People who manage hotels and condos are starting to realize that visitors have many, many options.

After three years of raising rates, they are now focused on making sure guests return.

David Teitelbaum, president of a small condo-hotel resort on Anna Maria Island, said that’s what drove him to make a rare move: He lowered winter season rates.

“If we didn’t have such a high repeat and referral business, we’d be sticking the rate as high as we could,” Teitelbaum said. “We want them to have a good Tortuga experience,” he said, referring to the 55-unit hotel in Bradenton Beach.

The vacationer’s first choice — where to stay — kicks off a whole series of spending decisions. Will they stay inland and drive to the beach? Where will they eat on the way?

Managers see patterns that emerged last year continuing.

First, a glut of condos is drawing bargain hunters to the mainland. Second, small hotels are seeing less advance booking.

Teitelbaum’s rate cut is an extreme example, but accommodation managers are paying attention to their prices. That is not surprising, given the statewide outlook for tourism.

Barry Pitegoff, vice president of research at Visit Florida, told tourism professionals gathered in St. Petersburg last fall that visitor numbers could level off in 2007.

He cited increasing room rates and a concentration of growth among affluent travelers. While big spenders are nice, there are only so many.

“Competition has gotten fierce right now for sun destinations in general,” said Gary Ettinger, vice president of the eastern region for ResortQuest, based in Nashville, Tenn.

ResortQuest manages about 2,000 condos and houses from Manatee County to Naples.

Like most managers, Ettinger was optimistic about the season. But ResortQuest worked hard for the growth.

Ettinger hired a revenue manager to do a comprehensive rate review. ResortQuest raised rates by as much as 5 percent in Sarasota and Longboat Key. In other spots, ResortQuest “right-priced” rates while eliminating discounts.

Ettinger acknowledged that management companies are facing a lot of competition from by-owner vacation rentals, but he said they can’t afford to chase bargain hunters.

Condos, which hold the bulk of beds in the area, are plentiful. Some condo managers are responding by holding rates in check, despite the wishes of their owners.

“When you’re talking about rates, you’re talking about a different market,” said Gloria Stephens, rental manager for Midnight Cove on Siesta Key. “You’re talking about how do you get visitors in.”

After surveying competitors on the key, Midnight Cove went with a 2.5 percent increase for this season.

“My gut tells me not to raise rates for ‘08 either,” said Walt Hammerling, who manages several hundred units on Siesta Key.

Hammerling said he knows that new condos on the mainland are skimming off the island business.

“They don’t mind just periodically driving to the beach,” Hammerling said of the bargain-hunters.

Nancy Speek, co-owner of Home and Condo Rentals in Venice said she has so many more condos under her management that she added two agents.

Still, units available for a short period, less than three months, are going quickly. “And we’re doing a good booking for ‘08 already,” she said.

Visitors are snapping up expensive digs as well. Michele Knuese, president of Florida Vacation Connection on Longboat Key, said she expects a 10 percent increase in occupancy over last year.

“We have some very high-end properties we have no trouble renting,” she said.

High-end means $10,000 to $25,000 a month.

Another high-end locale, Boca Grande, is doing well, said John Brandenberger, general manager of Parsley-Baldwin Realty. “Even the ones that didn’t rent last year are rented this year for the same time period,” he said.

Hotels, which are not as plentiful as condos, have reaped the benefits of strong visitation and a shift toward shorter stays. The average daily room rate in the Sarasota-Bradenton area reached $142.66 last March, according to Smith Travel Research.

Two big corporate players, the Ritz-Carlton and Hyatt Sarasota, say rates rose again this year, but even they were sensitive to the competitive climate.

The Hyatt, which is undergoing a $7 million renovation, acknowledged a soft spot among visitors within driving distance and increased its AAA discount from 10 percent to 15 percent, General Manager Mohammad Gharavi said.

Ritz-Carlton General Manager Jim McManemon said he didn’t raise rates across the board. A guest arriving on a Sunday might find a package deal cheaper than last year. Those who want to be here for Easter week will definitely pay more.

Meanwhile, some mom-and-pops say they are uncertain about the season because they don’t see as much advance booking as they used to.

“I still have Easter week open, which is just crazy,” said Prudie Varro, who manages Sunsets on the Key, a small hotel owned by her son and daughter-in-law.

Paige Hartmann, owner of Siesta Key Suites, said the last-minute business has gone from about 25 percent to 50 percent in winter.

She would like to keep a one-week minimum during the season, but she said, “If it’s not filling in the way it should, I will definitely go down to a three-night minimum.”

One seasonal business riding high as ever: RV parks.

Fancy RVs are selling, but the number of places to park is shrinking.

In 2006, KOA sold its park in the Florida Keys at Mile Marker 70, noted Mike Levine, who manages six Encore-branded parks from Port Charlotte to Palmetto.

When Encore raised rates, which included a 10 percent hike at Royal Coachman in Nokomis, the RVers kept their reservations, Levine said.

“Over all my properties, we’re running ahead of forecast.”

By KATHLEEN MCLAUGHLIN

“The office and industrial markets continue to shine, supported by job growth and trade, while the rental apartment sector is seeing healthy rent increases,” says David Lereah, NAR’s chief economist. “The retail sector is essentially flat, but the hotel industry is doing better than at any time since 2001.”  

James Marrelli, NAR vice president of commercial real estate, notes there is a record flow of capital into commercial real estate. “Institutional investors, pension funds and foreign investors have focused on commercial-grade properties to diversify portfolio assets, with expectations of solid long-term gains.”

Outside of the hotel sector, more than $236 billion in commercial real estate transaction volume was recorded in the first 10 months of 2006, up from $231.9 billion in the same period of 2005. The totals do not include properties valued at less than $5 million.

The NAR forecast for five major commercial sectors includes analysis of quarterly data for various metro areas provided by Torto Wheaton Research and Real Capital Analytics. 

Office Market

A reduction in speculative construction of new office space, along with growth in office jobs, means there are positive fundamentals for most market areas.

Office vacancy rates are projected to drop to an average of 12.1 percent in the fourth quarter of 2007, from an estimated 12.9 percent currently – the lowest since 2001; at the end of 2005 they were 13.6 percent. Annual rent growth in the office sector next year is expected to be 5.2 percent, after rising 4.3 percent in 2006.

Areas with the lowest office vacancies currently include New York City; Ventura County, Calif.; Miami; Orange County, Calif.; Honolulu; and Riverside, Calif., all with vacancy rates of 8.9 percent or less. 

Net absorption of office space in 56 markets tracked, which includes the leasing of new space coming on the market as well as space in existing properties, is likely to be 71.7 million square feet in 2007, compared with 73.7 million this year. 

Office building transaction volume in 2006 has been fueled by portfolio acquisitions, privatization of real estate investment trusts (REITs), and mergers within commercial real estate. Office buildings this year have accounted for 48 percent of the transaction volume in all commercial sectors, with more than $105 billion trading hands during the first 10 months of 2006, a 36 percent increase from the same period last year. 

Industrial Market 

Trade is continuing to drive warehouse space, creating a landlord’s market in many areas around the country. Available space is the tightest the market has seen since 2001.

Vacancy rates in the industrial sector are forecast to average 9 percent in the fourth quarter of 2007, down from 9.5 percent in the current quarter. Annual rent growth should be 3.8 percent by the end of next year, compared with a 1.7 percent annual increase in the current quarter. 

Trade with China in particular is impacting demand on both coasts. Traffic in Southern California is so congested that ships are traveling through the Panama Canal to get their cargo to East Coast markets, notably in Florida.  

The areas with the lowest industrial vacancies currently are West Palm Beach, Fla.; Los Angeles; Miami; Orange County, Calif.; Fort Lauderdale, Fla.; and Tampa, all with vacancy rates of 5.5 percent or less.

Net absorption of industrial space in 54 markets tracked will probably total 231.1 million square feet in 2007, up from 191.3 million this year.

Industrial transaction volume during the first 10 months of 2006 totaled $32 billion, placing 2006 on track to set a record. During the same period in 2005, transaction volume was $28 billion.

Retail Market 

Vacancy rates in the retail sector should hold at 8.1 percent through 2007, which would be unchanged from the estimate for the current quarter. Average retail rent is projected to grow 1.2 percent next year, after contracting 0.4 percent in 2006. 

Much of the lackluster performance is due to persisting vacancies in regional malls, impacted by the merger of Federated Department Stores and the May Co. Department Stores. Strip centers anchored by a grocery store seem to be enjoying the best demand from both a retail rental and investment perspective.

Retail markets with the lowest vacancies currently include Las Vegas; Orange County, Calif.; San Jose, Calif.; Oakland, Calif.; San Francisco; and Honolulu, all with vacancies of 4.2 percent or less.

Net absorption of retail space in 54 tracked markets is likely to total 18.1 million square feet next year, up from 6.8 million in 2006. 

Private investors accounted for 64 percent of retail transaction volume during the first 10 months of 2006, with a total retail investment volume of $33.8 billion, down from $41.1 billion during the same period of last year. 

Multifamily Market 

The apartment rental market – multifamily housing – should see vacancy rates at an average of 5.4 percent in the fourth quarter of 2007, which would be unchanged from the current quarter and down from 6.2 percent at the end of 2005. Average rent is expected to rise 3.9 percent next year, following a 4.3 percent increase in 2006. 

The slowdown in home sales this year has kept some people in the rental market, looking for signs of stabilization or waiting for the right time to purchase a home. At the same time, a growing population and household formation is supporting demand for rental housing. 

Multifamily net absorption is forecast at 207,400 units in 59 tracked metro areas in 2007, down from 221,900 this year but up from 203,300 in 2005. 

The areas with the lowest apartment vacancies include San Francisco, Northern New Jersey, Miami, Los Angeles, San Jose, and Salt Lake City, all with vacancy rates of 3 percent or less. 

During the first 10 months of the year, transaction volume in the multifamily sector totaled $68 billion, down from $70.1 billion during the same period of 2005. The slowdown of conversion activity has reduced competition for apartment complexes, with converters accounting for only 12 percent of transaction volume so far in 2006, down from 35 percent during the first 10 months of 2005. 

Hospitality Market 

Hotel occupancies are expected to average 68.2 percent in 2007, up from 67.6 percent this year. Revenue per available room (RevPAR) is projected at $81.28 next year, up from $77.69 in 2006. 

A record 29,200 hotel rooms are expected to be added to the inventory in 52 markets tracked in 2007, compared with 10,600 this year.

Markets with the highest RevPAR currently include New York; Honolulu; San Francisco; Miami; West Palm Beach, Fla.; and Boston, all with RevPAR in excess of $93. 

Transaction activity during the first 10 months of this year includes 1,165 hotels with a combined value of $38.7 billion, well above the $30 billion recorded during the same period of 2005. 

Source: NAR

© FLORIDA ASSOCIATION OF REALTORS

Probably the one whose premium just jumped by 200 percent.

State lawmakers will consider proposals next week that could roll back property insurance rates from 25 percent to 40 percent.

At The Inlets in Venice, where the condominium association’s windstorm insurance increases this month from $75,000 to $206,000, such a reduction would be welcome but “no big deal,” said association president Elmer Day.

“It’s not going to be a barn burner, but anything is helpful,” he said.

Homeowners, condo residents and business owners have been hit with crushing rate hikes in the past two years.

Last year alone, 52 of the state’s 167 property insurers asked for rate hikes of more than 25 percent.

In the Senate, leaders are pro- mising a rate cut of 33 percent to 40 percent. The House plan would trim rates by 25 percent.

The windstorm insurance bill at the Palm Tree Villas in Holmes Beach shot up 300 percent this month, from $1,500 to $6,000.

Like many business owners, Ashok Sawe could get coverage only from Citizens Property Insurance Corp., the state-run insurer of last resort.

“Any scraps we can get, we’ll take, because we have no choice,” he said.

He worries about any future rate increases from Citizens, which was considering a 775 percent rate hike for businesses in Manatee County.

That would bring the windstorm premium to more than $50,000 at the six-unit property.

“If that comes, it would create a totally untenable situation for everybody,” he said.

Sarasota landlord Joan Gardyasz wonders if she will get any rate relief.

She had to go to surplus lines carrier Lloyd’s of London for a policy last year, and the premium on her 16-unit apartment building off Swift Road climbed from $5,000 to $28,000.

The legislative proposals may not help those customers of surplus lines carriers, which are unregulated by the state.

“If I can’t get to Citizens or some other insurance company, then excuse my French, but I’m still screwed,” she said.

She had to raise monthly rents by $75 to pass on some of the higher insurance costs.

Patricia Cavalier’s premium for her manufactured home in the Kings Gate Club in Nokomis just went up from $875 to $2,115, a 141 percent increase, with Safeway Insurance.

“It will help,” she said of any rate relief. “It makes me feel better to know that rates are going down rather than going up.

“But will we be facing an increase for the next year? There has to be something that is a long-range solution.”

If insurance rates are rolled back, Day wonders if customers will get a rebate or just a credit toward next year’s bill.

Condo owners at The Inlets initially thought their insurance would be as high as $350,000 this year. Day said their agent managed to work it down, partly with a higher deductible.

“We had to raise our assessment by $100 a month just to cover windstorm insurance,” Day said.

By JOHN HIELSCHER
john.hielscher@heraldtribune.com

The varying pitch of pricing in the region makes perfect sense to David Lipstein, founder of Manasota Key Realty.

“Buyers are looking for bargains — there’s no question about it,” Lipstein said. “They are making offers that are much lower than list prices. In the past, sellers would have been insulted by such low offers and would not have responded, but now most of them want to be insulted. At least that gives them a starting point for negotiations.”

But what a difference 60 miles make.

In the Sarasota-Bradenton metro area, the mood among real estate broker and market watchers was much more upbeat following Tuesday’s report by the Florida Association of Realtors.

“It’s definitely the time to buy,” said John Schaub, a Sarasota investor and author of “Building Wealth One House at a Time.” “There are more and more opportunities out there.”

Even the hard-hit condominium market saw a turnaround in March. Sales rose 7 percent to 378 from 354 during March 2006, making Sarasota-Bradenton one of only two other Florida markets — Panama City, again, and Fort Walton Beach — to experience an uptick in condo sales.

And the increase came without a drop in prices.

The median condo price in Sarasota-Bradenton rose 5 percent to $276,200 from $264,000 in March 2006.

There is an inherent lag in all those statistics. Existing home sales are not counted until the deal is closed even if a contract was signed months before.

Analysts blamed the dismal March numbers nationally in part on troubles in the subprime mortgage market. They cautioned that tougher approval standards by lenders in response to the increase in mortgage delinquencies will depress sales further and might put off a housing rebound until 2008.

Because of a rising number of mortgage delinquencies more homes are being dumped onto an already glutted market. RealtyTrac reported that foreclosures surged by 47 percent in March compared to a year ago.

Meanwhile, the glut of unsold homes depressed prices further with the median dropping for a record eighth straight month nationally to $217,000 in March, down 0.3 percent.

Home inventories also are the biggest bugaboo hanging over Southwest Florida, too, but there are signs of a plateau.

For example, there were 8,376 single-family homes listed for sale in Sarasota as of April 15, according to a database maintained by Team DuToit at Keller-Williams Realty. That was a slight drop from the 8,411 homes listed for sale a month earlier.

The result is that Sarasota’s Multiple Listing Service has been left with a 110-week supply of homes at the current sales rate compared with a 131-week supply a month ago.

That is still historically high — the kind of figure that makes for odd requests: “I’d like to make an appeal to everybody who does not need to sell to take your home off the market,” said Marianne Zoll of the Re/Max 5 Star/Zoll Real Estate & Auction Team.

There have been indications that those tightening lending standards are making themselves felt in in Southwest Florida. Many listings that seemed to be on their way to closings are bouncing back, said Steve DuToit, head of team DuToit at Sarasota’s Keller-Williams Realty.

“We had one day last week where we had 30 back-on-the-markets,” DuToit said. “Financing is tightening up and a lot of people are changing their minds and backing out of contracts. A lot of Realtors are writing contracts that they are not qualifying, they are so anxious for sales.”

Falling prices are not necessarily a problem and there is no coincidence that prices in Sarasota-Bradenton have been falling while sales have been rising, said Matt Orr, an agent with Sarasota-based Michael Saunders & Co.

“Price is dictating everything,” Orr said. “It’s all about getting sellers to understand where the market is and getting properties priced where they will sell.”

Orr pointed to the 28 percent drop in total Florida sales while the statewide median price remained relatively flat.

“I think sellers in our market have a clearer picture of what their properties are worth,” said Sky Sotheby’s agent Marc Rasmussen. “They had trouble with that in 2006. Now buyers who were on the fence last year are feeling more comfortable about jumping in.”

The Zolls, Marianne and her husband, Reid, certainly hope so.

Together, they landed a set of listings that is heading for auction: nine beachfront motel units converted into condos on Casey Key. Priced from $300,000 to $900,000, the units were part of a 14-unit condo conversion called “A Beach Retreat” by a team of developers from Indiana. “The ones I have are right on the beach,” said Marianne Zoll. “They really want to sell them.”

Beechwood Builders is a custom home and remodeling builder and has been in business for more than 15 years in the Sarasota County area, according to Roger Greig of Beechwood Realty. The price of a new home will start in the low $500,000 range. The homes will be built in the Key West-style, with 2,200-2,300 square feet of living space under air, he said.

“We’re going to promote it as ‘your house, your way, your price,’” Greig said. “They’re going to be fully custom homes and they’re going to be priced with all the crown molding, all the extras — even towel warmers in the bathrooms,” he said. 

Greig said if a person does not want all the extras, a home can be built without them. Lot sizes will vary and most will be large enough to accommodate pools, if desired.

“There’s a lot of cul-de-sacs,” Greig said. “So there is not a set lot size.”

The community will consist of 35 home sites. Prospective owners will have the option of choosing from four different models, models with variations, or a fully customized home.

“This is the perfect mixed community,” Greig said. “We are not just gearing to the family or the empty-nester. We really see this subdivision as a small community with all age groups represented.”

Each home will be constructed to meet stringent hurricane codes with metal roofs, impact windows and doors. At the owner’s option, safe rooms and wired generators can be added as additional features.

Construction will begin on the models in February, with completion expected around August.

You can e-mail Steven J. Smith at ssmith@sun-herald.com.

By STEVEN J. SMITH
Staff Writer

If Four Seasons does commit, it would mark the second time the Toronto-based hotelier has considered Sarasota.

A decade ago, when plans to develop a Ritz-Carlton were jelling on an 11-acre tract on U.S. 41 at First Street, Four Seasons scouted the area and met with local economic development officials.

Kathy Baylis, president of the Economic Development Corp. of Sarasota County, said the company sought demographic and other material. Four Seasons has not contacted her of late, she said.

To make the project more palatable to Four Seasons, St. Regis Hotels & Resorts or InterContinental Hotels, Moyer said Lion’s Gate also has signed a contract to buy a site on Lido Beach, near the Ritz-Carlton’s $30 million Beach Club.

There, Lion’s Gate hopes to obtain approvals to develop up to 59 hotel rooms and related space. That way, guests of the five-star hotel could have both a downtown and beach experience, Moyer said.

“The opportunity would allow the hotel operator to offer beach access and amenities, and also provide hotel rooms for rent on the beach,” said Cook, who had until recently worked as a commercial agent and broker at Michael Saunders & Co. Inc.

She and Moyer, who are married, are jointly developing the San Marco Plaza in Lakewood Ranch.

Lion’s Gate intends to make a formal submittal for its project to city officials within 30 days, Moyer said. If approvals are obtained, Lion’s Gate would begin construction sometime in early 2008, and complete the project in phases beginning in 2010.

Lion’s Gate has retained renowned New York-based architect Perkins Eastman and local firm Lawson Group Inc. to design the 400 N. Tamiami Trail project.

The firm also is working with Freedman Consulting & Development LLC, a leading Sarasota land planning firm.

It has also hired Hotel Dynamics, a company led by the former head of Prudential Life Insurance Co.’s hospitality division, to assist with the hotel.

Tourism officials said a new, five-star hotel would boost marketing spending on the area and allow Sarasota to attract larger, higher-end meetings that presently are unable to squeeze into the 266-room Ritz-Carlton.

“Sarasota offers enough downtown amenities to make such a project attractive,” said Virginia Haley, president of the Sarasota Convention & Visitors Bureau. “Look where the demand is in Sarasota; it’s for hotel rooms in town.”

Even the proposed hotel’s chief competitor acknowledged a Four Seasons or like brand would help, not hurt, business.

Jim McManemon, the $130 million Ritz-Carlton’s general manager, said a second five-star hotel would “reaffirm what the Ritz-Carlton did by opening in 2001.”

“If Four Seasons came, it would be great for Sarasota and great for us,” McManemon said. “Four Seasons is a very good name. It’s luxury. If they chose to come here, it would say something.”

Four Seasons, which operates 73 hotels worldwide, has just a single lodging property in Florida, in Miami. Its average hotel contains 250 rooms.

But Lion’s Gate’s project faces a series of regulatory and other hurdles.

The biggest challenge will be traffic generation, and in meeting state and city concurrency rules.

To achieve the density it proposes, Lion’s Gate also might require a series of zoning changes.

Perception could also be an issue, because the tony project would sit directly across Cocoanut Avenue from the Sarasota Housing Authority’s 11-story McCown Towers, a 101-unit apartment complex occupied by senior citizens and poor, handicapped individuals.

But Moyer said McCown Towers’ presence won’t be an issue. Moreover, he said Lion’s Gate is considering ways to alleviate potential gridlock and meet traffic concurrency.

He is buoyed by the fact that in addition to U.S. 41, the site has access from Cocoanut Avenue and roads east.

For now, the Lion’s Gate team said they are confident and optimistic about the project.

“Hopefully the city will be just as excited about it as we are,” Moyer said.

By KEVIN MCQUAID
kevin.mcquaid@heraldtribune.com

The Center for Housing Policy, the research affiliate of the National Housing Conference in Washington, D.C., found that a working family needed an annual income of $84,957 to qualify to purchase a home valued at $248,000, the median price nationally in the third quarter of last year.

Yet the median salaries of many workers were below that, the study found.

It said, for example, that registered nurses earned an average of $58,640 last year; elementary school teachers, $47,104; police officers, $45,780; licensed practical nurses, $37,127; retail sales people, $24,597; and janitors, $23,724.

The study, released Wednesday, looked at workers in 60 different occupations in some 210 communities. On the rental side, it said, nursing aides couldn’t afford to rent a typical one-bedroom home in 80 of the metro areas or a typical two-bedroom home in 147 of the areas. For retail sales persons, the typical one-bedroom home was unaffordable in 78 of the metro areas, and the typical two-bedroom home was unaffordable in 162 of the metro areas studied, it said. Barbara Lipman, research director at the center, said the study suggests that communities should be worried about attracting and retaining good workers.

“These are people who provide basic services,” she pointed out. “In the health care field, we know that some hospitals and clinics are having trouble filling their ranks with qualified people, and one reason is that people can’t afford to live in these communities.” The study used wage data from Salary.com, a compensation Web site, and home price data from the National Association of Home Builders and the National Association of Realtors. It assumed that to purchase a home, a family had to put 10 percent down for a 30-year, fixed-rate mortgage; it also assumed that the family would spend no more than 28 percent of household income for mortgage, property taxes and insurance.

On the Net: National Housing Conference: http://www.nhc.org
 
Copyright 2007 The Associated Press.

Existing requirements for local 10-year comprehensive plans are inadequate to deal with the long-term statewide implications of rampant growth, said 1000 Friends vice president Tim Jackson. “The governor and Legislature should say ‘Here’s where we’re really trying to go in 100 years,”’ Jackson said. “‘What are the lands we ought to protect? What’s the form and character of communities that we ought to protect and preserve, and what form and where do we want new growth to happen?”’

The studies were commissioned in partnership with The St. Joe Co., Florida’s largest private land owner and one of the state’s biggest developers; A. Duda and Sons, a major agribusiness, and The Nature Conservancy, another environmental group. “The 1000 Friends of Florida 2060 population scenario is a useful look into what the future could be if we don’t take planning and plan implementation seriously,” said state Department of Community Affairs spokeswoman Alexis Antonacci. But she added, “There are many factors working to change those trends.”

Florida House Environment and Natural Resources Council Chairman Stan Mayfield, R-Vero Beach, said he had some qualms about proposals that might affect property rights but commended 1000 Friends for taking the lead on the growth management issue. “Overall, it’s good that we’re talking about it,” Mayfield said. “We’re going to have to be much more creative.” The first study by the University of Florida’s GeoPlan Center forecasts the state’s population will double to 36 million by 2060 and chew up 2.7 million acres each of agricultural land and natural habitat.
Only the Panhandle and adjacent Big Bend area would retain significant open space and then just if current growth and development patterns continue. Southeast Florida would be almost one solid urban area with a band of development extending across the peninsula to Fort Myers on the southwest coast, where a three county area would be built out.
Central Florida would be another massive urban sector extending from Ocala to Sebring and St. Petersburg to Daytona Beach. Duval County would be built out in northeast Florida with growth spilling into adjacent communities.
Neither the threat of hurricanes nor soaring insurance rates and property values are expected to dampen Florida’s growth, Jackson said.

“The sun’s going to keep shining in Florida,” he said. “People are going to retire and they’re going to want to move somewhere it doesn’t snow.” The state already has begun meeting the challenge with passage of a new growth management law in 2005, Antonacci said. It included about $1.5 billion for new highways, classrooms and water facilities, but that should be considered just a first step, said 1000 Friends president Lester Abberger. “We’re going to need a lot more big steps to avoid the frightening scenario that you see on the 2060 chart,” Abberger said while standing near a state map covered with red dots showing where growth is expected.

A second study by Georgia Tech’s Center for Quality Growth and Regional Development recommends ways to avoid the scariest parts of the forecast. It proposes a new policy for converting rural lands to urban use that would thwart sprawl by setting aside small sectors for high-density development while preserving most vacant property for agriculture, open space and nature. Antonacci said her agency already is developing such policies.

Other recommendations are to expand and continue the state’s Florida Forever program that obtains endangered lands, create a 100-year legacy plan and find leaders to support the proposals.

Source: Copyright 2007 The Associated Press, Bill Kaczor Associated Press Writer.

A recent CDL report, which analyzed more than 6 million subprime mortgages made from 1998 through the third quarter of 2006, estimates that 2.2 million households in the subprime market have either lost their homes to foreclosure or hold mortgages that will fail this year. The cost to homeowners could be as high as $164 billion, primarily from lost home equity.

Even during years of strong appreciation, as many as one in eight subprime loans ended in foreclosure within five years of origination, according to CDL.

In the past couple of years, many subprime borrowers chose nontraditional mortgage products, including interest-only loans and payment-option adjustable-rate mortgages (option ARMs), in which the borrower has flexible payment options, says Federal Reserve Gov. Susan Schmidt Bies. Recent estimates show these types of mortgages accounted for about one-third of all U.S. mortgage originations in 2006, compared with less than one-tenth a few years earlier. Bies spoke Jan. 11 at a Risk Mitigation Summit sponsored by the National Credit Union Administration.

Catch 22 of subprime loans

The CDL maintains that “borrowers already financially vulnerable are receiving loans known to pose a higher risk.” Balloon payments, prepayment penalties and limited documentation make subprime mortgages particularly vulnerable to foreclosure. A good example, according to CDL, is the “exploding ARM.” It features semi-annual rate adjustments following an artificially low introductory rate.

“It isn’t surprising that some borrowers can’t keep up with their payments once their loans fully adjust,” said Bies, noting that it’s not unusual to find margins of 6 percent or higher.

Loose underwriting practices and a lack of accountability can also add risk for subprime borrowers, some analysts say. “Mortgage lenders have relaxed credit standards and issued loans with a much higher risk of foreclosure,” says Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University.

Additionally, according to CDL, many subprime lenders don’t take into account whether the homeowner will be able to pay the interest rate when the loan resets, nor do they take into account insurance premiums and real estate taxes.

Subprime borrows also struggle to accumulate equity since some loans limit the amount of equity a borrower builds. Plus, some borrowers have difficulty refinancing to avoid foreclosure, particularly due to prepayment penalties and slowing home price appreciation.

Source: By Camilla McLaughlin for REALTOR® Magazine Online
© 2007 FLORIDA ASSOCIATION OF REALTORS®

What Howard got instead was a mortgage he did not understand. Baffled by the loan documents he was mailed after the closing, he consulted an AARP lawyer and learned that he now had an interest-only loan, a new and controversial kind of mortgage. Howard was told that under its terms, his mortgage balance will rise instead of fall and that he will need to refinance in 10 years, when he may be too old to work.

“This is a bunch of junk they done to me,” said Howard, a construction worker.

Howard’s chagrin at his mortgage’s complex provisions illustrates the confusion felt by many borrowers struggling to adapt to a radically transformed home lending market. Consumer advocates say most people learned about mortgages from their parents and grandparents, who typically put down 20 percent on a 30-year fixed loan on which they always knew what their payments would be.

Those long-standing assumptions have been challenged in recent years by the rapid proliferation of new loan products with looser credit requirements and fluctuating payment plans. Although the newer mortgage products allow almost anyone to buy or refinance a house, consumer groups say the loans often contain land mines hidden in the fine print.

Consumer advocates say the loosened standards are putting more people at risk as loans originally designed for sophisticated individuals are being marketed to far-less-savvy borrowers.

“Consumers haven’t caught up with the dynamics of the market,” said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America. “They are still thinking of how it used to be, but it isn’t like that anymore.”

Alternative mortgage loans were first developed for a handful of people with promising long-term earnings potential: young lawyers destined to make partner, doctors finishing medical school or stock brokers who get large commission checks several times a year.

But as housing prices have surged, outstripping wages in the most expensive markets, alternative financing has become a popular path to homeownership.

These new loans come in many forms. “Nontraditional” mortgages allow borrowers to pay only the interest on the loan or even only a portion of the interest each month, without being required to pay down the principal. Nationwide, more than a third of borrowers who got loans in the first nine months of 2006 got nontraditional loans, up from about 2 percent in 2000, according to First American LoanPerformance, a real estate information firm.

“Piggyback” loans allow people to borrow for a down payment, sparing buyers the trouble of saving for years and letting them avoid paying mortgage insurance, which is usually required on loans with down payments of less than 20 percent. In 2005, about 22 percent of people buying homes took out piggyback mortgages, according to the Federal Reserve.

“Subprime” loans are available to people who have bad credit, though they charge interest rates 2 to 3 percent higher than the rates charged to borrowers with good credit. About a fifth of the loans originated in 2006 now fall into that category, up from about 5 percent in 1999, according to the Federal Reserve.

Jim Sugarman, supervisory attorney at AARP’s financial-abuse unit, says these alternative loans offer new opportunities but also carry added risks. About 59 percent of subprime loans have adjustable rates, according to the Mortgage Bankers Association, and any sudden spike in interest rates would push payments higher.

In a rising real estate market like that of the past few years, borrowers who fall behind on their mortgages could sell before going into default. For that reason, lenders haven’t been too worried about repayment. But now, with home prices flat or falling, many homeowners may not be able to sell their homes for enough to cover their mortgage balances.

Alternative loan products are giving many people access to homeownership, counters Steve Calem, vice president with American Bank in Bethesda. “Interest-only loans help people get into their first house,” he said. “Interest-only loans minimize their payments, when people know their income is going to be going up. It gives them flexibility.”

Most consumers have only themselves to blame because they are not doing enough research on the mortgage market as it has grown increasingly complex, said Christopher Cruise, who trains mortgage brokers at major lending companies.

“The American consumer’s ignorance of mortgage procedures in the past hurt them a little,” he said. “What’s different now is that it’ll hurt them a lot. The stakes are a lot higher.”

Howard said he was persuaded to refinance his house by a “very friendly” loan officer who called once a week for a year, telling him the time was right to stabilize his finances.

After deciding to take out the loan, he said he told the lender he would need help reading the paperwork at the closing. He said he still doesn’t understand exactly what kind of mortgage he signed.

Howard’s mortgage contains several of these new features, said Sugarman, who has reviewed the documents. It is an interest-only loan, which is one of the nontraditional mortgages designed to help wealthy people manage their cash flow, and for people whose incomes are likely to rise — not for those whose incomes, such as Howard’s, are likely to fall as they retire on Social Security. The rate is fixed, but only for 10 years. Sugarman said Howard appears to have qualified for it with a “NINA” loan, a “no-income, no assets” loan that required minimal income documentation.

“It’s a very exotic mortgage, and he had no idea he was getting that,” Sugarman said. “He thought he was doing something smart.”

Sugarman said that in the past, lenders didn’t make these kinds of loans because they put financial institutions at risk. Bad real estate loans marked the beginning of the Great Depression, and subsequent banking reforms required lenders to consider the soundness of their lending practices. That made loans safer for borrowers and lenders alike.

What has changed is the booming market for real estate securities. Major financial institutions now put thousands of loans together and sell them in slices to investors. That means lenders seldom get caught holding the loans. If an individual loan goes bad, the effect is dissipated among many investors.

The new mortgage products have fueled record profits for the lending industry in recent years. Brokers can generate tens of thousands of dollars in additional fees, beyond what they earn on traditional mortgages, by placing borrowers in these loans, Cruise said.

The question is whether some consumers can adequately protect themselves in the complex financial transactions of the new mortgage marketplace.

Willie Webb Jr. of Lauderdale Lakes, Fla., was pleased for his daughter at first when she told him she had refinanced the home she had inherited from her grandparents, reducing her interest rate and allowing her to pay off some bills. He assumed she had gotten a fixed-rate mortgage, the kind of loan with which he is most familiar. A few months later, she called him in a panic. It turned out that she had an adjustable-rate mortgage in which the payments starting rising almost immediately, and when Webb investigated further, he learned that she can’t get out of the loan without paying a $6,000 prepayment penalty.

Webb is angry that his daughter, Keisha Smith, a single mother with four children, agreed to take a loan she did not understand. He has made the payments for her some months because otherwise she would risk losing her home.

Many newer mortgage products make it difficult and costly for borrowers like Smith to extricate themselves. The mortgage bankers group recently reported that more than 50 percent of some kinds of adjustable-rate loans contain prepayment penalties, which require borrowers to shell out big bucks to break free. A prepayment penalty of about 3 percent of the mortgage loan — about $9,000 on a $300,000 mortgage — is not unusual, according to the Federal Reserve.

A study by the Center for Responsible Lending, a consumer-advocacy group, said last year that about two-thirds of Virginians with high-interest, subprime loans also have prepayment penalties. In Maryland, where prepayment penalties are restricted by law, about a quarter of subprime borrowers have them.

The biggest risk lurking behind all these loans is the threat of foreclosure. Last month, the Mortgage Bankers Association reported that mortgage delinquencies were on the rise, particularly for costly subprime loans. Likewise, the Center for Responsible Lending said in a recent report that more than 19 percent of subprime loans made in 2005 and 2006 are at risk of foreclosure.

Federal and state banking regulators have instructed lenders to make sure before issuing a loan that borrowers can keep up if payments are adjusted upward. Consumer advocates and some members of Congress have asked that the guidance also include what is called a 2-28 mortgage, under which borrowers have low, teaser rates during the first two years, after which payments increase.

Consumer groups also say they would like to see a “suitability” standard imposed on mortgages whereby lenders would be required to show that people got loans appropriate for them. Sugarman, for example, thinks putting Howard into an interest-only loan left the man with a “horrible situation.” But banking trade groups oppose these proposals, saying they could curtail lending to some people who would otherwise have trouble getting loans they need.

Additional government regulation “could impede the ability of the market” to change to meet demand, said Doug Duncan, the chief economist at the Mortgage Bankers Association.

But Fishbein, the consumer activist, said legislators, regulators and lenders need to do more to protect consumers.

“We’re not confident buyers are getting all the information they need,” he said. “They don’t understand the toxic environment.”
 
Copyright © 2007 washingtonpost.com, Kirsten Downey. All rights reserved.

Some Sarasota city commissioners leave us scratching our heads — such as two months ago, when they rejected parking meters as too inhospitable, then requested higher parking fines instead.

News flash: Joe Tourist doesn’t get a warm and fuzzy feeling about downtown Sarasota when he’s greeted with a big parking fine on his windshield.

Tuesday’s vote, which reversed the commission’s 3-2 conceptual approval last month of a metering pilot project, demonstrated one reason why parking solutions have eluded Sarasota for so long. Leaders can’t seem to steer a clear course.

The board’s action also discarded much of the advice the city paid for as it attempts to address perceived parking shortages.

Emphasize the word “perceived” because, truth be told, downtown parking is available for people able and willing to walk a block or two. Not among that group, apparently, are numerous employees of downtown businesses. These workers grab Main Street parking spaces for themselves, city officials charge, preventing customers from using them.

To be sure, meters aren’t lovable. But the intractable behavior of employees must be dealt with if merchants — who seem incapable of tackling the problem — are to get the customer parking they want.

The city’s expert had recommended meters, combined with incentives, so workers would use secondary parking sites rather than prime spaces on Main Street.

The incentives may still happen, and they could help. But to rally the kind of consensus needed to change entrenched habits, leaders need to send decisive, clear signals. Last week’s parking-meter flip-flop was anything but.

Source unknown

At the end of December, the market share for ARMs fell to 20.4 percent, the lowest since July 2003, according to the Mortgage Bankers Association of America. ARMs’ share of the market has been as high as 33 percent (in 2004) and as low as 11 percent (in 1998).

Frank Nothaft, vice president and chief economist of Freddie Mac, which buys residential mortgages and repackages them for the secondary market, said Fed action in the first half of 2006 had increased short-term rates by 1 percentage point, to 5.25.

The resulting increase in short-term mortgage rates – first-year ARMs rose 0.3 percent – narrowed the gap with fixed-rate instruments, making adjustables less of a bargain. First-year ARM rates would have risen more had lenders not increased the use of discounts.

To boost the financial incentive for borrowers to choose an ARM, lenders typically offer a lower initial interest rate than what the fully adjusted rate would be at the time of origination – meaning the underlying index rate plus the margin.
At the end of 2005, this discount averaged 1.9 percentage points for conventional, conforming one-year Treasury-indexed ARMs. And by the end of 2006, it had reached an average of 2.3 percentage points.

The last time initial-rate discounts were higher was in 1997. In the 23 years that Freddie Mac has been tracking the data, initial discounts on one-year ARMs have averaged 1.7 percentage points.

“When the interest-rate difference between a 30-year fixed-rate mortgage and the fully indexed ARM rate decreases, lenders generally offer a larger initial-rate discount on the ARM,” Nothaft said. “The larger initial discounts increase the initial rate benefit of an ARM compared with fixed-rate loans, helping lenders to maintain ARM originations.”

Brett M. Warren, president of Buyers Home Mortgage in Abington, said his company isn’t writing any adjustable-rate mortgages.

With the gap between short terms and long terms so small, Warren said, “we are able to offer a 30-year fixed-rate mortgage at 5.875 percent with no points, which is almost identical to a 3/1 or a 10/1 adjustable. So why not go fixed?”
A point equals 1 percent of the amount of a mortgage. If a mortgage is $100,000, a point would be equal to $1,000 (fully deductible on a purchase in the year the loan is closed).

Known as a “hybrid,” a 3/1 adjustable mortgage has an initial interest rate for the first three years, and then adjusts annually. Each annual rate adjustment is based on another rate, typically the yield on a Treasury note.
The initial rate on a 10/1 adjustable lasts for 10 years.

One-year adjustables have been hovering at 5.5 percent, with five-year hybrids around 6 percent with about half a point, according to Freddie Mac.

Hybrids have become much more popular than one-year adjustables, and for good reason.
“A 5/1 hybrid ARM provides the consumer the comfort of knowing that the interest rate will be fixed over the first five years of the loan,” said Nothaft, offering an example. “However, the interest rate may jump as much as 5 percentage points on the fifth anniversary. Thus, the product has been popular with families who plan to have the mortgage for five years or less.”One major change that the mortgage industry has been tracking is the shift to interest-only fixed-rate loans.

With an interest-only loan, the borrower pays only the interest that accumulates on the loan balance, which does not decrease. At some point in the life of the loan, payments do rise, however, and the borrower begins paying against both the principal and the interest.

In the first half of 2006 – the period for which the Mortgage Bankers Association has the most recent data – interest-only loans accounted for 26 percent of all mortgages. But fixed-rate interest-only loans accounted for 24 percent of all the “I-Os,” compared to 13 percent in the second half of 2005.

“A lot of the adjustable I-Os have disappeared from the marketplace,” said Warren, with not a bit of regret in his voice. “We like some of the fixed-rate products, but not the adjustables because they come with a lot of uncertainty.”

Copyright © 2007 Philadelphia Inquirer, Al Heavens. All rights reserved. http://www.floridarealtors.org/NewsAndEvents/n5-012207.cfm

Source: The Baltimore Sun, Lorraine Mirabella (01/21/07)
© Copyright 2007 INFORMATION, INC. Bethesda, MD

The local increase in apartment vacancies reflects a similar trend in every metropolitan area tracked by RealFacts, a Novato, Calif.-based firm that compiles data for the multi-family rental industry.

It’s most likely “a (consumer) reaction to rent increases that started earlier in the year,” RealFacts reported. “Such widespread declines in occupancy likely herald reductions in rent growth rates.”

Between late 2005 and late 2006, the average rent in surveyed Sarasota-Manatee apartment complexes reached $928, an increase of 4.2 percent. Meanwhile, those complexes saw their occupancy rates drop from 97 percent to 92.3 percent.

RealFacts surveys more than 12,000 rental complexes, all with 100 or more apartments, in 15 states. In Sarasota and Manatee counties, it surveys 26 properties with a total of 7,627 apartments, ranging from studios to three-bedroom, two-bath units.
Last modified: January 19. 2007 5:16AM

“We’re looking north and south,” said Roselyn Britton, an investor who owns several properties in Sarasota.

A combination of low mortgage rates and more reasonable home prices has Britton looking. Even though she has experience as an investor, she said the learning process is a continual one.

That is why local real estate agents, Dan Forbes and Marie Avery, the broker/owners of Bradenton’s Premier Team Realty, launched a group for those already in the game and those looking to get in it.

The Bradenton Real Estate Club was formed in September and now has 32 members. During weekly meetings at the Stoneybrook Country Club in Heritage Harbour, investors share information and receive input from real estate professionals.

“We all learn from each other,” Britton said.

Last week, guest speaker Martin Ehman of Highland Investment Group helped the group explore lease to buy options. Lease to buy gives tenants the right but not the responsibility to purchase the property.

It’s one of many topics the group has addressed since its formation.

Ehman also cautioned people not to get stuck in the same situation certain novice investors found themselves in, having to pay on a property they can’t afford because they were sure they could flip it.

“Buy what you can afford and look for deals,” Ehman said.

Ed Laake of North American Title Co. deals with investors as well as being one himself.

“This is the best club in all of Manatee,” Laake said.
 
Copyright © 2007 The Bradenton Herald, Fla., Melissa Followell. Distributed by McClatchy-Tribune Business News.