UPDATE: 820 Fifth Avenue

A couple of short weeks ago, Your Mama gave a thorough run down on all the ridiculously rich residents of 820 Fifth Avenue, one of New York City’s most exclusive apartment houses where the famously fussy and fearsome board has been known to reject purchase applications of big name and big money buyers like mono-monikered stitch bitch Valentino, bald billionaire Ron Perelman, casino tycoon Steve Wynn, oil heir Freddie Koch and pharmaceutical heiress Libbet Johnson who was reportedly cleared to purchase one apartment but nixed when she inquired about buying both the fourth and the fifth floors in order to create a monumentally massive duplex situation.

In our little discussion, Your Mama discussed the 4th floor spread currently owned by real estate magnate Ara Hovnanian and his abstract ar-teest wifey Rachel. According to New York City real estate tattler Max Abelson at the NY Observer, the Hovnanians recently and quietly floated their full floor apartment on the market with a heart stopping asking price of $36,000,000.

Shortly after Mister Abelson let the Hovnanian real estate cat out of the bag, Miss Beeswax whispered to Your Mama that the Hovnanians had already secured a contract to sell the apartment to an unknown buyer and all that remained to seal the deal was for the wannabe resident of 820 to pass muster with the iron-fisted board and more specifically with the 3rd floor resident, high society doyenne Jayne Wrightsman who is rumored to hold the keys of the Golden Kingdom at 820 even though she does not technically sit on the board.

This week, Mister Abelson came right out and identified the wannabe resident of 820 as 40-something year old real estate wunderkind Jeff Blau and his nutrition nut wifey Lisa. Mister Blau, the head honcho at the real estate juggernaut Related Companies, reportedly offered thirty one million smackers for the Hovnanian apartment but, according to one of Mister Abelson’s seemingly very well placed sources, before Mister Blau could write that big check he received word from the board that “it would not be appropriate to go forward with the application.” Oh, ouch. The market may be down but apparently the boards of New York’s most difficult to access buildings are going to maintain a stiff upper lip and adhere to their stringent (and arcane) standards for gaining entry. It’s a weird world ain’t it children?

Before anyone throws a real estate pity party for Mister and Missus Blau remember that just last year the deep pocketed pair forked over $21,000,000 for Scott Bommer’s full floor apartment at tony 1040 Fifth Avenue which is, of course, the same building Jackie-O called home for about a thousand years before her death.

Commercial Cataclysm?: Moody=?UTF-8?B?4oCZ?=s/REAL Commercial Property Price Index March 2009

The latest results of the Moody's/REAL Commercial Property Index strongly suggests that the nation's commercial real estate markets are now firmly experiencing a tremendous downturn with prices plummeting a whopping 20.79% on a year-over-year basis and 22.83% since the peak set in October 2007.

The Moody's/REAL CPPI data series is produced by the MIT/CRE but is noted to be "complimentary" to their alternative transaction based index (TBI) as it is published monthly and is formulated from a completely different dataset supplied by Real Capital Analytics, Inc.

Existing Home Sales Report: April 2009

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for April indicating that home sales are continuing to fall, despite the significant slide to median selling prices, record low interest rates and significant numbers of speculative sales of distressed properties in the western region.

Existing single family home sales were down 2.8% on a year-over-year basis while the median selling price declined a dramatic 14.9% over the same period.

More notably though, the Condos now seem to have fully tipped into the major decline phase with sales declining 9.4% on a year-over-year basis with median selling prices declining a whopping 18.5% over the same period.

The NAR leadership continues their shameless spin with their chief economist Lawrence Yun suggesting the Federal Reserve needs to subsidize extravagant home purchases by the most affluent in our society and in turn, bail out the Realtor industry.

"The Federal Reserve needs to help restore liquidity for the jumbo mortgage market by buying these loans under the TALF program."

The following (click for larger versions) are charts showing sales for single family homes, plotted monthly, for 2006, 2007, 2008 and 2009 as well as national existing home inventory and month supply.

Below is a chart consolidating all the year-over-year changes reported by NAR in their most recent report.

Your Home Is A Bad Investment

Many people believe their home is a good investment. Using Robert Kiyosaki’s definition of an investment as “something that puts money into your pocket,” it’s obvious it is not. Now the Wall Street Journal is reporting that, even by the conventional definition of investment, your home still may not be a good investment.

Using housing pricing data for the last twenty years in ten major cities, housing prices produced a real return of between 1.15% and 2.2% annually, after inflation. When you figure in maintenance costs, you could actually be losing money.

The article really only looks at property appreciation to determine the value of the investment. There is no mention of the income tax deduction for mortgage interest, which is usually quite substantial for most homeowners and probably would boost the return figure a couple of percentage points. Still, the gist of the article is correct - your primary residence is not an investment.

I subscribe to the “putting money in your pocket” definition of an investment. And while your personal residence may not be a good investment, that doesn’t mean real estate isn’t. As long as a property has positive cash flow, it’s a decent investment. How good of an investment, of course, depends on how good the cash flow is. Then, of course, there are the other factors, such as depreciation, the ability to defer taxes through 1031 exchanges, etc.

While I am glad the WSJ article points out that people’s primary residences are not generally good investments, I’m afraid some readers might come away from the article thinking all real estate is a bad investment.

UPDATE: Sheree Whitfield

Listen puppies, y’all know Your Mama does not like to dance on the real estate grave of anybody. However, sometimes we just can’t help it. Egotastic Atlanta Housewife Sheree Whitfield presented herself as an arrogant, selfish and myopic ladee who play-acted that she was richer, more stylish and possessed more class than all the other ladees on The Real Housewives of Atlanta. Pleeze. It wasn’t just the damn editing by Bravo’s cunning and crafty editors that made Miz She By Sheree look like a damn fool, beehawtcha didn’t display an ounce of humility on The Real Housewives of Atlanta reunion show neither and now, Miss High and Mighty result has been pushed off her pedestal.

First there were mad rumors hurtling down the gossip grapevine that she was bouncing checks for cakes and private investigators. Then, as Your Mama discussed in late December of 2008, egotastic Atlanta Housewife Miz She By Sheree Whitfield, listed her 8,903 square foot Sandy Springs, GA mansion with an asking price of $2,850,000.

The high price (and the bad juju Miz She By Sheree left behind) kept buyers away and eventually the asking price dipped to around $2,400,000 before it was ripped off the market and seized by the bank in foreclosure. That’s right children, Miz She By Sheree’s real estate pride and joy was taken by the bank. As we understand, Miz She By Sheree was actually booted from the Sandy Springs crib by her ex-huzband who was awarded the house in the dee-vorce. So technically, it was Mister Whitfield who allowed the house to go into foreclosure. This seems an odd choice for a rich man, but one probably designed to stick a stake into the heart of his ex-wife at the expense and comfort of his children.

Anyhoo, soon the bank-owned property on Long Island Drive in Suburban Atlanta was re-listed with an asking price of just $959,000. After only 9 days on the market, the house went to contract and sold for what listing information shows was $1,100,000. The children will note that Miz She By Sheree (or somebody) took the kitchen appliances when the premises were vacated.

Do we even want to know where Miz Thing has landed her 747 of an ego? We’re not sure our weak heart could handle the humiliation by proxy, but wouldn’t it just be dee-lishus if Miz She By Sheree was shacked up in NeNe’s basement? Oh lawhd, now that would be some damn fine poetic justice.

Portland 16th Best City for Fresh Starts

A new study rates Portland as the 16th Best City for Fresh Starts.

Relocation.com examined factors that "would appeal to someone looking for a fresh start: city ‘popularity’ based on consumer requests for moving quotes to move to that city; economic-growth prospects; home affordability; and the strength of a community as reflected by volunteerism rates."

Here are the top five cities:

1. Austin
2. Dallas
3. Charlotte
4. Denver
5. Columbus, Ohio
16. Portland

From the study:

Popular cities: Relocation.com’s moving request data was used to determine the cities that people want to move to, based on the per-capita number of quotes for moving services requested to particular communities in 2008 and year-to-date 2009. Although an influx of people can put pressure on local resources, these newcomers also bring new ideas, skills and outlooks that can spark economic development and strengthen communal ties. A ‘churn’ of newcomers is vital for a community.

Economic prospects: Forbes.com’s list of the Best Places for Businesses and Careers was used to determine the cities with the greatest job growth prospects over the next three years. The list was published in March 2009.

Affordable housing: Figures from the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index were used to determine the best housing opportunities. This report looks at more than 200 of the country’s largest metropolitan areas and determines the percentage of homes sold in the latest quarter that were affordable to the median average family in that area - the higher the percentage, the more affordable housing is to the greatest number of people.

High volunteerism rates: Relocation.com looked at volunteerism rates from the Corporation of National Community and Service, an independent federal agency whose board of directors and CEO are appointed by the president. Communities with high volunteerism rates tend to be stronger with lower crime rates, and greater volunteerism rates can mean less need for government spending on providing those services. It is healthier too: people who volunteer have lower mortality rates and lower rates of depression than the general population, according to the Corporation.

Reading Rates: MBA Application Survey – May 27 2009

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage increased 12 basis points since last week to 4.81% while the purchase application volume increased 1% and the refinance application volume dropped 18.86% compared to last week's results.

It's important to recognize that the Federal Reserve's "quantitative easing" measures have clearly pushed mortgage rates down spurring increased re-finance activity yet the rate reductions have yet to impact purchase activity, arguably the more important goal.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% "rule of thumb") on a $400,000 loan has changed since November 2006.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).

The following charts show the Purchase Index, Refinance Index and Market Composite Index since November 2006 (click for larger versions).