Today S&P Case-Shriller Home Price Index, which reports US home prices in 10 major metropolitan areas, fell a record 8.4 percent for 2007 through November.
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Today Joseph Lewis disclosed in a regulatory filing that he has just increased his stake in Bear Stearns to 9.57 percent.
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MBIA Inc, the world’s largest bond insurer, announced today that it had guaranteed 8.1 billion dollars of the riskiest mortgage securities
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Buying real estate seemed a no-brainer five years ago.
Cheap home loans were easy to acquire. Home prices were soaring. Stocks were dead money. Oh, how things have changed.
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What characteristics do people look for in a good investment?
Start with positive cash flow, low expense ratios, low transaction fees, and proven returns on a historical basis. Using these criteria, does the average house match up with other investment options?
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In the current collapsing housing market, the vultures are circling for an economic feast, and they aren’t necessarily the bad guys.
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In the rampant real estate speculation in Las Vegas three years ago, people lined up outside Pulte Homes offices overnight as if they were waiting for the release of the latest video game console or concert tickets.
For five years, a Lower Windsor Township, Pa., couple has been buying, remodeling and reselling homes - a process known as flipping - for a profit.
Whether the housing market horror show has come and gone - or still alive and well - is one of the most hotly debated issues on Wall Street.
After Tuesday’s report from the Mortgage Bankers Association about ballooning home mortgage foreclosures and delinquencies, it is hard to accept the hypotheses some economists and money managers are pushing:
Some buy this outlook, but Michael Larson, a Florida investment adviser, says the housing horror show is only in the intermission stage. He cites bulging inventories, rapidly slowing sales, and weakening home prices.
Last April, Larson, associate editor of Safe Money Report, a monthly newsletter out of Jupiter, Fla., said that subprime (bad credit mortgage) lending firms were “indiscriminately lending to anyone who had a pulse.”
At the same time, he recommended the sale of the shares of the industry’s third largest firm, home loan lender New Century Financial. At the time, the shares were trading at around $45. It was a good call; the stock is now under $2.
While Wall Street is heavily focused on the latest debacle, notably any company with exposure to the $1.2 trillion worth of outstanding bad credit home loans, Larson sees another burgeoning risk — apartment real estate investment trusts, notably rental-oriented firms that build, own, and manage apartment complexes.
“They could be a major housing problem, the next big shoe to drop,” he said.
Put another way, real estate investment trusts could be Act II of a bloody housing horror show. But you can’t detect that from the blistering showing of apartment REITs, one of the stock market’s hottest sectors over the past three years.
In this period, many have racked up sizzling gains, including reinvested dividends, of roughly 100-150 percent. That, in turn, drove up the market capitalization of the 19 largest apartment REITs to $65.8 billion as of last month.
But that was yesterday.
Today, Larson observes, REITs face swelling problems, among them increasing supply, rising vacancies, and slowing real estate demand, all of which point to diminishing rental growth.
And he sees rising rental competition from the many speculators who hoped to make fast killings using low-interest mortgages for buying and flipping condominiums, single-family homes, and townhouses.
With the housing market slumping, many flippers, unable to flip, have now resorted to renting, thus putting increased pressure on the rental market.
Follow the link to continue reading in the New York Sun …
The San Jose housing market is cooling off.
That much is common knowledge. However, despite the drop-off in California mortgage loan demand, Silicon Valley real estate has become the new darling of the real estate investment world, brokers at a Commercial Real Estate Women luncheon said last week.
Erik Doyle, a broker with CB Richard Ellis, who handled last year’s sale of the Peery-Arrillaga real estate investment trusts to RREEF for $1.1 billion, said he believes much of the sizzle in the South Bay can be credited to venture capitalists.
Those investors, who believe there is still money to be made from investing in real estate, are thought to pour more than a third of their money into companies within 30 miles of Palo Alto.
“That coupled with strong demand for space … makes the valley very much in demand among institutional buyers,” Doyle said.
Another sign that the valley is one of the up-and-comers in commercial real estate is the Blackstone Group’s apparent decision to hold onto the South Bay buildings just acquired in its $39.2 billion buyout of Equity Office Properties.
Blackstone, Doyle noted, is selling portions of the EOP portfolio in San Francisco, Sacramento and elsewhere, but so far has held tight to other major developments within the Silicon Valley region, where housing prices are already sky-high.
Before the acquisition by Blackstone, EOP owned 580 buildings with more than 108 million square feet in 16 states and the District of Columbia.
Doyle also observed that the face of ownership is changing as developers who built the valley - he called them “cowboy developers,” such as Joe Lewis, Richard Peery and John Arrillaga - are now selling off their real estate holdings to institutional investors.
“The big-money guys are not emotional about their real estate. These people move their money very quickly,” he said. “It’s different than with the Peerys, Arrillagas, Bergs and Sobratos, who build and hold or buy and hold. … This is exciting for the valley.”
All coming at a time when home loan demand is plummeting in the residential real estate market, sparking concern that a recession may soon follow.
But that’s not deterring developers or jobs from focusing in on the area.
Legacy Partners is “dusting off” its blueprints for its second River Park Tower on West San Carlos Street and expects to file plans with the San Jose Planning Department in the next week.
Moreover, a 17-story, 300,000-square-foot tower is now underway, one that would serves as a replica of the downtown tower built in 2001, according to Steve Dunn, Legacy’s vice president.
“That doesn’t mean we’re definitely going forward. But we do believe the market is coming back. There’s all sorts of indications: absorption of space, new jobs being filled and now an increase in rental rates.”
SOURCE: San Jose Mercury-News