Now that the so-called expert analysts have run out of superlatives, they don’t know what to think about real estate – this HW article refers to “housing desolation”.
But this is the recovery.
Mission accomplished, we’re here, it’s done. The ‘market’ will be on choppy seas for years to come, and people can either participate, or grab some popcorn and watch.
We’ll have more financial calamity and hysteria, but we’ve become accustomed to it by now. When Greece goes under, will anyone in NSDCC care? I don’t think the FedGov will stop throwing money at the USA (especially Fannie/Freddie), so short of a domestic revolution, this is it – at least until somebody with vision steps up to the microphone and demands market clearing.
As the housing market exits its typical buying season, it faces what many analysts predict to be several months of an ongoing search for a bottom and many years of slow recovery unless bold action is taken now.
Moody’s Investors Service lowered its near-term outlook for housing and the broader economy this week. Home sales and starts are now hitting a bottom, while home prices will continue to sink until early 2012, said Celia Chen, senior director at Moody’s Analytics in a research note.
“As 2011 began, the recovery appeared healthy and ready to turn into a self-sustaining expansion. Job growth was strong, unemployment was falling, and income and consumer spending were accelerating,” Chen said. “Today, the economy is struggling to avoid another recession.”
Recent housing indicators remained stable over the last three months. Housing starts averaged 590,000 units, house prices were flat, according to the National Association of Realtors and CoreLogic indices. But all data were down from last year and should only show minimal gains by the end of 2011.
Chen expects existing home sales will reach a 5.3 million annualized pace, and housing starts will touch 640,000. Next year, she said sales should reach a 6.5 million pace and housing starts could hit 1 million.
Of the bankers surveyed by analysts at the consumer credit firm FICO and the Professional Risk Managers International Association more than half do not expect home prices to climb back to 2007 levels before 2020.
“Have we finally hit rock bottom? That’s hard to say, but according to our survey, it’ll be quite some time before prices fully recover. The fact is that the market needs help to clear the backlog of distressed properties,” researchers said. “We are in no man’s land right now.”
Both Chen and the surveyors said the most obvious policy step to take would be the new refinancing package the Obama administration is currently putting together. Most believe the upcoming changes will simply be a tweak of the underwhelming Home Affordable Refinance Program.
“Economic logic strongly favors action to promote refinancing. With current mortgage rates near 4% and the median rate on outstanding mortgages above 5.75%, the potential rate reduction could average almost 175 basis points,” Chen said, adding that the savings to borrowers could be around $63 billion a year, though estimates vary wildly.
Chen also pointed out that the estimated 2012 bottom to home prices hinges on a restarted foreclosure process very soon, and that depends on how quickly the attorneys general and the banks resolve their differences in the robo-signing talks.
The FICO and PRMIA surveyors agreed.
“Something bold has to happen – either an acceleration of foreclosures that will force prices down to clear the market, or the adoption of aggressive policies that encourage the resetting of loan terms, such as the proposed expansion of the number of homeowners that qualify for refinancing,” they said.
Other than injecting boatloads of money into the system, what exactly has changed since September of 2008?
Hmmm…since 2008? Let’s review:
1. Housing prices? Better (lower)
2. Mortgage rates? Better (lower)
3. NAR cheerleaders? Quieter
4. Housing leadership? Zero (same)
5. Buyers more educated? Yes but need to be self-taught or come across a witty blog. (same)
6. Sellers more educated? Not really, still have head in sand. (same)
7. Government still wasting trillions? Yes (same)
8. No hope of change ahead? Nope on hope (same)
Yep, I’d agree, not much has changed since 2008.
The Fed has potent tools at its disposal to combat a sluggish recovery, and won’t hesitate to use them if economic conditions worsen, according to St. Louis Federal Reserve President James Bullard.
Encinitas Village, a 183,675-square-foot community shopping center at 105-133 N. El Camino Real in Encinitas 92024, has been sold for $78.65 million, cash.
The buyer was TRC Encinitas Village LLC, 5973 Avenida Encinas, Suite 300, Carlsbad 92008, Attn. Stephen M. Bowers. The buyer is affiliated with Terramar Retail Centers, of Carlsbad.
The seller of the property (259-121-24) was Encinitas Associates-II, a California limited partnership, formerly known as Hughes/Encinitas, Ltd. Newport Assets Inc. is the general partner of Encinitas Associates-II and Richard M. Haugen is president of Newport.
Cushman & Wakefieldís Retail Advisory team led by founder Executive Director Pete Bethea, and supported by investment sales specialists Rob Ippolito and John Jennings represented the seller and procured the buyer.
The seller owned the shopping center — anchored by Ralphs (43,400 square feet), CVS (25,473 square feet) and Trader Joeís (11,000 square feet) — for more than 20 years. The property was upgraded in 2008 with new landscaping, improved circulation and patio seating areas. Terramar has acquired, managed and leased more than 6.5 million square feet of commercial property in its 15-year history, and currently owns and operates 21 neighborhood, community, specialty and power centers
Let’s see, a large neighborhood center with two major anchors occupying 38 percent of the apace at low anchor rents sells at $428 per square foot. Don’t see much distress here. I keep waiting for all the distressed commercial properties to be sold at fire sale prices a la the RTC in the 1990’s, but it just is not happening.
The bifurcated market extends way beyond housing. There is a LOT of money out there chasing “quality” assets. It just isn’t in the pockets of the average home buyer.
What say you, Clearfund?
I say the deals are out there, just not listed and set up on a platter for the casual participant.
The deals are handled quietly, in a boardroom, not on the street. We are doing discounted buy outs of the loans with the borrowers which resets their basis lower and let’s them recapitalize the property for the benefit of all.
Great deals are there if you know where to look, and have 100% cash to close in <30 days or less. This is why we raise our cash from investors FIRST, then go attack properties, not the other way around.
Stabilized deals like this Encinitas project, and CBD bldgs sell at peak CAP rates and prices.
It's a barbell, good/bad deals get attention, , middle/average deals are all OPTs of the commercial world.
Check out the buyer orgy in Encinitas Highlands.
Five houses for sale between 101 and I-5 from Encinitas Blvd to just south of Santa Fe. That’s about 1 mile by 1/2 mile. And four of the five are pending!
As for the Encinitas Village (Trader Joe’s) deal, it’s all about the interest rates and future inflation. With interest rates near zero, you can pay a really high multiple of rents and still get cash flow breakeven. And then any inflation in the next ten or twenty years is pure profit.
Read what this “expert” wants to do. Nuts!