that] was involved in either home building, home financing, or home sales," Walsh says. "And all of the sudden all three pieces of those are gone." As a result, Merced's unemployment rate stood at 19 percent through the fourth quarter of 2009.
3. El Centro, Calif.: The same forces that upended Merced's housing and labor markets also hammered the city of El Centro, Walsh says. Residents looking for a cheaper alternative to nearby San Diego moved to El Centro, increasing home prices in this city of 40,000, Walsh says. But when home prices crashed, nearly 57 percent of homeowners found themselves underwater through the fourth quarter of 2009. And without real estate-related industries churning out jobs, the unemployment rate has hit nearly 30 percent.
4. Port St. Lucie, Fla.: The housing market in Port St. Lucie, located on the southeast coast of Florida, experienced one of the most aggressive pricing booms in the state, says Jack McCabe of McCabe Research & Consulting. But the run-up in real estate values wasn't underpinned by growth in population or jobs. "These were markets that were heavily dominated by investor flippers, speculative flippers," McCabe says. "They had no intention of ever occupying the property." When prices crashed, more than 55 percent of single-family homeowners found themselves underwater through the fourth quarter of 2009. And as stagnant sales undercut the housing sector's ability to create jobs, area unemployment reached 14 percent.
5. Fort Myers, Fla.: Over on Florida's west coast, the housing market in Fort Myers experienced a similar phenomenon. An aggressive boom-and-bust cycle has handed negative equity positions to 55 percent of single-family homeowners. And like other housing-boom hotspots, the pain hasn't been limited to real estate values. "We had extremely low unemployment during the boom years because it was all construction jobs," McCabe says. "There was no industry growth and there was no company growth. These were all real estate-related businesses--brokers, title companies, appraisers, and on and on." After the housing euphoria subsided, many employees of real estate-related companies lost their jobs. Unemployment in the Ft. Myers area hit 14 percent in the fourth quarter of 2009.
6. Bend, Ore.: Vacation home buyers, speculative investors, and unique land-use laws worked to drive home prices in Bend sharply higher during the housing boom, says Lester Friedman, president-elect of the Central Oregon Association of Realtors. But as the market petered out, prices headed south in a hurry. "When the market turned, all of a sudden instead of multiple bidders, you've got multiple sellers and very few buyers," Friedman says. Declining real estate values dragged nearly 41 percent of Bend's homeowners underwater. Meanwhile, the housing bust hit the local economy by eroding demand for wood products, an industry that expanded swiftly as real estate values climbed, according to Celia Chen of Moody's Friedman notes that weakness in the tourism sector, which slowed along with the broader economy, has also helped lead to an unemployment rate that topped 14 percent in the fourth quarter of 2009.
7. Ocala, Fla.: The central Florida community of Ocala, which is located north of Orlando, is in the same precarious position as the coastal cities of Port St. Lucie and Fort Myers. Thirty-six percent of homeowners in Ocala are underwater, and area unemployment stood at 14 percent in the fourth quarter of last year. "All throughout Florida--from one coast to the other and in between--the market was overdeveloped and overbuilt," McCabe says. "And that includes the Ocala market."
8. Detroit: A number of cities located outside of the housing-boom hotspots are also facing the twin dangers of high unemployment and negative equity. The erosion of its traditional manufacturing industrial base has helped drive unemployment in the Detroit area to more than 16 percent through the fourth quarter of 2009, Chen says. "And at the same time, there was some very aggressive lending going on during the housing bubble," Chen says. "So many buyers were getting credit who probably shouldn't have gotten credit." High unemployment and exotic home loans have combined to drag nearly 26 percent of area homeowners underwater through the fourth quarter of 2009.
9. Rockford, Ill.: These same forces have worked to land Rockford--a city of 157,000 located in northern Illinois--in a comparable fix, Chen says. Local unemployment hit 16 percent in the fourth quarter of 2009. "The Midwest did go into the recession earlier than the rest of [the country], so the situation has been eroding for a longer period of time," Chen says. At the same time, more than 22 percent of homeowners had negative equity in the final three months of last year.
10. Toledo, Ohio: The housing market in Toledo also faces high unemployment and negative equity. In the fourth quarter of 2009, local unemployment stood at more than 12 percent and roughly 28 percent of homeowners had negative equity. As was the case for Rockford and Detroit, Chen fingered the disappearance of manufacturing jobs and the proliferation of risky mortgages for Toledo's housing headaches.

Friday, April 16, 2010

Real Estate Values In "FREE FALL" According To Yahoo Article

U.S. Cities In Free Fall

Francesca Levy,

Apr 13th, 2010

Economic indicators in these metros have gone from bad to worse, with no sign of recovery.

Miami boasts a popular South Beach club scene, Art Deco Architecture, and perhaps the best Cuban food in the country. But residents don't have much else to celebrate.

More than three years after the economy started its downward slide, the Miami metro area, like a handful of Sun Belt cities, still hasn't begun to recover. Median home prices in Miami have fallen 38% since its market peaked in the second quarter of 2007; the city's 11% unemployment rate is above the national average and has grown more than most of the 40 cities we surveyed.
List: 10 U.S. Cities In Free Fall 10 Cities in a Free Fall

Cities in the "Sand States" of Florida, California, Arizona and Nevada, where overbuilding was rampant, are also in trouble, claiming nine of the top 10 spots in our list of cities in free fall. In Las Vegas, Riverside, Calif., and Phoenix, median home prices have fallen 50%, 44% and 37% from their respective peaks. Jobs are vanishing. Though country-wide, employers added 162,00 jobs last month, Riverside gained 13% fewer jobs in February 2010 (the latest numbers available by metro) than it did the same month three years earlier. Tampa, Fla., saw a 10% drop, and Los Angeles added 9% fewer jobs over the same time period.

These cities are also slow to absorb their glut of unsold foreclosed homes, keeping recovery at bay.

"These were highly speculative housing markets," says Jonathan Miller, president of Miller Samuel, a Manhattan-based real estate appraisal firm. "In the markets that have unloaded a lot of foreclosed housing stock there's still a lot more coming."
Behind the Numbers

To find the country's cities in free fall, we rated its 40 largest Metropolitan Statistical Areas (MSA) on six metrics.

We ranked each MSA on the percent its median home price has fallen since its individual peak, using data provided by Local Market Monitor, a housing market data tracker. To get an estimate for the number of new homes being built, we used data from the U.S. Census Bureau, which tracks how many building permits are issued. Roughly 98% of these permits become new home starts. We looked at the percent change in new building permits between February 2007 and February 2010.

We also wanted to know how many people were moving in and out of these metros, since a growing population buoys a local economy. We used the Census Bureau's most recent population estimates to rank each metro on its net population change between July 2006 and July 2009. To judge each city's productivity we also ranked each metro on its per capita gross domestic product in 2008, the most recent year available, using data from Moody's Finally, we ranked the metros on the percent change in unemployment between January 2007 and January 2010 and the number of jobs they added between February 2007 and February 2010, with data from the Bureau of Labor Statistics. We averaged these rankings to arrive at a final score.
Sunshine State Stagnancy

Florida cities dominate our list, with Tampa, Orlando and Jacksonville joining Miami. Florida's real estate market keeps falling even as some herald the start of a rebound. The state's comparatively sluggish foreclosure process keeps those homes from getting easily flushed out of the market. Because every foreclosure must be approved by a judge, the procedure takes a minimum of five months to complete.

"In states with complex foreclosure laws, the recovery is clearly being delayed," says Mike Simonsen, CEO of Altos Research, a Mountain View, Calif.-based real estate research firm, who adds that lengthy foreclosures may be driving away real estate investors in these cities.
A Trouble Spot in the Northeast

Picturesque Providence, R.I., is the only New England metro on our list. Economically, it's struggling far more than other cities in the region. Although Providence saw a slower three-year increase in unemployment than some other major metros, it still has a high unemployment rate, at 14%. The city also added 9% fewer jobs in 2010 than three years earlier. Workers are getting the message and leaving town. Providence is the only city in our top 10 to see a net loss in population.
Grim News for the Golden State

California cities are struggling too. Riverside, Los Angeles and Sacramento are suffering because of the knocks they took after their inflated housing markets began to plummet. Unemployment in the City of Angels has nearly tripled in three years, to 12%. Riverside's unemployment has also ballooned, to 15%. Meanwhile Sacramento saw a 75% drop in new building permits. These are troubling signs for Cali metros, but not surprising. The end of the state's home-price climb triggered more than just a housing slump.

"In California, so many jobs were concentrated in construction," says Michael Fratantoni, vice president of research at the Mortgage Bankers Association, the professional association for real estate financiers. "Jobs building single family homes wound up not being sustainable, and there were a lot of job losses."

The long-term consequences of the housing crash in these cities are still playing out, and new factors that complicate a recovery keep cropping up.

"Places like Phoenix and Riverside may take even longer to recover because people might just pick up and leave to go to places doing better," says Fratantoni. "It may make more sense to leave, rather than wait for jobs to return."
Top 5 Cities in a Free Fall

1. Miami-Fort Lauderdale-Pompano Beach, FL
Net Population Change, 2006-2009: 1.47%
Per Capita Gross Domestic Product: $42,645.52
Change in New Building Permits, February 2007-February 2010: -77.46%
Change in Unemployment, January 2007-January 2010: 202.70%
Change in New Jobs Added, February 2007 - February 2010: -9.68%
Change in Median Home Price from Market Peak: -38%

2. Tampa-Clearwater, FL
Net Population Change, 2006-2009: 2.33%
Per Capita Gross Domestic Product: $42,562.92
Change in New Building Permits, February 2007-February 2010: -44.18%
Change in Unemployment, January 2007-January 2010: 235.90%
Change in New Jobs Added, February 2007 - February 2010: -9.87%
Change in Median Home Price from Market Peak: -32%

3. Riverside-San Bernardino-Ontario, Calif.
Net Population Change, 2006-2009: 4.40%
Per Capita Gross Domestic Product: $32,403.49
Change in New Building Permits, February 2007-February 2010: -65.69%
Change in Unemployment, January 2007-January 2010: 177.78%
Change in New Jobs Added, February 2007 - February 2010: -12.94%
Change in Median Home Price from Market Peak: -44%

4. Jacksonville, Fl.
Net Population Change, 2006-2009: 3.83%
Per Capita Gross Domestic Product: $16,035.65
Change in New Building Permits, February 2007-February 2010: -66.09%
Change in Unemployment, January 2007-January 2010: 227.03%
Change in New Jobs Added, February 2007 - February 2010: -7.74%
Change in Median Home Price from Market Peak: -23%

5. Phoenix-Mesa-Scottsdale, AZ
Net Population Change, 2006-2009: 7.85%
Per Capita Gross Domestic Product: $40,870.16
Change in New Building Permits, February 2007-February 2010: -83.61%
Change in Unemployment, January 2007-January 2010: 148.65%
Change in New Jobs Added, February 2007 - February 2010: -10.01%
Change in Median Home Price from Market Peak: -37%
Click here to see the full list of Ten U.S. Cities In Free Fall
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List of All Ten Cities In FREE FALL

Thursday, April 8, 2010