In Miami, Using the South American Playbook

Published: December 6, 2012


OUTSIDE the United States, many real estate developers have less of an appetite for risk than their counterparts here.

In South America, for instance, developers typically ask buyers to pony up a big chunk of the total price of an apartment in a new development long before it’s finished.

So South Americans pay huge installments — often 50 percent or more of the cost of the unit by the time the building is completed. It’s a system that most Americans, accustomed to financing at least 80 percent of a property with a bank loan, would consider unworkable.

I remember being shocked to learn from the owner of the apartment I rented in São Paulo, Brazil, where I lived as a foreign correspondent, about the schedule of huge payments — totaling 57 percent — he had had to deliver to the developer as the condo building went up. It was all nonrefundable, he told me.

But what if something went wrong, I asked him, like the developer going bankrupt? Or if the economy suddenly exploded into crisis, which is certainly not unheard of in South America?

He just shrugged. That’s simply how things are done down south, where interest rates are much higher, and where historically high inflation made financing riskier and more expensive than in the United States. The practice is especially common in Brazil and Argentina, but also in smaller countries like Uruguay, where Donald Trump has a licensing agreement for a new residential tower in the beach resort of Punta del Este that will require down payments of 40 percent from buyers before construction begins.

That perspective offers a different lens on the risks that developers are taking in Miami’s recent condo boomlet.

The Miami of today is not the Miami of 2004, when property prices were still rising in large part on a wave of speculation, with buyers putting down, at most, 20 percent and then flipping properties before construction was done.

This is post-bubble Miami, where banks are still skittish about backing new condo projects.

So Miami developers have taken a page from the South American playbook — a handy strategy, given how many willing buyers are flocking to Miami from that continent. Developers of several condos downtown and at the beach are requiring initial deposits of 40 percent or more, and more as they get closer to completion. By the time the building is finished, buyers are forking over as much as 80 percent of the total price of their apartments.

“Essentially, the buyers are helping developers build their buildings,” said Ann Nortmann, senior project director for Palau at Sunset Harbor, a 50-unit development planned for South Beach that requires a total deposit of only 40 percent because the developer, SMG Management, expects more American buyers.

Jorge M. Pérez, chairman of the Related Group of Florida and a chief architect of the new strategy, defends it as necessary to get developments off the ground, and to prevent speculators from flocking back to Miami, hoping to flip apartments as they did in the old days.

“Financing died during the recession,” Mr. Pérez said. “We all were awakened by the things that happened. We said, ‘If we don’t have the buyers that will pay for the majority of the price in the building upfront, then we don’t want to take the chance of building these buildings.’ ”

Related has employed the financing strategy in three buildings now under construction in South Florida (Apogee Beach, MyBrickell and Millecento) and in three others where sales, but not construction, have started (Beachwalk, Icon Bay and One Ocean). A 3,200-square-foot penthouse at One Ocean is listed for $8.5 million.

For all six towers, Related is requiring buyers to pay 40 percent by the time construction begins, and even more during construction. By the time they move in, buyers will have paid 50 percent to 80 percent of the total apartment price.

The strategy isn’t exactly keeping buyers away. MyBrickell and Millecento, both in downtown Miami, have all their units under contract, while Apogee Beach has only two apartments out of 49 still available, according to a Related spokeswoman.

The True Meaning of Hanukkah


Published: December 7, 2012

WHEN my brother was in kindergarten, where he was the only Jewish student, a parent organizing enrichment activities asked my mother to tell the class the story of Hanukkah. My mother obligingly brought in a picture book and began to read about foreign conquerors who were not letting Jews in ancient Israel worship freely, even defiling their temple, until a scrappy group led by the Maccabee family overthrew one of the most powerful armies in the world and won their liberty.

The woman was horrified.

The Hanukkah story, she interrupted, was not about war. It was about the miracle of an oil lamp that burned for eight days without replenishing. She urged my mother to close the book. My mother refused.

The woman wasn’t alone. Many Americans, Jews as well as Christians, think that the legend of the long-lasting oil is the root of Hanukkah’s commemoration. And perhaps that mistake is no surprise, given that for many the holiday has morphed into “Christmas for Jews,” echoing the message of peace on earth accompanied by gift giving. In doing so, the holiday’s own message of Jewish survival and faith has been diluted.

Hanukkah is one of the most widely celebrated Jewish holidays in America. But unlike Rosh Hashana, Yom Kippur and Passover (or even the lesser-known Sukkot and Shavuot), all of which are explicitly mentioned in the Torah, Hanukkah gets only a brief, sketchy reference in the Talmud, the voluminous collection of Jewish oral law and tradition written down hundreds of years after the Maccabees’ revolt.

There for the first time the miracle of the oil is recorded: the ancient temple in Jerusalem held an eternal flame, but after the desecration by the foreign invaders — including the sacrificing of pigs, a non-kosher animal, on the altar — only one day’s worth of purified oil remained. Yet the faithful went ahead and lighted it.

The oil burned in the rededicated temple for eight days, long enough for a new supply to arrive. Hence the practice of lighting candles for eight nights to observe Hanukkah, which means dedication in Hebrew. (Perhaps just as significantly, the reference to oil also gave rise to a holiday tradition of eating foods like potato pancakes and doughnuts that had been cooked in it.)

Though Hanukkah is a minor Jewish holiday, 19th-century activists in America promoted it to encourage their coreligionists to take pride in their heritage. During the 20th century it was embraced more broadly by Jews who wanted to fit in with other Americans celebrating the holiday season — and to make their kids feel better about not getting anything from Santa.

It helped, of course, that Hanukkah falls near Christmas on the calendar and traditionally involved candles and small monetary gifts. Over time, children began receiving grander presents, and Hanukkah-themed season’s greeting cards proliferated. Some families even started to purchase “Hanukkah bushes,” small trees often decked out with Stars of David and miniature Maccabees.

By the 1980s, when I was a child, menorahs had been placed next to mangers in the public square and Hanukkah songs had been incorporated into winter holiday concerts. Despite this recognition, I still felt excluded enough to brag to classmates that my holiday was better than Christmas, since it had eight days of gift giving, instead of one.

While elevating Hanukkah does a lot of good for children’s morale, ignoring or sanitizing its historical basis does a great disservice to the Jewish past and present.

The original miracle of Hanukkah was that a committed band of people led a successful uprising against a much larger force, paving the way for Jewish independence and perhaps keeping Judaism itself from disappearing. It’s an amazing story, resonant with America’s own founding, that offers powerful lessons about standing up for one’s convictions and challenging those in power.

Many believe the rabbis in the Talmud recounted the miracle of the light alongside the military victory because they did not want to glorify war. That in itself is an important teaching, as are the holiday’s related messages of renewal, hope and turning away from darkness.

But it’s a story with dark chapters as well, including the Maccabean leaders’ religious zealotry, forced conversions and deadly attacks on their neighbors. These transgressions need to be grappled with. And that is precisely what the most important Jewish holidays do: Jews on Passover spill out wine from their glasses to acknowledge Egyptian suffering caused by the 10 plagues, and congregations at Rosh Hashana read and struggle with God’s order to Abraham to bind his son Isaac as a sacrifice.

If we’re going to magnify Hanukkah, we should do so because it offers the deeper meaning and opportunity for introspection that the major Jewish holidays provide.

Hilary Leila Krieger is the Washington bureau chief for The Jerusalem Post.

Upshot of the Foreclosure Backlog


Published: December 6, 2012

FORECLOSURES are taking significantly longer in states where lenders must go through the courts, and the delay may or may not be good for borrowers, depending on their circumstances. But some researchers say that dragging the process out hurts society at large.

About half of the 50 states have judicial foreclosure systems. The housing market crash so bogged down the systems in New York and New Jersey that foreclosures there have routinely dragged on for two or three years; their timelines are among the longest in the country. The national average, which factors in nonjudicial states, is about one year, according to RealtyTrac, which monitors foreclosures nationwide.

The sluggish process has caused a backlog of loans in foreclosure and is slowing the housing market recovery in judicial states, says Michael Fratantoni, the vice president for research and economics at the Mortgage Bankers Association. As of the end of the third quarter, according to the association, 6.6 percent of all loans were in foreclosure in judicial states, compared with 2.4 percent in nonjudicial states.

A study released last summer by researchers at the Federal Reserve Banks in Boston and Atlanta found that the longer properties languish in delinquency or under a bank’s ownership, the greater the negative effect on the value of surrounding properties.

“The best outcome is to prevent the foreclosure,” said Paul S. Willen, an economist and policy adviser at the Boston Fed. “But if it’s clear that can’t be done, it’s in society’s interest to get the foreclosure done as soon as possible.”

In a separate study last year, Mr. Willen and his colleagues question the basis for giving borrowers more time to try to fix mortgage problems. The study found that avoiding foreclosure was no more likely for borrowers subject to either judicial foreclosure, or laws forcing lenders to wait 90 days before beginning foreclosure proceedings, than it was for other borrowers.

Consumer advocates agree that foreclosures are taking too long in some states. High concentrations of vacant properties have taken a heavy toll on certain neighborhoods, said Michael D. Calhoun, the president of the Center for Responsible Lending in Washington. “We agree that borrowers should be considered quickly for loan modifications,” he said. “They’re more successful if they’re done early on.”

But in his estimation, the delays aren’t a result of the protections provided to consumers under the judicial process, because the court process has worked fine in “normal times.” The problem now, he said, lies with the mortgage servicers. “We had a servicing system that was totally overwhelmed by the housing boom and even more so by the housing crash,” Mr. Calhoun said. “The backlog is due to servicer errors and lack of capacity.”

Communication gaps are also a factor, says Mark S. Cherry, a lawyer who represents borrowers in the state-sponsored foreclosure mediation program in New Jersey. His clients must sometimes return to mediation sessions five or six times before finally getting a loan modification. “Persistence breaks resistance,” he said.

Courts, too, have been overwhelmed. In New Jersey, a typical year brings about 24,000 residential foreclosure filings; in 2009 and 2010, annual filings surpassed 60,000.

The courts have since had time to adjust, especially because lenders have halted the processing of thousands of old cases while they work with federal regulators on improving their practices, said Kevin M. Wolfe, the assistant director of the Civil Practice Division of New Jersey’s Administrative Office of the Courts.

New foreclosure cases are moving much more quickly, and there is no backlog, Mr. Wolfe said. The average time for foreclosures filed this year is 6.4 months.

By the time lenders begin processing those old cases, the court should be far better prepared, he said, adding, “We’re not going to be caught up short this time.

Improving markets surge 60% in December

WASHINGTON – Dec. 7, 2012 – The number of housing markets considered “improving” in the National Association of Home Builders (NAHB)/First American Improving Markets Index (IMI) surged by 76 – to a total of 201 metros – in December. The number of states (plus the District of Columbia) represented by at least one metro increased from 38 to 44.

For the index to consider a city “improving” for the index, it must have shown growth from its respective trough in housing permits, employment and house prices for at least six consecutive months.

While the list grew by 76, a total of 84 new metros were added. The number was offset by eight cities that dropped off the list, though none were in Florida.

“The big gain in improving markets this December indicates that key measures of housing and economic strength have now been holding steady or improving in metros across the country for six months or more, which is an important signal of stability amidst the slowly emerging recovery,” says NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “The main thing that’s limiting progress … is difficulty that potential buyers continue to experience with overly tight mortgage qualifying standards.”

The index has improved for four consecutive months, and over half the cities are now “improving.”

“In general, we expect the overall housing recovery to continue expanding in 2013,” says NAHB Chief Economist David Crowe. “However, that is absent a major policy change of the kind that some policymakers have been discussing with regard to the mortgage interest deduction.”

The IMI measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas (MSAs). The three indicators are employment growth from the Bureau of Labor Statistics, housing price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. An MSA must improve in all three measures before it’s included on the improving markets list.

A complete list of all 201 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in December, is available at

© 2012 Florida Realtors®

Short Sales Outside Foreclosure

MIAMI – Dec. 7, 2012 – More Florida borrowers are short selling their homes without defaulting on their mortgages, a far-reaching change from days when stopping payments was the only sure-fire way to spur bank approval.

About 29 percent of all Florida home sales during late summer and early fall were short sales granted when the homeowner was not yet in foreclosure, according to a new RealtyTrac measure of non-distressed short sales. That’s an increase of 32 percent from the previous year.

In Palm Beach, Broward and Miami-Dade counties, 21 percent of sales were of properties where the owner was not in foreclosure, but owed more to the bank than the home was worth – a 49 percent annual increase. The difference between the sale price and unpaid mortgage balance in South Florida was an average of $106,712.

Daren Blomquist, RealtyTrac vice president, said this is a new trend that reflects recent federal changes that expand what can be considered a financial hardship and attempts to streamline the short sale process. It’s also likely that banks are more reluctant to file a foreclosure, hoping to avoid years-long foreclosure proceedings in court.

“We’re hearing a lot more about short sales happening outside of foreclosure,” Blomquist said. “Everyone is celebrating that foreclosures are down, which is good, but a lot of the reason for that is distressed homes are being disposed of further upstream.”

In a short sale the bank agrees to sell the home for less than what the owner owes on the mortgage.

The federal rule changes only affect loans backed by Fannie Mae and Freddie Mac, which announced the new guidelines during the summer. The rules didn’t take effect until Nov. 1.

Under the changes, borrowers who are current on their mortgage but suffer a hardship such as a death, divorce, or a job change requiring them to move more than 50 miles from their home can be qualified for a short sale by their loan servicers without additional approval from Fannie or Freddie.

“The bottom line is banks are trying to remedy the number of foreclosures any way they can,” said Realtor Dean Hooker of Pompano Beach-based Southeast Realty. “It’s taken them four years to get to this position.”

About 28 percent of all homes sold during the third quarter in Palm Beach County were properties in some stage of foreclosure, but the majority were sold through short sales rather than as bank-owned homes repossessed through foreclosure, according to a separate RealtyTrac report released this morning.

The 12 percent increase in distressed property short sales from the previous year and 28 percent jump from the second quarter was likely spurred by the National Mortgage Settlement and pending Dec. 31 sunset of the Mortgage Forgiveness Debt Relief Act, Blomquist said.

Joanne Epstein, a South Florida Realtor with the Keyes Company/Ragbir Team, said she has 18 short sales she’s trying to close before the end of the year when the act expires. If it isn’t extended, sellers will have to count the debt forgiven by the banks in a short sale as income – an expense that could cost tens of thousands of dollars depending on the tax bracket and amount forgiven.

Epstein is confident Congress will extend the act, even if the vote is taken next year and it’s made retroactive.

“They want people to be able to move on and our country to move on,” Epstein said.

Nationally, distressed short sales also outnumbered bank-owned sales, increasing 22 percent from last year to account for nearly 10 percent of all home purchases during the third quarter. The shift to more short sales is happening as “both lenders and at-risk homeowners realize that short sales are often a better alternative than foreclosure,” Blomquist said.

But it’s also a requirement under the $25 billion National Mortgage Settlement signed by the five largest banks in March.

More than $2.2 billion, or 63 percent, of Florida’s share of the settlement has come in the form of deficiency waivers for short sales. Nationwide, about 60 percent of the debt forgiven through Sept. 30 had been through short-sale deficiency waivers. Not all short sales are distressed sales

Short sale: Bank accepts less for the home than the borrower owes on the mortgage, but the homeowner has not had a foreclosure filed against them.

Distressed short sale: Homeowner has a foreclosure filed against them, but during the court process, a short sale is conducted.

Bank-owned sale: A final foreclosure judgment is awarded by the court. The home is repossessed by the bank then resold.

© 2012 The Palm Beach Post (West Palm Beach, Fla.), Kimberly Miller. Distributed by MCT Information Services

Home prices rise in Oct. by most in 6 years

WASHINGTON – Dec. 4, 2012 – A measure of U.S. home prices rose 6.3 percent in October compared with a year ago, the largest yearly gain since July 2006. The jump adds to signs of a comeback in the once-battered housing market.

CoreLogic also said Tuesday that prices declined 0.2 percent in October from September, the second drop after six straight monthly increases. The monthly figures are not seasonally adjusted. The real estate data provider says the decline reflects the end of the summer homebuying season.

Steady price increases are helping fuel a housing recovery. They encourage more homeowners to sell their homes. And they entice would-be buyers to purchase homes before prices rise further.

Home values are rising in more states and cities, according to the report. Prices increased in 45 states in October, up from 43 the previous month. The biggest increases were in Arizona, where prices rose 21.3 percent, and in Hawaii, where they were up 13.2 percent.

The five states where prices declined were: Illinois, Delaware, Rhode Island, New Jersey and Alabama.

In 100 large metro areas, only 17 reported price declines. That’s an improvement from September, when 21 reported declines.

Mortgage rates are near record lows, while rents in many cities are rising. That makes homebuying more affordable, pushing up demand.

And more people are looking to buy or rent a home after living with relatives or friends during and immediately after the Great Recession.

At the same time, the number of available homes is at the lowest level in 10 years, according to the National Association of Realtors. The combination of low inventory and rising demand pushes up prices.

Last week, an index measuring the number of Americans who signed contracts to buy homes in October jumped to the highest level in almost six years. That suggests sales of previously occupied homes will rise in the coming months.

Builders, meanwhile, are more optimistic that the recovery will endure. A measure of their confidence rose to the highest level in six and a half years last month. And builders broke ground on new homes and apartments at the fastest pace in more than four years in October.
Copyright © 2012 The Associated Press, Christopher S. Rugaber, AP economics writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

FHA extends flipping waiver through 2014

WASHINGTON – Dec. 4, 2012 – The Federal Housing Authority (FHA) has a rule that forbids “flipping” – executing a new sales contract for a home with an FHA-insured mortgage in 90 days or less.

However, FHA has waived that rule and allowed flipping since January 2010 as a way to boost sales during the housing slowdown. Since that time, the rule has been extended three times, including the most recent announcement yesterday.

By waiving the flipping rule, FHA hopes to encourage investors that specialize in acquiring and renovating properties. If investors upgrade the housing stock, FHA says, it will make more livable homes available for first-time buyers and others.

The waiver applies to all single-family properties being resold within the 90-day period after prior acquisition – it’s not limited to foreclosed properties. However, the waiver is subject to certain conditions, and mortgages must meet these conditions to be eligible for the waiver. The waiver isn’t applicable to mortgages insured under HUD’s Home Equity Conversion Mortgage (HECM) Program.

The Department of Housing and Urban Development announced the extension in the Federal Register, which is posted online.

© 2012 Florida Realtors®