Home Sales Ahead of Last Year, Prices Stabilizing

August home sales reached a level 18 percent higher than August 2010. Traditionally, June is the highest sales month, but this year July and August were the two summer months that experienced higher sales than in 2010. In the August 2011 RE/MAX National Housing Report based on MLS data from 53 metropolitan areas, the inventory of homes-for-sale dropped for the 14th consecutive month, while total inventory remains almost 19 percent below the level in August 2010. And the Median Sales Price of homes sold in August, like July, was down fractionally, while the loss from last year’s prices continues to shrink.

The Median Sales Price for August was $189,831. This is just 0.6 percent below the price in July and 3.6 percent below the price in August 2010. Home prices have risen in 4 of the last 8 months, while on a year-over-year basis, the Median Price has improved for five consecutive months. Of the 53 metro areas reviewed for this report, 14 saw prices rise from July, and 10 saw prices rise over August 2010, including: Detroit +15.7 percent, Orlando +14.2 percent, Milwaukee, +10.6 percent and Pittsburgh, +2.2 percent.

Dallas-Based Investment Firms Form Hotel Venture

Downtown Dallas

Dallas-based hotel investment venture, GVM Hotel Partners (GVM), today announced the acquisition of five TownePlace Suites by Marriott, at a purchase price of $30 million. Four of the hotels are located in Texas markets (Austin, College Station and Houston) with the fifth in Birmingham, Alabama. GVM Hotel Partners is a joint venture among affiliates of Gatehouse Capital, Varro Hospitality and the Muse Family Office.

"This acquisition falls directly in line with the stated goals of our venture -- to purchase assets built in the last ten years in solid Texas growth markets at a discount to their current replacement and by changes in management and/or additional capital investment, produce good year one yields," said Marty Collins, of Gatehouse Capital. "We are hopeful this is the first of many deals, as we feel there is particular opportunity in the major growth markets of Texas within this segment of the hospitality industry."

This is the first acquisition by GVM, which was formed to acquire and manage a portfolio of financially distressed select-service, limited-service, and extended-stay premium-branded hotels. The venture builds on broad depths of experience in the investment, real estate and hospitality markets, while marking its initial entry into this particular segment of the hotel market.

"With the hospitality markets showing quicker rebounds in recessionary periods than most other classes of commercial real estate, we are excited about our growth possibilities and look forward to generating positive cash-flow for our investors," said Jeremy Robinson of Varro Hospitality.

Gatehouse Capital is an investor and provides specific investment strategies and oversight for this portfolio and the GVM venture. Gatehouse has developed a $1 billion portfolio of hotels including the W Hotels of Hollywood, Silicon Valley, San Diego and Dallas, as well as The Joule Hotel in Dallas, Hyatt Regency Resort and Marina in Mission Beach and Aloft Jacksonville Tapestry Park.

Varro Hospitality, a co-equity investor in the venture with their Opportunity Fund I, is a privately-held hotel investment company whose principals have broad experience in real estate and investments. Varro provides the underwriting, due diligence, asset management, re-development, administration and reporting for the GVM venture.

John Muse is the single largest investor and brings more than 30-years investment experience to the venture through his experience as co-founder and chairman of HM Capital.

The partners engaged Texas Western Management to operate these Marriott branded hotels, among others owned by Texas Western Hospitality and third parties.

"This portfolio of quality Marriott properties, in attractive markets at well below replacement cost, represents a compelling investment opportunity. We hope to drive growth in performance by having Texas Western manage these assets," said John Muse of the Muse Family Office.

Pending Home Sales Slip in July but Up Strongly From One Year Ago

Pending home sales declined in July but remain well above year-ago levels, according to the National Association of Realtors. All regions show monthly declines except for the West, which continues to show the highest level of sales contract activity.

The Pending Home Sales Index,  a forward-looking indicator based on contract signings, slipped 1.3 percent to 89.7 in July from 90.9 in June but is 14.4 percent above the 78.4 index in July 2010. The data reflects contracts but not closings.

Lawrence Yun, NAR chief economist, said sales activity is underperforming. “The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” he said. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.”

The PHSI in the Northeast declined 2.0 percent to 67.5 in July but is 9.7 percent above July 2010. In the Midwest the index slipped 0.8 percent to 79.1 in July but is 18.8 percent above a year ago. Pending home sales in the South fell 4.8 percent to an index of 94.4 but are 9.5 percent higher than July 2010. In the West the index rose 3.6 percent to 110.8 in July and is 20.6 percent above a year ago.

“Looking at pending home sales over a longer span, contract activity over the past three months is fairly comparable to the first three months of the year, and well above the low seen in April,” Yun said. “The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market.”

Fed Says Residential Real Estate Remains Weak

In its July Beige Book report, the Federal Reserve reports most residential real estate activity was little changed and remained weak, although construction and activity in the residential rental market continued to improve since the previous Beige Book.

For six Districts, activity in the nonresidential real estate market has improved slightly for specific submarkets, although conditions generally remained weak across all twelve Districts.

The Fed says since the last Beige Book, overall loan volumes have increased in three Districts, decreased in two Districts, and were relatively flat, often with mixed trends across the banks' portfolios, in five Districts. Credit quality was steady or improving.

Residential real estate sales in almost all Districts were little changed from the last Beige Book. Activity edged up in the Richmond, Atlanta, and Minneapolis Districts. Of the Districts reporting on home prices, most said that they were flat or declining. The Boston and Richmond Districts reported steady prices; the Philadelphia and Atlanta Districts reported that prices were steady to down slightly; and the Kansas City and New York Districts reported that prices were down. Increasing inventories of unsold homes in the Boston, New York, and Kansas City Districts have restrained building in the single-family housing sector. Residential construction activity overall was mixed, though it increased in the Minneapolis District. Since the previous Beige Book, construction and activity in the residential rental market have continued to improve in the New York, Chicago, Dallas, and San Francisco Districts.

Nonresidential real estate activity improved somewhat in the Boston, Philadelphia, Cleveland, Chicago, St. Louis, and Dallas Districts. The Chicago District reported strong demand for industrial facilities, particularly from the automotive sector. The Philadelphia District reported improvements in terms of lower vacancy rates for office space, industrial space, and apartments; the Chicago District reported generally lower vacancy rates. The New York, Richmond, Atlanta, Minneapolis, Kansas City, and San Francisco Districts all reported generally weak activity in nonresidential real estate. Construction in the Minneapolis District stalled in areas because of flooding and unavailability of state building inspectors due to the Minnesota state government shutdown. Health care and apartment construction was a bright spot for the Atlanta District. Activity was weak in the Kansas City District, but firms that supply construction materials reported increased sales and stable prices. San Francisco reported stable but high vacancy rates in many parts of the District.

March Toward Rentership Society Continues

Perhaps another sign of a shift in the federal government toward a rentership society comes with an announcement from Fannie Mae. The company announced that in the first half of 2011, it had issued $10.3 billion in MBS backed by new multifamily acquisitions.

"In today's economic environment, Fannie Mae continues to deliver liquidity to the multifamily housing market and provide investment options to market participants," said Kimberly Johnson, Fannie Mae Vice President for Multifamily Capital Markets. "Through our multifamily MBS issuance (including DUS MBS, GeMSTM structured transactions and portfolio activities), Fannie Mae provided market participants with considerable volume and a variety of execution options in the first half of 2011."

Beginning in 2009, Fannie Mae says it made reinvigoration of its multifamily MBS business and broadening the investor base a top priority. By ramping up its MBS execution and transforming the multifamily capital markets business, Fannie Mae has shifted from being primarily a multifamily portfolio market participant to one that provides liquidity to the multifamily market mainly through securitization.

Fannie Mae provides the largest share of U.S. multifamily mortgage financing, and traditionally has been a leader in this market.

Real Estate Council Welcomes New Dallas Mayor Mike Rawlings

Days after being elected as Dallas Mayor, Mike Rawlings met with members of The Real Estate Council for one of his first official events on June 21 at the Patton Boggs offices in downtown Dallas. The Real Estate Council endorsed Mayor Rawlings, who is committed to issues that the organization supports such as expanding the Dallas tax base by focusing economic development efforts on the underutilized Southern Sector, small business growth and large business relocations.

"I want Dallas to be the best town in America to do business," Rawlings said at the event. "We need to attract those businesses and recognize that Southern Dallas is a resource for our city. It is 60 percent of the land mass representing 15 percent of the population."

Mayor Rawlings also wants to work with the Dallas Independent School District (DISD) on the quality of public education. Although the mayor does not have control over the DISD, Rawlings intends to influence positive change and raise expectations of the educational standard in Dallas. He said he will also concentrate on The Trinity River Corridor Project, which he believes will impact Dallas for generations.