20% of properties at trustee sales are purchased to third parties amounting to just over 1,000 properties per month.

The graphs below represent, first the percentage of properties sold at trustee sales that sell to third parties and the second graph shows the number of properties sold to third parties: third parties being mostly investors and some owner occupants.  Both graphs run the span from Jan. 2004 to June 2010.

Notice that in the peak years the bulk of the properties that went to trustee sale got purchased by third parties, but in units that was a small number: simply not many properties got as far as a trustee sale and when they did they could in most cases be quickly resold to a very property hungry market.

In the following year that changed for many reasons which I don’t want to go into here.

What’s interesting now is that sales to third parties have increased and are hovering at about 21% for the last 2-3 quarters and the total number of properties sold to third parties has skyrocketed to well over 1,000 per month.  Most of these properties are sold to investors who keep them as rentals or supply the market with good or bad fix ups as flips. 

Graphs: The Cromford Report

Sometimes these properties are sold to owners through various methods.  Those who have cash and take the time to do the appropriate research, can buy properties at prices well below market price.  We’ve had clients take this route, but mind you, it’s not for the unprepared as you can get into a property with lots of problems and title issues.  

What these higher numbers signal is a more buoyant market, one where buyers have more confidence in their purchases.  That confidence comes from, amongst other places, lower starting prices set by lenders and a fairly good resale market, especially for well prepped properties.  In other words this is good.

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Call for inquiry into property bubble…

An independent inquiry is needed into the Government’s failure to control the property bubble, a State-funded academic institution said today.

In a scathing report, the National Institute for Regional and Spatial Analysis (Nirsa) also demanded a full investigation into charges of cronyism in the planning process.

Furthermore, the body which examines how the country is developing, claimed the National Asset Management Agency (Nama) is a worrying organisation set up as part of a response to protect developers potentially at the expense of taxpayers.

Professor Rob Kitchin, director of Nirsa, which is based in NUI Maynooth, said an inquiry into planning decisions and alleged close links between politicians and property speculators was necessary if the housing market was to recover.

“An independent inquiry is needed to investigate all aspects of the planning system and its operation within and across different agencies and at all scales in Ireland including charges of localism, cronyism and clientelism,” he said.

Prof Kitchin said it would be foolhardy to carry out a banking inquiry without also looking into planning mistakes.

In a 66-page report into the crisis, Nirsa lays blame for the property boom and bust squarely with the Government and local councils.

It says light touch regulation and tax incentive schemes administered by a political system infected by those in power favouring friends were the chief culprits.

Planning guidelines, regional and national objectives as well as proper assessment of demand for housing were ignored, it claims.

Nirsa says Nama, banking bailouts and nationalisation are worrying short-term moves involving “the protection of the interests of developers and speculators at the potential expense of the taxpayer.”

Prof Kitchin said there is now a growing sense Nama is paying too much for the loans it is buying from the banks. There is also a “worrying lack of transparency” around the agency and legitimate questions hanging over its potential, he argued.

“The truth is – based on current modus operandi – we will not know whether it might succeed or fail until much further down the line,” he said. “That may be too late.”

A home-grown “litany of systemic failures” that allowed the over-development and re-zoning of too much land will see housing lie empty in some areas for more than a decade, according to the Nirsa report.

“The banks could have lent all they wanted but if zoning and planning permission was not granted, property construction could not have gone ahead,” said Prof Kitchin.

The report concludes there is presently no need for any more homes to be built in Ireland apart from some social housing. House prices are also likely to fall further, with the average home expected to drop in value by as much as 60 per cent from the peak in February 2007, it found.

Nirsa said the property over-supply is not confined to housing, with too many hotels, offices, shopping centres, retail parks and industrial units also built. “Ireland is awash with buildings that few people either can afford or want to purchase,” it states.

The report also found:

- Reckless planning has left one in six houses uninhabited for most of the year.

- More than 300,000 homes are unoccupied and there are more than 620 half-empty or unfinished “ghost estates”.

- Tax incentive schemes greatly exacerbated the crisis as counties with most empty housing – Cavan, Longford, Leitrim, Roscommon and Sligo – built most new developments.

- The number of houses in these counties soared by almost half during the boom and they have enough housing now zoned to feed demand for the next 27 years.

- Nationally, there is enough excess housing and zoned land for the next 17 years.

- Cork city has enough for the next 64 years, Monaghan for 59 years, Dún Laoghaire Rathdown for 47 years and Roscommon for 45 years.

Nirsa said just six local authorities – Fingal, Kildare, Galway City, Meath, Wicklow and South Dublin – had employed relatively sensible planning during the boom.

The report argues that seven key issues need to be addressed before house prices bottom out and the property market can recover.

These include linking supply with demand; economic growth and job creation; linking house prices to average wages and affordable mortgages for first-time buyers.

It also requires concerns over Nama to be allayed; a verifiable end to the banking crisis and an overhaul of the planning process. Nirsa also calls for a clear plan of action to deal with “ghost estates”, including an investigation into alternative uses.

Minister for Planning Ciarán Cuffe said the Nirsa report echoed the concerns raised by the Green Party for years.

“There is a direct link between planning failures and the over-supply of housing in totally inappropriate places,” he said. “This did feed the property bubble which has now had terrible consequences for so many ordinary workers and their families.”

But Mr Cuffe insisted many of its recommendations have already been covered, through the imminent Planning and Development Act and a forthcoming investigation into planning failures at six councils.

“This process will be very revealing and there is nothing to stop its extension to other areas,” he said. Measures to deal with “ghost estates” will be revealed in the coming months, he added.

PA – Irish Times

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Selling off state assets on the cheap is just madness…

This Government will not contemplate selling property just in case it would bankrupt the banks. The State’s argument is that the market is depressed so if we were to sell the land, we would not get a fair price for it.

So we will postpone the problem: we get NAMA — a financial skip into which the banks throw their worthless mistakes — and you pay. The logic of NAMA and this Government’s central strategy is to wait for the value of land to improve before selling.

Whether you agree with it or not, this is their logic. It can be summed up by: “Don’t sell land in a depressed market.”

Yet at the same time, the Government has just announced that it will sell real assets via privatisation in a similarly depressed market. So why can it sell ESB — a real company with real assets — and not a field in Athlone which is worthless and should command the price a farmer would pay you to put a donkey grazing on it?

Why is it imperative to sell proper state assets and inconceivable to sell useless land?

This is the part I do not understand. Why does the State believe that it is okay to have a fire sale of the family silver and yet protect the very asset which caused the problem in the first place? How could it be that a depressed market is a bad time to sell land but a good time to sell a strategic electricity company?

We the people are supposed to fork out for NAMA which is paying over the odds for the banks’ and the developers’ mistakes, yet look on helplessly as the State sells — at knockdown prices — those companies that our taxes have built up. Can anyone explain this inconsistency to me?

If you look at what the Government published about the privatisation of everything it can sell, the first aim is: “To consider the potential for asset disposals in the public sector, including commercial state bodies, in view of the indebtedness of the State.”

So the key phrase is the “indebtedness of the State”. But selling big companies like ESB will not solve the indebtedness of the State.

Furthermore, the indebtedness of the State wasn’t caused by companies like ESB in the first place. The precarious position of the State with respect to its finances is a result of the estimated €50bn cost of saving the banks and a reckless overdependency on land and credit to generate enough tax to pay for the State’s current expenditure.

If you don’t solve the underlying problem, the issues will not go away no matter how much you privatise.

It is akin to the alcoholic flogging his house and his car to pay for his drinking; unless he stops drinking things won’t improve. This is why privatisation (the putative cure) side by side with NAMA and the land scam (the obvious problem) will not work. It will make us poorer and make someone hugely rich as the assets are sold cheaply.

Worse still if Eircom is anything to go by, strategic state assets are sold off and then asset stripped by anyone who can raise enough leverage to do so. I gave up counting how many times Eircom was flipped, stripped and flogged on. What is clear, is that each time Eircom was overburdened with debt to make a few quick quid for the buyers, the chances of us having a first-class telecom infrastructure faded.

Think about the challenges ahead for energy. The biggest single economic issue facing not just us, but all of the global economy, is energy. The most far-sighted countries are those which are harnessing their energy companies’ resources to come up with an environmentally friendly and efficient new energy blueprint.

And what do we do in Ireland? We flog our main energy company, which will end up in the hands of a private equity outfit that has little more than a five-year time horizon.

But there will be winners, so let’s see who might make a quick buck in a rapid Irish privatisation. Would it surprise you if it is the same professional “insider” elite being bailed out by NAMA? Well the same lads emerge as winners again.

The stockbrokers who put together (and took a fee from) many of the syndicated deals which NAMA is now buying, take a fee for every new euro of debt we issue. I have been told that entire units of our biggest brokers have morphed from selling equities and land deals into flogging debt. The more indebted the country, the more fees they make.

So the brokers made in the boom and are making in the bust and now with privatisation they will make again because they will get a fee for “placing” the shares of the newly privatised companies with investors.

What about the big law firms, the ones who put the property deals together in the boom? Well apart from being given a gig at NAMA, they will be paid with your cash to issue legal prospectuses, which will govern the terms of the privatisations.

What about the big auditor companies? What about these guys who audited the likes of Anglo and Irish Nationwide and saw nothing at all untoward? Well they will be given hefty fees in the privatisation process to produce audited accounts of our companies.

And what about the geniuses in the Irish pension fund industry, the ones who bought shares in Anglo and the Bank of Ireland when they were in the high teens? These lads will be given another opportunity to shine by being given cheap shares on a plate — for which they will take a fee for buying a company on our behalf, a company which we already own!

Selling state assets for a decent price could well be a clever thing to do, but selling cheaply is always stupid, particularly if it doesn’t solve the underlying problem.

When you look at this idea of flogging the family silver right now, you see that Ireland is doing everything backwards as this Government fumbles from one crisis to another. In economics, when a country or a company gets into huge debt difficulties, the standard approach is to kick off the recovery with a debt for equity swap. This means you tell the people who are owed money that they will have to take shares in the company or in the country instead of real cash, which the country can’t afford to pay.

In Ireland we are doing the opposite: by privatising now, we are selling real valuable equity to pay for old debt! So rather than a debt/equity swap, we are doing an equity/debt swap in a depressed market.

You couldn’t make up a worse strategy.

Article by David McWilliams – Irish Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

2010 AAR Legislative Issues

Several new laws go into effect July 29th.  These were often promoted by the Arizona Association of Realtors.  Tom Farley is the CEO of the Arizona Association of REALTORS® put this short list together.

The laws address signage a condos, home inspections, water and wastewater fees, property transfer fees and landlord tenant issues, each of which home owners and anyone in the industry should be familiar with. 

2010 AAR Legislative Issues

HB2345: HOA; Condos; For Sale Signs – Homeowner and condo associations are prohibited from banning the display of temporary open house signs, except in common areas. Furthermore, they’re prohibited from regulating a property owner’s “for sale” signs that conform to the industry standards and are owned or used by the seller or the seller’s agent, nor can they require a particular sign. Further, they may not regulate open house hours except for restricting the hours to after 8 a.m. or before 6 p.m. Nor can they prohibit display of “for lease” signs unless the association does not allow leasing of units.

HB2768: Real Property Transfer Fee Covenants – Prohibits private transfer fees paid to developers or third-party companies on the sale of real property.  This legislation targets a specific and new type of transfer fee, not those paid homeowner associations. Government-imposed transfer fees are already prohibited by the 2008 constitutional amendment drafted by AAR and passed by the voters.

"The bills summarized below can be viewed in greater detail at www.azleg.gov. Type the bill number in the upper right corner, and the site will bring up different versions of the legislation as it made its way through the process, You can also see voting records of your lawmakers.  Thanks for taking the time to read the legislation below so that you can be in the know." via: Blog.AAROnline.com

Sewer repairs can be costly: a few grand to grand and they are always unexpected.

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Be prepared for a double whammy of property and water levies…

PROPERTY tax isn’t going away — and it might be introduced at the same time as water charges.

Homeowners who thought they would be spared the controversial taxes for the foreseeable future have been told that they are still firmly on the Government’s Budget agenda.

As the Cabinet prepared to meet for its final session before the summer break, Justice Minister Dermot Ahern reignited the debate over domestic taxes.

It had been believed that property tax would be shelved, despite the Government’s need to make a €3bn adjustment in December’s budget.

But yesterday, Mr Ahern said: “That may include a property tax and charging for water – which are in every other European country.”

Dragged

He also warned that low paid workers could be dragged back into the tax net.

“There’s a relatively small percentage of people who are paying tax. But 50pc of people are not paying a bob of tax. That is not sustainable,” he said.

The property tax could cause significant problems for Finance Minister Brian Lenihan, as it is already the subject of backbencher disquiet.

Fianna Fail TD Chris Andrews had tabled a motion against its introduction for a recent Parliamentary Party meeting.

However, the debate never took place as ministers indicated that the tax was being put on the long finger.

Report by Kevin Doyle – Evening Herald.

Ireland Property – Daft Property – http://daftproperty.blogspot.com

FHA and Cash are nearly on par as a way to purchase homes in Greater Phoenix.

FHA continues to be the primary way homes are purchased, but not far behind are cash buyers and I think lots of people will be surprised how much cash is out there.  Following cash are conventional loans, those were people who put down a larger down-payment and got preferable interest rates.   Let’s see the numbers for June 2010.

Single family home sale in Greater Phoenix via the ARMLS for June 2010

1. FHA     2,344  sold  /  34% of the market.

2. Cash    2,179  sold /   32% of the market. 

3. Conv.  1,955  sold /   29% of the market.

4. VA         290  sold /     4% of the market.

Followed by the rest. 

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Modernism in Central Phoenix: from custom homes to some well know favorites.

Well executed remodels make perfect contemporary homes as the ideas of modernism remain fresh even today.  Often the simple open structures are better suited to this desert climate then the more typical newer modified ranch structures that dot the landscape.  Of course I don’t mean traditional ranches here, but even those could use some of the ideas from modernism.

Phoenix living is meant to be a melding of indoor and outdoor living and the space we fill should fit those needs, but most homes tend to have small windows, dark interior, useless floor-plans and often the covered patio is an after thought more akin to say a race car spoiler on a Honda civic.

Luckily many modern homes were spared over the last few decades, long enough to see a resurgence in their popularity.  But, unlike their original intention of being more affordable, they tend to be quite pricey these days, more so because many owners have raised the quality and standards of finishes.

In Central Phoenix there are a few clusters of mid-century modern homes.  Marlen Grove a successful Haver-hood, Windemere at the southern tip of Arcadia – another Haver-hood come to mind.  These two will be an inspiration to any home owner wanting to make their home unique: the mix of natural and man made materials, many recycled and natural or structured landscaping come to form habitats of all sensory appeal.

Then there is Three Fountains by Al Beadle or the infamous Executive Towers.  

Other interesting location of mid-century modern homes include Janet Manor along Rose Lane or East Sunnyslope and Canal North in midtown Phoenix all of which have great examples if less famous ones then Marlen Grove or Windmere.

Then there are plenty of individual often custom homes dotted throughout Central Phoenix in places like the Royal Palm neighborhood or even a few examples in Windsor Square Historic District which is more well known for it’s California and transitional ranch homes then modernism, yet it has a few interesting examples.

Indeed, Phoenix can’t  boast of being an architecture admirers destination point, yet for those willing to take a closer look there is enough to at least keep some sense of satiation, definitely more then the suburbs.

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And They’re Off… The Hook Again…

As the Nama smoke begins to clear, it is apparent developers deemed too big to fail are being bailed out just like the banks…

Last week, there was the ritual sacrifice. Seán FitzPatrick “bowed to the inevitable” as he said himself, and petitioned to be declared a bankrupt. From here on in, if he is to enjoy any luxury in his life, it will be as a kept man. His wife, who never worked a day in Anglo Irish Bank, enjoys half a pension pot somewhere north of €3m. She is also part owner of a number of properties, which is just as well for the FitzPatricks, if they are to continue living in the style to which they have become accustomed.

There is little sympathy for FitzPatrick. In a country where so many are struggling, he has become the pantomime villain. As a result, there was no way that Anglo Irish Bank was ever going to accept a private deal to settle his debts. The public would have been outraged.

But what of all the rest? FitzPatrick had debts of around €150m, which is chickenfeed compared to some of the serious players from the Celtic bubble era.

The bankers and politicians have sailed off to fat pensions. Those with serious debts have gone to ground.

At a time when thousands are struggling with debt, and some with the prospect of losing their home, it still grates with many that those at the top of the heap appear to be sailing on into the sunset.

There is often a good economic reason for not taking the ultimate sanction against somebody unable or unwilling to pay debts. Even in FitzPatrick’s case, his creditors would probably have recovered more of their loans if a deal had been struck.

But with trust in government and state institutions at an all-time low, the feeling persists that many who bear the biggest debts are getting special treatment.

The only other player to be subjected to any ignominy was Bernard McNamara, whom the sheriff visited last month. He carted away some art and reportedly also took possession of McNamara’s Mercedes.

Ironically, this intrusion into the developer’s life was on foot of one of his minor debts. He owes €2.2m to two investors who have obtained a judgement against him, and now they want their money. Early last week, Ivor Dougan and Gary Smith began proceedings to make McNamara bankrupt, a process which he is resisting with all his might.

One other major developer has landed in the mire. Liam Carroll’s big problem, it appears in hindsight, was that he borrowed from the ACC, which is now owned by Dutch-owned Rabobank. That bank had a liquidator appointed to Carroll’s empire against the wishes of his other lenders, which were Irish banks and were happy to wait for the establishment of Nama.

Apart from Carroll, it’s as you were. Those who were to the fore in landing the country in the mire just get on with business. Now that Anglo Irish Bank as they knew it is dust, they must turn to their next best friend – Nama.

When the agency was established last year, it was repeatedly stated by government figures that it was not going to act as a bail-out for developers. Its sole purpose was to relieve the banks of their smelly loans in order that they might be in a position to lend into the economy once again, and set the country back up on the road to recovery. In other words, back to the system which landed us in the mire in the first place.

It was acknowledged that Nama was a bail-out for banks, but only because banks were too big to fail. But, no sir, under no circumstances was it a bail-out for developers.

Now, as the smoke is beginning to clear, it is becoming apparent that those developers deemed too big to fail, will, like their kindred spirits in the banks, also be bailed out.

The position was highlighted in the recently published business plan for Nama.

“Nama may work with certain debtors where it takes the view that this is the optimal commercial strategy in the circumstances. However, this will only occur where debtors are cooperative, make full disclosure and are realistic in terms of asset funding and of the lifestyle implications for them of Nama support.

“They must also accept close monitoring by Nama of their activities.”

How exactly will the Nama executives assess who should be bailed out and who should be turfed out? Many who work within Nama have histories themselves of being players in the property game and while they will undoubtedly act in the best interests of the exchequer, they carry psychological baggage from the days of the bubble.

We now know the identity of the first 10 players whose loans are going into Nama. All of them have debts in excess of €500m. Some have made an effort to rein in their previous high-flying lifestyle, but all these things are relative. If you were fond of a wager, you could put your house on most of these guys coming out the other end financially fit and healthy, over the lifespan of Nama.

The whole project is rife with problems. One is the trust that we, the citizens, are being forced to invest in something that may well shape the future of the country.

Another issue is the old chestnut, long-term economic value. This is a premium that was put on the loans bought on the basis that property in the long term will increase again. Various percentages have been thrown around, but it remains unclear what base the long-term economic value is projected from.

For instance, just last week Goodbody Stockbrokers released information in which it said property prices have further to fall and will eventually be worth 50% of what they were at the outer limits of the bubble. We don’t know whether that base is being taken into account by Nama.

While Nama will almost certainly bail out the big boys, there are many others who will have to answer for their loans. There are also developers who weren’t hit as badly by the downturn.

One is Paddy McKillen, who is taking a legal action to prevent the transfer of personal and business loans from 15 of his companies to Nama from Bank of Ireland and Anglo Irish Bank. His case is that it will negatively affect his business interests.

On the other hand, it was revealed last week by Nama chairman Frank Daly that the banks have heretofore apparently dealt with indebted developers with kid gloves, and the implication is that Nama will have a different approach.

Brian Lenihan has repeatedly said that Nama will not cost anything, but that if it does, there is provision to impose a levy on the banks to recover the cost to the exchequer. Above all else, this appears to be a bad joke. The provision is that the banks “may” be subjected to a levy. By the time the cost to Nama is available, the banks will most likely be back in private ownership. Any new owner is going to want a contingency for the levy taken into account as it would be deemed to pertain to a legacy issue which is nothing to do with the new owner. So once again, it is Joe and Josephine Citizen to whom the bill will eventually be passed on.

Article by Michael Clifford – Tribune News

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Sales of condos went down over the last few years as home sales rose, but is that trend at an end?

The Cromford Reports noted an interesting trend taking place over the last few years.  Condo sales were an increasingly smaller part of the market as single family homes gained favor, especially in 2008 and 2009.  

From 2000-2008 single family home sales were 82.4% of the market and condos 15.4%.  

2007: 81.0% SFR  16.7% Condo

2008: 88.0% SFR  10.6% Condo

2009  88.2% SRF  13.9% Condo

It’s not easy to draw any defined conclusions, but it’s seems reasonable the demand followed pricing.  Single Family Homes were the first to drop in price and naturally as prices dropped more people opted for a house instead of a condo, especially since prices were high for condos and pressure was building for a drop.  

Often people purchased a condo, patio home or town-home instead of a house simply for affordability reasons.  When house prices dropped to a level competitive with the former the choice was in favor of houses.

But since condo prices have also dropped dramatically in 2009 they are regaining popularity.  Year to date sales show a large increase in sales of condos where for the same time period single family homes sales have dropped.  Lets take a look at the numbers provided by the Cromford Report.

Sales of houses are down 0.5% this year to date over 2009 year to date.

Townhome sales up 39.9% year to date; condo sales are up 89.5%; patio home sales are up 23% and loft sales are down 10.8% – probably because lofts tend to be in the higher and weaker price brackets. 

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