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Archive for the ‘Real Estate’ Category

Commercial Mortgage Delinquencies May Not Peak Until 2012

Posted by Larry Doyle on January 11th, 2010 2:50 PM |

I have yet to find a financial site that aggregates as much quality material as Wall Street Pit. With over 160 authors from leading universities, central banks, think tanks, and private enterprise, there is little that gets by this crowd. The quantity of the Wall Street Pit material is only exceeded by the quality. Amidst my reading and reviewing today, this commentary stood out as it addresses perhaps our weakest domestic economic link, commercial real estate.

Commercial real estate [CRE] continues to face significant pressures in the U.S. as the level of delinquencies increases.
Defaults on hotel, office, and retail loans are driving up delinquency rates for CRE loans, with strong concentrations in the multifamily segment, which represents parts of the US hit hardest by the housing crisis, Fitch Ratings said in its latest Loan Delinquency Index report. (more…)

Increasing Vacancy Rates Will Pressure Both the Rental Market and Home Values

Posted by Larry Doyle on October 6th, 2009 11:42 AM |

You do not need to take Economics 101 to understand that an increase in supply of any asset will almost always lead to a decline in prices. This ‘tremendous grasp of the obvious’ in regard to housing runs right in the face of assertions put forth by many real estate brokers and housing experts.

High five to our friends at 12th Street Capital for bringing attention to The Wall Street Journal‘s writing, Apartment Glut Expands:

(Getty Images) Signs advertise apartments for rent in San Francisco in July. Rents declined during the third quarter, usually a strong period for rentals.

Signs advertise apartments for rent in San Francisco in July. Rents declined during the third quarter, usually a strong period for rentals. (Getty Images)

Apartment vacancies hit their highest point since 1986, surging in cities from Raleigh, N.C., to Tacoma, Wash., as rising unemployment continued to chip away at demand during the traditionally strong summer rental months.

The U.S. vacancy rate reached 7.8%, a 23-year high, according to Reis Inc., a New York real-estate research firm that tracks vacancies and rents in the top 79 U.S. markets. The rate is expected to climb further in the fall and winter, when rental demand is weaker, pushing vacancies to the highest levels since Reis began its count in 1980.

Let’s Get Real About Real Estate

Posted by Larry Doyle on March 27th, 2009 5:25 AM |

After the meltdown in technology stocks in 2000-2001, many people decided they would never go near that sector again. I certainly hope we do not see people reluctant to buy real estate again after this correction. Real estate has so many great qualities. As with anything you put money into, you need to understand the risks beforehand and while you own it. Regrettably, not nearly enough people understood the risks of real estate or the risks in the mortgage finance process before they purchased real estate over the last 5 years. 

While Sense on Cents has been focused on many of the major market moving news on Wall Street and Washington, ultimately to most effectively navigate the economic landscape we all need to relate the major news to our own financial lives.

To that point, there are already some great deals in certain real estate markets and there will be more coming along. Where does one go to become more familiar with real estate? Let’s check out our Investing Primer which just so happens to have a piece on Exploring Real Estate Investments: Introduction. (more…)

How Long Can You Tread Water?

Posted by Larry Doyle on March 26th, 2009 11:10 AM |

The other day, I provided a cursory overview of the details embedded in the recently proposed Public-Private Investment Partnership, Will Banks Truly Sell these Toxic Assets?

The main point I tried to highlight in that piece was the need for true price discovery for these toxic assets. A loyal reader provided tremendous insight in highlighting that the PPIP needs to assure that sellers are truly at arm’s length from buyers to insure that the price discovery process is real and fair.

There are potential concerns with this price discovery process highlighted in my piece Send in the Clown. Are the bank portfolios, located within the largest banks needing to sell toxic assets, attempting to prop the market higher? (more…)

FDIC . . . For Doing It Correctly

Posted by Larry Doyle on March 19th, 2009 2:41 PM |

Sense on Cents is very judicious in selecting our Economic All-Stars (highlighted in the left sidebar). These individuals continually display a level of professionalism, maturity, consistency, and integrity which are not commonly found in our financial or political spectrum. I deeply appreciate their insights and perspectives and enjoy sharing them with our audience at Sense on Cents and No Quarter USA.

I thank Susan and Andy for tipping me off to remarks made earlier today in which Sheila Bair Says “Too Big to Fail” Strategy for Financial Institutions Must End. The administration and other political pundits  are trying to make the case that the Federal Reserve should serve as the systemic risk regulator. In my opinion, Sheila Bair should occupy that role. There is a major political battle developing over this turf.  Make no mistake that how this battle plays out will have deep and longstanding implications for our financial system as a whole and for individual consumers. (more…)

Housing Index Revisited

Posted by Larry Doyle on March 18th, 2009 1:11 PM |

A week or so ago, I introduced two indexes that track the outlook for housing in our country. The S&P/Case-Shiller Index is released on a monthly basis. The ABX is an index that can be traded daily by institutional money managers and thus allows them to reflect their opinions on the outlook for housing. The ABX is a very broadly defined index that tracks housing by the underlying year of origination of the mortgage.

Yesterday, the monthly housing starts number surprisingly jumped 22%. The government program TALF (Term Asset-Backed Lending Facility) to restart the consumer finance markets is set to launch next week.  Hopefully that program will bring added liquidity to our consumer finance markets and support housing as well. The mortgage modification program to support housing is underway. (more…)

Market Fades on the Close

Posted by Larry Doyle on March 16th, 2009 6:30 PM |

Monday’s price action in the equity markets was particularly interesting. The market opened firm, up approximately 1%, and continued to trade with a very firm tone all day. What precipitated the strong tone? Fed chair Ben Bernanke was interviewed on 60 Minutes last evening. On that show, Bernanke Defends Recovery Efforts in Rare TV Interview.

First and foremost, it is very uncharacteristic for anybody from the Fed to consent to an interview targeted at a general audience. I view this as Bernanke trying to make the case for himself, the Fed, and the economy during these challenging times. In fairly short order, Bernanke has gained significantly greater credibility than his colleague, Secretary Geithner. Bernanke also spoke well of the economy turning around later this year IF the financial system recovers. That is a mighty big IF!! (more…)

Obamanomics: Conservative or Revolutionary?

Posted by Larry Doyle on March 16th, 2009 4:17 PM |

A loyal reader shared with me a recent posting from former Clinton Labor Secretary Robert Reich. Earlier today I cross posted a piece from No Quarter in which Reich was less than complimentary of Secretary Geithner. Well, let’s see what Mr. Reich has to say about President Obama’s economic program: Is Obamanomics Conservative or Revolutionary?

Prior to delving into my thoughts and commentary on Reich (or anybody), I always find it useful to consider the perspective of the writer. In regard to Mr. Reich, let us not forget that Robert Reich Excludes White Male Construction Workers from Obama Stimulus Plan. Utilizing that perspective, Mr. Reich would be considered to be more than slightly left of center. Additionally, in considering the Obama economic plans, I think it is critically important to incorporate the economic plans and agenda of the Democrats in Congress. These Congressional leaders have a major influence in this process. These Democrats, including David Obey (D-WI), Nancy Pelosi (D-CA), Harry Reid (D-NV), Barney Frank (D-MA), Chuck Schumer (D-NY), Chris Dodd (D-CT), and Steny Hoyer (D-MD) amongst others are major players in the stimulus, budget, and Omnibus bill that have come down from Congress. It is not totally clear where the lines are drawn between the White House and Congress on all the economic issues. That said, let’s see what Mr. Reich has to say and then critique his assessments of Obamanomics. (more…)

What About Commercial Real Estate

Posted by Larry Doyle on March 16th, 2009 12:31 PM |

On my radio show last evening, I touched on some of the pressing issues facing our economy and, in turn, our markets. These issues include residential housing, municipal finance, automotive, and commercial real estate. While the first three issues seem to get a wealth of very personal and humanistic coverage from the media, the world of commercial real estate seems much more opaque. The site of large office buildings, suburban shopping malls, upscale hotels, warehouses, and apartment complexes do not evoke the level of human emotion involved in a foreclosed home, municipal layoffs, or factory closings. That said, the problems in the commercial real estate industry should generate just as much concern if not more. Why?

These commercial properties are the glue in our entire world of global finance. While the development of the commercial mortgage-backed securities market brought a large amount of liquidity to this sector, the shutdown of that market has just as quickly sucked the oxygen right back out. What has happened as a result? The lack of a transparent market has caused an overwhelming lack of liquidity and as a result properties are not trading. Why? The disparity between perceived value from the buyers’ and sellers’ perspectives is so wide that we could drive that proverbial Mack truck through it. (more…)

How Do We Track Housing?

Posted by Larry Doyle on March 12th, 2009 7:07 AM |

housing-crisisAt the core of most, if not all, of our economic problems lies housing. I do not need to replay the tape of low rates, shoddy underwriting, and Wall Street securitizations that all played a dramatic role in creating a bubble the likes of which we have never seen and hopefully never will again.  All that said, housing is an enormous market with a wide array of factors impacting it. How does one track it? Are we supposed to rely on our local brokers telling us things feel better? Should we ask contractors if they are bidding on jobs? Dare we rely on our local or national media outlets to provide their expertise and pandering? If we did, housing may have bottomed 14 different times in the last 10 months. In all seriousness, how can we track housing? Welcome to Sense on Cents

There are two indexes that have developed over the last few years and are enormously respected by market participants. One index, the S&P/Case-Shiller Home Price Indexes, is released on a monthly basis. This index tracks a variety of regions in the country but not every region. Still, all things considered, this index is widely watched as a reliable indicator of health in housing. The index is typically released toward the end of each month. The most recently released report was on February 24th, A Look at Case-Shiller Numbers, by Metro Area. In this report, all indications are that housing has yet to see any support. (more…)

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