My New Blog

Since I have been neglecting my blog recently, I am getting caught up today. There is more and more good news out there now that I am looking for it. - Lloyd

Plenty of Positive Market News Today

Hungry for a little good real estate news? Leon d’Ancona, president of IMS Inc., has something to cheer you up.

D’Ancona, who provides real estate information to the industry, has set up a Web site that lists 2,319 markets in the United States where homes are selling well.

For instance, Loganville, Ga., homes sold 38.5 percent faster in April than they did in March, and sales of homes in Avondale, Ariz., increased by 64 percent in April compared with March

"The problem with glass-is-half-empty stories is that they have an undue psychological impact on markets that is not borne out by all the facts," says d’Ancona. "We know, because it's our business to know, that there are hundreds of cities and thousands of neighborhoods in the United States right now where the market is very healthy, thank you.”

Source: IMS Inc. (05/27/08)

It's not all bad news out there. Here is some of the latest stats for our "still growing" economy. The much publicized residential market bust is creating fear in the commercial market as well. Banks are definitely tightening their lending standards and some banks are suffering from past sins, typically related to poor residential loans. However, we are seeing brisk activity in commercial loan requests and businesses that are growing. Feel free to share any positive news you've heard or seen and I will post it on this site.

Thanks - Lloyd Easters

WASHINGTON — The U.S. economy grew at a faster rate in the first quarter of this year than previously thought, the government reported Thursday, further muddying the question of whether the sluggish U.S. economy is now in recession.

Between January and March, the U.S. economy grew by 0.9 percent, not the 0.6 percent projected a month ago, the Commerce Department reported Thursday morning.

Normally, such a slight upward revision wouldn't merit much attention. But economists and policymakers are confounded by today's economy, which is being dragged down by a deep housing slump and soaring energy prices. Some indicators point to recession, while others suggest that the economy is continuing to grow despite stiff head winds.

"We're pleased that the number is higher than the original number. Inside the numbers, the shape ... is healthier than the first set of numbers," Commerce Secretary Carlos Gutierrez said in a telephone interview with McClatchy Newspapers.

Gutierrez pointed to the revised numbers showing continued strong exports, healthier business investment than first thought and a reduction in business inventories, which were thought to have been making economic growth appear stronger than it actually was.

By KEVIN G. HALL

McClatchy-Tribune

Dramatic declines in commercial real estate investment activity mask respectable fundamentals so far in 2008...

While investment in commercial real estate has decreased to levels not seen in four years, fundamentals (vacancy, rent growth, absorption) have remained relatively buoyant. There have not been any great spikes in vacancy rates nor have that many markets experienced negative rent growth. Under normal circumstances, full or near-to full occupancy coupled with positive rent growth would be ample incentive for investor interest. Where is the disconnect?

Many analysts have assumed that capital does not exist and that banks or other sources of equity have put a halt to lending for commercial real estate. This is not the case. The decline in investment activity actually has more to do with a lack of confidence by investors and lenders who are leery about current conditions and are taking a “wait and see” attitude. More than anything else, the decline in confidence levels is due to investor concerns and reticence about the current and future state of the economy.

While economic uncertainty and the credit crunch have led to investor anxiety in many markets, commercial real estate remains comparatively attractive, according to Deloitte LLP’s recently released report, 2008 Real Estate Capital Markets Industry Outlook.

"In prior boom cycles, commercial real estate has responded by overbuilding. The industry has clearly learned its lesson because this time commercial real estate is enduring a credit crunch, not a crisis, partially because it resisted this urge,” said Dennis Yeskey of Deloitte’s Real Estate Capital Markets practice.

"No doubt the industry is in a strong position to withstand a recession, should one occur, and commercial real estate remains a viable investment option for those seeking to diversify and insulate their portfolios from market volatility.”

The Deloitte report discloses that commercial real estate (CRE) has "evolved from an asset class characterized by steadfast returns and low volatility to a ‘Best in Show’ asset class providing investors with both high yield and high stability . . .

"Despite several stock market run-ups in the last few years, CRE has shined, outpacing stocks and bonds on a 1-year, 5-year and 10-year basis.”

According to the report from Deloitte’s Real Estate Group, which has offices across the U.S. and in Europe and Asia, CRE "has been a clear winner in terms of performance and stability, in addition to offering diversification for investors.

"Early in 2007, the story that appeared to be developing was the emergence of asset class parity, as rebounding stocks as well as private equity and hedge funds emerged as more significant competition. During the first three quarters of 2007, however, private CRE returns held steady as stocks endured significant and repeated volatility.”

The report makes a number of positive observations regarding commercial real estate, including:

• Over the 3-year period from 2004 to 2006, core private commercial real estate had annual returns of more than 17 percent, while the S&P had an average annual return of 10.44 percent over that period, NASDAQ returned less than 7 percent, and bonds returned less than 5 percent.
• Due to the weak U.S. dollar, commercial real estate in the U.S. is relatively attractive to foreign investors compared to other international markets.
• Overall vacancies in commercial real estate remains stable, and rent continues to increase.

The "Bottom Line,” according to the report: "Going forward, investors would do well to stop comparing commercial real estate returns to the previous few years’ performance, and to take a closer look at how these returns fit into the big picture.

". . . when compared to other investment categories (stocks, bonds, etc.), commercial real estate remains an attractive investment vehicle due to its stability and opportunity for diversification.”