 Current Market Conditions
Residential
Case Shiller and NAR reports show continued weakness and everyone
is wondering whether the recovery is waning. Case Shiller notes that
the rate of decline in home prices slowed in October from the previous
month, and prices remain flat after the spring and summer gains. Home
price Indices of its its 10-city and 20-city composite indices declined
6.4% and 7.3%, putting home prices at 2003 levels. A flat report is not
as bad as much of the last two years, but some Govt programs are being phased out. NAR site points out that on a month-to -month basis,only seven of the 20 cities  showed
improvement. NARs data for November showed prices down 4.3%
year-over-year. Foreclosures continue to be the problem, making up 30%
of the third quarter’s home purchase. Moodys points out that there are 3 million more homes in the pipe and that another 3 million are 30-60 days late. These homes are in a foreclosure pattern. New Home Sales: The government reported that sales of new homes dropped a sharp 11.3 percent, an indication that supply is still greater than demand.
Apartments
The apartment market is showing signs of improvement, according to
the National Multi Housing Council’s latest Quarterly Survey of
Apartment Market Conditions. Although the survey still indicates higher
vacancies and lower rents, we see increased sales activity and greater
availability of debt and equity capital compared with three months ago.
Apartments have long been considered the better investment, partly because there is financing available and they didnt participate in the building boom of single family homes
Follow The Money
The American Recovery and Investment Act of 2009
Green HUD
and the U.S. Department of Energy are working together to offer more
financial incentives for owners to retrofit properties for energy
efficiency. Another economic stimulus plan enacted earlier this year
provided funds for green retrofits. Larger property owners of
commercial buildings including apartment complexes whereconservation of energy had the greatest impact. Hopefully, some of this money will trickle down to smaller owners. Fannie and Freddie Congress
had placed a cap on spending of $200 billion dollars on each. On
Christmas eve, Obama lifted the cap through 2012, giving the two quasi
public institutions a blank check. I think this points very clearly to
the next big wave of foreclosure that will stem from the Alt A and
commercial mortgage recasts that will be coming due between now and
2012. A blank check (read big money problems) is whats next.
The Stock Market
REITS
The Dow Jones Equity All REIT Total Return Index is up 31% this
year, reversing a 38% decline in 2008, beating the S&P 500 by 25%.
Given all the flat to downright ugly news still coming out it seems
counter intuitive that real estate funds would be doing so well. They have been raising money issuing new shares and selling property whenever they can. In short, they have been raising money for whats expected to be a generational opportunity in good properties coming on the market at great prices. The ishares industrial/office and retail REITS are up 10.7% and 11.2% respectively in November/December alone. Even mortgage REITS are up 3.8% for the same period. Heres what they are looking at...
Real Estate Rubble Bloomberg
reports that commercial property prices have fallen by 30 percent to 50
percent wiping out the equity in most debt financed real estate deals
since 2005. This equals as much as 54 percent of the $1.4 trillion in
loans that will come due in four years, according to Randall Zisler,
chief executive officer of Zisler Capital Partners LLC (via Bloomberg
News).Mr. Zisler goes on to say that much of the debt is likely worth about 50 percent of par. Many banks will end up insolvent as they reduce the value of their holdings, he wrote, adding that regional and community lenders are especially vulnerable. Stock markets are forward looking mechanisms and the REITS are looking passed the problem to great future buying opportunities. If the banks are holding so much bad paper, then it will be taxpayer money (those blank checks) and private investment money (REITs) likely final owners of all this real estate rubble. I know that investors will cherry pick and to drive hard deals to profit. I wonder if that leaves us, the taxpayers, to buy whats left.... Its all in the oversight REsourced from www.yourpropertypath.com You may republish this article, as long as you do not edit and you agree to preserve all links to the author and www.yourpropertypath.com
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