Josh McLean

But recent forecasts show many housing markets in the Sunshine State are looking at double-digit drops in home prices. What is he thinking?

"The smart money is thinking about buying there right now," says Martinez. "It may be six to 12 months early, but it's a good time to be searching for deals."

Local housing markets that have fallen far, yet have the potential to recover soon, are ripe targets for "vulture investors," who buy cheap in the hope that prices will rebound.

One area suffering from steep declines is the Miami/Ft. Lauderdale/Palm Beach region, where prices are expected to drop as much as 12 percent. The correction comes after years of intense real estate speculation.

"We believe in the long-term viability of the Florida real estate market, but we're buying on rental economics," Martinez says. "People had been purchasing on condo economics and those numbers no longer apply."

He's looking for 15 percent or higher discounts off previous condo prices to make his purchases viable. He then plans to convert the apartments back into rental units.

For vulture investors, it's not only about the discounts. In order to hold a real estate asset for the several years it might take to turn around, properties have to generate ample cash flow while they wait.

The mortgage meltdown mess and stagnating housing markets have reduced home ownership, according to the Census Bureau, adding to the number of the nation's renters. As a result, demand for rental housing has grown.

Marcus & Millichap Real Estate Brokerage projects average rents nationwide will jump 14 percent for the three years ending this coming December.

Rents in Florida have jumped. Orlando is expected to finish up 21.2 percent for the three years, Ft. Lauderdale 20.5 percent and West Palm Beach 18.6 percent.

The rent increases should provide a price-safety net, especially for condos, since investors will buy as the spreads between rents and mortgage payments diminish. Today the nationwide median mortgage payment of $1,566 is still 80 percent higher than the median monthly rent of $943, but that's down from a couple of years ago, when the difference was close to 100 percent.

When markets were extremely hot, the investor mind-set was very different than it is today, according to Danielle Babb, who owns properties in the Southwest. "They were looking for flips, now they're looking to buy and hold," she says.

According to Babb, more investors are eyeing various markets but are being extremely cautious. "They're concerned that the market has not yet hit bottom."

Investors will look to buy in areas where home prices are reasonably low and rents reasonably high, according to Babb, with an eye for the long haul.

"What we've got is a market that has reverted to what it was like six years ago. People no longer look at their houses like lottery wins," says Jim Gillespie, chief executive of real estate brokerage, Coldwell Banker.

But according to Jonas Lee, of Redbrick Partners, a private equity firm that invests in real estate, sellers are reluctant to slash prices.

If owners want to sell quickly, within 90 days, they may have to come down about 15 percent, he says. Lee is also interested in Florida, and the Boston and D.C. areas as well.

Some of the down markets he's not considering include the Central Valley cities of California, where prices in places like Stockton soared for several years. Moody's projects prices there will fall 25 percent.

Lee doesn't like Stockton's prospects because, "It was so overpriced there and there are few constraints on building." If prices start to recover, developers can quickly build again, putting a damper on price growth.

"Investors will look to areas with job growth and low unemployment, especially in smaller communities where there hasn't been big price appreciation and rents haven't gone down," according to Gillespie. "In those places, the return is much greater."

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Two years of unexpectedly quiet hurricane activity in the US have caused a dramatic drop in insurance premiums that, experts say, could spark consolidation amongst brokers and underwriters.
Brokers are predicting cover for hurricanes in the will tumble by at least 10pc in 2008




The chief executives of the world's largest insurers and brokers are predicting cover for hurricanes in the US will tumble by at least 10pc in 2008 - on top of a 20pc slump in premiums this year.
They forecast the sharp falls as they headed out to Monaco, where they meet over the next few days to estimate demand for next year's policies. The annual Monte Carlo Rendezvous is the most important event in the industry's calendar where reinsurance companies, which provide cover to insurance businesses, unveil their demands for 2008. Insurance companies tend to pass on any premium changes to their policyholders.


Grahame Chilton, chief executive of the world's third largest reinsurance broker Benfield, said despite some major hurricanes such as Felix, this has been a benign storm season.
"In 2007, catastrophe reinsurance fell by around 5pc and insurance was off by more than 20pc," he said. "Without a major loss, we are expecting a reduction of between 5pc to 10pc for reinsurance and for insurance, much more."

It is thought insurers at Lloyd's of London could reduce the maximum amount of business they can underwrite in 2008 as a result of the sharp premium falls. This could lead to total capacity at the world's largest insurance market dropping from a record level of 16.1bn.
Although a quiet hurricane season could lead to record profits, a fall in prices combined with the negative impact of a weak dollar may lead to takeover activity in the sector. Mr Chilton said: "There will be further consolidation."





He said the growth of capital markets is likely to continue, with more demand for catastrophe bonds, which give investors a generous interest rate if they take on risk. "For the first time in 2007, cat bonds were more competitive than reinsurance," he said.

Stephen Catlin, chief executive and deputy chairman of Catlin - the largest syndicate in Lloyd's - agreed the relationship between reinsurance and capital markets will be a major discussion point. "Some people are always quite protective of their own position," he said "But I think there is not enough capital in the reinsurance market to pay for the big exposures in places like Florida. As such, using the capital markets as a buffer is evidently sensible."

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NEW YORK (CNNMoney.com) -- The delinquency rate for mortgage borrowers spiked higher in the second quarter and the number of homes entering the foreclosure process hit a record high, according to a report released Thursday.

Deliquencies hit 5.12 percent of all outstanding mortgages, up from 4.39 percent a year ago, the Mortgage Bankers Association (MBA) said in a quarterly survey.

Serious delinquencies, those 90 days or more late, jumped to 1.11 percent of all loans, from 0.98 percent in the first quarter.

The loans actually entering foreclosure proceedings stood at 0.65 percent, a rise from 0.58 percent in the first three months - and the highest rate in the MBA's 55-year history. (Latest home prices - 149 markets)

More Americans are falling behind in their mortgage payments as stagnant home prices, auto-industry weakness and climbing interest rates have taken a toll on housing affordability.

The survey revealed steady increases in all categories of delinquencies among mortgage borrowers, but problems in subprime adjustable rate loans drove much of the increase.

"There is a clear divergence in performance between fixed rate and adjustable rate mortgages due to the impact of rate resets," said Doug Duncan, the MBA's chief economist.

Duncan called the delinquency trends "a story of seven states." There are the three midwestern states - Michigan, Ohio and Indiana - where defaults and foreclosures are linked to serious underlying economic and job issues. Michigan alone has lost 300,000 jobs since 2000.

Then there are the once red-hot housing markets of the Sunbelt. According to Duncan, homes entering the foreclosure process in Arizona, California, Florida and Nevada drove the national increase - the national foreclosure rate would have otherwise declined.

"The data shows dramatic effects of speculative investing in those four states," said Duncan. High levels of non-occupied houses there coupled with a high percentage of ARMs made markets particularly susceptible to delinquencies.

Many investors simply do not have the same level of interest in retaining their properties than do owner-occupiers who have, historically, always strived to keep their properties.

Delinquencies are expected to continue a steady climb for the next year or so. The number of adjustable rate mortgages (ARMs) that reset to higher rates will peak this fall and many of those borrowers will likely fall behind on payments.

Many borrowers in default work out their problems without undergoing foreclosure. Some rework their loans in cooperation with their lenders, often cleaning up arrears by making extra payments later. Others get free of unaffordable ARMs by refinancing into fixed rates.

Many sell their homes before they lose them, especially if they still retain some equity in the properties. Even if there is no home equity, they may get their bank to agree to a short sale in which the bank will forgive the debt not covered by the sale of their houses.

A minority of homeowners will actually go through the entire foreclosure process and their numbers are not forecast to peak until 2008, as homeowners scrambling to find a solution to their unaffordable loans abandon the fight.

The ultimate foreclosure total may be influenced by several of the initiatives being discussed in Washington. President Bush floated some proposals last week that sought to help responsible borrowers stay in their homes.

Bush's proposals, if followed through on, could make it easier for some families to refinance from ARMs into fixed rates.

In addition, regulators recently informed mortgage servicers, which act as liaisons between investors and borrowers, that rewriting the terms of mortgages does not violate accepted accounting practices if it's done for the benefit of the investors. That should remove one of the legal stumbling blocks faced by servicing firms that want to help borrowers by modifying or refinancing their mortgages.

Other proposals - such as increasing cap limits on HUD loans - that offer some relief to troubled homeowners may also reduce the total of loans that actually go into foreclosure.

If, however, the housing-market slump deepens, delinquencies and foreclosures could worsen. And turmoil in the credit markets could tighten the liquidity squeeze that has made it much tougher for many potential home buyers - as well as owners looking to refinance - to obtain loans.

That has caused demand for homes to plunge in many areas and the national inventory of homes on the market has doubled over the past three years. There is now about a nine-month supply of listings at the current rate of sales.

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Home Prices Expected to Bounce Back in 2008

The prices of existing and new homes are expected to bounce back next year after a dreary 2007, a real estate trade group said Wednesday.

The National Association of Realtors also said it expects existing-home sales to rise to nearly 6.4 million in 2008, up from the 2007 estimate of more than 6.1 million. Nearly 6.5 million existing homes were sold in 2006, the association said.

As for new homes, sales are projected at 865,000 in 2007 and 878,000 next year, but the 2008 projection would still be down more than 20 percent compared with the nearly 1.1 million new homes sold in 2006.

More than 1.4 million housing starts, including multifamily units, are forecast this year and in 2008, but that is down from 1.8 million last year.

Existing-home prices are expected to gain 1.8 percent to a median of $222,700 in 2008 after a 1.4 percent decline this year to $218,800. The median new-home price should rise 2.2 percent to $222,700 next year after a 2.6 percent drop in 2007.

"Markets that sharply reduce new construction in 2007 will generally experience respectable price increases in 2008," Lawrence Yun, NAR senior economist, said in a release. "Buyers now have an overwhelming advantage given the wide selection of homes available in many markets. But with profit margins coming under pressure, home builders will limit new construction well into 2008."

FoxNews.com 7/11/2007

Sales of High-End Homes Are Booming

Sales of high-end homes are doing better than the rest of the market in many areas, according to DataQuick Information Systems, which tracks home prices.



In Boston , for instance, the number of homes selling for at least $1 million fell to 619 in the first five months of 2006, but jumped to 711 in the first five months of this year, about equal to sales during the same period of 2005, which was a boom year.



The same situation is true for New York City ; San Jose , Calif. ; Seattle ; Denver ; and Houston . Meanwhile, in San Francisco , Los Angeles , Phoenix , and Miami , high-end sales are down but not by nearly as much as sales in other price segments.



There appears to be three main causes of the split in the market. First, affluent families continue to do better financially than others, thanks to healthy income gains and a rising stock market. The upper end of the market has also been helped by an influx of well-off foreign investors whose buying power has grown with the recent decline of the dollar.



Finally, both the recent rise in interest rates and the problems in the mortgage market have had a much bigger effect on low-income and middle-class buyers than affluent ones. It's become harder to get a subprime mortgage, while the uptick in interest rates this year has added about $100 to the monthly payment on an average 30-year fixed-rate mortgage.

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UF study: The price is right, so buy now

GAINESVILLE , Fla. - March 9, 2007 - Hopeful homebuyers in Florida should act now: The price is right as the state's single-family residential housing market bottoms out, according to a University of Florida study released today.

"If you're thinking of buying a house, there's probably not much to be gained by holding out at this point," says Wayne Archer, director of UF's Bergstrom Center for Real Estate Studies. "It doesn't look like prices are going to fall anymore."

The quarterly survey of experts in the real estate industry completed in January shows that the share of respondents observing a drop in single-family housing prices has dipped, while a growing number find prices staying even with inflation, Archer says.

"We see that as a benchmark," he says. "When prices maintain the same level as inflation, then we're probably in some kind of equilibrium. It indicates the market is stabilizing."

The exception is condominiums, which are overbuilt and prone to speculative and nave investors, he says.

This is the first time in the UF survey's five-quarter history that the buyers' investment outlook for residential development has brightened. It declined for the first three surveys and remained flat for the fourth survey at the end of October, starting to rise only in this latest survey.

Because of the dominance of single-family housing, the findings have far-reaching and potentially optimistic implications for the state's real estate industry, Archer says.

"You can't get away from the fact that the single-family housing market is the single largest driver of the real estate market," he says. "Most brokers and real estate agents are dealing with single-family housing. Most lending is for single-family housing. And single-family housing drives home furnishings. So when it stabilizes, that's important."

One possible explanation for the housing market turning the corner is a restricted supply of land for residential development, Archer says. The shortage meant there was less overbuilding than there might otherwise have been, he says.

Condos did not have this land restraint, which is one reason they are overbuilt, Archer says. At the same time, condos are prone to strong speculative swings because they are considered a relatively easy commodity to exchange; it's not difficult to acquire them in multiple units or to buy contracts on them, he says.

The stabilization of the single-family housing market came earlier than anticipated and is not expected to affect all parts of the state equally, Archer says. The quieter markets likely will take longer to rebound than those in Central and South Florida, where growth has been explosive.

Jacksonville typically has been a slower and steadier market than Orlando, Tampa-St. Petersburg, Miami and other cities in South Florida, but that is changing, Archer says. Recently, the Jacksonville housing market has picked up momentum.

Even with a turnaround, Archer says he does not believe Florida's real estate market is likely to reach the same level that it did at its peak in 2005-06. "I don't think any thoughtful person would expect sales to go back to where they were a year or so ago," he says. "That was probably an overheated condition and it was extraordinary."

On a positive note, nearly all other markets, including apartments and commercial rental markets, appear to be remaining steady or even experiencing robust growth. "They did not experience a downturn in the same sense that the single-family development market did and they're continuing to be strong," Archer says.

Optimism about Florida real estate seems to be particularly apparent among foreign investors. Many respondents commented that foreign investors and lenders are aggressively trying to invest more capital in the state's rental markets.

"They apparently have no fears about the future of these markets, despite what we perceive as our problems with hurricanes, taxes and other concerns," Archer says.

For the survey, UF's Survey Research Center asked a series of questions of 318 industry executives, real estate lawyers, market analysts, title insurers, financial advisers, market research economists, real estate scholars and other experts in the field, an increase over the 183 respondents in the last survey.

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