Pappas Realty Co... "Commercial Real Estate...Exclusively" in Northeast Ohio since 1957

Thursday, July 26, 2007

New Home Sales Down Substantially

Thursday July 26, 11:37 am ET By Martin Crutsinger, AP Economics Writer

Sales of New Homes Plunge by the Largest Amount in 5 Months, Commerce Department Reports

WASHINGTON (AP) -- Sales of new homes fell in June by the largest amount in five months as the housing industry continued to struggle with its worst downturn in 16 years. The median home price also fell.

The Commerce Department reported that sales of new single-family homes dropped by 6.6 percent last month to a seasonally adjusted annual rate of 834,000 units. The decline was more than triple what had been expected and was the largest percentage drop since sales fell by 12.7 percent in January. Sales are now 22.3 percent below the level of a year ago.

The median price of a new home sold last month dropped to $237,900, down by 2.2 percent from a year ago. It was the biggest year-over-year price drop since a 6.5 percent fall in April. The median price is the point where half the homes sold for more and half for less.

Wednesday, July 18, 2007

AP ~ Bernanke: Economic Growth Will Be Slower This Year Due to Housing Slump

Wednesday July 18, 11:59 am ET By Jeannine Aversa, AP Economics Writer

Bernanke: Economic Growth Will Be Slower This Year Due to Housing Slump

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Wednesday that the economy has emerged from its anemic spell, but overall growth for the year will be lower than expected. Inflation remains the chief concern, he said.

Delivering a midyear Fed economic report to Capitol Hill, Bernanke struck a somewhat cautious tone. He suggested that the economy appears likely to expand "at a moderate pace" over the second half.

Still, the Fed chief told the House Financial Services Committee that growth this year will be a bit slower than the Fed projected in February. Growth should strengthen a bit next year, he said. The inflation forecast, however, wasn't changed. It calls for prices other than food and energy to edge lower.
Against this backdrop, the Fed is likely to leave interest rates where they are through the rest of this year.

For just over a year, the Federal Reserve has held a key interest rate at 5.25 percent, providing a period of stability to borrowers. Before that, the Fed had boosted rates for two years to fend off inflation.

On Wall Street, stocks fell. Investors reacted uneasily to Bernanke's assessment of the economy and news that two Bear Stearns Cos. hedge funds were essentially worthless.
Bernanke took pains Wednesday to hedge the Fed's bets and outline risks to the economy.

One risk is that energy and commodity prices could continue to rise sharply, boosting the prices of lots of other goods and services and thus spreading inflation through the economy.
The Fed "has consistently stated that upside risks to inflation are its predominant" concern, Bernanke said.

The panel's chairman, Rep. Barney Frank, D-Mass., said that finding "troubles me." In Frank's view, the biggest problem is the growing gap between low-wage and high-wage workers. Democrats have accused the Bush administration of not doing enough to narrow this gap.
Overall consumer prices calmed down in June, the government reported Wednesday. They rose by just 0.2 percent -- the smallest increase in five months. Gasoline prices, however are now hovering past $3 a gallon.

Another risk is that the housing slump could turn out worse than expected, sapping consumer spending and possibly causing overall economic growth to be weaker, Bernanke said.
The economy barely budged in the first quarter, growing at pace of just 0.7 percent, the worst in more than four years. The sour housing market was the principal culprit.

But other factors in that dismal perfomance -- including cutbacks in inventory investment by businesses, weak federal defense spending and a bloated trade deficit -- are showing some signs of improvement. Given that, the economy could grow close to 3 percent in the April-to-June quarter, Bernanke said. The government's estimate of second-quarter growth will be released later this month.

The housing market will remain sluggish for some time, partly because of some now tighter lending standards and the recent rise in mortgage rates, Bernanke said.
Even if the demand for housing were to stabilize somewhat, the pace of new home building will probably fall as builders work down excess stocks of unsold homes, he said.

"Thus declines in residential construction will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time," Bernanke said.

Bernanke also outlined efforts by regulators to deal with problems in the market for risky mortgages. Those are mortgages made to people with spotty credit histories.
Foreclosures and delinquencies for these "subprime" mortgages have spiked. Some big subprime lenders have been forced out of business.

Borrowers and lenders have been clobbered by rising interest rates and weak home values. Congress has blasted the Fed and other regulators for not doing enough to crack down on lax lending standards, which had contributed to the problems.

"Rising delinquencies and foreclosures are creating personal, economic and social distress for many homeowners and communities -- problems that likely will get worse before they get better," Bernanke said.

To better protect consumers, the Fed is looking at ways to improve mortgage disclosure and ways to curb unfair or deceptive lending practices. It also is encouraging lenders to work with troubled homeowners.

Rep. Spencer Bachus, R-Ala., talked about problems involving rogue mortgage brokers losing licenses in one state but then setting up shop in another. Bernanke said it might be helpful to have federal licensing or some federal data base to keep track of problem brokers.
On another issue, Bernanke said hedge funds and private equity firms can spread risk, boost liquidity and thus can be good for national economic activity. "They certainly are a benefit to the economy," he said. There's an effort in Congress to raise taxes on these firms.

In new economic projections, the Fed expects the economy to grow between 2.25 and 2.50 percent, as measured from the fourth quarter of last year to the fourth quarter of this year. That's lower than the old forecast of 2.5 percent and 3 percent.

For 2008, the economy should pick up and expand between 2.50 and 2.75 percent.
"Core" inflation, meanwhile, should increase by 2 percent and 2.25 percent this year, the same as the previous projection. Core inflation excludes the more volatile categories of energy and food.

The unemployment rate -- currently at 4.5 percent -- could rise as high as 4.75 percent this year, which would still be considered relatively low by historical standards. That's also unchanged from the Fed's old forecast.

Thursday, July 12, 2007

Manhattan parking spot going for $225,000 Manhattan parking spot going for $225,000
Thursday July 12, 11:38 am ET

Parking spaces in New York cost as much as $225,000 and could soon be going higher still, putting the cost for the prime spots above the price tag of the typical U.S. home price.
Manhattan real estate agent Tom Postilio said there is a waiting list of seven or eight people hoping to pay $225,000 for one of five private parking spaces that has been approved in the basement of 246 West 17th Street, a 34-unit condo development scheduled for completion next January.

The developer of that building is seeking permission to add another four spots, and Postilio said the addition spots are likely to cost even more than the current price, although he could not give an exact price.
"Supply and demand being what it is, there's probably going to be an increase," he told

That latest figures from the National Association of Realtors put the nation's median existing home price at $223,700 in May, meaning that half of the homes sold in the month sold for less than that and half sold for more. Overall, home prices nationwide have been declining in the face of a slump in home sales this year.

Part of the reason for the pricey spots in New York is city rules controlling new residential buildings in most of Manhattan that limit spots to about 20 percent of the units, according to The New York Times, which first reported the $225,000 price tag in an article Thursday.
That limit has resulted in some condo buyers paying roughly as much per square foot for their car's home as for their own, according to the paper.

The paper says that property appraiser Miller Samuel estimates that the average parking space in the expensive neighborhoods of Manhattan now costs $165,019, or $1,100 per square foot. That compares to an average apartment price of $1,107 per square foot.

Sometimes the parking spot costs more than the finished space in the same building. The building at 246 West 17th Street with the $225,000 parking spots has two-bedroom, 2-1/2 bath 1,717-square-foot units listed for $2.2 million. That works out to $1,281 a square foot, while parking spot costs about $1,500 a square foot.

That building isn't the only one which is seeing prices rise before tenants even move in. The paper reports that another 52-unit condo under development in the city's Chelsea neighborhood had its first two spots go for $165,000, the third for $175,000 and the last two for $195,000.
One of the buyers of a condo in that building told the paper she regrets passing up the chance to buy one of those spots.

"At first, I was getting overwhelmed and didn't want to spend the money," Cynthia Habberstad told the paper. "I'm kicking myself now, believe me."
Some people are buying parking spots even if they don't own cars, but instead buy the spaces as investments, renting them out to cover their costs.

Parking has long been a costly endeavor in New York, but expensive spots are not limited to those Manhattan neighborhoods. The paper reports that open lots and garages in Brooklyn, Queens, the Riverdale neighborhood of the Bronx and Harlem are close to $50,000, although at least one new Brooklyn development is asking $125,000.

And some other major cities are also seeing eye-popping prices for parking spots. The paper reports that in Boston, spots can sell for as much as $175,000, and as much as $75,000 in Chicago. But in other cities, like Los Angeles and Dallas, most condos include parking in their prices.