Triangle Area Ranks Number One in Housing Market Health

Raleigh News and Observer

The Triangle (Raleigh, Durham and Chapel Hill, NC) has received more affirmation that it is better-positioned than most regions to emerge quickly from this recession.

Hanley Wood Market Intelligence, a California research firm, has ranked the Raleigh-Cary real estate market first and the Durham-Chapel Hill market sixth on its list of the healthiest markets among the top 100 U.S. housing markets.

The rankings are based on home prices, employment conditions and income growth potential. This is the second Market Health report released by Hanley Wood. The first was published last year.

Jonathan Smoke, senior vice president of products and innovation at Hanley Wood, had this to say about Raleigh real estate:

'Based on end-2010 economic forecasts, we think Raleigh will be the healthiest of the largest 100 markets in the country. Raleigh comes out on top because of stronger employment conditions, moderate household income growth, and continued strong household formation. The market still is expected to see minor home price declines (approximately 3 percent decline expected for 2010 over 2009), which is one factor that keeps the market from being even stronger.'

An additional note, Fayetteville, Greensboro and Charlotte are all ranked in top 10 lists by Fortune, CNN/Money.com, Forbes and NAHB reports. 

Northeast Foods to Open New Plant in N.C.

Baltimore Sun

CLAYTON, N.C. - Northeast Foods, a Maryland company that bakes hamburger buns for McDonald's restaurants and other commercial customers, plans to open a new plant in North Carolina, creating about 80 jobs.

Gov. Beverly Perdue's office said Monday that taxpayers will contribute $350,000 to lure the company into spending $25 million on a new plant in Clayton.

The company says on its Web site that it's supplied burger buns to McDonald's fast food restaurants since 1965. The privately owned company has five plants along the East Coast from Connecticut to Virginia, including one on Commercial Avenue.

Perdue's office says wages at the Northeast Foods bakery south of Raleigh will top an average of $41,000 a year plus benefits, compared with the Johnston County's average of $31,000.

As Many as 1300 to Attend Biotech 2010

News Observer

 

Attendance at the state's annual biotechnology conference passed 1,000 people for the first time last year.

This week's 19th annual conference in Raleigh is expected to draw a bigger crowd, despite the down economy.

Sponsored by CED, the N.C. Biotechnology Center and others, Biotech 2010 will bring together corporate leaders, university researchers, investors and policymakers to discuss an industry that's become a foundation for this region's economy. North Carolina's biotech industry ranks third in the country, employing more than 58,000 people, with many of those in the Triangle.

The conference's speakers, including Allen Roses, a genetics expert at Duke University, and Talecris Biotherapeutics CEO Lawrence Stern, are only part of the allure.

Another attraction is the chance to network, mingle and make deals, say the conference's co-chairmen. Arthur Pappas, founder of a Durham venture-capital firm, and John Russell, a partner with the Research Triangle Park office of the K&L Gates law firm, discussed Biotech 2010 with staff writer Alan M. Wolf. Here are edited highlights of that conversation:

On what makes Biotech 2010 a draw:

For starters, CEOs and other successful executives who will discuss how to get deals done and attract financing during a downturn. And some of the region's top university researchers will show off new developments.

Investors and larger pharmaceutical companies can begin to identify promising startup companies or products. And smaller companies can connect with larger partners that can pay for further research and hiring.

"We need to bring people together and help businesses that need funding get through this tough time," Russell said.

One example is Roche, a Swiss drug company that will hold a private session where it will outline what types of investments it's seeking and what types of companies it's interested in buying, Pappas said.

"The [conference] programming is substantive and I'm proud of it," Russell said. "But over time, the social aspect of it and making contacts has become just as important."

On holding a conference during a recession:

Organizers started planning this year's conference shortly after last year's, Pappas said. And they initially worried about a drop in attendance. But local companies, law firms and venture capital firms stepped up as sponsors, and the conference is expected to draw about 1,300 people, he said.

The increase is another symbol of the biotech industry's importance to North Carolina and this region, Russell added. And it's a big change from its roots two decades ago "with 10 of us sitting around a card table drinking coffee out of paper cups."

On the industry's outlook for 2010:

Pappas and Russell are optimistic that this year will bring an uptick in financing activity for small medical companies. In addition, large pharmaceutical companies continue to seek promising products and smaller firms they can buy to bolster their business, Pappas said. That bodes well for a region like the Triangle, which is home to fledgling companies.

Another positive sign: As larger players like Glaxo SmithKline cut more jobs, some former employees will try to start their own companies.

"These cycles tend to produce more entrepreneurs coming out of large companies," Russell said. "We need to help find homes and Raleigh real estate for these people and get them busy with startup companies. That could be a powerful driver for this area."

On 2010's challenges:

Wall Street volatility could dampen investors' appetite for initial public offerings of stock. That traditionally has been a growth engine for the biotech industry.

That trend also could hurt the flow of venture capital, money that fuels most smaller companies' research and hiring.

"We have a backlog of promising drugs and medical devices that need funding," Russell said. "There is venture money that is looking for opportunity."

And unlike previous recessions, this region hasn't seen a huge increase in the number of business failures, Russell said. That makes the area more attractive to outside investors.

"I like to think it's because we're smarter, but it might be because we're lucky, too," he added.

Home Prices Recover in Some Metro Areas

The Wall Street Journal

Home prices rose in more than a third of U.S. metropolitan areas in the fourth quarter, the National Association of Realtors said Thursday as it pointed to a "broad stabilization" in values.

The median price for single-family home resales was up from a year earlier in 67 of the 151 U.S. metropolitan areas included in the trade group's quarterly survey. But other housing analysts say the home-price trend depends heavily on any recovery in the job market and on the pace of foreclosures.

The national median price for single-family homes was $172,900 in the fourth quarter, down 4.1% from a year earlier. That was the smallest decline in more than two years.

Among metro areas showing the biggest gains from a year earlier were Cleveland (25%), Akron, Ohio, (23%) and San Francisco (13%). Those increases don't denote a general surge in home values but rather show that sales of foreclosed homes at fire-sale prices made up a smaller percentage of overall sales than they did a year earlier.

Foreclosures dominated some markets a year ago. Nationwide, "distressed property," including foreclosures and homes at risk of foreclosure, accounted for 32% of fourth-quarter transactions, down from 37% a year earlier, the Realtors estimated.

Metro areas showing big price declines included Las Vegas and Ocala, Fla., (both down 23%) and Orlando (down 20%).

For condominiums, the median resale price in the quarter for 54 metro areas surveyed was $177,300, down 4.8% from a year earlier. Eleven of the metro areas showed higher condo prices, and the rest showed declines.

One major worry is that price drops have left many households without any equity in their homes. Homeowners who are "underwater"—owing more than the value of their homes—are more likely to abandon their houses if their incomes fall or they lose their jobs. That would create more foreclosures, weighing on home prices.

At the end of 2009, 21% of households with mortgages on single-family homes owed more than the current value of their homes, according to a new estimate from Zillow.com, a real-estate data provider.

State and federal efforts to avert or delay foreclosures by offering borrowers easier terms have created a huge backlog of unresolved cases, likely to lead to an eventual bulge in the supply of foreclosed homes. As of Dec. 31, about 3.9% of first-lien home mortgages were 120 days or more overdue but still not in the foreclosure process, according to LPS Applied Analytics. That represents about two million households.

January Foreclosures Up 15% Year-Over-Year

USA Today

The number of U.S. households facing foreclosure in January increased 15% from the same month last year, and a surge in cash-strapped homeowners who've fallen behind on mortgages could be on the way.

More than 315,000 households received a foreclosure-related notice in January, RealtyTrac reported Thursday. That number is down nearly 10% from 349,000 in December, which saw the third highest total since the company began tracking foreclosure data in 2005.

In January, one in 409 homes were sent a filing, which includes default notices, scheduled foreclosure auctions and bank repossessions. Banks repossessed more than 87,000 homes last month, down 5% from December but still up 31% from January 2009.

January marked the 11th straight month with more than 300,000 properties receiving a foreclosure filing. The numbers could stay above that level as unemployed homeowners who have tried to keep up with their mortgages finally start missing monthly payments.

Mortgage financier Fannie Mae reported in late January that the rate of borrowers who have a conventional loan on a house and are seriously delinquent was 5.29% in November, more than doubling the rate of 2.13% in November 2008. Borrowers are considered seriously delinquent if they are past due by three months or more, or are in foreclosure.

"There's a lot of foreclosures in the pipeline, and the number is going to continue to get bigger," said Patrick Newport, an economist with IHS Global Insight.

Last month's foreclosure activity followed a pattern similar to that of a year ago, when a double-digit percentage increase in December was followed by a 10% drop in January.

The dip in January's numbers may be due to processing delays by lenders during the end-of-year holidays, said Rick Sharga, senior vice president of RealtyTrac, which is based in Irvine, Calif.

"I don't think it's an early sign of the coming of the end of the foreclosure crisis," Sharga said.

A record 2.8 million households were threatened with foreclosure last year, and the numbers are expected to rise to between 3 and 3.5 million homes this year, RealtyTrac said.

Slowing the foreclosure rate is a key step in the recovery of the real estate market and the overall economy. The foreclosure crisis forced the federal government and several states to come up with plans to prevent or delay the process to help delinquent borrowers.

Foreclosed homes are usually sold at steep discounts, so they often lower the value of surrounding properties. Cities lose property tax dollars from foreclosure homes that sit empty and from declining home values, straining local economies. Home prices have stabilized in some cities, but are still down 30% nationally from mid-2006.

Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Initially, subprime mortgages were mostly the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

Among states, Nevada posted the nation's highest foreclosure rate, followed by Arizona, California, Florida and Utah. Rounding out the top 10 were Idaho, Michigan, Illinois, Oregon and Georgia.

The metro area with the highest foreclosure rate in January was Las Vegas, with one in every 82 homes receiving a foreclosure filing. It was followed by Phoenix and the California cities of Modesto, Stockton, and Riverside-San Bernardino-Ontario.

Study: Raleigh-Cary Ranked No. 3 in Five-Year Jobs Growth

Triangle Business Journal

The number of jobs in the Raleigh-Cary area grew 10.3 percent during the five-year period that ended in December – the third best performance among the 67 U.S. metros with a population of at least 750,000.

A study of U.S. Bureau of Labor Statistics data conducted by G. Scott Thomas of Buffalo Business First, a sister paper of Triangle Business Journal, found that Wake, Johnston and Franklin counties added 47,600 jobs between December 2004 and December 2009, bringing the area’s total number of jobs to 508,300.

Raleigh-Cary ended up on the positive side of the jobs ledge despite losing nearly 20,000 jobs over the past two years. The area had 527,700 jobs in December 2007. (Go to the bottom of this page to see how Raleigh-Cary fared in each of the five years studied.)

Still, Raleigh-Cary trailed only two Texas metros in percentage job growth over the five-year stretch, which bodes well for the Raleigh real estate market. Austin led the way with 14.2 percent growth, to 781,000 jobs. San Antonio was second at 10.6 percent, to 847,700.

The only other North Carolina metro with at least 750,000 residents, Charlotte, also gained jobs during the five years studies. The Queen City added 24,200 jobs, or 3.1 percent – to 811,600 – despite taking a major hit on the jobs front with the financial crisis and the shedding of thousands of banking jobs.

The Durham metropolitan area was not big enough to be included in the study.

Texas posted the strongest performance, with four of the top six metros in terms of percentage gain. Houston, No. 4 in percentage gain at 8.9 percent, was No. 1 in raw gain at 206,600 jobs added over the five-year stretch.

Texas and North Carolina fared better than most areas of the country during the five years ended in December 2009. Nearly two-thirds of the 67 major markets have fewer jobs now than they did in 2004.

Detroit has suffered the worst – no surprise, given the woes besetting domestic automakers. The Detroit area has lost 343,700 jobs during the past five years.

Los Angeles and Chicago have also suffered six-figure declines. A total of 200,700 jobs have slipped away from L.A. since 2004, and 173,300 have vanished from the Chicago area.

Detroit also ranks the worst in terms of percentages. One-sixth of Detroit’s jobs -- 16.5 percent -- have disappeared in the past half-decade. New Orleans, which was battered by Hurricanes Katrina and Rita early in the study period, has suffered a five-year loss of 14.9 percent.

Builders Reassess the Market

The NY Times

RIVER VIEWS At Henley on Hudson in Weehawken, work continues on a 27-unit building that is scheduled to open this summer. It is the fifth building there; a sixth structure is expected to be built later.

THE number of new-housing permits issued statewide in 2009 did not even reach 12,000. The last year the tally was that low: 1945, when New Jersey was still mostly cow and corn country.

If the housing crisis was finally over and the overall economy was headed toward recovery, it would still take at least two years for housing starts to recoup, according to market analysts.

“Traditionally, after past recessions, housing starts have doubled within two years,” said Jeffrey G. Otteau, whose Otteau Valuation Group provides advice on state real estate trends. “Because of the severity of this recession, though, there may be lingering wounds.”

Yet even in the face of these sobering numbers, several builders of multifamily projects have forged ahead — some actually building, others planning on it as soon as weather permits.

Their reasons are varied, based on interviews with developers of several large projects. Some asserted that their condominium developments held special appeal despite the general slowdown in sales; others said they had used the “down time” of the economic crisis to reconfigure plans and now felt that they understood the changes in buyers’ requirements.

“We paused our construction process,” said Lisa Macchi, an executive vice president of sales and marketing at Millennium Homes, in discussing Vizcaya, a high-end development rising atop a ridge off Northfield Avenue in West Orange.

In late 2008, Millennium was at work on 40 condo flats and 46 town homes at Vizcaya; as the outlook for the housing market grew increasingly grim, the company decided to create just the “shell” for another 41 condos. On the north side of the development’s huge main structure, it simply laid in foundation and put up first-floor walls.

Then, according to Ms. Macchi, sales were surprisingly strong at the first residences despite the slowdown: About 80 percent of them sold, at an average price of $1.2 million. So the decision to wait was revised. Last summer, Millennium decided to build out the last group of condos.

Construction is set to begin in March. Contracts have already been signed for a dozen of the units that won’t be completed until early next year, she said. The average sales price for those units is now $1.4 million.

By contrast, other developers expressed the belief that demand for top-end dwellings with the most elaborate possible finishes and features has diminished for the foreseeable future.

One of them, David Barry, the president of the Ironstate Development Company in Hoboken, said his company was instead focusing on ways to create “efficient” units — “not overly large, with high amenities, but lower price points.”

Mr. Barry, who shocked some fellow developers by pulling out of the condo construction game three years ago even as the market was still booming, said Ironstate would not get back in before the end of the year.

But the company is proceeding with plans to create about 70 condos at its Pier Village rental-and-hotel development in Long Branch. One idea Mr. Barry says he is considering is a condo conversion of one rental building at the complex.

It is still very hard to get construction financing, he noted, and conversion is less expensive than new construction. Also, the move would be in line with his notion of “efficient” apartments. The rental units are 700-square-foot one-bedrooms and 1,000-square-foot two-bedrooms.

“This could allow an entry-price point of something like $349,000, not $500,000,” he said, “which is more in line with today’s market.”

Mr. Barry said he and his brother Michael, the other principal at Ironstate, were also back at work on plans for the next phase of building at Port Liberté, the Hudson Riverfront complex in Jersey City. “I don’t know if we’ll start going in ’10,” he said, “but we are starting to work with architects again.”

At Henley on Hudson in Weehawken— part of the Port Imperial complex, which stretches into three towns along the Hudson — work is under way on a 27-unit building that is to open in July. It will be the fifth structure at Henley, with condos priced from the mid-$500,000s, for an 881-square-foot one-bedroom, to the $700,000s for certain two- and three-bedroom units. A sixth building is to be built later with the same configurations.

Michael Skea, the director of operations for Lennar Urban’s Northeast Division, which is developing Henley on Hudson in partnership with the Roseland Property Company, said that for the last 18 months the complex had had nothing available under $1 million. Penthouses and four-story town houses there go for more than $3 million.

“We get a lot of visitors who are enamored of the finishes and amenities we offer,” Mr. Skea said, “but they cannot pay prices that high. We wanted to press ahead with providing homes that are affordable to more buyers. ”

K. Hovnanian Homes, a large builder of single-family and condo developments, has several projects that continued to sell at a healthy pace over the past couple of years, said Steven Caporaso, an area vice president. As a result, construction has continued.

The final phase at Hunter’s Brook in Hackettstown, consisting of 21 single-family houses, is now under construction, for example. Eighty homes have sold since the project began marketing in late 2007, Mr. Caporaso said. This last group of houses is priced from $400,000 to the low $500,000s, for three- and four-bedroom homes. “We want to get the remaining homes ready for someone to purchase prior to April 30,” he said. That is the deadline for the federal tax-credit program for first-time buyers.