Real Estate Investors Decry Four-Loan Limit

D.L. Bennett / The Atlanta Journal-Constitution

Atlanta-area real estate investors, like their counterparts around the country, say a new four-loan limit is keeping good buyers away from foreclosed properties — and could actually prolong the recession.

The new policy, which limits to four the number of real estate loans by one person that will be backed by mortgage giants Freddie Mac and Fannie Mae, has spread to most local and national lenders. Experienced investors, frustrated and angry, complain the limits prevent them from buying bargain homes and possibly helping resolve the mortgage crisis.

“How does it affect us? We’re paralyzed,” said Joe Ard, a Peachtree City investor who also runs Vestlet.com, a Web site that identifies properties for other investors. “I don’t need Big Brother watching me. I’ve got 19 houses. I’m making payments on them.”

The new policy, which went into effect Dec. 1, was designed to keep small-time investors from getting in over their heads and losing numerous rental properties to multiple foreclosures. The previous 10-loan limit was easier to get around, investors say.

The hard four-loan limit has no exceptions for income, credit status, assets or history of success as a real estate investor.

Ard says that restricts good investors — the most likely buyers for most foreclosures — from helping to turn around the foreclosure mess.

“The people who are going to pull us out of this are investors,” he said, “and we can’t help.”

Other Atlanta real estate investors agree the stricter rules will extend the current crisis by keeping foreclosures on the market longer and drive down home values.

“The four-house rule is going to keep us in a recession longer,” said Tom Hutchens, a Dunwoody mortgage broker and real estate investor. “It’s going to keep qualified buyers out of the market.”

Hutchens said three years ago he was making investor loans at 95 percent or more of the market value. At the same time, banks could not count the mortgage against the credit of the investor if he or she presented a contract to rent the property and cover the note. Those contracts were easily manufactured and not closely checked by loan officials, he said.

“I’m not going to say it was fraud,” Hutchens said, “but it was very loose.”

Banks now demand at least 20 percent down for investor loans, strict appraisals and are refusing to count up-front contracts as income to pay them off. They no longer allow cash-out refinances on the day of closing. Fannie Mae and Freddie Mac both now require at least a six-month wait before a reappraisal and refinancing to pull out cash.

Investors argue those reforms should be enough to ensure that loans go to quality investors.

They complain that limiting the number of loans keeps well-heeled investors — folks the government should be encouraging to buy houses during the downturn — from snapping up the bargain houses that are driving down values all over metro Atlanta.

John Adams, a real estate investor who owns dozens of homes and advises others through seminars, newsletters, a radio show, a Web site and a column in The Atlanta Journal-Constitution, said the limit has kept him from buying. He said he’s not willing to go to hard-money lenders or put up his own cash to buy houses.

“I’m sitting here as an observer,” said Adams. “I ought to be putting people to work.”

John Clark, an investor who lives in Dacula, said he’s trying to work around the limit by enticing private investors to put up money for house flips and rentals. Cash purchases aren’t covered by the rule.

Still, he’s unhappy about being unable to get a loan.

“If you are a full-time investor with good assets and documentation, ” Clark said, “you ought to be able to get a good loan. They have absolutely locked down the good group because of the bad. There are a lot of good investors out there.”

A Rush Into Refinancing as Mortgage Rates Fall

Last week, the Federal Reserve took actions to increase liquidity in the U.S. market by planning to buy $500 billion in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Mortgage rates dropped quickly, leading to a surge in refinancing activity.

The 30-year fixed-rate mortgage averaged 5.53% for the week ending Dec. 3, its lowest point since late January.

The 15-year fixed-rate mortgage averaged 5.33% this week, its lowest point since March.

Read A Rush Into Refinancing as Mortgage Rates Fall

Tokyo Replaces Shanghai as Top Asia City for Property

Kathleen Chu / Bloomberg

Tokyo overtook Shanghai as the best Asian city to buy real estate as investors seek less risky investments for 2009, a survey by the Urban Land Institute and PricewaterhouseCoopers LLP showed.

The Japanese capital has the best prospects and lowest risk among the 20 locations covered by the Emerging Trends survey. Singapore is in second place and Hong Kong is third, according to the ULI, a Washington-based research firm, and New York-based accounting firm PricewaterhouseCoopers.

Property values are tumbling in New York, London and Tokyo after the global credit crisis roiled lending and sidelined buyers. In Asia, markets with the strongest economies and highest levels of liquidity will be most attractive as investors show a flight to quality, according to Stephen Blank, a principal researcher at the ULI.

“Tokyo is a weaker market than last year, but clearly stronger than other global financial centers,” according to executives interviewed by the ULI.

Among executives surveyed, 40 percent recommended “hold” for properties in Tokyo, 32 percent suggested “buy” and the rest said “sell” for real estate in the city.

Shanghai fell to fifth in the survey because its risk rating was ranked 11th, the report showed.

The survey was based on interviews with executives at 60 property developers and investment companies. Property developers surveyed include Mitsui Fudosan Co., Japan's largest developer, and Hongkong Land Holdings Ltd. Funds that responded included Morgan Stanley Real Estate which manages $96.3 billion globally as of June 30, and RREEF Alternative Investments which manages about 59.7 billion euros ($76 billion) globally as of Sept. 30.

“Financing will be the single biggest issue facing the industry in 2009.” Blank said.

Real Estate Agents: Dubai Boom is Ending

Agents and industry insiders are expecting Dubai's property prices to crash amid collapsing sales and the global economic downturn. They say the six year boom that ignited a "$475 billion building frenzy" is over. Dubai was the first Gulf shiekdom to allow foreigners rights to buy homes and may be the first to see property prices tumble. The city's developers insist that sales are still strong, but shares of Emaar Properties, one of the area's biggest developers, have fallen 62% for the year (according to Zawya.com data).

Read Real Estate Agents: Dubai Boom is Ending

Read Dubai Property Giant Sacks 500 as Finance Crisis Bites

Read Has the Bubble Burst?

Shine Might be Wearing Off Manhattan Real Estate Market

Manhattan's residential real estate market may be losing some of its luster. Declines in the city's financial-services industry and the nation's credit crisis have started to affect one of the country's top real estate performers.

Adding to the problem on a global level is the declining euro. Foreign buyers are now more cautious, as the New York market has become less of a bargain for them.

Read Shine Might be Wearing Off Manhattan Real Estate Market

Best Places to Buy Foreclosed Homes

Earlier this year, Forbes magazine released its list of best cities to buy foreclosed homes. Forbes looked at the country's 100 largest metro areas and assigned rankings based on risk and price levels to determine where foreclosed properties might be a good investment. Their list includes Charlotte and Raleigh, NC, San Antonio, TX, and Seattle, Washington.

A comprehensive database of foreclosure and real estate owned properties can be found at RealtyTrac.

Read Best Places to Buy Foreclosed Homes

Bargain Buyers Drive up Home Sales

While the large number of foreclosed homes being dumped on the market has led to falling prices, some areas of the country are seeing huge reductions in the available supply of homes for sale. Sacramento and Orange County, CA dropped by 32 and 27 percent, respectively. Boston, Denver, and Los Angeles were all down 21 percent, and Dallas and Houston saw their number of homes for sale drop 14 percent.

"While the rise in home sales is promising, it might not be enough to turn the market around. Thousands of foreclosed and bank-owned homes are still being dumped on the retail market, continuing to drive down prices."

Read Bargain Buyers Drive up Home Sales Article

Panama: Boom or Bust?

The article below, “Tourism and Hotels Boom in Panama,” may provide an overly confident outlook for Panama’s real estate market. NuWire Investors “Panama: Boom or Bust?” delivers a more well-balanced analysis. While the author acknowledges Panama as a global hub for real estate, tourism and business development, he is equally quick to point out that “much of the investment in Panama was based on speculation (much like the now ailing South Florida market)." While banks around the world tighten their financing (and Panama is unable to loan to weak credit buyers as it once did), a correction for Panama City real estate can be expected in the time it takes for many of the projects currently under construction to be finished. Builders will only then know which buyers can cover their balances due. Longer term investors are expected to fare well with good levels of appreciation predicted. If the bubble for Panama’s market does bust, experts are saying it won’t be as bad as the United States. Panama did not have the excessive levels of creative financing and many of its real estate buyers put down a substantial amount of cash.

As both articles mention, infrastructure problems (strain on water and electricity, traffic and parking) will only worsen as the city grows. It is crucial that the government plan for the city’s needs; however, this has not been a priority in the past.

“Panama: Boom or Bust?” urges buyers to consider other areas of Panama that have not yet been overdeveloped and speculated. Resort areas including Coronado-Farallon, the Chiriqui coast and Pedasi are predicted to increase in value as they develop and become a greater draw for snowbirds and retirees. The prices of more well-known and established destinations like Bocas del Toro and Boquete are expected to peak in the short term.

While not the bargain it once was, Panama will continue to attract global buyers and seems well-sheltered from the threat of a severe real estate crash. Many of Panama’s areas are still cheap relative to parts of Mexico or Costa Rica, and are likely to gain value as they are developed. The success of the Panama real estate market is in large part dependent on the government’s ability to balance development and planning concerns.

Tourism and Hotels Boom in Panama

Doreen Hemlock / South Florida Sun-Sentinel

South Florida faces a rising rival in tourism: Panama.

Investors are pouring hundreds of millions of dollars into hotels into the small Central American country, which posted the fastest growth in international arrivals in the hemisphere last year: up 30 percent to 1.1 million.

Some now dub the tropical nation, long known for its canal and banks, the "new Miami" and hottest spot for new hotels outside the Middle East's Dubai.

Panama competes with South Florida largely for visitors from nearby South America and the Caribbean, including many interested in waterfront condo-hotel units. It also lures some U.S. travelers and retirees who like its use of the dollar and proximity, less than three hours' flight from Fort Lauderdale.

Florida companies are cashing in. The Seminole Tribe's Hard Rock International plans its first Latin American hotel in Panama. Miami-based Nikki Beach Hotels & Resorts plans an oceanfront resort and a city tower. Plus, Florida designers, architects and other service firms are working on projects in the tropical nation of 3.2 million residents.

Spurring growth are several factors: recent Panama incentives to encourage hotel investment; the $5 billion expansion of the Panama Canal; costs and taxes lower than South Florida; and increasing air and sea links for travelers.

Panama also is gaining from tough U.S. security rules after Sept. 11, 2001, which make it more cumbersome for foreigners to obtain U.S. visas and cross U.S. gateways."

A lot of our international customers refuse to come to the United States now because of the hassles. It's so much easier to get into other countries," said Gary Sims, president of Nikki Beach Hotels, which has no hotels planned to date in the U.S.

Just three years ago, few would have predicted that Panama would come on so strong in tourism. But a 2006 vote for a massive canal expansion and government incentives helped fuel a real estate boom, including luxury towers in the capital with condo-hotels.

Panama became so vibrant that hotels could not keep pace with demand, especially from business travelers.
City hotels that averaged $120 a night three years ago now run $170 a night or more. And occupancy at top-tier hotels jumped from less than 70 percent to roughly 85 percent, with rooms often full weekdays, said Rogerio Basso, a hospitality analyst at Ernst & Young in Miami.

At least 8,000 new hotel rooms are planned, most in shopping center-studded Panama City and on Playa Blanca beach on the Pacific coast. That's about 50 percent more rooms than Panama's current tally — or an increase equal to about one-fourth of all the hotel rooms now in Broward County.

Still, Panama remains relatively small in tourism. Even with double-digit growth again this year, it attracted fewer than 800,000 air and sea arrivals in the first half. That compares with more than 7 millionguests who stayed overnight in Broward County in the same period.

Panama also faces challenges to sustain its rapid growth. Roads and infrastructure lag, with traffic already a problem in the capital. New luxury hotels must focus on employee training. And analysts question whether the country can attract enough upscale guests to fill the many luxury hotels proposed, including the first Buddha-Bar Hotel & Spa in the Americas, linked with the Paris nightclub.

But hoteliers such as John Issa of Jamaica's all-inclusive chain SuperClubs, now opening his first Central American resort on Playa Blanca, see opportunity first.

"Panama is becoming a sort of crossroads" luring North, Central and South Americans and increasingly, Asians doing business in the hemisphere, Issa said. That's much like South Florida, which bills itself the gateway to the Americas.