Archive for May, 2011
The following article was published in the NY Times today. It refers to the real estate market in general. Does the same apply to the Vail Valley? We have seen prices drop 30-40% in the Valley, with some neighborhoods less and others more. My analysis shows that in Beaver Creek and Bachelor Gulch prices seem to have stabilized. On the Valley floor, prices in Wildridge have dropped significantly but may have bottomed out. Homestead hasn’t dropped as far as Wildridge but prices are still dropping.
We didn’t suffer with the overbuilt conditions other communities faced (except in Eagle Ranch) but have seen our construction market devastated resulting in high unemployment and a significant number of distressed properties. It will be interesting to see what the local buying season brings to the Valley. Under contract properties in May were not impressive, a poor start to summer.
Published: May 31, 2011, NY Times
Housing prices fell in March to their lowest point since the downturn began, erasing the last little bit of recovery from the depths plumbed two years ago, according to data released Tuesday.
The Standard & Poor’s Case-Shiller Home Price Index for 20 large cities fell 0.8 percent from February, the eighth drop in a row. Prices are now down 33.1 percent from the July 2006 peak.
“Home prices continue on their downward spiral with no relief in sight,” said David M. Blitzer, chairman of the S.& P. index committee.
Housing is in persistent trouble, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.
The desire to own your own home, long a bedrock of the American Dream, is fast becoming a casualty of the worst housing downturn since the Great Depression.
Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.
“The emotional scars left by the collapse are changing the American psyche,” said Pete Flint, chief executive of the housing Web site Trulia. “There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own.”
Trulia, a real estate search engine for buyers and renters that is based here, is a hive of renters, including Mr. Flint. “I’m in no rush at all to buy,” he said. He expects homeownership to decline further to about 63 percent, a level the country first achieved in the mid-1960s.
The new Case-Shiller data did not offer much room for short-term optimism. The national housing index, which is reported quarterly, fell 4.2 percent in the first quarter after a drop of 3.6 percent in the fourth quarter of 2010. This, too, is a new recession low.
Twelve of the 20 cities in the index hit a new recession low in March. Washington was the only city where prices rose both in March and over the last year.
Years of declines are teaching potential buyers to expect more of the same. Tim Hebb, a Los Angeles systems engineer, expertly called the real estate bubble. He sold his bungalow in August 2006, then leased it back for a year. Since then, the 61-year-old single father has rented a succession of apartments.
“I have flirted with buying again many times over the past few years,” said Mr. Hebb. “Let’s face it, people are not rational creatures.”
But he always resists, figuring housing is still overpriced and even when it stops declining it will stumble along the bottom for years and years. He says there is plenty of time to get back in if he should ever want to.
Housing prices are now back to where they were in mid-2002. Such a decline was literally unimaginable to the boosters and many of the analysts in the middle of the boom, who were fond of saying that house prices never fell on a national basis.
But as credit dried up and the easy refinances disappeared, the foreclosures began. Prices fell sharply in late 2006, 2007 and 2008.
The market turned around in 2009, prompting hopes that the worst was over. A government tax credit proved wildly popular but after it expired a year ago the declines resumed.
When demand will naturally reignite to stabilize the market is a matter of debate. Most economists have been saying that they think the price declines will level off in the second half of this year, although a few think they will continue until 2012. What no one seems to anticipate is any sort of a brisk recovery. Instead they see a muddling along until the foreclosure crisis diminishes and the excess housing supply is soaked up.
The financial blog Calculated Risk estimated the excess housing supply this week using 2010 Census data, which it compared to 1990 and 2000. The blog concluded that the excess supply in April 2010 was about 1.8 million units but probably several hundred thousand fewer now.
Foreclosure activity in the Valley seems to have leveled off according to the statistics from the Eagle County Assessor.
The graph below shows the total number of foreclosures filed in Eagle County on an annual basis since 2005.
The graph below shows foreclosure sales in Eagle County.
All of these statistics are from the Eagle County Assessor. I took the liberty of projecting both filings and sales through the end of 2011 based on the current rate through 5/17/11.
Sales are up this year but filings are down which should translate to fewer foreclosure sales in the future.
Does this mean fewer homeowners in the Valley are in distressed properties? Not necessarily. This could simply mean that lenders are more actively pursuing short sales rather than foreclosures. Short sales cost lenders less than foreclosures.
There are still many distressed properties on the market. Until employment picks up and the number of listings comes down, I think we will continue to see a high level of foreclosures and short sales.
The latest real estate news in the Valley is the foreclosure notice for the Ritz-Carlton in Bachelor Gulch and the new Haymeadow project in Eagle which was recently submitted to the town. We are also seeing fewer foreclosures. Details are included in my market update. Click on the link below to take a look.
Prices seem to have stabilized and sales are slowly increasing. We’ve had 5 condo sales this year versus 3 last year at this time.
Click on the links below to view the May market update and the current BG condo and townhome listings and 2011 sales.
The following stories are courtesy of The Eagle County Times. Thanks for your thorough research on this issue.
May 22, 2011 by eaglecountytimes
by – Casino Royale
It seems there is more Poker than Golf being played in Cordillera these days.
One of the current players – local Alpine Bank wants out of the game. With their Golf Course backed loan to the Wilhelm Family Trust outstanding for $12.7 Million – Alpine has chosen to go the route of New York based – Mission Capital Advisors to exit their Cordillera Golf investment. Mission Capital has been hired to sell that Note – at auction next month – presumably at a minimum number/bid agreeable to Alpine Bank. That Note by the way is due in its entirety – no later than June 2012.
Here’s what you’re not being told in the Casino.
The (Golf) Club at Cordillera has a massive financial legal obligation to several hundred current members. Back in the day…Cordillera Golf memberships where selling for as much as $115,000.00 Initiation Fee with an annual dues of $9,750.00 The contracted deal at the time was – that 80% of the $115k was refundable when a member left the club and a new member came in – and paid his/her $115k. (Click Here) No doubt Mr. Bernie Madoff would describe this arrangement as perfectly workable – as long as there was someone new, standing in line, anxious to hand over his/her $115k for a new Cordillera Golf membership. Therein lies the Rub…That legal agreement to pay back 80% of the Initiation fee is still on the books – and the ECT folks have been told that obligation is in the range of $50-$100Million!
The big unanswered question. What is the real value, in today’s market for the Cordillera Golf Course complex, when that legal entity has an outstanding debt in the $50-100 Million range? Nobody is standing in line these days, to pay to get in – however there is a growing line of current Cordillera members – that want out – just like Alpine Bank.
The interesting question at the ‘Poker table’… Having pointed out above is – who would reasonably want bid on the $12.7 million dollar Note – soon to be offered at a Mission Capital Auction?
The logical answer: The two effected parties, Wilhelm who owes the current Note to Alpine and the current property owners/golf members of Cordillera. It is reasonable to expect Wilhelm will bid (via a 3rd party?) in order for the chance at lowering his $12.7 Million obligation to Alpine Bank. It is also reasonable to expect the Cordillera homeowners would bid to preserve, protect, maintain and control the quality of their 4 golf courses and associated buildings.
None of the real Cordillera insiders will say one word about that today…a clear indication the games afoot. And a high stakes ‘Poker’ game it is.
A Third Party bid, at Auction? Possibly yes, but only if said 3rd party is prepared to navigate through the Court system; Goal being to have the $50-100 Million long-term obligation expunged via a (bankruptcy/foreclosure?) in the years to come. Now add in the additional costs to that bidder – who would have to pay for annual golf course repair and maintenance – in access – of whatever operational costs – aren’t covered by the annual dues from the shrinking number of Cordillera Golf memberships. A 3rd party bid like this? Possibly, in the ECT’s assessment – but a long shot for sure.
How to Bid at the ‘Poker table’? ECT not sure this is legal or if a bid like this would be accepted by Mission Capital…
Hypothetical: Why not a bid (Cordillera homeowners?) that reads – “our bid is whatever the highest bid is plus $1,000.00 – not to exceed $12.7 Million dollars”?
If Mission and Alpine Bank accepted something like that – Wilhelm would then owe the (Cordillera homeowners?) the (presumably less than $12.7 Million dollars) still due in June 2012. If the Cordillera homeowners weren’t paid back their (now less than $12.7 million Note) by June 2012 – in theory – the Homeowners could then force a Foreclosure and possibly get their Club now owned by Wilhelm.
A big Poker play indeed. We’ll all know more very soon.
by Paul Drake and Della Street
Wednesday, May 25th 2011 – Now that the Wilhelm/Cordillera lawsuit has been filed at the Eagle County Courthouse – it is a matter of Public Record.
Interested parties can read/download a copy of that legal document by (Clicking Here)
The case number is 2011CV456 and the Judge assigned to the case is District Court Judge – Frederick Gannett
Bank auctioning $12.7M loan for Club at Cordillera
By Randy Wyrick
CORDILLERA — Alpine Bank is getting out of the Club at Cordillera controversy.
The regional bank has hired a New York City firm, Mission Capital Advisors, to auction its $12.7 million loan with David Wilhelm and the Wilhelm Family Trust, which acquired the Club at Cordillera in 2009.
This will be the sixth loan Mission Capital will have auctioned for Alpine Bank.
Maybe Alpine Bank will get the entire amount, and maybe it won’t, said Mission Capital staffers who asked not to be identified. Those Mission Capital officials said they’ve sold loans for 5 cents on the dollar, 100 cents on the dollar and everything between.
The loan is categorized as “performing” in the offering memo. That means the Wilhelms are making the payments.
But that may not last. Several Cordillera property owners and club members have said they’re leaving the club, and several others already have. Annual dues are $13,800.
“It was a fairly complex deliberation that led us to this conclusion,” said Glen Davis, of Alpine Bank.
The Wilhelms have paid down the loan by $1 million to $12.7 million. They got the loan on June 26, 2009, and it’s due June 26, 2012.
Bidding opens Tuesday. The whole deal closes June 17, according to the offering memo.
When the loan is sold, the Wilhelms will still own Cordillera, but they’ll be in debt to someone new.
Owners not tipping their hand
Cordillera property owners remain optimistic but declined to say whether they’ll be bidding, said Bob Vanourek, of the Cordillera Transition Corp.
“We are very optimistic about the future of Cordillera regardless of who owns the note,” Vanourek said. “It’s an extraordinary place. We’re going through some difficult times right now, but that doesn’t change what’s wonderful about it. We’re doing our best to find a good solution for all the stakeholders.”
Wilhelm and Club at Cordillera officials did not comment Thursday.
Mission Capital’s appraisal puts Cordillera’s value at $50 million. That includes four golf courses and the club facilities.
“This deal trades like any other bank debt. It just happens to have some spectacularly beautiful collateral,” said a Mission Capital official handling the sale.
Mission has handled more than $26 billion in loan sales since 2002. The firm values and markets loans that either are not performing or are distressed and then puts them up for auction.
Cordillera cash clash continues
The loan sale is the latest chapter in the saga between Club at Cordillera owner David Wilhelm and some of the club members.
Last year, Wilhelm said in a letter to members that the club was running millions in the red and that he’d do whatever was necessary to protect the Cordillera brand and make his business profitable. His cost-cutting options included closing one or two of Cordillera’s four courses and allowing public play.
The $12.7 million loan from Alpine Bank is a small piece of Cordillera’s debt load.
When Wilhelm took on the club, he also took on more than $100 million in obligations to some of Cordillera’s original members and investors, according to the Cordillera Transition Corp., a group of Cordillera property owners.
The Cordillera Transition Corp.’s accounting review says the Club at Cordillera lost approximately $10.7 million between June 2009 and October 2010.
“We completely underestimated the magnitude and negative effects of the economic recession,” Wilhelm said in a letter to Club at Cordillera members. n, the memo says, bringing it from $13.7.
By Rob Reuteman, CNBC.com
The buyers’ market for vacation homes is likely to continue for years, with activity largely limited to buyers with enough cash to circumvent a tighter, post-recession lending environment.
Thirty-six percent of all vacation-home buyers in 2010 did not use a mortgage — versus 29 percent the year before — while more than half of them financed less that 70 percent of the purchase price, according to the National Association of Realtors. Of those who bought a second home as a rental investment, 59 percent paid cash.
“Mortgage lending in the past three years has been pretty rough, with much higher underwriting standards,” says Paul Bishop, NAR’s vice president for research. “People drawn into the market at this point are buyers with substantial cash, or people not dealing with a mortgage. If your credit is strong and you put down a sizeable down payment, lenders are more interested.”
Vacation homes remain the hardest-hit sector of the U.S. real estate market. Sales fell 1.8 percent to 543,000 in 2010, according to the NAR’s 2011 Investment and Vacation Home Buyers Survey. The median price was $150,000 in 2010, down 11.2 percent from $169,000 in 2009.
By Ruth Mantell
WASHINGTON (MarketWatch) — The average rate on the 30-year fixed-rate mortgage declined to 4.71% in the week ending May 5, hitting the lowest level since January, down from 4.78% in the prior week, according to a survey released Thursday by Freddie Mac, a buyer of residential mortgages. Last year, the rate was at 5.00%. To obtain the latest rate, payment of an average 0.7 point was required. A point is 1% of the mortgage amount, charged in prepaid interest. “Weaker economic data reports reduced Treasury bond yields and allowed mortgage rates to drift lower for the third consecutive week,” said Frank Nothaft, chief economist at Freddie Mac, in a statement. The rate for 15-year fixed-rate mortgages averaged 3.89% in the latest week, down from 3.97% in the prior week. The rate on the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.47%, down from 3.51%. The 1-year Treasury-indexed ARM averaged 3.14%, down from 3.15%.
Note from TMN: This is good news although I expect rates to rise at QE2 ends this summer. Our current problem is not the rates themselves but the underwriter guidelines which continue to be very strict. We certainly needed some correction in the guidelines but the pendulum swung so far that it is nearly impossible even for well qualified buyers to find financing. We need a little more common sense from the lenders to revive the housing market.
Earlier this week the developers of the Haymeadow residential project submitted their proposal to the Town of Eagle for review. While the project will undergo significant changes as it progresses through the planning process, the facts as submitted are:
- The Haymeadow parcel is 660 acres.
- The proposed density of the Haymeadow project is 979 homes or about 1.5 homes per acre.
- Approximately 60% of the parcel will remain open space.
- The project will be phased with three specific neighborhoods. Neighborhood A, which includes around 400 units, would be the first phase of development because it is located closest to town. It is also the most dense part of the proposal.
- It is expected it will take at least 20 years to build out the project.
The property is adjacent to the Eagle Pool and Ice Rink site southeast of town. Annexation petitions have also been submitted and in the weeks and months ahead, the project will be examined by the Eagle Planning and Zoning Commission, and ultimately the Eagle Town Board.
Many questions will have to be answered before moving forward with this project, including:
- Will the local real estate market support a project of this size, even if it doesn’t start for several years? The Eagle market is being driven downward by bank owned properties and short sales. Most builders believe it is cheaper to buy than build. How long will it take for that to change?
- Will the Eagle infrastructure support this project, including water and sewer services?
- How will Eagle resolve the significant traffic issues that already exist on Eby Creek Road and how will this project contribute to those solutions?
- How will this project impact wildlife movements across the parcel?
- I will be personally impacted by this project. I live on Brush Creek Road and would like to see traffic diverted from Brush Creek Road to the main road through this subdivision.
As a real estate broker, in general I support new residential projects throughout the Valley. 86% of the County is federally owned land so what land we have to build on should be utilized in the most efficient manner that fits with the community needs. I’ll need to look more closely at the details of this proposal as it moves forward through the review process.
My guess is that this project will ultimately be placed in front of the Eagle voters as Eagle River Station was. Even as controversial as ERS was, this project stands to polarized voters even more as this parcel is not located between a freeway and a highway and is much more picturesque. It will be an interesting process. Stay tuned.
Last week the lender that holds a $61 million note on the Ritz-Carlton building in Bachelor Gulch filed a foreclosure notice. The details are:
- Notice filed on 4/27/11
- Currently scheduled sale date is 8/24/11
- The original outstanding balance was $61 million
- The outstanding principal balance is $61 million
- The lender is Lehman Brothers Holdings Inc., Doing Business as Lehman Capital, a Division of Lehman Brothers Holdings Inc.
- The grantor is Bachelor Gulch Properties, L.L.C.
Doing a little digging, Bachelor Gulch Properties, L.L.C. is part of the Gencom Group, headquartered in Miami. From the Gencom website; “Founded in 1987 by Karim Alibhai, Gencom Group is one of the nation’s leading domestic and international investment and development firms specializing in the hospitality and residential real estate sectors.”
Don’t confuse the owner of the building with the management company of the hotel, which is Ritz-Carlton. Gencom owns the real estate and has a management contract with Ritz-Carlton to operate the hotel.
Personally, I don’t see this proceeding to a sale in August. This could be a move by Gencom to restructure their financing. I don’t see this having any impact on property values in Bachelor Gulch or skiing in Bachelor Gulch next season. Whatever does happen, it will be interesting to watch.