February 2010

PORT AUTHORITY WANTS TO SELL WORLD TRADE CENTER BUILDING

The Port Authority of New York and New Jersey is looking for a "partner" in its quest to build a new World Trade Center complex in New York.

"As 1 World Trade Center continues to rise into the city skyline, the timing is right to determine whether there is a strategic partnership that can add long-term success into the building," announced Stephen Sigmund, the Port Authority's chief spokesman.

Late last year, the authority asked a small, exclusive group of commercial real estate property owners and developers to place bids for part-ownership of the project, according to New York Times reporter Charles Bagli. When completed, probably in 2013, the 105-story building will stand 1,776 feet tall, according to the patriotic plans. It is expected to be one of the most expensive commercial buildings in the United States. The authority is counting on the partner it chooses to market the project, not an easy task considering the current recession in commercial real estate the city is going through.

"There's a substantial amount of real estate equity capital looking for the right investment," said Michael Rotchford, executive vice president of Cushman & Wakefield, who is conducting the authority's search for the right partner. "We think this is potentially one of the best real estate investments available in New York."

HIGH 'WALK SCORES' BOOST HOME VALUES

A recently published study suggests a home's value is somewhat dependent upon how practical its neighborhood is for walking. The study was sponsored by CEOs for Cities, a Chicago-based nonprofit, which bills itself as "a national cross-sector network of urban leaders from civic, business and philanthropic sectors dedicated to building and sustaining the next
generation of great cities." It was written by Joe Cortright, president and chief economist of Impresa, Inc., a consulting firm out of Portland, Ore., that specializes in metropolitan economics.

"The walkability of cities translates directly into increases in home values," Cortright wrote in the report, entitled "Walking the Walk." "Homes located in more walkable neighborhoods, those with a mix of common daily shopping and social destinations within a short distance, command a price premium over otherwise similar homes in less walkable areas."

Homes at most metropolitan addresses in the United States have their walkability measured on the Web site Walkscore.com, with zero for an area where residents are totally vehicle-dependent and 100 where everything someone needs is within a short walk. The study compared the Walk Scores with sales figures of 90,000 homes in markets throughout the country before announcing its conclusion.

"After controlling for all other factors that are known to influence housing value, our study showed a positive correlation between walkability and housing prices in 13 of the 15 housing markets we studied," Cortright wrote. "In the typical market, an additional one point increase in Walk Score was associated with between a $500 and $3,000 increase in home values."

HOME OWNERSHIP RATE PREDICTED TO DECLINE

A study conducted by the Federal Reserve Bank of New York concluded with the prediction that the U.S homeownership rate will continue to drop. In a staff report, entitled "The Homeownership Gap," Federal Reserve economists Andrew Haughwout, Richard Peach and Joseph Tracy noted that the homeownership rate in this country reached an all-time high of 69% in the
third quarter of 2006 and dropped 1.7% over the next three years to 67.3%, which was the lowest it had been since the second quarter of 2000.

Increasing unemployment and foreclosures, combined with decreasing housing prices have led to this rate decline, the report said. The economists noted the higher percentage of negative-equity households, where more is owed on the mortgage than the home is worth, and said this trend will lead to less "household mobility," due to the fact that people in this situation "need to delay a move during the period they are rebuilding their savings." They site Census reports to point out that "the number of households moving is at its lowest point since 1962."

"The current severe house price cycle, combined with borrowers who had little or no equity at origination of their mortgages, has led to a dramatic rise in homeowners with negative equity," the report said in its conclusion. "This situation is likely to put downward pressure on future homeownership rates, and has potentially important implications for the maintenance of the
housing stock, the stability of neighborhoods, and future household saving behavior."

OVERVALUED MARKETS STUDY A REVERSAL OF FOUR YEARS AGO

Unlike its study four years ago, when it concluded most homes in the United States were undervalued, CNNMoney.com found the reverse to be true in its recently released report on overvalued and undervalued housing markets late last month. The study looked at 330 markets (metropolitan areas) in the United States and concluded that 242 of them are undervalued because it considered their homes to be priced less than fair market value. Only 87 markets were overvalued, according to the study.

In January 2006, CNNMoney.com's ranking of U.S. housing markets indicated that out of 299 markets studied, 213 were overpriced. Needless to say, a burst in the bubbled housing market has occurred since then.

Today, the two best-known cities for gambling in the United States are at opposite ends of the 330-market study. Atlantic City, N.J., is considered by the CNNMoney to be the most overvalued market (at 30.2% over fair market value), while Las Vegas (at 41.4% below fair market value) is considered to be the most undervalued. Following Atlantic City in the overpriced category are Wenachee, Wash. (28.9%) and Ocean City, N.J. (26.6%) Following Vegas in the bargain market territory are Vero Beach, Fla, (- 39.8%), Merced, Calif. (-37.7%) and Cape Coral, Fla. (-36.8%).

Les Christie, staff writer at CNNMoney, said that the ratings came from a combination of data on "Median home prices, local interest rates, population densities and income, plus historical premiums or discounts that areas have exhibited over time." The statistics came from National City Corp. and HIS Global Insight.

"I've done some research that shows when you get a bubble, you don't get a return to normalcy," said Richard DeKaser, who engineered the report for National City. "You go past normalcy for a long period of undervaluation."

ASK MARTITIA

QUESTION: Can an appraiser use the same appraisal report to communicate multiple, appraisal intended uses, along with a single value, and be in compliance with USPAP?

MARTITIA: Yes, as long as the intended uses are performed with the same scope of work and have the same type and definition of value. In order to be in compliance with the Uniform Standards of Professional Appraisal Practice, the appraiser must identify all of the intended uses of the appraisal
opinions and designated values in the appraisal report.

 

Martitia Mortimer, Elliott’s executive vice president, answers appraisal questions on a regular basis in Elliott Real Estate News.

QUOTES

"A baby is born with a need to be loved, and never outgrows it." –  Frank Howard Clark

"World War II was the last government program that really worked." – George Will

"May your walls know joy, may every room hold laughter, and every window open to great possibility."                                                                                                                                        – Mary Radmacher

"Always bear in mind that your own resolution to succeed is more important than anything else."
                                                                                                                                 – Abraham Lincoln

"It's the most unhappy people who most fear change." – Mignon McLaughlin
 

Newsletter Editor: kevin@elliottco.com
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