A group of Florida investors, enticed by buying opportunities created by the lending crisis, is partnering with a Raleigh land developer for a $100 million buying spree in the Triangle and Charlotte.
Landquest of Raleigh and Bradenton, Fla.-based Starwood Land Ventures are offering cash for homebuilders' untouched subdivision lots or expansive tracts held by land developers. They also plan to offer equity and loans to other developers, and buy debt from lenders who want to quickly reduce residential real estate exposure.
The joint venture, called LStar, illustrates how the national housing bust has arrived at the doorstep of the Tar Heel state.
While much of the U.S. has slogged through a housing slump for almost three years, the Triangle and Charlotte have felt the effects for only a year.
Home values have held up here, relative to other parts of the country. Still, builders are scaling back even in lightly hit areas such as the Triangle to make up for their losses elsewhere.
"A lot of these problems don't have to do with the Carolinas," says Kyle Corkum, Landquest's president. That is why LStar is tempted by North Carolina in the first place. LStar expects people to continue to flow to the state in the next decade, and it predicts that the housing market here will rebound more quickly than elsewhere.
And because the partnership is buying with cash, it has a big advantage over like-minded investors -- especially those who have to persuade banks, still leery of real estate bets, to finance deals.
"It's much more powerful to say, 'We can close in three weeks,' than to have to go through the process of someone else's underwriting," Corkum says. "We can just say, 'We're ready to stroke a check. Let's do it.' "
Starwood is an an affiliate of private investment behemoth Starwood Capital Group of Greenwich, Conn., which might explain its end of the deal: $100 million. Landquest is adding an undisclosed sum. But its value lies in its local expertise. Starwood has formed seven such partnerships throughout the country.
Last week LStar made offers totaling $100 million, Corkum says. He declined to be more specific, but offered hints:
"The objective is to buy properties that people want to live in tomorrow," he says. " ... This is not a land bank. This isn't buying land in the boonies and in 10 years civilization reaches there."
Land banking has been Landquest's forte for eight years.
The company has primarily been a land developer in New England and the Carolinas. Its business has been buying large tracts from farmers or other willing sellers, preparing the land for residential development by getting planning approvals, building infrastructure, and dividing lots before selling to builders.
But a year ago, as the nation's mortgage mess began to seep into the Triangle, Landquest decided to pay down debt and walk away from several hundred acres in land options -- going against critics who advised that this region would avoid the ill effects of the bust. Predicting a lending pullback, the company began searching for the bottom of the market.
The Starwood deal began taking shape in the spring.
"Things have been a lot worse than we expected," Corkum says. "We feel really, ridiculously lucky we're on the right side of this."
Existing-Home Sales Rise on Improved Affordability
WASHINGTON, October 24, 2008
Existing-home sales increased last month as buyers responded to improved housing affordability conditions, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.5 percent to a seasonally adjusted annual rate¹ of 5.18 million units in September from a level of 4.91 million in August, and are 1.4 percent higher than the 5.11 million-unit pace in September 2007.
Lawrence Yun, NAR chief economist, said more markets are seeing year-over-year gains. “The sales turnaround which began in California several months ago is broadening now to Colorado, Kansas, Minnesota, Missouri and Rhode Island,” he said. “The South was hampered by much lower home sales in Houston in the aftermath of Hurricane Ike.”
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said low home prices and low interest rates have been attracting buyers. “This is the first time since November 2005 that home sales have been above year-ago levels,” he said. “Credit tightened at the end of September, but the improvement demonstrates that buyers who’ve been on the sidelines want to get into the market to make a long-term investment in their future.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.04 percent in September from 6.48 percent in August; the rate was 6.38 percent in September 2007.
Yun said there may be market disruptions. “The credit markets are not settled yet, although the mortgage market stabilized with the government takeover of Fannie Mae and Freddie Mac. Inventory remains high, and price declines are pressuring owners,” he said. “Additional housing stimulus would stabilize prices more quickly, which in turn would bring faster stability to Wall Street. Removing the repayment feature on the first-time buyer tax credit and permanently raising loan limits would bring more buyers into the market and further reduce inventory.”
Total housing inventory at the end of September fell 1.6 percent to 4.27 million existing homes available for sale, which represents a 9.9-month supply² at the current sales pace, down from a 10.6-month supply in August. This marks two consecutive monthly declines since inventories peaked in July.
The national median existing-home price3 for all housing types was $191,600 in September, down 9.0 percent from a year ago when the median was $210,500. “Compared to a fairly small share of foreclosures or short sales a year ago, distressed sales are currently 35 to 40 percent of transactions. These are pulling the median price down because many are being sold at discounted prices,” Yun explained. “The current market is not being dominated by speculative investors. Rather, 80 percent of current buyers are purchasing a primary residence, which is a bit higher than historic norms.”
Single-family home sales increased 6.2 percent to a seasonally adjusted annual rate of 4.62 million in September from a pace of 4.35 million in August, and are 3.8 percent above the 4.45 million-unit level a year ago. The median existing single-family home price was $190,600 in September, which is 8.6 percent below September 2007.
Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 560,000 units in September, but are 15.7 percent below the 664,000-unit pace in September 2007. The median existing condo price4 was $199,400 in September, down 10.2 percent from a year ago.
Regionally, existing-home sales in the West jumped 16.8 percent to an annual rate of 1.25 million in September, and are 34.4 percent higher than September 2007. The median price in the West was $253,600, down 18.5 percent from a year ago.
In the Midwest, existing-home sales increased 4.4 percent to an annual pace of 1.19 million in September, but are 2.5 percent below a year ago. The median price in the Midwest was $152,500, which is 7.9 percent lower than September 2007.
Existing-home sales in the South rose 2.2 percent in September to a pace of 1.90 million but remain 7.8 percent below September 2007. The median price in the South was $167,200, down 4.1 percent from a year ago.
In the Northeast, existing-home sales slipped 1.2 percent to an annual pace of 840,000 in September, and are 7.7 percent lower than a year ago. The median price in the Northeast was $246,800, down 5.4 percent from September 2007.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
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NOTE: References to performance in states or metro areas are from unpublished raw data used to analyze regional trends; please contact your local association of Realtors® for more information.
¹The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
²Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases.
³The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
4Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for October will be released November 24, and the next Pending Home Sales Index & Forecast is scheduled for release at 11:30 a.m. EST November 7 at NAR’s annual convention in Orlando, Fla.
Reprinted from REALTOR® Magazine October, 2008(http://www.realtor.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS ®. Copyright 2008. All rights reserved.”