The Benn Pacific Blog

Monday, July 16, 2012

Housing Passes a Milestone

Housing Passes a Milestone

The housing market has turned—at last.

The U.S. finally has moved beyond attention-grabbing predictions from housing “experts” that housing is bottoming. The numbers are now convincing.

Nearly seven years after the housing bubble burst, most indexes of house prices are bending up. “We finally saw some rising home prices,” S&P’s David Blitzer said a few weeks ago as he reported the first monthly increase in the slow-moving S&P/Case-Shiller house-price data after seven months of declines.

The U.S. finally has moved beyond attention-grabbing predictions from housing “experts” that housing is bottoming. The numbers are now convincing, according to David Wessel on The News Hub.

Nearly 10% more existing homes were sold in May than in the same month a year earlier, many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point. In something of a surprise, the inventory of existing homes for sale has fallen close to the normal level of six months’ worth despite all the foreclosed homes that lenders own. The fraction of homes that are vacant is at its lowest level since 2006.

The reduced inventory of unsold homes is key, says Mark Fleming, chief economist at CoreLogic, a housing data-analysis firm. For the past couple of years, house prices have risen in the spring and then slumped; the declining supply of houses for sale is reason to believe that won’t happen again this year, he says.

Builders began work on 26% more single-family homes in May 2012 than the depressed levels of May 2011. The stock of unsold newly built homes is back to 2005 levels. In each of the past four quarters, housing construction has added to economic growth. In the first quarter, it accounted for 0.4 percentage points of the meager 1.9% growth rate.

“Even with the overall economy slowing,” Wells Fargo Securities economists said, cautiously, in a note to clients, “the budding recovery in the housing market appears to be gradually gaining momentum.”

Economists aren’t always right, but on this at least they agree: A new Wall Street Journal survey of forecasters found 44 believe the housing market has reached its bottom; only three don’t.

Housing is still far from healthy despite the Federal Reserve’s efforts to resuscitate it by helping to push mortgage rates to extraordinary lows: 3.62% for a 30-year loan, according to Freddie Mac’s latest survey. Single-family housing starts, though up, remain 60% below the 2002 pre-bubble pace. Americans’ equity in homes is $2 trillion, or 25%, less than it was in 2002 and half what it was at the peak. More than one in every four mortgage borrowers still has a loan bigger than the value of the house, though rising home prices are reducing that fraction slowly.

Still, the upturn in housing is a milestone, a particularly welcome one amid a distressing dearth of jobs. For some time, housing has been one of the biggest causes of economic weakness. It has now—barely—moved to the plus side. “A little tail wind is a lot better than a headwind,” says economist Chip Case, the “Case” in Case-Shiller.

From here on, housing is unlikely to drag the U.S. economy down further. It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses. “Manufacturing had led growth and construction had lagged,” JPMorgan Chase economists said last week.“Now the roles are reversed: Manufacturing growth has slowed as private construction comes to life.”

Plenty could go wrong. The biggest threat is a large shadow inventory of unsold homes, homes which owners won’t put on the market because they are underwater, homes that will be foreclosed eventually and homes owned by lenders. They have been trickling onto the market, slowed in part by government efforts to delay foreclosures; a flood could reverse the recent rise in prices. Or the still-dysfunctional mortgage market could get worse. Or overly zealous regulators or a post-election change in government policy could unsettle mortgage lenders or home buyers.

But the housing bust is over.

Write to David Wessel at .(JavaScript must be enabled to view this email address)

A version of this article appeared July 12, 2012, on page A2 in the U.S. edition of The Wall Street Journal, with the headline: Housing Passes a Milestone.

Posted by Trevor Benn on July 16, 2012 at 12:02 PM
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Wednesday, June 20, 2012

Pacific Business News - Island of Lanai for sale

Will Bill Gates or Larry Ellison buy Hawaiian island of Lanai?

Pacific Business News by Duane Shimogawa, Reporter
Date: Monday, June 18, 2012, 1:34pm HST - Last Modified: Tuesday, June 19, 2012, 9:56am HST

Word spread fast after PBN broke the story last Friday confirming the widely spread rumor that Los Angeles billionaire David Murdock is trying to sell the island of Lanai.

Now, Maui County Mayor Alan Arakawa is telling PBN that there’s a good chance that Lanai might be sold relatively quickly. Word of the sale could come out in about a week or so.

“At this point, there seems to be a serious inquiry, [but] the due diligence must be done — a lot of paperwork must be satisfied,” he said.

The listing price for the island is not being publicly disclosed, but one expert who sells islands for a living told PBN that its price is probably more than $500 million.

Arakawa said he had a discussion with representatives from Castle & Cooke Hawaii Inc. over the weekend and, in that discussion, “someone” was identified as being interesting in purchasing Lanai, although he declined to give any names.

Meantime, Gov. Neil Abercrombie told PBN through his spokeswoman, Donalyn Dela Cruz, that he met with Castle & Cooke representatives Thursday afternoon, and they informed him that they have started discussions with a potential buyer for Lanai.

Dela Cruz said Monday that the governor has no other information at this time.

Lanai, the sixth-largest Hawaiian island by acreage, is owned by Murdock, who in 1985 took control of it as a result of his purchase of Castle & Cooke. The state owns 2 percent of the island.

Rumors have been spreading for some time now that two prominent American businessmen, Larry Ellison, co-founder/CEO of Oracle Corp., and Bill Gates of Microsoft-fame may be likely candidates to buy Lanai.

Gates and his wife, Melinda, rented out the entire island for their marriage in 1994, and Ellison has a home on Lanai.

Calls to Oracle’s corporate offices weren’t immediately returned.

A call and email to Gates’ Bill and Melinda Gates Foundation requesting comment weren’t immediately returned.


Posted by Trevor Benn on June 20, 2012 at 09:28 AM
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Wednesday, June 13, 2012

Bloomberg - Hualalai Loan in trouble…

Four Seasons Hualalai Hotel Loan Sent to Special Servicer - Bloomberg

By Nadja Brandt - Jun 12, 2012 11:26 AM GMT-1000

A loan on the luxury Four Seasons Resort Hualalai, a joint venture of Rockpoint Group LLC and Michael Dell’s MSD Capital LP, was transferred to a special servicer because of maturity default, Fitch Ratings said.

The loan has a balance of $175.9 million, Fitch said today. Rockpoint and MSD, the investment firm started by the Dell Inc. (DELL) founder and his family, bought the property in June 2006 for $503.7 million, according to Scott Pritchard, a director for structured finance at Fitch.

Special servicers negotiate with landlords on behalf of investors in commercial mortgage-backed securities. The resort’s owners are in talks with lenders and seeking a later maturity. The fourth and last extension on the loan expired on June 9, according to Fitch.

The borrowers “will continue to make interest payments on the mortgage during the discussions with lenders,” Patrick Fitzgerald, chief executive officer of the resort, said in an e- mailed statement. “We are confident that the discussions will lead to a multiyear extension of the maturity date.”

A tsunami triggered by the 9.0-magnitude earthquake in eastern Japan caused more than $10 million of damage to the hotel on March 11, 2011, primarily to landscaping. Losses from tsunami disruptions probably will be covered by insurance, Fitch said in its note. The 243-room, five-star property, on Hawaii’s Big Island, has a golf course, two outdoor swimming pools and three tennis courts, according to Fitch.

The original balance of the interest-only, floating-rate loan on the resort was $354.4 million, Pritchard said.

Occupancies at U.S. luxury hotels climbed to 72 percent this year through April from 70 percent a year earlier, according to Smith Travel Research, based in Hendersonville, Tennessee. That’s the highest among the seven lodging categories the firm monitors. On Oahu, the only Hawaiian region Smith Travel tracks, occupancies were 84 percent, the best performance among the top 25 U.S. markets.

To contact the reporter on this story: Nadja Brandt in Los Angeles at .(JavaScript must be enabled to view this email address)

To contact the editor responsible for this story: Kara Wetzel at .(JavaScript must be enabled to view this email address)


Posted by Trevor Benn on June 13, 2012 at 09:22 AM
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Friday, June 08, 2012

FHA to sell bad loans to investors?

Not the best sign.  Today on CNBC, Diana Olick reported about FHA’s plan to sell blocks of non-performing loans…

FHA Turns to Investors as Losses Continue to Rise
By: Diana Olick
CNBC Real Estate Reporter

Faced with a rising number of severely delinquent loans, the Federal Housing Administration is taking a very small program to sell these loans to investors and ramping it way up.

The government’s mortgage insurer came to the rescue of the mortgage market, when credit seized up at the start of the recent housing crash.

It’s market share rose from barely 3 percent to upwards of 40 percent of new originations. Now it is saddled with over 700,000 bad loans, or 9 percent of the residential loans it insures.

“I’m not going to make any future predictions “bailouts”, but we are working hard every day to ensure that we are protecting the taxpayers and the FHA,” said FHA Acting Commissioner Carol Galante.

The initial pilot program was launched in 2010 and sold barely 3000 loans in all of last year. The newly renamed Distressed Asset Stabilization Program, will offer up to 5000 loans per quarter starting this fall. Borrowers must be at least six months behind on their payments for the loan to be eligible.

“If we can sell the mortgage sooner, we have the opportunity to do at least as good in terms of money back to FHA and potentially help the borrower, and the community,” said Galante.

Since the FHA does not own, but insures mortgages, this would be a voluntary choice by the banks, but likely a popular one, as the FHA requires banks to go fully through the costly and time-consuming foreclosure process before handing off the properties to the FHA.

FHA also limits the types of modifications the banks can do. Big banks have already starting selling off some of their non-FHA other mortgages to private investors, like Connecticut-based Carrington Mortgage Holdings.

“If an investor has correctly analyzed and priced the NPL(non-performing loans) pools, and has the people, services and infrastructure in place to work with borrowers and manage the properties, these pools can be a very attractive investment,” says Rick Sharga, a Carrington executive.

Investors in these pools, however, will face restrictions. They cannot foreclose on the property for six months after purchasing the loan, and they must guarantee that at least half the loans would be modified to a reperforming status and held for at least three years. That is designed to prevent immediate “flipping.”

“We have a fairly straightforward approach to how we handle NPL (non-performing loan) pools. We attempt to keep the borrower in the home and keep the property cash flowing. In the long run, that should deliver the best results for our investors,” says Sharga.

Investors are buying the loans at a discount and therefore can make more aggressive modifications than the banks might be willing to do. For the FHA, selling the loans, even at this discount, is stemming at least some of the bleeding simply by getting rid of them more quickly.

“We actually save money because we’re not paying all the cost of holding that mortgage all the way through to foreclosure and managing and maintaining those properties over a long period of time,” said Galante.

The program will offer some national loan pools and some pools in “hardest hit geographies,” according to Galante. Those geographically specific pools will have additional restrictions in terms of how many of those properties could come to market as vacant REO (real estate owned, foreclosed homes).

FHA is not offering up all of its troubled loans for sale, because as the housing market improves, they are able to get increasingly better returns when selling the foreclosed homes it has.

“We’re seeing our recovery dollars go up in some markets,” adds Galante. “We have to have multiple tools.

Questions?  Comments?  .(JavaScript must be enabled to view this email address) And follow me on Twitter @Diana_Olick

© 2012

Posted by Trevor Benn on June 08, 2012 at 08:54 AM
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Thursday, May 17, 2012

New condos are a coming…

The coming condo boom?

The promise of an improved economy is driving plans for six — maybe seven — new residential towers

By Andrew Gomes

Late last year there was one. Now there are two. Soon there may be three or more developers unveiling high-rise condominium plans for Honolulu’s urban core. UP AND COMING As many as seven residential towers on six sites have been unveiled or are in the works within Honolulu’s urban core, which was ground zero for high-rise condo development during the last market boom in the early 2000s.

IN THE PACK:  Location: 605 Kapiolani Blvd. >> Status: Developer Franco Mola has an option to buy the property and is exploring plans for two condo towers on the site of the former Honolulu Advertiser, but has not filed an application with the state authority governing high-rise development in the area.

EARLY STARTER:  Location: 1189 Waimanu St. >> Status: Alexander & Baldwin Inc. launched sales efforts in December. The 340-unit tower called Waihonua could break ground later this year on the undeveloped site between existing Hawaiki and Koolani towers.

COMING SOON:  Location: 1555 Kapiolani Blvd. >> Status: Local developers MacNaughton Group and Kobayashi Group are working with a Texas company that owns the rights to build a 210-unit condo tower on top of the Nordstrom parking garage at Ala Moana Center. Sales efforts are slated to begin before the holiday season.

CLOSE SECOND:  Location: 850 Kapiolani Blvd. >> Status: San Diego development firm OliverMcMillan and local landowner Joe Nicolai submitted a permit application recently for a 400-unit tower called Symphony on this undeveloped site Ewa of Blaisdell Center. Construction could begin by the end of the year.

JUST PURCHASED:  Location: 2121 Kuhio Ave. >> Status: A California development firm recently bought this parcel. The site is on the Diamond Head-makai corner of Kuhio Avenue and Kalaimoku Street.

LINED UP:  Location: 604 Ala Moana Blvd. >> Status: Alexander & Baldwin Inc. has an option to buy this site formerly occupied by CompUSA. The company envisions building a tower here after it finishes another one on Waimanu Street slated to break ground by the end of this year.

Posted by Trevor Benn on May 17, 2012 at 07:53 AM
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Monday, December 12, 2011

Time to bring out the cranes?

One of the best economic indicators of a turn-around in real estate is when developers start to build!  The past month has marked the announcements of the new Waihonua project by Alexander and Bladwin which will be 345 condominium residences in Kakaako.  This is an interesting one as they will have to overcome the fact that there are sandwiched in between 5 other high rises as their neighbors!  More at:

Another project is The Cove Waikiki.  Interestingly this project, too, is amongst some giant neighbors as it is essentially behind the Windsor building.  However, this one is a low-rise project:

On the flip side of this, the new proposed Hale Ka Lae in Hawaii Kai has been halted and deposits cancelled due to slow sales:

So we will see what the absorbtion rates are for these newer projects…


Posted by Trevor Benn on December 12, 2011 at 11:40 AM
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Thursday, August 25, 2011

21% of sales in Q2 were foreclosures?

Pacific Business News
Date: Thursday, August 25, 2011, 7:02am HST

Homes that were in some stage of the foreclosure process accounted for more than 21 percent of all residential sales in Hawaii during the second quarter, according to new data from RealtyTrac. 

There were 743 foreclosure sales in Hawaii between April 1 and June 30, which was a 4 percent increase compared to the same period in 2010, according to Irvine, Calif.-based RealtyTrac. 

Nationally, more than 31 percent of all residential home sales were in some stage of foreclosure, either with a notice of default, a notice of auction or bank-owned property. 

However, the total number of foreclosed homes sold in the United States — 265,087 — represented a drop of 11 percent from the second quarter in 2010, RealtyTrac said.

In Hawaii, more than 39 percent of all sales in Maui County during the second quarter were foreclosures. The 250 foreclosure sales on Maui, Lanai and Molokai represented an 8 percent increase from the second quarter in 2010.

Foreclosure sales on Kauai represented 33 percent of all sales. However, the number of sales, just 57, was a 26 percent drop from 77 sales during the second quarter of 2010.

The Big Island had 164 foreclosure sales in the second quarter, which was a 19 percent increase from 2010, and represented 27 percent of all residential sales.

The 272 foreclosure sales on Oahu represented 13 percent of all sales, and a 2 percent decline in number from last year.

Nationally, the average sales price of a bank-owned home or one in foreclosure was $164,217, which was a 1 percent decline from a year ago.

Hawaii’s average price was more than double that, the highest in the nation at $347,428. However, it was a 7 percent drop from $375,264 in the second quarter of 2010, according to RealtyTrac data.

Posted by Trevor Benn on August 25, 2011 at 11:11 AM
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Wednesday, June 01, 2011

Hawaii Business Magazine’s Top 100 Realtors

On May 27th, I was honored to be recognized as one of Hawaii Business Magazine’s Top 100 Realtors.  We have been fortunate enough to achieve this distinction every year since the awards inception.  Only 24 Realtors, of the more than 10,000 in the State of Hawai’i, have achieved this.

I want to extend a big “MAHALO” to all our clients and friends who have made this possible. 

- Trevor

Posted by Trevor Benn on June 01, 2011 at 04:50 PM
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Friday, May 06, 2011

Pacific Business New’s Top Real Estate Firms

Benn Pacific Group is honored to be named the 26th largest real state brokerage in Hawaii by sales volume according to Pacific Business News.

Posted by Trevor Benn on May 06, 2011 at 05:34 PM
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Tuesday, January 11, 2011

Outlook and rants for 2011

Aloha!  I apologize for the lapse in blogs.  It has been quite a hectic 4th quarter of 2010 and an exciting beginning to 2011. 

Let me start by sending a big MAHALO to all our loyal clients and friends who made 2010 one of the best years ever for our business despite the economic uncertainties!  I am equally grateful for our exceptional agents who continue to display their outstanding professionalism and steadfast duty to their clientele. 

As we begin the New Year one of my tasks is to re-examine the marketplace and try to position our clients to benefit from what we believe will be the long term movement of the real estate and financing markets.  This is one part art, and one part science.

That being said, one of the first observations that comes from the past month has been the marked upwards move in the stock market.  This, coupled with the large movement of investors out of the bond market, signifies an important change in consumer sentiment and likely means the end to the recession.  It also may signal the possibility of mortgage interest rates rising.  Without getting into details that would have the quants out there roast me… suffice it to say that there are forces at work that could push interest rates higher.  (Remember that interest rates have been artificially low for sometime from the stimulus, etc.)

So what does this mean?  In my opinion there is generally an inverse relationship between real estate prices and interest rates.  As interest rates rise, the Buyer’s buying power diminishes and they can afford to pay less for their purchase.  When this happens the Sellers must meet the Buyer’s expectation level by reducing their price. Couple this with a somewhat unknown amount of pending foreclosures or “shadow inventory,” as it is being widely referred to, and we are faced with another possible period of pricing pressure right?

Not so fast.  Here’s the rub if you live in my neck of the woods.  In case you didn’t know, Oahu is an island.  So, inventory is much more finite than other parts of the US and we have an organic need for housing units as the adult children finally move out of grandma and grandpa’s house!  We will never have the issues we are seeing in markets like Nevada or Florida, for example, simply due to our inability to find more developable dirt and our less mobile residents (i.e. we can’t get in a car and go to the next town where land is cheaper). 

But what does that really mean in plain English?  In my humble opinion we are in the middle of a flat line.  How do I know this?  Because if you look at median prices on Oahu for both condos and single family homes from 2006 and 2010, it is largely unchanged (which is to say the difference over that period is between 3-8 percent downward, which, to me, falls under the category of “who cares”).  So, what happened to the doom and gloom of the mainland?  The 20-40% price declines?  It really never came…unless you were buying condo-hotels in Waikiki (for which financing dried up) or homes on the Ewa Plain (for which foreclosures and short sales hit the hardest).

So enough already…tell me what to do?  If you are a Buyer…buy now.  You have extremely low interest rates historically so even if the market moves down a bit it’s not as significant as an interest rate hike.  AND, as I stated before, nothing is a better inflation hedge than a 30 year fixed mortgage at some ridiculously low rate.  If you are a Seller…sell now.  You can still get a very fair price on your property and upsize or downsize from there.  If you are an investor…well, here is where it gets interesting.  I think you have to buy prudently.  Rental yields are still pretty anemic so you have to look for distressed assets or other interesting low-hanging fruit.  Some of those very assets I mentioned in the previous paragraph as being hit the hardest are some of the best poised to recover back to the mean!

Aloha to all,

** Disclaimer:  These are the opinions of Trevor Benn and may or may not have any basis in reality.  You are advised to form your own opinions and seek advice from people smarter than Trevor.  No investment decisions should be made based solely on what you read here… one should always consult the oldest member of the village first.

*** Real disclaimer:  DISCLAIMER

Posted by Trevor Benn on January 11, 2011 at 09:21 AM
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