Beach Club Expert Blog

The number of homes listed for sale declined again in many U.S. cities last month as bargain hunters continued to search for foreclosed properties.

Interactive Graphic: Bargain Hunters Dent Home Supply

The supply of homes available for sale in 28 major metropolitan areas at the end of July was down 2.5% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The Zip data cover all single-family homes, condominiums and town houses listed on local multiple-listing services in metro areas where the firm operates.

On a national basis over the past 25 years, inventories in July have fallen by an average of 1% from the June level, according to Zelman & Associates, a research firm. Compared with the year-earlier month, the July inventory in the 28 metro areas was down 27%, according to the Zip data.

The exact level of supply is unclear because the figures don’t include all of the foreclosed homes that banks are preparing to sell. According to some industry estimates, as many as half of those homes aren’t included on multiple-listing services at any given time. Some foreclosed homes aren’t listed because they are being offered as rentals, while others are awaiting repairs or are subject to litigation or other delays.

Some analysts expect a resurgence in foreclosed homes on the market later this year, as lenders pursue legal actions that had been delayed by moratoriums in various states that sought to keep more people in their houses.

The  data don’t cover New York City. But Miller Samuel Inc., an appraisal firm, reports that there were 8,644 cooperative apartments and condominiums on the market in Manhattan at the end of July. That was down 7.8% from June but up 6.9% from July 2008.

An estimated 100,000 houses across the country, most built in 2006 and 2007, may be affected, based on the 500 million pounds of Chinese drywall—also known as plasterboard or gypsum board—believed to have entered the U.S. during that period. The drywall is being investigated by numerous agencies, including the U.S. Consumer Product Safety Commission, the Environmental Protection Agency, and the Centers for Disease Control and Prevention, along with state health departments. Several are due to report their findings later this month or in September.

If the agencies conclude a “substantial” electrical, fire or health hazard exists, they could issue a recall or other action. More than 800 complaints from 23 states have been filed at the Consumer Product Safety Commission’s Drywall Information Center.

Experts estimate it costs about $100,000 to pull out bad drywall and replace corroded electrical wiring and appliances in an average-sized home, and the problem is shaping up as a costly disaster for homeowners and the battered housing industry. Many homeowners are hoping the federal government will step in with some sort of aid similar to that provided for victims of hurricanes and tornados, as well as a moratorium on mortgage payments.

Others are staking their hopes on lawsuits against home builders and the drywall manufacturers and distributors. Many of the suits are being consolidated in federal court in New Orleans. But suing foreign-based manufacturers for liability is difficult and complicated, legal experts say.

A few builders are already taking action. Lennar Corp. has set aside almost $40 million to fix 400 houses in Florida and is ripping out the drywall in many homes throughout the state, the Miami-based home builder said in a securities filing last month. Some other builders are making

The area that is now known as Hallandale Beach was not even settled until the late 1800's, when Henry Morrison Flagler expanded the Florida East Coast Railway to Palm Beach in 1895. Before then, there wasn't much to Hallandale Beach except swamp and a gray, sandy soil called marl. The Seminole Indians would hunt in the area and gather cootie root, which was used to produce starchy dough.

First Settlement

Flagler recruited Luther Halland, son of a Swedish minister and brother-in-law to one of Flagler's agents, to start a Swedish settlement south of the Danish settlement of Dania. With the assistance of an immigrant named Olaf Zetterlund, Halland began promoting the frost-free subtropical climate and cheap land of Halland (later to be named Hallandale). Halland set up a small trading post in the new community and became its first postmaster.

Farming Community

Settlement was slow, with only a dozen families in town by 1900 – seven Swedish, three English, and two black. The first school was built in 1904 and had only ten students. The first church, Bethlehem Lutheran, was established in 1906. Originally, Hallandale was a farming community, with farmers using the beach only for recreation.

Town of Hallandale Beach

Hallandale officially became a town on May 14, 1927. By that time, there were 1,500 residents, street lights, and electricity in the community. In 1947, Hallandale was reincorporated as a city, and was allowed to annex land to the east. In August of 1999, the city officially changed its name to Hallandale Beach.

How much house can you buy for $1.5 million? Depending on where you look, it might not be very much.

Despite global economic concerns, the credit squeeze, and rising commodity prices, properties in the world's most expensive neighborhoods are still commanding ferocious premiums. While $1.5 million in Cleveland or Tampa would probably purchase a substantial house, with four bedrooms, a multicar garage, and maybe even such amenities as a swimming pool and media room, in London's Belgravia or on Manhattan's Fifth Avenue, it would buy you little more than a glorified shoebox.

Using data from London-based real estate group Knight Frank, BusinessWeek.com identified the 20 most expensive markets in the world and what you can buy in those cities' prime areas with $1.5 million. In London, where at $6,191 the average price per square foot is the highest in the world, your $1.5 million would buy only a small studio in the smartest parts of town. In Venice, on the other hand, despite limited building space, your money goes a bit further, getting you a two-bedroom apartment or more near the Grand Canal. (Of course, in less illustrious neighborhoods, your money goes further still.)

Slower Growth, but Sustained Strength

And it looks as though, despite the general economic malaise, these top markets are likely to remain relatively strong for the foreseeable future, even if they won't see the extraordinary growth of the past few years. Liam Bailey, head of residential research for Knight Frank, says prime markets had a relatively good year last year but are "on the tail end of a boom."

For example, in the fourth quarter of 2007, prime real estate in once-booming Dublin fell 15% from the same period the year before, according to Knight Frank. Prices in other markets such as London and Tokyo continued to rise through 2007 but softened a bit this year. Luxury property prices in St. Petersburg at the end of last year were 38% higher than the year before, but that's nothing compared with the 95% price growth in 2006.

London remains one of the world's most robust markets, thanks in no small part to its position as the financial capital of Europe. Prices for prime real estate jumped 29% in 2007. But the city's strongest price category has narrowed from £1 million ($1.98 million) and higher to more than £10 million, Bailey says. In other words, only the very top of the market is still seeing growth.

The sustained buoyancy of cities such as London and Paris and resort areas like Monaco or Gstaad is partly the result of their appeal to newly minted millionaires from Russia, China, India, the Gulf states, and elsewhere. Like wealthy Americans and Europeans, they don't feel as affected by the changing economic conditions. In fact, many are actually helped by the downturn, especially in the U.S. where the dollar is trading at a discount to currencies such as the euro.

Confidence Issue

But even the most expensive markets aren't immune. "You see price growth at the very best locations. If properties are perfectly positioned, if they have no faults, if they are perfect, you will see perfect price growth," Bailey says. "Most markets are tailing off."

David Michonski, CEO of Coldwell Banker Hunt Kennedy in Manhattan, says the softening of international real estate markets is a "normal correction in a major long-term bull market that started 10 years ago." He adds: "I don't believe it's a function of the credit crisis. It's a confidence issue at this point.… Everybody in the world has been told that wherever the real estate markets are, they're going to fall."

In Tokyo, prices began to soften soon after the subprime problems in the U.S. came to light, says Ryuichiro "Drew" Iwanami, director of global business development for Japan Sotheby's International Realty. But Tokyo, which experienced a "mini-boom" from 2003 to early 2007, is also dealing with an oversupply of condos that were built in the low-interest-rate environment of the last few years, he says. The mini-boom followed Japan's real estate collapse in the early 1990s, when prices for some rural properties fell to 10% of their peak price. "You're beginning to see a slump in the sales of high-end condominiums…[and] the rate of price increases is stabilizing," Iwanami says. "You may see more of that in the next 12 months."

Still, the softening of real estate markets has at least one silver lining, especially in hard-hit cities such as Miami. Buyers from Canada, Europe, and South America are flocking to neighborhoods such as South Beach and Coral Gables, where home prices are tumbling. For Europeans, Miami's declining condo prices are "like Americans handing them the gift of the century," says Michonski. "The sun has not stopped shining. The beaches aren't any less white, and the whole thing costs them 30% or 40% less."

World's Most Expensive Luxury Real Estate Markets

Take a look around the world at what $1.5 million buys in 20 of the world's most expensive housing markets.

1. London
Price: $6,191 per sq. ft.
What you get for $1.5 million: Small studio apartment
Annual price change: 29%*

A housing boom began in Central London in September, 2005, and continued through 2007, as wealthy buyers flowed in from around the world. The annualized growth for prime real estate is slowing this year and is expected to weaken further. But the super-luxury segment remains incredibly strong. Sales for £10 million-plus homes in Belgravia, Chelsea, Knightsbridge, and Mayfair increased by 190% in the six months ending January, 2008, compared with the same period a year earlier.

* The annual price change compares the fourth quarter of 2007 with the fourth quarter of 2006.

2. Monaco
Price: $5,888 per sq. ft.
What you get for $1.5 million: Studio apartment
Annual price change: 25%

It's not just the casinos, beautiful people, and staggering views of the Mediterranean that have made Monaco a popular home for the world's wealthiest buyers. The real appeal is that its residents don't pay income tax.

3. St. Jean Cap Ferrat (France)
Price: $5,853 per sq. ft.
What you get for $1.5 million: Small studio apartment
Annual price change: 39%

St. Jean Cap Ferrat on the French Riviera continues to be popular with European aristocracy and the super-rich, such as billionaire Paul Allen, who enjoy the gorgeous beaches and warm weather.

4. Courchevel (France)
Price: $4,710 per sq. ft.
What you get for $1.5 million: Studio apartment
Annual price change: 5%

Like to ski and shop? This resort town high in the Savoie region of the French Alps is favored by the Russian elite and is known for expensive hostelries such as the Hotel Le Lana, fashion boutiques, and wild parties.

5. Hong Kong
Price: $4,507 per sq. ft.
What you get for $1.5 million: Studio apartment
Annual price change: 21%

Hong Kong's real estate market has been driven by China's strong economic growth. Despite limited space, real estate demand on the island has started to slow, and prices are softening as the effects of the U.S. credit squeeze spread.

6. Manhattan
Price: $4,320 per sq. ft.
What you get for $1.5 million: Studio apartment
Annual price change: 25%

At the high end, Manhattan continues to boom even as the credit crunch deepens. In fact, in the first quarter of 2008 average prices were up 19% and the price per square foot was up 16%, according to the Corcoran Group. There are several reasons: First, the city has been shielded from the subprime crisis, largely because its co-ops and condos are well out of reach of most buyers with poor credit and shaky finances. Second, it remains a popular destination for movers and shakers in the financial, entertainment, and media world. Last, because of the weak dollar it is more affordable than ever for wealthy foreigners looking for a Manhattan pied-à-terre.

7. Cortina d'Ampezzo (Italy)
Price: $3,028 per sq. ft.
What you get for $1.5 million: 1 bedroom
Annual price change: 22%

The Northern Italian resort town is a popular second-home destination for ski buffs and Milan's business elite. Prices for prime European vacation homes have benefited from the growth of the world's population of high-net-worth individuals.

8. Portofino (Italy)
Price: $2,692 per sq. ft.
What you get for $1.5 million: 1 bedroom
Annual price change: 14%

Although there's no beach, the harbor of this resort village on the Italian Riviera is packed with yachts owned by the world's rich and famous. The village is about 20 miles from the Genoa airport.

9. Singapore
Price: $2,423 per sq. ft.
What you get for $1.5 million: 1 bedroom
Annual price change: 31%

The city's high-end real estate has benefited from an influx of foreign buyers and has been particularly strong close to the Orchard Road shopping area and on the island resort of Sentosa.

10. Tokyo
Price: $2,334 per sq. ft.
What you get for $1.5 million: 1 bedroom
Annual price change: N/A

Despite traditionally astronomical prices and cramped living conditions for all but the very wealthiest, Tokyo's market is beginning to slow as a result of the credit crunch and a heavy supply of new condos that have recently come on the market.

See Moscow, Paris, and more of the world’s most expensive cities...

The number of foreclosed homes owned by lenders continues to rise despite signs that they are increasingly willing to slash prices to sell those properties.

Lenders and investors in mortgages owned about 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to First American CoreLogic, a research firm based in Santa Ana, Calif., that collects data from lenders and county clerks. The April total works out to about one in seven previously occupied homes available for sale nationwide.

A surge in defaults has increased the inventory of bank-owned homes, known in the trade as REO, for "real estate owned." By cutting prices, lenders have managed to increase sales of such homes sharply in recent months in some cities hit hard by foreclosures, including Las Vegas, Detroit and Sacramento, Calif., local real-estate brokers say.

With home prices falling, "holding the assets means further losses," said Mark Fleming, chief economist for First American CoreLogic. Some lenders now are cutting prices as often as every 20 days on homes that aren't selling, said David McCarthy, chief executive officer of Integrated Asset Services LLC, a Denver-based company that helps banks value and sell REO homes.

But lenders haven't yet managed to catch up with the inflow of foreclosed homes. Mark Zandi, chief economist at Moody's Economy.com, forecasts that the inventory of REO homes won't peak before the end of 2009.

In dollar terms, foreclosed one- to four-family homes owned by lenders whose deposits are insured by the Federal Deposit Insurance Corp. more than doubled to $8.56 billion at the end of the first quarter from $3.59 billion a year earlier.

The REO glut is weighing on house prices in many areas, as banks tend to cut prices faster than other sellers. A new set of local home-price indexes, to be introduced this week by Integrated Asset Services, shows that the median price of homes sold in Riverside County, Calif., in April was down about 29% from a year earlier. The median price fell about 13% in Clark County, Nev., and 12% in Arizona's Maricopa and Pima counties. Median-price comparisons can be skewed by shifts in the proportions of high- and lower-priced homes sold from one year to the next but provide a broad indication of market trends.

To avoid or at least delay losses, many lenders are trying to avert foreclosures by easing loan terms or giving struggling borrowers more time to catch up. Hope Now, an alliance of mortgage companies and investors, said last week that mortgage companies completed loan workouts for 183,000 households in April, up from 160,000 in March.

Meanwhile, long-term interest rates rose last week, marking another potential drag on the housing market. The average rate on 30-year fixed rate loans eligible for sale to government-sponsored investors Fannie Mae and Freddie Mac was 6.17%, up from 6.02% a week earlier, according to HSH Associates, a financial publisher in Pompton Plains, N.J.

Miami Beach, Fla. --Yes, this state is on sale. But how cheaply can you get a weekend home?

After all, not everybody is in the market for a multimillion-dollar residence, or is ready to spend $1,000 a month on condo fees.

So what kind of deals are out there now for the rest of us?

The answer is that for less than $200,000 you can now get something pretty reasonable, on or near the water.

Whether you count that as value may depend on a lot of things. But these are prices not seen down here since well before the bubble.

For example, $150,000 might now get you a three-bedroom house in a distressed sale in Cape Coral, a town on the Gulf coast just north of Naples. "I've got one in a short (read  distressed) sale," says local agent Joan Psarros at Re/Max. "It's 2,000 square feet, on a fresh water canal, and it has a pool. It's only a few years old – it was built in 2005."

The owner, a speculator from Connecticut, paid $275,000 for it in the boom.

Some of the best bargains are to be found in the southeastern crescent, from Miami to West Palm Beach. That's where the torrent of new homes flooding onto the market has washed all prices downstream.

In West Palm Beach, if you look hard, you can find new, upscale one-bedroom condos for less than $200,000 if you look hard. A few years ago, when they were being built, the same units were selling for nearly twice that.

You have to do serious detective work to find the best deals. Look beyond the sticker prices. There is a lot of inventory around. There's often a desperate seller.

I looked at one unit that was on the market for $225,000 – while a few floors below an almost identical apartment was being offered in a distressed sale for $175,000.

In Fort Lauderdale, the cheapest bargains are in some of the older co-ops a few blocks from the beach. I looked at some one- or two-bedroom units for around $150,000. A few years ago, they would have cost around $250,000 or more.

No, they aren't fancy. The architecture is what brokers, with some humor, call "mid-century modern." That means they were new in 1950.

But the buildings are perfectly sound, your fees may be only $200 a month, and you'll find yourself with a pool and a five-minute walk to the beach.

If you want to go 20 minutes west, $200,000 or less will buy you a brand new two-bedroom unit in a development with gyms, spas, pools and tennis courts. When they were being built, they were being sold for twice that.

But probably the cheapest deals I saw were in the historic Art Deco district of Miami Beach itself. Here you can get small one-bedroom units for well under $200,000. Some are selling for much less than that.

South Beach broker Leslie Cooper of Douglas Elliman Florida showed me a tiny one-bedroom of about 450 square feet that is being sold in a distressed sale for $139,000. You might get it for less. The owner, an artist, bought it a few years ago for $175,000 and has also fixed it up beautifully. You even get a designer bathroom, if such things matter to you.

I also looked at one-bedroom units nearby that had been completely renovated and are now being offered for about $170,000.

Lots of these places are on the market in the Art Deco area. They're a short walk from the Lincoln Road shops and restaurants and a short walk to the beach. What else are you looking for? You'll even have the New World Symphony around the corner.

At the height of the boom these prices were a lot higher. "A few years ago many of these types of units were selling for $230,000, some as high as $270,000," says Ms Cooper, the real estate broker.

By the standards of the Northeast, let alone Europe, these prices seem cheap. To those elsewhere in the country, they may not. But they are certainly a lot cheaper than they were.

Americans' love affair with real estate may be cooling, but -- thanks to falling home prices and the weak dollar -- attention is heating up from another group of suitors: foreign investors.

Foreign buyers have long looked to certain U.S. markets, such as high-end properties in Manhattan or South Beach Miami, as investment opportunities.

These days, however, real-estate professionals report increased international interest in a much larger range of properties, from $60,000 single-family homes in South Florida's inland neighborhoods to $1 million waterfront villas located just miles from the Canadian border in Washington State.

Almost one in five, or 18%, realtors surveyed by the National Association of Realtors last year said they sold homes to international clients between April 2006 and April 2007. More recent data aren't yet available, but according to anecdotal evidence, those numbers continue to rise.

"There definitely is more interest in U.S. properties, no question about it," says Mark Partin, president of Trailridge Property Corp., of Toronto, which brokers deals between U.S. developers and Canadian investors interested in buying residential properties in "bulk."

For many foreign buyers, property in the U.S. is cheap. Foreign buyers also seem more optimistic about the long-term health of the U.S. market, says David Michonski, a certified international property specialist and chief executive of Coldwell Banker Hunt Kennedy in New York. "The foreign buyer has an unbridled confidence in the U.S. market that is lacking in the domestic purchaser today," he notes. "They view this as the bargain of a lifetime and are terribly excited about it."