Oil companies drilling off the coast of Florida

Oil companies once viewed drilling in the deep waters off Florida as cost prohibitive. Politicians feared even the slightest sign of support would be career suicide.

No more. Record crude oil prices are fueling support for oil and natural gas exploration off the nation's shores. In Florida, movement was underway even before President Bush called on Congress last month to lift a federal moratorium that's barred new offshore drilling since 1981.

The early activity here stems from a 2006 Congressional compromise that allows drilling on 8.3 million acres more than 125 miles off the Panhandle — an area that had been covered by the moratorium, which was enacted out of environmental concerns. In exchange, the state got a no-drilling buffer along the rest of its beaches.

Florida may turn out to be a prelude for other coastal states. If oil or natural gas deposits are found in the newly opened region, experts say it could further the push to explore other once-protected areas everywhere. It also could be a rallying point for critics, who say the new exploration isn't a license to expand exploration.

With gas topping $4 a gallon, recent polls show Americans, Floridians included, more supportive of drilling in protected areas. Some politicians — including Gov. Charlie Crist — have switched sides.

"We think the public is way out ahead of the politicians on these issues. People are more open to (offshore drilling) now," said Tom Moskitis, spokesman for the American Gas Association, a trade group.

At the same time, oil companies, driven by the record energy price, are more willing to risk $100 million or more to begin exploring new regions. The Interior Department estimates there could be 18 billion barrels of oil and 77 trillion cubic feet of natural gas beneath the 574 million acres of federal coastal waters that are now off-limits.

Drilling activity off the Florida Panhandle has started and sputtered for decades. Some companies had leases to drill off the Panhandle before the 1981 moratorium. They were grandfathered in when the moratorium passed because they were already actively exploring in their lease areas. They continued their activity off and on into the early 1990s.

In March, four companies — Australia-based BHP Billiton Petroleum Deepwater Inc., Houston-based Anadarko E&P Co., Shell Offshore Inc. and Italian oil and natural gas company Eni SpA — purchased leases on 36 Gulf of Mexico tracts under the 2006 compromise.

Jeb Bachmann, an analyst with New Orleans energy consultant Howard Wiel, said the four understand the shifting political and financial realities.

"It gives you an indication that some of these companies believe there is some light at the end of the tunnel," Bachmann said. "There is higher pricing and a belief that higher prices are going to ultimately drive some changes."

Anadarko bought seven of the recently opened tracts south of Pensacola because of their proximity to its Independence Hub, a major natural gas field off Alabama that supplies 1.5 to 2 percent of the natural gas consumed in the U.S. every day, said Stuart Strive, the company's vice president of exploration for the eastern Gulf. The newly leased tracts are between 50 and 75 miles east of the Independence Hub.

But finding and producing natural gas in the new site will be expensive. Three-dimensional mapping of the ocean floor, which must happen before any drilling, could take up to two years, Strive said. If a promising site is found, engineers must drill up to three miles below the ocean surface to extract the oil or natural gas.

And it will take years before the company begins producing anything at the site — and there is no guarantee of success. A company can have as much as $4 billion invested and a wait of up to five years before seeing any return on the investment, Strive said.

"We typically will have $100 to $200 million invested in a project before we know if it is an economic venture or not," he said. "Then, if you know you have made an economic discovery, you spend a billion dollars or more on a facility."

The 1981 moratorium — enacted out of environmental concerns in response to a massive oil spill off the Santa Barbara coast a decade earlier — has prevented the Interior Department from spending money on offshore oil or gas leases in virtually all coastal waters outside the western Gulf of Mexico and in some areas off Alaska.

But politicians who once supported the ban are changing their minds.

U.S. Sen. John McCain supports lifting the ban and allowing states to decide whether to approve drilling of their shores. Crist, Florida's Republican governor and a possible vice presidential candidate, reversed his long-standing opposition to lifting the ban last month.

The ban won't be lifted without a fight.

U.S. Sen. Bill Nelson, who has led opposition to offshore drilling among the state's Congressional delegation, criticized the governor for reversing his position, accusing Crist and McCain of putting oil company profits before protecting the state's $65 billion annual tourism industry.

"Oil companies and their allies are using the shockingly high price of oil and gasoline, which largely is the result not of a supply problem but speculative fever, to scare the public into thinking coastal drilling offers a real solution to our dependency on oil," he said in an e-mailed statement.

The 2006 Senate compromise opening up the Panhandle tracts made sense and should be honored by the oil companies, said Dan McLaughlin, Nelson's spokesman. Instead, the companies and Congressional Republicans are pushing to open more acreage, he said. Nelson helped broker the compromise.

"It was a compromise allowing them to go where they wanted to go, where there were some proven reserves, while also keeping them at a distance to save the economy, the environment and protect our military training areas," McLaughlin said.

"That compromise closed the door and kept the moratorium in place. Now you see the governor doing an about face, but we are confident we are going to fight it back again."

Should bike week be stopped?

The North Myrtle Beach Chamber of Commerce is looking to its members for feedback.

The chamber asked members to answer questions in an online survey.

Questions like:

*Do the bike weeks have a positive impact on my business?

*Is my business would be more profitable with or without the bike weeks?

*Should things be left just the way they are?

The website is set up so people can respond anonymously.

The debate continues over the city of Myrtle Beach's attempt to put an end to both the Atlantic Beach and Harley Davidson bike weeks.

$130 million to private equity real estate investments

The New York City Board of Education Retirement System is looking to deploy approximately $130 million to private equity real estate investments and is seeking exposure to a diverse range of property types through stable return and enhanced/opportunistic investments.

The system has issued a request for qualifications from managers to implement its new mandate via fund of funds or limited partnerships. Individual direct property investments, funds of predominantly debt securities, and discrete real estate investment trust portfolios will not be considered.

Firms must have at least $100 million of committed capital in a prior fund, at least $1 billion in committed capital in all real estate investment vehicles and at least one public fund investor with aggregate assets over $1 billion. Firms must also have a five-year track record managing private real estate products.

commercial activity

The general slowdown in the U.S. economy has begun to have an impact on commercial real estate markets. After posting a record $427.2 billion in commercial transactions in 2007, it should come as no surprise that investment in commercial properties is well off the pace of last year. Indeed, tight credit availability has significantly slowed the volume of commercial real estate transactions.

The slowdown in commercial activity was expected. Commercial activity follows economic activity, and the downturn in the economy which began in late 2007 has yet to end. Add to that the turmoil in financial markets resulting from the subprime mortgage meltdown, continued rising oil prices and job creation in negative territory since the beginning of the year, and it is no wonder that activity in the commercial sector has eased.

markets that have appreciation

Despite a real estate market slow down leading the majority of U.S. housing into an all-time depression, there are still exceptions to the rule with markets that have appreciation, according to the latest Housing Predictor survey.

Only three states remain on the annual Housing Predictor state appreciation list, and all three are benefitting from the energy crisis with growing local economies. Strong oil and natural energy reserves give the three the likelihood to continue with appreciating housing markets through the remainder of 2008.

Housing Predictor forecasts more than 250 local housing market futures in all 50 states, and has attained one of the highest levels of accuracy with its forecasts for any research firm in real estate forecasting.

The over-whelming majority of states are in real estate depressions, according to the latest survey of real estate markets by Housing Predictor. Record breaking numbers of foreclosures have led to a national economic crisis precipitated by new creative mortgages. Rising gasoline, commodity and grocery prices are adding to the nation´s economic woes.


In Washington D.C., lawmakers are working on a series of proposals, but it seems that there´s little hope it will help resolve the real estate crisis. President George W. Bush has threatened to veto any plan that has any sort of bail-out provisions for homeowners. Housing Predictor was the first to forecast the foreclosure epidemic and is currently forecasting a total of 5.6-million foreclosures through 2011.

Falling home values have made it more difficult for homeowners and home new buyers to obtain financing as interest rates rise. The deflationary marketplace is sending the majority of the country´s home prices to new modern day lows.

Like many second home and vacation real estate markets Myrtle Beach attracts visitors from all over the east coast for its beautiful Atlantic beaches, and similar to many second home markets many owners have paid cash for their property immune to the national housing recession as a result.

But for those who want to sell or need to sell the Myrtle Beach market can be a tough place to be right now. Myrtle Beach has seen sales slow from the markets peak, and will see prices fall on average 8.2% in 2008, which makes it bargain hunting time for buyers.

Horry insurance rates will likely drop on July 1st

There's good news ahead for people who live in Horry County. Your home insurance rates will likely drop on July 1st.

Horry County Fire Rescue announced the Insurance Services Organization reclassified the majority of unincorporated areas within Horry County.

This means homeowners could save several hundred dollars a year in insurance rates.

Homeowners may need to provide proof to insurance carriers. Click on the following link for the letter of proof.

how will rates react ?

Last week, rates ended slightly better than where they began as we predicted. The holiday shortened week ahead is packed with high impact reports including the all important Jobs Report which is scheduled for release on Thursday before bond traders head out the door to celebrate Independence Day. So how will rates react when all the fireworks are over? Read on to find out.

Last week, the Fed performed a high wire act leaving rates unchanged while balancing inflationary fears in the statement released just after the conclusion of their two day meeting. But will this week's economic news continue to calm fears or will they return?

The shortened holiday week ahead begins with a bang when the Chicago PMI report is released on Monday. Tuesday, the ISM index takes center stage. However in all likelihood most bond investors will be focused on Thursday's Non-farm Payroll Report. Economists are predicting that the net job loss for June will be to the tune of 50,000. However, the headline number will be only half the story. When the Jobs Report is released it generally includes revisions to the past months as well. If it appears more jobs were created than was reported and/or predicted, expect rates to move higher. On the positive side, if less jobs were created rates may likely fall further.

The bottom line: With a full slate of high impact reports, expect rates to be volatile.

safe ride home on July 4th

On July 4th, Beachside and Diamond Taxis will offer free sober rides home.

You can reach a safe ride at 843-222-2222 or 843-448-8888.

The bartender has to make that phone call for you, and you have to be able to prove you drove to the bar.

This is a free, safe ride home, not to another bar.

silver lining in real estate

Is there a silver lining in the dark cloud hovering over real estate? Leaving aside for a moment the conventional wisdom that all real estate-like politics-is local, there has seldom been a time when the expertise, knowledge and services that savvy brokers and agents bring to the table have been needed more than now.With resales from foreclosures glutting the market and prices in some areas seemingly in freefall, the days of multiple offers and speculative profits are largely gone. The result has been far fewer FSBOs-homes for sale by owner-and more agent-represented listings.

With a huge inventory of unsold new homes, strapped builders who previously relied on an in-house sales staff are increasingly turning to outside brokers to move the product. In some markets, builders are hard-pressed to pay full commission, leading brokers to cut them a break, lowering commissions, making sacrifices to make a buck. In other markets, however, commissions on new home sales are the same or have never been better, or higher.

So maybe it’s not a silver lining. Maybe it’s only a bronze.

But for some, it’s pure gold. “What’s happened is that just about every builder everywhere is not only paying co-broke commissions but very healthy ones, in the 10 to 12 percent range, to move some of the standing inventory,” says Dennis Walsh.

This new builder’s attitude contrasts with what prevailed during the boom years. Then, Walsh says, “in the hotter areas, the builder often wouldn’t pay any co-broker commissions at all” for agents to bring them buyers. “They’d handle all sales themselves.” Those were the days when the sales force could pretty much sit back and let it all happen.

The current market has led to a whole universe of new options, not all of them slam dunks. Some brokers are targeting short sales, homes priced for less than the mortgage balance, or REOs (real-estate owned), properties that as a result of foreclosures have become part of a lender’s portfolio. “But these transactions involve a lot of moving pieces,” Walsh says. “It’s awfully hard to coordinate, and often agents have to compromise on commissions to get the numbers to come together.” Better to work with overstocked new homes, he says.

Nationally, housing starts were down to a little more than one million in April, from a peak of nearly 2.3 million in January 2006. In all areas but the Northeast, where housing starts reached a new low of 89,000, starts were slightly up in April compared to the previous month but still far below their peaks, according to the National Association of Home Builders.

For single-family homes, the figures were even worse. In that category, housing starts declined 1.7% in April, to an annual rate of 692,000 units, the lowest since January 1991, and 42.2% below April 2007. NAHB officials attributed the low numbers to the high volume of vacant new houses still on the market. But the good news is that sales of new homes were slightly up in April after an 8.5% decline in March, though still near the lowest levels since 1991. Home prices, meanwhile, were 14.4% lower in March than a year earlier. Tightened credit requirements have only made the problem worse.

In many parts of the country, the glut that resulted from overbuilding during the boom years is far from gone. In normal times, the Phoenix market could absorb about 40,000 new homes a year, but peak demand pushed it to 60,000, much of it investor or speculator-generated, according to John Foltz, president and designated broker, which has 17 offices and 1,600 agents. The firm is primarily in resales, but about 15% of its business is in new homes. The percentage hasn’t changed, but the number of transactions has dropped. “Almost everybody has a smaller income,” he says.

When economic conditions took a turn for the worse, newly built spec homes “had very little market to be sold into,” he says. Furthermore, cancellations left many of the houses to languish in a builder’s bulging inventory, resulting in sharp price reductions.

“Now, the builders have adjusted,” Foltz says. “That inventory is slowly being absorbed-slowly.” But it may take two or three years to bring inventory back to normal levels. The glut has had a spillover impact on the resale market, with current homeowners whose houses have lost value tending to stay put rather than trade up as they might have in the past. Price declines have been especially sharp-as much as 25%–on the outer rings of Phoenix. Prices of closer-in, custom-built homes have also dropped, but by less, five to seven percent.

“The more positive impact,” Foltz says, “is that some of the builders who, depending on their own sales people when demand was so high, were less assertive about paying real estate commissions to Realtors to sell a product, are now actively co-broking to bring in buyers.

“The commission rates are actually higher in new homes than they were,” adds Foltz. “In our area, the rates have improved an average of 20 basis points or so. I don’t see [agents] asking for higher commissions when they list a property, but there are fewer commission negotiations during the sale.”

Foltz is guardedly optimistic about the future. “It’s evident in some of the data, but it’s only a glimpse,” he says. “The change is from decidedly negative short term to much more neutral. Not like it’s bouncing and people are suddenly euphoric, but there is much less negativity than six months ago. The sense on the street is we are digesting and absorbing the impact of this market, and Phoenix will return to a more long-term historic growth.”

For now, though, the abnormal market in new homes gives brokers and agents an edge, and an opportunity. “In some cases they’ll offer advances on commissions, paying some of it before the closing is even done, before the house is complete,” says Rich Rector, chairman of Realty Executives International. “Sometimes they’ll offer bonuses. Look at the builder as a seller. Sometimes when you need marketing help, you’re willing to pay more. I hate to use the retail analogy, but that’s what it is. Think about a department store. If there’s an oversupply of something, you might drop the price. But if someone out there is willing to help sell it, they might get a higher commission. It’s really sort of retailing economics 101 in a way.”

Dave Schoner, head of the new homes division of Coldwell Banker Mortgage Real Estate, represents 120 builders in the New York-New Jersey-Connecticut area. “Things have slowed down, but they haven’t stopped. They continue to build, and I continue to sell,” he says, and commissions are holding steady. “It’s not like I raise my [commission] to take advantage of unfortunate circumstances,” says Schoner, who now must “spend more time counseling them on current market values.” As a result, he adds, “Builders have adjusted their expectations.”

“The trends are very localized,” says Rick Hoffman, regional senior vice president oa a brokerage in Manhattan, Brooklyn, eastern Long Island and south Florida. Sales volume in the prosperous East End is lower this year, but not by much. “We’re beating the market,” Hoffman boasts. New homes, largely high-end with custom quality finishes, continue to be built and to sell in the $6 million to $10 million range. But because of the overall slowdown, Hoffman says, “we’ve seen our average commission rate go higher.”

With their huge inventories, not all builders can afford to pay higher commissions. “New homes have been hit exceptionally hard,” says Steven Domber, president and principal broker, which has six offices and 200 agents in the northern suburbs and near exurbs of New York City, spanning both sides of the Hudson River. “Most builders are selling houses out of their inventory and at lower prices just to clear their books.”

In fact, there is building going on, he says, not new subdivisions starting from scratch but those where the land has already been readied for development. “In many cases, they have no choice but to build. Sometimes, if you overpaid for land and are holding it, the only way to get out is to build your way out of it,” Domber says. “Others are slowing down the approval process. No one is rushing to get a new subdivision on line.”

If times are bad, Domber believes, “you have to be more flexible with commissions when you know the client is losing money. Staying alive in the [down] cycle is a real challenge for a broker,” who must “educate builders that market value has nothing to do with the cost to build.”

Domber says he sets commissions “on an individual basis,” depending on “how long a relationship you have. You’re more flexible with a guy you’ve been working with for ten years and 200 homes than someone with a few homes over a few years. It’s very subjective.”

Given the new homes market, Domber’s brokerage is doing more resales and concentrating on the commercial end, “diversifying,” he says. A few years ago, he says, new home sales accounted for 30 to 35% of his business; now, it’s 10 to 15%.

To Remodel or Not?

The current buyer’s market-for new and resale homes-has had some serious side effects. As sellers try to unload properties whose prices have already dropped, they are loathe to spend a lot on remodeling to make them more marketable. Even those staying put are hesitant to invest in remodeling or additions they think won’t help their homes appreciate.

The Joint Center for Housing Studies at Harvard University has forecast that home improvement spending will continue to fall through the end of 2008, at an annual rate of 4.8%. Reflecting this trend, the Lowe’s home improvement retail chain posted an 18% drop in its first-quarter profits. The overall picture, though, is muddled by regional differences.

In northwestern New Mexico, for instance, new home construction and remodeling continue, as before on a small scale. “Remodeling-wise, I’m as busy as I’ve ever been,” says Lonny Rutherford, of Farmington, New Mexico, and the current remodelers chairman of the National Association of Home Builders. Sandy Dunn, a broker-builder and NAHB president, based in Point Pleasant, West Virginia, reports, “The market here is a little softer” but not drastically so.

But if remodeling is down in many other areas, staging a property to boost its sales appeal is up. “The buzzword is not remodeling but staging,” says Steven Domber, based in Poughkeepsie, New York. “Staging has replaced remodeling.”

In most markets, that has meant fewer expensive additions or remodeling jobs and more of the less costly cosmetic work to impress potential buyers. Homes, to sell, “must be sparkling and shining,” says Dennis Walsh. “Remodeling now means repainting, re-carpeting, redoing the doors on kitchen cabinets, the kinds of things that make a house look well-kept, show better, look cleaner, in nice move-in condition.”