Thursday, May 19, 2011

Late to the party...

For everyone that reads my blog they'll know this is old news...

http://blogs.forbes.com/morganbrennan/2011/05/19/dont-expect-a-housing-market-recovery-until-2014/

Saturday, February 12, 2011

Happy 2011 Utah Real Estate!

Sorry I've been MIA the past few months... but so has the real estate market!

Some really good things are happening with the economy... finally... but we still have a long way to go. IF you want to know whats happening in real estate here in Utah, then let me try to summarize:

Prices overall are still falling. REO inventory is a little flatter but still rising. Banks are holding on as long as they can. A few Utah banks have failed, but a couple that were on the chopping block were able to raise some cash and keep the FDIC at bay. I can't imagine the ROI being too great for many of the investors, but in the long run it should pay off just fine. Who wouldnt want to borrow money at 0% and invest risk free for 2 or even 4% risk free!

The Utah economy is relatively strong and the employment pool is deep. The next hurdle to overcome is realizing that wages here still need to come down. If you were making $80,000 a year in 2007 in the real estate/construction industry, then you will likely need to be happy making $45,000 in 2011. Sorry buds, but thats the truth. Everyone was overpaid a few years ago... even myself!

Distressed deals are out there, however there are lots of overly aggressive investors and trust fund babies who are trying to "do deals in real estate". Be careful and dont get emotionally attached to a project. Let someone else overpay, and you can buy it from them next year when they decide to take the losses. Also, dont pay more than 5% in broker fees. They are starving and usually dont add value to the deal.

Home builders who wisely saved their money during the boom years are reaping the benefits. Do not try to buy a distressed development project anymore. If it is a good deal, then a home builder like Salisbury Homes, Ivory, Perry Homes, or McArthur wouldve already bought it.

Be afraid of commercial deals... especially retail. Employment stinks and there is still a contraction to urban centers. There are some pearls out there if you get lucky, but after the bidding war you likely wont see high ROI. It'll look good on paper, but you actual yield will be lucky to get in the low teens.

Sorry for the brevity of this post. If you'd like me to elaborate please comment!

Thursday, September 16, 2010

I warned you about the cont'd decline...

http://www.cnbc.com/id/39192979/

As this article states, there are many local areas that wont see dramatic declines in the future. But for the most part we will see prices decline all over the US. It's gonna make a lot of the tax break buyers looks bad bc many of the homes will likely decline beyond the $8000 tax credit they received.

The winners over the next 12 months are the people who can afford to sell for the lowest price. Banks will continue to be slow about approving offers bc they wont admit the truth. Some of the big winners will be the home builders who have managed to get into DEVELOPED LAND for super cheap. A brand new home will always get the nod, if everything else is equal... and even if some things AREN'T equal! There are a few guys who can afford to build a home for 50-75 dollars per foot, and as long as they got the home site for a great price they'll be able to sell what they build. It may not be the absorption we saw a few years ago, but it will be steady.

Monday, August 30, 2010

The really good deals are pretty much gone...

This article covers it. It's been awhile since I posted anything. This is why:

http://online.wsj.com/article/SB10001424052748704323704575461681180655898.html

I have seen some VERY aggressive buyers out there. Although to be honest I see about ten times as many aggressive offers as I do deals that actually close on the property. Definitely some dumb money out there just buying stuff for a management fee. If they can get 5% the investors will be happy they just dont lose their money I guess.

Friday, June 11, 2010

More downward pressure to come.

http://www.sltrib.com/business/ci_15271636

Remember... its a great time to rent a large house. Do not buy unless you are in it for the LONG haul (10-15 years).

Saturday, May 15, 2010

Zell tells it how it is

This is a great short article. Zell is a smart guy and doesnt mince words. One point I really like is about the small banks. For the past several months I have been afraid that most good deals would be pooled together in large traunches for FDIC structured note sales. After seeing the high prices those assets are going for, I'm beginning to think that the small banks will still offer some decent deals. I especially like his point about "investing by committee" vs investing being done by entrepreneurs.

http://nreionline.com/news/Zell_ULI_0513/

Wednesday, May 5, 2010

CRE Delinquency above 8%

The trend keeps on going... The following article shows that there is still a lot of trouble with commercial real estate. Keep in mind that these are only DELINQUENCIES and NOT foreclosures/workouts. Most banks are not in a position to write down the huge losses on these assets, so we will be in this mess for several quarters to come. While there is some good news of credit markets loosening up, I dont think it is the silver lining that developers/borrowers are looking for.

http://nreionline.com/news/cmbs-delinquence-rate-hits-record-0504/

I also like this short article about rating agencies. They are completely useless. Remember, theyre the ones that blindly marked all these debt packages as AAA so they were quickly sucked up by the investment groups. I think the same criticism can be made of appraisers as well. I have YET to look at a recent appraisal that is anywhere NEAR the fair market value for the asset in question.

http://www.cnbc.com/id/36961144