Archive for the 'Other States' Category
We found Portsmouth to be a very interesting place. And as residents of an area trying to build the type of vibrancy that they seemed to already have, it was difficult not to compare and contrast Portsmouth with the Hartford area.
For background, the City of Portsmouth proper is only 15.6 square miles and has a population of about 21,000. This is about the same geographic size as our municipalities, as the City of Hartford is 17.3 square mile with 125,000 people and West Hartford is 21.9 square miles with 63,000 people.
Downtown Portsmouth as a Neighborhood and Destination
We spent most of our time in Downtown Portsmouth. That’s where our hotel was, and that seemed to be the center of activity – shops, restaurants and attractions. Downtown has a critical mass of stuff, and we’re guessing it’s attracting people from the neighboring towns since there didn’t appear to be enough housing Downtown for all the people we saw out and about.
There were a lot of tourists/visitors there, but it wasn’t clear why they were in town. Many (like us) were there for the local beaches. Others staying in our hotel were there on business. But unlike visiting Downtown Hartford during a big event, it was not obvious why they were there.
Defining the Built Environment
In terms of geographic size, Downtown Portsmouth is about the same size as Downtown Hartford. Both have many street blocks while remaining very walkable. My unscientific way of measuring is that I can get the most interesting parts of each Downtown into a single screen at the same zoom level of Google Maps (Portsmouth, Hartford). If anything, Downtown Hartford is a bit bigger.
In terms of building scale, Downtown Portsmouth is about halfway between Downtown Hartford and West Hartford Center. Most buildings are mid-rise structures (generally 4 levels or fewer). There are no skyscrapers (as there are in Downtown Hartford), but there are also very few single level buildings (as are common in West Hartford Center).
There are very few super-blocks in the active part of Downtown Portsmouth. Most of the blocks were small, with multiple buildings on them. Downtown Hartford, and to a lesser extent West Hartford Center, have numerous examples of a single structure occupying entire blocks (or more).
Highway access to Downtown Portsmouth is very good. I only recall seeing one public garage in addition to the on-street parking. I do not recall any surface parking lots in the Downtown core itself, though I see online that there are four. There is bus service in town, and it looks like they have their own Downtown loop route – like the Hartford Star Shuttle.
Portsmouth is charming. The historic buildings are interesting to look at, and because there are so many of them they define the look of the town. It is an attractive place to visit.
Every space was utilized. There are some hills in Downtown Portsmouth, so you see buildings where there are walkout basement levels around back on a little side street/alley. They were almost always finished spaces that were shops, restaurants, or apartments.
Their main museum (Strawberry Banke) is Downtown, making it very accessible for visitors.
They were the only game in town. There did not seem to be any other downtown areas competing for the attention of locals or visitors. There were big malls, and there is outlet shopping. But if you want an urban feel in that part of the country, then Downtown Portsmouth appears to the be only option.
There were few national chain stores or restaurants. This was very surprising to us, and we’re not sure if it’s because chains don’t see opportunity in Portsmouth or if the locals discourage chains from entering the market. Either way, the dominance of local shops makes Downtown Portsmouth even more attractive since it’s a different experience than going to the mall.
Our main takeaway is that Portsmouth has done well for itself given its location, size and history. It has its challenges (economy dependent on cyclical military spending), but it has been consistent in prioritizing history as a core asset to build around. It’s a fun place, and we will likely go back to visit again.
Downtown Hartford is much larger than Portsmouth and the two aren’t really comparable. However, we have many of the same types of complementary attractions, and may be able to learn from them. They have a summer tourist season due to their coastal location. We have visitors coming to town year-round for events at the convention center. They have a modest park on the water, we have a park along the water and a much larger park integrated into Downtown. They have one main museum, we have multiple signature attractions.
The main difference we see is that Portsmouth is a complete and integrated economic system that can easily handle the ebb and flow of visitors. Downtown Hartford sees much larger surges of visitors. When we’re prepared and geared up for it, everything goes smoothly and our guests enjoy the City. But at times it seems like the visitors overwhelm the system.
Hartford projects that are under discussion should improve our baseline economic activity. More apartments and the proposed UConn campus will boost demand for goods and services in Downtown Hartford – many of the same things that visitors need. The iQuilt project is already helping guide visitors through the City to the various attractions.
Hartford seems to be taking positive steps. We have the potential to evolve into a unique Downtown environment that is not only a mixed use neighborhood, but also regularly draws in (more) visitors from surrounding towns. Once we get the baseline activity up to a critical level, we will hopefully see a snowball effect and see development projects that don’t rely on subsidies to be viable.
Enjoying Portsmouth, New Hampshire
Recently we went on a 4 day vacation to Portsmouth, New Hampshire. I really knew nothing about Portsmouth when I booked our hotel stay in May. Just that I was kind of going out of my mind with work and that I would probably want a few days off when things typically slow down for us at the beginning of August.
My requirements were that our vacation destination couldn’t be more than 3 hours away, it should be near water and there should be stuff to do. “Stuff to do” for me is loosely defined as activities that keep me moving around and exploring, as I am not one to sit around and relax. That is not vacation for me. The running family joke is that I have to “squeeze the fun” from all of my downtime because I don’t get much of it. We zip from activity to activity yelling “squeeze the fun!” shaking our fists. I don’t know, maybe I have adult ADHD.
In any event, we were off to Portsmouth for a few days. I had done some preliminary research and it seemed lively enough with interesting architecture and history, walkable shopping, quality restaurants and in close proximity to beaches where we could go exploring later in the days. Our awesome hotel even let us bring Libby along for the trip.
I think Portsmouth might be my new favorite New England town ever. They are quite small, a population of approximately 21,000, and they seem to have their stuff together on so many levels. They have a very well developed downtown area of well more than a hundred small owner shops and restaurants. Just blocks and blocks of independently owned places. The only large retailers we saw were a Banana Republic and Stonewall Kitchen. Everything else was locally owned. Kitschy stores with all different items doing well. Restaurants of all different varieties serving great food, at a variety of price points.
They’ve condo-ized many of their older buildings and built new construction of condos and houses so they blend in with the older historic buildings. There are several large hotels near the water that cater to visitors and allow people to be involved right in the downtown area of shopping and eating.
They are proud of their history and do a great job explaining it to visitors and incorporating it into daily life and the structures that are in place. Their visitor center was really well run and gave us helpful ideas for our visit, incorporating our interests. On-street and garage parking was easy to find. It was a dollar an hour for parking pretty much wherever you parked. That seemed more than reasonable to us. They even had a few dog parks within various City parks.
We tried to compare it to something in Greater Hartford, but really couldn’t. It was kind of like the West Hartford Center area, but supercharged. There seemed to be such an entrepreneurial base of small owner places, while still catering to both locals and out-of-towners. We’re still trying to think through the things we learned from our very enjoyable visit, so more on that next week.
Warning: What follows is a long, dry, stat-heavy summary without much original commentary or insight. It’s here because putting this together helped me think through the subject better. Proceed at your own risk. Hopefully at least one other person will find it interesting…
I came across an article a while back that I’m still trying to wrap my head around. It’s a wide-ranging piece on the Bloomberg site called Private Equity Has Too Much Money To Spend On Homes. The author/editors include quotes from a huge range of people, and the narrative bounces around to all different points of view. It’s a dizzying collection of factoids and thoughts that covers a market we have very little visibility to here in Greater Hartford.
The overriding theme is that investors have raised a lot of money to buy and operate distressed single-family homes as rentals, but so far they have not been able to acquire many properties at all. Below I’ve reorganized the points to first focus on the supply and then the demand side of the equation.
Supply of new distressed homes has been down in recent years, and is controlled by a limited number of mortgage lenders and government entities.
Fannie Mae is reviewing final bids on the bulk sale of 2,490 properties. A couple paragraphs later the author cites a Guggenheim Securities LLC note that said future REO-to-rental bulk sales by Fannie Mae and Freddie Mac may be delayed to “monitor the properties in the pilot program.”
Fannie Mae’s bulk sales will be based on regional pools – Atlanta, Chicago, three regions of Florida, Las Vegas, Southern California, and Phoenix. Pools will either be sold outright or used for joint ventures with Fannie Mae. 85% of the homes have rental tenants. Buyers will face restrictions on resales to prevent flipping and flooding a market. A March filing showed that Fannie owned 114,157 foreclosed homes and that 8% of them had tenants.
The FHA (Federal Housing Administration) manages about 35,000 repossessed homes, and “plans to sell 5,000 properties with delinquent loans.” (KB: It’s not clear if this would be a bulk sale or individual property sales. Also, how do you sell a property with a delinquent loan? I can understand selling a loan. Or foreclosing and selling the property. But not “properties with delinquent loans.”)
Bank of America is avoiding bulk sales with their REO inventory, preferring to approve short sales, sell properties through real estate agents or auction them off individually.
Foreclosure processing – the taking of homes – has not yet recovered after the robo-signing issue and related settlement.
Short sales are increasing, and RealtyTrac expects them to exceed the number of REO sales in the second quarter of 2012.
CoreLogic reports that there are 1.6 million homes that are either owned by banks and not yet for sale, or are more than 90 days delinquent on their mortgage. They refer to this as shadow inventory.
PIMCO (Pacific Investment Management Co) believes that 6 million homes will be lost through a distressed sale in the next five years, and that will create demand for 4 million new rental units. By their calculations, $6 billion spend on foreclosures, at an average price of $150,000, only equals 40,000 homes. So the opportunity is much larger than $6 billion.
On the other side of the equation, there are many different groups hoping to buy and rent single-family homes in the United States. Here is what they are seeing in this market.
Investors have committed at least $6.4 billion to this investment theme. A managing director in the real estate investment banking group of Jeffries Group Inc. is quoted as saying “less than $2 billion of institutional capital has been spent.”
A company called PropertyAccess currently manages about 10,000 single-family rentals for banks and investors, and is expecting to be able to buy 500 to 1,000 per month by the fourth quarter. The gentleman quoted from that firm thinks the ability to buy these types of properties is more of a challenge than the ability to operate them.
Private Equity firm Colony Capital hopes to buy $1.5 billion worth of single-family houses by April 2013, and believes the operation of the properties is more of a challenge than the acquisition. The gentleman quoted estimated that 7.5 million homes with a market value of $1 trillion will be lost to foreclosure by 2016.
Investors at Carrington Capital Management LLC, who received a $450 million commitment from an Oaktree opportunistic fund, believe the primary challenge is finding homes to buy.
GTIS Partners, another investment firm, hopes to buy $1 billion worth of single-family houses by 2016, but prefers not to buy in bulk. Their chairman is quoted as saying “if you buy by the pound, I think you’ll underperform” since you haven’t done your due diligence on the individual properties and will end up with a lot of junk.
Delavaco Properties Inc, an owner/operator that is planning to go public, focuses on single-family homes that generate a stable rental income. They own 450 homes and also like to be selective in their purchases.
The Phoenix area was specifically mentioned a couple of times, with the point being that investor demand for distressed home is outpacing supply.
Landsmith LP sold 75 homes they had previously bought in the Phoenix area for about 3.4x their purchase price. (KB: No information was provided about how much they spent improving the properties) They are now looking to other markets that are earlier in the foreclosure cycle.
American Residential Properties, Inc., a REIT that is planning to go public in 2013, also sees the Phoenix market as more competitive.
Finally, it was noted that real estate agents hate the idea of foreclosed homes selling in bulk. One reason is that brokers feel the buyer market is deep enough to absorb the coming inventory. Additionally, the Chairman of brokerage firm Realogy was quoted as saying that large-scale foreclosure sales “would put further downward pressure on home prices, take away local investment opportunities, and enrich Wall Street investment funds.” The author concludes by noting that real estate agents do not receive commissions for the bulk sales.
Since this article was published, Fannie Mae has put out this press release about the next step in their REO program.
Now that I’ve sorted through all that information…
There aren’t enough distressed situations in Greater Hartford to warrant bulk sales of repossessed homes. There are a handful of agents who seem to have relationships with the banks and government organizations and they handle all the REO sales. The rest of us – the vast majority of local real estate agents – work directly with owner/sellers who are not in distress. There are short sales periodically, but they are not overwhelming the system either.
A billion dollars is a lot of money. For example it would be almost enough to buy all of the single-family houses in the City of Hartford (about 7,100 of them), which the Assessor valued at $1.12 billion as of October 1, 2012 in the most recent revaluation. If another billion-ish dollars were laying around it could be used to buy all the two-family and three-family properties in the City (another 6,300 total), which were valued at $1.11 billion.
Six million homes (or 7.5 million) lost to distress is an even larger number. So they’re saying that nationally the problem is about 1,000 times worse than if every single-family home in the City of Hartford were lost to foreclosure.
According to this recent housing survey on census.gov, there are about 79.7 million detached single-family homes in the country and 125.5 million residential units in total. So somewhere between 5% and 10% of them are going to be lost, with much higher concentrations in some areas.
What does this mean for Connecticut real estate and for Greater Hartford in particular? Are we late to the foreclosure party, or was the housing boom and bust so tame in this area that we’re going to miss the mass foreclosures entirely?
The storm has passed, the skies have cleared, and the wind has died down. It is a bright and sunny Monday.
Sunday morning – before the eye of the storm arrived – turned out to be the worst of the weather for Greater Hartford. That’s when the bulk of the rain came through, and the strongest wind gusts, though they did not approach hurricane strengths. The rain died out quickly as the storm moved north of us, and the heavy winds that were forecast never materialized.
Our biggest concern before the storm was that massive trees would not be able to withstand the heavy winds, especially with the saturated soil. We were worried about cars and homes getting hit, and were mentally prepared for a power outage. Thankfully, neither happened for us (though we know others in the immediate vicinity that were affected).
Our biggest actual issue during the storm was the heavy rain. Like most homes in the area, our basement has a portion of the foundation floor cut out at the low point to allow water to drain from inside to outside. During especially rainy stretches we sometimes see water collect in the pit, and attribute it to the rising water table. Early Sunday morning we began to see signs that the water may try to use the hole to come into the basement.
Our makeshift solution is shown in the picture – we basically tried to plug the hole using whatever we could find. The key components ended up being over sized garbage bags as a liner, wet kitty litter to mold the the bags to the irregular shape of the hole, a sheet of foam insulation to hold down the perimeter, and then lots of weights to apply pressure and seal the edges. It’s an ugly solution, but we didn’t get any water in the basement.
We feel very fortunate that we seem to have emerged unscathed, and are also grateful that the scope of the damage in the region was much less than expected. Other areas of Connecticut experienced considerably more problems – flooding, trees down, and power outages. Some friends in NYC were evacuated from their high rise apartment and then came back to water damage. Friends further south have also reported major problems.
Worst of all, it seems like just about all of southern Vermont, our home state, was devastated by flash flooding. All the major routes we would take to get from Hartford to Rutland are washed out – Route 103 in Chester and Ludlow (near Okemo). Route 9 in Wilmington (near Mt. Snow). Route 4 in Woodstock and Mendon (near Killington). Other towns sustained major damage away from the primary roads, especially Brattleboro. It’s the worst flooding pictures and video I have ever seen. Please consider taking a trip up to VT this fall or winter for some touristing activities – it’s a wonderful place to explore and their economy is going to need our help.
Below is another article about demographics and other real estate trends that builds on the research of Arthur C. Nelson. It came to my attention after being posted by City of Hartford COO David Panagore. This continues on the themes of Mr. Condon’s piece from Sunday and our take on specific neighborhoods that may benefit from the market shifts.
I’ll be honest, I couldn’t get through the whole thing in the first sitting, but when I finally did, it seemed worth the effort.
The Next Real Estate Boom: How Housing (Yes, Housing) Can Turn the Economy Around
Patrick C. Doherty and Christopher B. Leinberger
Washington Monthly, November/December 2010