Archive for February, 2013

February 6, 2013

Subprime credit scores are declining

….continued

“We are seeing a trend of consumers being careful and disciplined about their use of existing credit while also being cautious about using new accounts they have opened,” Loughran said.

Equifax observed the greatest improvements in markets where employment rates are strengthening. Population shifts are also impacting some markets, according to Equifax.

Equifax also found “early housing-bust markets” are experiencing improving credit scores as time passes since the worst of the foreclosure crisis. These markets include San Francisco, Sacramento, San Diego, Los Angeles, Las Vegas, Phoenix, and Miami.

The number of subprime borrowers in San Francisco declined 6.4 percent. In Sacramento, the number declined by 6.2 percent.

San Diego and Los Angeles experienced identical declined of about 5.3 percent.

Of the 25 metro areas Equifax measured, Chicago experienced the greatest decrease in subprime borrowers—about 9 percent.

Chicago’s rising employment rate is one major factor leading to this decline.

The only metro on Equifax’s list to experience an increase in the number of subprime credit scores is Houston, Texas. However, when population growth is taken into account, it is evident credit scores in Houston are improving as well.

The percentage of subprime creditors in Houston declined 0.5 percent from the third quarter of 2011 to the third quarter of 2012.

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February 5, 2013

Miami, Moscow and Dubai to be Strongest Performing Global Markets in 2013

continued

• Government-imposed regulatory measures will keep a lid on price growth in Asia in 2013 but the west-east shift in the economic balance of power suggests more promising prospects in the medium term.

Prime property has done more than just weather the economic storm and outperform its mainstream counterparts; it has prospered as a direct result of the uncertain economic climate. The protracted Eurozone debt debacle, the geopolitical tensions surrounding the Arab Spring and the absence of alternative strong-performing asset classes have heightened its appeal.

But aside from the climate of uncertainty, the rapid transition from ‘crisis’ to ‘safe haven’ was assisted by low interest rates, the preference amongst HNWIs for accessible and transparent markets and the unprecedented scale of wealth creation that was simultaneously occurring in the world’s developing economies.

Between 2006 and 2011 the number of centamillionaires (those with disposable assets of $100m+) increased by 29% globally. The number of centa-millionaires in Latin America, South-East Asia and South-Central Asia rose by 67%, 80% and 200% respectively over the same period.

Cross-border investment flows have risen significantly as HNWIs in these emerging markets have looked beyond their national boundaries for double-digit annual returns. Miami has delivered for wealthy Brazilian, Venezuelan and Argentinean buyers while Dubai is the location of choice for an increasing number of Indian and Iranian HNWIs.

What will be trending in 2013?

In Knight Frank’s 2012 Forecast we envisaged there would be three global trends that would be increasingly influential on the world’s luxury residential markets; wealth creation, the growth of ‘safe-haven’ investments and the widening gap between East and West.

In 2013 Knight Frank expects a continuation of the same trends but currency movements will have an increasing bearing on the flow of wealth from city to city. Prime prices in New York have slipped 2.6% since 2008 but taking currency movements into account this translates into a 17.6% discount for Chinese buyers.

The search for unique “trophy” homes will gather pace in 2013 due in part to the increasingly high standard of new projects. Tall towers in the main gateway cities are already capturing the attention of an expanding number of HNWIs and we expect this trend to intensify.

In the coming year the world’s wealthy will continue to micro-manage their property portfolios weighing up lifestyle gains against tax benefits and currency movements but central to most decisions will be price performance, both historic and forecast.

The forecast

Barring a collapse of the euro, the US toppling off its fiscal cliff or Asian protectionism being ramped up, the outlook for luxury homes in the world’s key cities is one of quiet optimism.

The Knight Frank forecasts shown in the map below represent our view as to where we consider prime prices are headed in 2013; for comparison purposes we have also shown each city’s actual price performance in the year to September 2012. In 2013 we expect prime prices across the 14 cities surveyed to rise on average by 2.5%. In 2012 we predicted average price growth of 0.6%.

In 2013, we expect prices to rise or remain flat in eleven of the 14 cities included in our forecast. Moscow is expected to record the strongest price growth of all 14 cities (we forecast annual growth of 10%) due to tight prime supply and the expected release of a number of superprime projects.

Dubai provides another good news story; here we expect prices in the luxury villa market to rise by between 5% and 10% in 2013. The volume of enquiries from professionals relocating from the UK and Asia is rising while the supply of high quality family homes is largely static.

Prices are expected to fall in only three cities – Paris, Geneva and Shanghai – but in each case by less than 5%.

In Paris, the market has been sluggish in the second half of 2012 but we expect greater clarity to emerge in 2013 once President Hollande’s austerity measures have bedded in. New development is still limited in markets such as Paris which may help sales absorptions in spite of political dampening measures.

Geneva has seen foreign demand fluctuate in 2012 and borrowing power has been affected by new lending legislation.

Shanghai meanwhile is set to see a continuation of the home purchase restrictions that came into force this year. This includes preventing single persons that are non-resident from buying property in the city.

In 2013 supply constraints are expected to be a determining factor for a number of cities. The shortage of top-end homes in Moscow and Miami is expected to support price growth. But in Monaco and New York although the lack of luxury homes is also evident there is not enough of an imbalance to drive prices significantly higher in 2013.

Mainstream housing market forecasts are arguably more straightforward than prime. By scrutinizing key indicators such as house prices to income ratios, house prices to rent ratios, interest rates and disposable incomes it is possible to gauge levels of affordability. The prime market however operates according to a different set of dynamics.

Instead, hard-to-quantify factors such as lifestyle, market confidence and the ease with which HNWIs can exit a market are often the critical factors under consideration. The current situation in Asia where markets are increasingly being controlled by government regulatory measures also make it harder to take a true reading of a prime markets’ capacity for growth.

February 5, 2013

Foreclsoures are down……

…….continued

The number of mortgages in some stage of the foreclosure process was also down month-over-month, decreasing by about 4.2 percent from November. Foreclosure inventory in December accounted for about 3 percent of all homes with a mortgage.
“The most encouraging foreclosure trend reported here is that the inventory of foreclosed properties is almost 20 percent smaller than a year ago,” said Mark Fleming, chief economist for CoreLogic. “This big improvement indicates we are working toward resolving the backlog of the most distressed assets in the shadow inventory.”
Completed foreclosures also fell on a yearly and monthly basis as fewer homes were lost to foreclosure in December. According to CoreLogic, completed foreclosures were down 21 percent from a year ago after they decreased to 56,000 in December from 71,000 a year ago. Month-over-month, completed foreclosures declined 3 percent from November’s revised 58,000.
During the pre-crisis years between 2000 and 2006, completed foreclosures averaged 21,000 per month, according to CoreLogic. Since September 2008, the data provider estimates about 4.1 million homes have been lost to foreclosure.
Over a one-year period ending in December, California led as the state with the highest number of completed foreclosures—100,000. Florida was close behind with 98,000, followed by Michigan (74,000), Texas (57,000), and Georgia (49,000).
CoreLogic also ranked states according to foreclosure inventory and found Florida led with the highest foreclosure inventory rate—10.1 percent. Other states on the top five list were New Jersey (7.0 percent), New York (5.1 percent), Nevada (4.7 percent), and Illinois (4.5 percent).

February 5, 2013

Mulitple Offers Increase

 Since an “All Cash” transaction does not have to go through lengthy lending approval process,the escrow process is faster and is less likely to fall through, making the
offer more attractive and more assured.

According to results based on C.A.R.’s 2012 Annual Housing Market Survey, “All
Cash” buyers has been on the rise since the mid of 2000’s, increasing from 11
percent in 2005 to 30 percent in 2012. Almost one-third of all home buyers paid
with all cash in 2012, which is more than 3 times what it was in 2001 when “All
Cash” buyers were merely 8.8 percent. The share of all cash buyers in 2012 was
also nearly double the long-run average of 15.1 percent since 1998.