Dont' worry CR, new demand coming from illegal aliens
FORMER NASA astronaut and moon-walker Dr Edgar Mitchell - a veteran of the Apollo 14 mission - has stunningly claimed aliens exist.
And he says extra-terrestrials have visited Earth on several occasions - but the alien contact has been repeatedly covered up by governments for six decades.
If it's here, then it aint that bad. Also, I know I make this point over and over again, but remind me why a slow down in construction is a bad thing? I mean were seeing people put on the brakes well in advance of plummeting rents, skyrocketing vacancies, isn't that a good thing that CRE developers have actually, you know, learned to forecast demand a bit vs. react solely to the collapse around them?
"Commercial real estate activity weakened or remained sluggish in a majority of Districts, although Cleveland, Minneapolis, and Kansas City noted some improvement. Boston characterized sentiment in the sector as "decidedly morose," and industrial markets were especially weak in that District. Office market conditions in the Richmond District continued to weaken and were "bleak" in the Washington, DC area. Vacancy rates increased in the Philadelphia and Atlanta Districts, and were up noticeably in both Midtown and Downtown Manhattan, according to contacts in the New York District."
Commercial real estate activity weakened or remained sluggish in a majority of Districts, although Cleveland, Minneapolis, and Kansas City noted some improvement.
Improvement from what, 'morose' or 'bleak'? FWIW - I have friends in CRE in MPLS and from what they describe I wouldn't call it 'strong'.
"isn't that a good thing that CRE developers have actually, you know, learned to forecast demand a bit vs. react solely to the collapse around them?"
It would be good if it were true. They would still continue building if they could get financing. It has nothing to do with them reacting to supply and demand.
And he says extra-terrestrials have visited Earth on several occasions - but the alien contact has been repeatedly covered up by governments for six decades.
I think having an alien appear would really spook Paulson. He would have it killed immediately.
Ok so there's this billboard for Metro Brokers in ATL, with a nice diplay..for months it's been showing listing for sale...+104,000. Yesterday it showed number sold, ~8,000....
Let's see that's (thumb in the air) 13 months or so.
There a shopping center a few miles from me that typically rolls over about 10% of its stores every year, but there's always a store in every space or a soon to be opened store.
Now, there's about 4 vacancies that are completely empty out of about 15 store slots. The vacancies are former restaurants and an art gallery. Things that aren't really needed.
The center has a couple of decent magnets in McDonalds and CVS.
There have been some new homes built in the area over the last few years and no new commercial space.
I wouldn't call Mpls CRE "robust" right now, but I wouldn't call it moribound either.
There are massive projects still going on/underway. Such as the Ivy Hotel, the W, The Westin, the huge mall/office complex over by Costco, the huge apartment complexes (and I mean HUGGGEE) On Lake between Lyndale and Hennepin, and so on.
it's true that a lot of the CRE stalled, but a fair amount just switched gears. (went from condo to apartment, went from condotel to office space, and so on).
ades--what you've probably got is a stock split--you now own twice as many shares worth twice as much. Assuming that's what happened, it's economically a non-event. The index fund that tracks MSCI Emerging Markets (EEM), did that this morning (3 for 1), as well. It's down 2-3% on the day, not 33%.
New York Attorney General Andrew Cuomo filed a civil lawsuit on Thursday against UBS AG , accusing the Swiss bank of deceptively steering customers into auction-rate securities that this year became impossible to cash out of amid the credit crunch.
This development is in Buford (40mi outside the city of Atlanta). I'm not sure how much the slowdown in this particular geographic are is indicative of the overall metro Atlanta area. It could be that the deveopments on the outskirts are finally starting to slowdown.
Yearning,
The big engines in Mpls right now are the stadium, the bridge and 35W. They are not technically CRE, but they are buying a lot of concrete and steel and lumber and are paying tons of very high wages. One year from now will be rather different, I'd say.
You'll probably be able to get a REALLY cheap condo down on Washington then, too.
I'm sitting here in Seattle, and I'm starting to see all kinds of signs that the CRE collapse is coming. From out my window I can count about 20 cranes building office buildings and condos. I've recently started seeing strip malls with vacancies and signs popping up all over the place "for lease". In the past month I've noticed a dramatic increase in the number of houses with For Sale signs posted outside. And people I know in the real estate business say things have slowed dramatically just in the past couple weeks.
The Federal Reserve Bank of New York has a plan to establish a central clearinghouse for firms generating 90 percent of credit swaps activity.
SEC Chairman Christopher Cox told reporters after a House Financial Services Committee hearing that the SEC is very interested in improving this multi-trillion dollar market and wants to do so soon.
More of a comment on how this toxicity is getting picked up in the MSM, years after the fact that it was held up as the emblem of wealth. Kind of a kick-em-while-they're-down to all those homedebtor's who leveraged up MEW or bought newly overpriced houses during the boom.
As in - "And you thought only your LOAN was toxic - think again!"
The Tennessee Department of Transportation also will cut roadwork, resurfacing about 1,600 miles of state highways this year instead of the 2,500 miles originally planned. Julie Oaks, TDOT spokeswoman, said gas prices were much lower when TDOT budgeted its resurfacing work.
TDOT feels the impact of rising asphalt prices, Ms. Oaks said. But also because we have to use diesel to run the majority of the equipment that we use for our resurfacing projects.
Rising rock and diesel-fuel costs are adding to the paving crunch, Mr. Austin and Mr. Young said.
Were going to try to think outside the box a little bit and come up with better ways to save a little money, including alternative asphalt mixes, Mr. Austin said.
Omega Paving and Construction Management Group in Atlanta produces one of the alternatives Mr. Austin is considering, a liquid enzyme formula, PZ-22X, which binds soil and uses less liquid asphalt.
This has been a good time for us, Omega owner Thomas Settles said. Were getting a lot of requests to use our product because it can cut about 50 to 60 percent of the cost out of paving a regular road.
At that rate, a mile of roadwork would cost $30,000 to $37,500.
Mr. Young said no one is spared from the high cost of asphalt.
Its beginning to affect the homeowner that wants to get their driveway paved, he said. The cost is rising so rapidly that some of them cant afford it. Its also slowing development. ... People arent developing subdivisions and strip malls.
Elvis writes:
RacerX,
It is a systematic screeching. Geographics have virtually nothing to do with it at this point
Understood. But the Atlanta market is very geographically dispersed (no physical barrier to growth). Inside the city CRE appears to be pretty abundant. Market conditions may have forced investors to build up rather than out.
Realtors are now estimating that anywhere from 30 to 40 percent of existing home sales now are either foreclosure sales by banks that repossessed properties or short sales by desperate owners whose lenders agreed to take a hit on the principle of the loan just to get the home sold.
And that doesnt even include auction sales, where banks are unloading hundreds of homes in one day at bargain-basement prices.
Think about that. That means that by summers end, if things go the way theyre going, nearly half of all home sales in this country will be of homes in some kind of financial distress. If existing home sales are now running at an annualized rate of 4.86 million units, thats around 2 million homes.
I asked the NARs chief economist, Lawrence Yun, what to make of that:
"Well in terms of home sales activity, economic impact, people moving, its all, whether its foreclosed sales, short sales, normal sales, its all into the same bucket, so it doesnt really matter too much because it depends upon the country. If one person goes to places like Dallas where prices are holding on, Charlotte, theres very little short sales, foreclosed sales. If people want to buy a home in California, it will be a short sale. It will be a foreclosed sale."
I have to say, and no offense to Mr. Yun, but I think thats a tap dance. It does matter. It says that sales of normal existing homes with no financial issues, that is Americans who are fine with their mortgages, have fallen to somewhere just above a two million dollar annualized rate. It means that the two million people buying all those foreclosed properties are not buying regular properties where sellers are more apt to hold prices higher. Think about that, and what it will mean down the road.
Radioactive granite counterops...whether real or hooey, what a resonant symbol of the current malaise, like the strawberry pickers who supposedly got a $700K mortgage...
I'm involved in commercial plumbing contracting in Atlanta (suburbs primarily) and can confirm the screeching halt. Private projects out for bid have all but dried up. This has been the case for several months now.
There are still a lot of public projects in the bid pipeline. I see school additions, police and fire stations, parks/recreation, and libraries flooding the channels that used to bring me office, medical, retail, and industrial projects.
Elvis writes:
For some reason, I cannot stop wondering what the function of a conjunction is.
One of the only stories I remember from grade school english (i'm more a math person) was that conjunctions were created so that monks could conserve paper when they were writing or copying books...
I have absolutely no idea how true that really is, I did go to a podunk school!
off hand, I'd think that among the people to whom the mix of traditional transactions/auctions, foreclosures and short sales mattered most would be Mr. Yun's employer, the National Association of Realtors. The impact on realtor commission income of auctions and foreclosures, if not short sales, has got to be severe (and even the short sales probably involve negotiated reduced commissions). Those guys must be starving.
One proposal would permit buyout firms to use so-called silo funds walled off from their other investments to buy the stakes without subjecting the rest of their holdings to more federal oversight, said the people, who declined to be identified because the talks aren't public. Under another scenario, the Fed would allow private equity firms to exercise more control of banks they invest in. A third plan would encourage buyout firms to invest together.
Many real estate agents are pretty. They have alternative methods to gain income like hooking and stripping to prevent them from starving. You should worry about the ugly ones, though.
The big engines in Mpls right now are the stadium, the bridge and 35W. They are not technically CRE, but they are buying a lot of concrete and steel and lumber and are paying tons of very high wages. One year from now will be rather different, I'd say.
CR,
You've been one of the best analysts of the emerging CRE collapse. Good work.
As the economic train wreck continues, CRE will probably be one of the next cars to derail. Right now our crisis managers are too preoccupied with housing, oil, BSC, the dollar, GSEs, FDIC, GM/Ford, etc. to notice. I wish some of them would read your blog instead of blaming bloggers for spreading panic.
"FORMER NASA astronaut and moon-walker Dr Edgar Mitchell - a veteran of the Apollo 14 mission - has stunningly claimed aliens exist."
LOL.
I can't believe people still buy in this nonsense.
And why haven't we gone to Mars yet? With all the advancements in computer technology it should cost a whole lot less to fake the Mars landing than it did the Moon landing.
The fog was gone the seventh day and they saw the morning sun
Ten hours away from homeland the Bismarck made its run
The Admiral of the British fleet said turn those bows around
We found that German battleship and we're gonna cut her down
The British guns were aimed and the shells were coming fast
And for those who say this won't effect the big markets like DC and NYC, we have this bit:
A 21-story office building planned in East Harlem for Major League Baseball is shrinking.
The tower's developer, Vornado Realty Trust, had planned to begin construction in April on what would be the home for professional baseball's newly created cable network, which is scheduled to make its debut in January with 50 million subscribers.
But, according to real estate executives and city officials, Vornado's inability to finance the $435 million project, known as Harlem Park, has delayed construction and is doing what critics who had complained about the tower's size could not: reduce its height by about a third. That is in part because the developer seems to have had problems signing up other tenants for the building.
Where's the 2nd half recovery going? please... come back...
The second half recovery was based on subprime being a 50 billion dollar contained problem. No joke. Just go back and review Bernanke's 2007 congressional testimony.
First we have a bubble, then we have deflation, then we have a move toward ZIRP, then we have efforts to save the banking intsitutions through bailouts and refusal to take losses, concurrently we have a stock market that makes no sense to buy for years on end, and finally we have an attempt to pump up employement and business through massive public debt used to build infrastructure.
I live in Midtown Atlanta near the High Museum and work in Midtown Atlanta near the Georgia Tech campus. For the first time in 7 years, I can work in my backyard on a Saturday morning without a power saw or jackhammer from a residential or CRE construction project splitting the air. All I can say is Amen Jesus and I'll be looking for the F-150's at the local Mannheim auto auction soon. There are 1000's of houses on the market and NO activity. I'm hearing stories of friends in residential/ commercial real estate market taking BIG losses just to get out of the carrying costs. Loans are GONE. Residential homes that recently sold for $600K-$800K are going for $550K.
I know the Buford area well and my "local" guess is that it is just the start of a 1-3 year vicious downward real estate spiral.
If one person goes to places like Dallas where prices are holding on, Charlotte, theres very little short sales, foreclosed sales.
Wow, Yun is finally to Sebastian's "It's diferent here in Mt. Pilot" fallacy. Median in Charlotte is up, volume is down and Wachovia is about to terminate a couple of thousand employees at HQ alone.
...and that great American Silverstein was on television the other day saying how all the new WTC construction is "spec."
"I think it is time for congress to allow the dark twins (F&F) and FHA to get involved in CRE. Let's do it right this time!"
FNMA does a ton of cmbs. I think when we get into all the yuckiness we'll find that the most toxic stuff was originated at Wachovia, Wamu, and Wells Fargo. Which makes me wonder...
If fnma was created to create liquidity for home purchases, WHY were they allowed to buy commercial loans? The bail-outs are going to help billionaire developers and the large commercial owners as well???
Regarding the moon landing...In a previous life I was the general manager for Space Camp in California and we always had a "guest speaker" for the kiddies at the end of each week. We got Buzz Aldrin for one week and some child's parent was railing him about the whole thing being a hoax....well "Mr. Aldrin" decided to take matters into his own hands and had a little scuffle with said parent-didn't hit him but came close....all in full view of the kids. My voice-mail was full for two weeks after that. Most of the former astronauts are all VERY big drinkers, especially the ex Mercury ones. I've been around all of the ex mercury ones...the two thatt were great to be around were Jim Lovell and Wally Schirra. Alan Shepard....BIG DRINKER..actually showed up (at 10:00am no less) already having had a few.....
I have pictures of me with all of them ...I even went to John Denver's funeral ( a big Space Camp benefactor)but boy he could pound them too.
The cost to insure the debt of Washington Mutual Inc jumped on Thursday and began trading at terms that indicate stronger concerns about the bank's credit quality, and its stock fell more than 18 percent.
Dubya should take that fargin pen and write on the 1st page of that GSE bailout provision that the first nickel that the Treasury sinks into those PoS institutions occurs simultaneuosly with a wipeout of equity - period. That will get people to think good and hard about equity ownership for money losing institutions with zero prospects.
Then sign it and send it back to Barney the purple dinosoar
We've gotta find buyers somehwere - maybe from Mars? According to our scopes, their real estate is less than desirable. It's about as plausible a plan as I've heard yet.
Horrible unemployment number, dismal housing, crashing CRE, Ford reporting staggering losses...and the market responds in a somewhat rational manner. If the market is rational, someone must no longer be solvent.
You don't believe in UFOs until you see a UFO. Then you believe in UFOs. These aren't some two bit commuter prop pilots. I give them the benefit of the doubt.
Japan was a net creditor and its citizens were huge savers. ...
But much of Japanese savings is invested in bonds that financed monstrous public works projects that will yield no return. Bridges and tunnels to nowhere. Expressways with tolls so high they're nearly empty, while traffic takes the parallel local roads. Savings accounts in banks that lend at ultra-low interest to unprofitable companies to keep them alive and avoid write-offs.
That's why Japanese government bonds pay nearly zero interest.
And that's why a lot of Japan's savings have gone into US Treasuries and GSE securities -- though they may yield no net return long-term due to exchange-rate losses, in the near term they do pay significantly higher interest. (In Japan, kicking the can down the road is called, "tobashi".)
There's no such thing as "saving", only investment. If the investments your "savings" have been put into yield negative long-term returns, do you really have as much in "savings" as you think?
There's no such thing as "saving", only investment.
If you believe in our national accounting: Savings = investment.
Over the past five years a big pile of our savings (and the savings of foreigners) went into real estate. Just like Japan prior to their bust. The massive public works in Japan came after and in response to the real estate bust.
Lack of domestic savings mean we rely on foreigners for capital and is why I think our interest rates will rise or our dollar will continue to fall. Somewhat different than Japan, but a bad outcome nonetheless.
"...FNMA does a ton of cmbs...If fnma was created to create liquidity for home purchases, WHY were they allowed to buy commercial loans?..." - Uncle Billy Vs. Mt. Pelerin
FNMA purchases a relatively small amount of CMBS, Freddie a little more - many of the multifamily classes of standard Conduit/Fusion CMBS deals are sold to these two agencies. The collateral is mostly low LTV (averages 70%, < 80%), 10-year loans, with stabilized properties. FNMA has a very small program called DUS (designated underwriting and servicing) that actually issues deals, and GNMA issues deals back by multifamily as well. Fannie and Freddie also have a relatively small prop-like desk that can invest in non-resi investments.
These GSEs mandate is to expand affordable housing, and that includes multifamily projects. So, to your first point, they are not outside of the mandate. To take it a step further, though, the deals that they are invested in are likely to have some losses (I don't think anyone would argue that CRE is not going to have issues), but the big problems in the CRE space are going to more heavily impact short-term financing, such as bridge loans, construction and development loans, etc. - these types of loans are not in the Conduit/Fusion CMBS deals that Fannie/Freddie/Ginnie are involved with on any scale.
I work in Buckhead. If I look out my office window, all I can see is cranes everywhere. Some of these developments do surprise me at this point. I cannot believe these are moving forward.
Realize they have water issues to deal with in addition to whatever RE problems there are.
Hi
Dont' worry CR, new demand coming from illegal aliens
FORMER NASA astronaut and moon-walker Dr Edgar Mitchell - a veteran of the Apollo 14 mission - has stunningly claimed aliens exist.
And he says extra-terrestrials have visited Earth on several occasions - but the alien contact has been repeatedly covered up by governments for six decades.
And with that come job losses, major job losses.
If it's here, then it aint that bad. Also, I know I make this point over and over again, but remind me why a slow down in construction is a bad thing? I mean were seeing people put on the brakes well in advance of plummeting rents, skyrocketing vacancies, isn't that a good thing that CRE developers have actually, you know, learned to forecast demand a bit vs. react solely to the collapse around them?
You did see this in the beige book:
"Commercial real estate activity weakened or remained sluggish in a majority of Districts, although Cleveland, Minneapolis, and Kansas City noted some improvement. Boston characterized sentiment in the sector as "decidedly morose," and industrial markets were especially weak in that District. Office market conditions in the Richmond District continued to weaken and were "bleak" in the Washington, DC area. Vacancy rates increased in the Philadelphia and Atlanta Districts, and were up noticeably in both Midtown and Downtown Manhattan, according to contacts in the New York District."
Decidedly morose.
FRB: Beige Book--Summary--July 23, 2008
Hey CR - I take it CRE starts & stops more abruptly than RRE? Yes/no?
Does it take off faster too, upon recovery?
Commercial real estate activity weakened or remained sluggish in a majority of Districts, although Cleveland, Minneapolis, and Kansas City noted some improvement.
Improvement from what, 'morose' or 'bleak'? FWIW - I have friends in CRE in MPLS and from what they describe I wouldn't call it 'strong'.
CRE debt will preform well!
LOL
................
"FORMER NASA astronaut and moon-walker Dr Edgar Mitchell - a veteran of the Apollo 14 mission - has stunningly claimed aliens exist."
Does he have a new book out or something? He's been saying that for decades.
"isn't that a good thing that CRE developers have actually, you know, learned to forecast demand a bit vs. react solely to the collapse around them?"
It would be good if it were true. They would still continue building if they could get financing. It has nothing to do with them reacting to supply and demand.
I think having an alien appear would really spook Paulson. He would have it killed immediately.
Ok so there's this billboard for Metro Brokers in ATL, with a nice diplay..for months it's been showing listing for sale...+104,000. Yesterday it showed number sold, ~8,000....
Let's see that's (thumb in the air) 13 months or so.
NAR July 24, 2008
Miami condo market heat's up in anticipation of Castro's passing.
"I think having an alien appear would really spook Paulson."
Nahh, the "alien" they fear most is Obama.
I think it is time for congress to allow the dark twins (F&F) and FHA to get involved in CRE. Let's do it right this time!
There a shopping center a few miles from me that typically rolls over about 10% of its stores every year, but there's always a store in every space or a soon to be opened store.
Now, there's about 4 vacancies that are completely empty out of about 15 store slots. The vacancies are former restaurants and an art gallery. Things that aren't really needed.
The center has a couple of decent magnets in McDonalds and CVS.
There have been some new homes built in the area over the last few years and no new commercial space.
The economy must be to blame.
I live about 15 miles north of Washington DC.
dryfly:
I wouldn't call Mpls CRE "robust" right now, but I wouldn't call it moribound either.
There are massive projects still going on/underway. Such as the Ivy Hotel, the W, The Westin, the huge mall/office complex over by Costco, the huge apartment complexes (and I mean HUGGGEE) On Lake between Lyndale and Hennepin, and so on.
it's true that a lot of the CRE stalled, but a fair amount just switched gears. (went from condo to apartment, went from condotel to office space, and so on).
doesn't look good to me... not at all.
I have a unrelated question for anyone how knows about ETFs
iShares Russell Midcap Growth Idx. (ETF) - Google Finance
IWP dropped 50% today
Its an index fun
iShares Russell Midcap Growth Idx. (ETF)
How on earth did an index fund lose 50% in 2 hours?
Is iShares in trouble?
..........................
evermind it seems to be a google issue...
.............
I would assume a split:
Barclays Global ETFs: iShares Are Doing The Splits - Undesignated - Resource Investor
What happened today? Did Bush say he'd veto Paulson's bailout?
IWP split yesterday AH.
Futures and Commodity Market News Categories : Courtesy, TFC Commodity Charts
ades--what you've probably got is a stock split--you now own twice as many shares worth twice as much. Assuming that's what happened, it's economically a non-event. The index fund that tracks MSCI Emerging Markets (EEM), did that this morning (3 for 1), as well. It's down 2-3% on the day, not 33%.
New York Attorney General Andrew Cuomo filed a civil lawsuit on Thursday against UBS AG , accusing the Swiss bank of deceptively steering customers into auction-rate securities that this year became impossible to cash out of amid the credit crunch.
New York sues UBS, alleges auction-rate fraud
| Reuters
GET THOSE BASTARDS!
I think the CRE builders in Atlanta just found out the Olympics were over.
IWP dropped 50% today
Its an index fun
iShares Russell Midcap Growth Idx. (ETF)
How on earth did an index fund lose 50% in 2 hours?
Probably got split.
I noticed that ILF looks like it got split 5 ways today.
A split is like getting four quarters for a dollar. Or at Leftys, three quarters if they are too drunk.
yes, there are a bunch of ishares splits today.
Anyone know why MER is being singled out for double punishment today?
OT - granite may be radioactive. So all those graniteel kitchens... um, hmmm. talk about toxic mortgages - how about toxic houses?
What's Lurking in Your Countertop? - NY Times
Exit | 07.24.08 - 1:44 pm |
Please tell me this isn't the first you heard of this??? Granite has always had low levels of radioactivity...
Chris
All thanks!
Seems kinda childish for a index fund to split.... esp when it goes from 80 to 40... pretty weak....
"This ones got eleven"
da hahahahaaaa
..............
OT - granite may be radioactive. So all those graniteel kitchens... um, hmmm. talk about toxic mortgages - how about toxic houses?
Anybody out there ever heard of radon?
This development is in Buford (40mi outside the city of Atlanta). I'm not sure how much the slowdown in this particular geographic are is indicative of the overall metro Atlanta area. It could be that the deveopments on the outskirts are finally starting to slowdown.
Yearning,
The big engines in Mpls right now are the stadium, the bridge and 35W. They are not technically CRE, but they are buying a lot of concrete and steel and lumber and are paying tons of very high wages. One year from now will be rather different, I'd say.
You'll probably be able to get a REALLY cheap condo down on Washington then, too.
RacerX,
It is a systematic screeching. Geographics have virtually nothing to do with it at this point.
I'm sitting here in Seattle, and I'm starting to see all kinds of signs that the CRE collapse is coming. From out my window I can count about 20 cranes building office buildings and condos. I've recently started seeing strip malls with vacancies and signs popping up all over the place "for lease". In the past month I've noticed a dramatic increase in the number of houses with For Sale signs posted outside. And people I know in the real estate business say things have slowed dramatically just in the past couple weeks.
The Federal Reserve Bank of New York has a plan to establish a central clearinghouse for firms generating 90 percent of credit swaps activity.
SEC Chairman Christopher Cox told reporters after a House Financial Services Committee hearing that the SEC is very interested in improving this multi-trillion dollar market and wants to do so soon.
SEC's Cox says could see OTC market plan by fall
| Reuters
Translation: We have every intention of manipulating this market so get out while the getting is good.
Chris / Elvis -
More of a comment on how this toxicity is getting picked up in the MSM, years after the fact that it was held up as the emblem of wealth. Kind of a kick-em-while-they're-down to all those homedebtor's who leveraged up MEW or bought newly overpriced houses during the boom.
As in - "And you thought only your LOAN was toxic - think again!"
"I think having an alien appear would really spook Paulson. He would have it killed immediately.
rich | 07.24.08 - 1:16 pm | #"
I think Paulson would spook the alien. He certainly spooks me.
Mpls is in completion mode right now as far as CRE goes. Come visit us soon, there will be ample hotel space.
Fannie owns a nice loft at 801 Wash. Maybe it is Freddie that owns it. I can't remember right now.
I think it is time for congress to allow the dark twins (F&F) and FHA to get involved in CRE. Let's do it right this time!
F&F and FHA are already involved in CRE in a big way.
The Tennessee Department of Transportation also will cut roadwork, resurfacing about 1,600 miles of state highways this year instead of the 2,500 miles originally planned. Julie Oaks, TDOT spokeswoman, said gas prices were much lower when TDOT budgeted its resurfacing work.
TDOT feels the impact of rising asphalt prices, Ms. Oaks said. But also because we have to use diesel to run the majority of the equipment that we use for our resurfacing projects.
Rising rock and diesel-fuel costs are adding to the paving crunch, Mr. Austin and Mr. Young said.
Were going to try to think outside the box a little bit and come up with better ways to save a little money, including alternative asphalt mixes, Mr. Austin said.
Omega Paving and Construction Management Group in Atlanta produces one of the alternatives Mr. Austin is considering, a liquid enzyme formula, PZ-22X, which binds soil and uses less liquid asphalt.
This has been a good time for us, Omega owner Thomas Settles said. Were getting a lot of requests to use our product because it can cut about 50 to 60 percent of the cost out of paving a regular road.
At that rate, a mile of roadwork would cost $30,000 to $37,500.
Mr. Young said no one is spared from the high cost of asphalt.
Its beginning to affect the homeowner that wants to get their driveway paved, he said. The cost is rising so rapidly that some of them cant afford it. Its also slowing development. ... People arent developing subdivisions and strip malls.
Re stock splits:
Funny story... a stock I've traded since it's IPO (NFLX) had a split in '04...the message board was filled with rants like:
"you all had it coming to you...you're stock is cut in half today suckers"
I wish I made it up but I didn't.
ETF Info.
This guy knows his shit and comments about more weekly movements than daily but i's a good place to go if you use them in your portfolio:
Dave's Daily
He is quite amused at the timing of the beige book release (early) that happened to coincide with the BofA "buyback" scheme.
Good read IMO
Ciao
MS
Elvis writes:
RacerX,
It is a systematic screeching. Geographics have virtually nothing to do with it at this point
Understood. But the Atlanta market is very geographically dispersed (no physical barrier to growth). Inside the city CRE appears to be pretty abundant. Market conditions may have forced investors to build up rather than out.
slightly off topic if Yun is ever OT..
Existing Home Sales: A Look At Numbers That Weren't There - CNBC
From beautiful Dana:
Realtors are now estimating that anywhere from 30 to 40 percent of existing home sales now are either foreclosure sales by banks that repossessed properties or short sales by desperate owners whose lenders agreed to take a hit on the principle of the loan just to get the home sold.
And that doesnt even include auction sales, where banks are unloading hundreds of homes in one day at bargain-basement prices.
Think about that. That means that by summers end, if things go the way theyre going, nearly half of all home sales in this country will be of homes in some kind of financial distress. If existing home sales are now running at an annualized rate of 4.86 million units, thats around 2 million homes.
I asked the NARs chief economist, Lawrence Yun, what to make of that:
"Well in terms of home sales activity, economic impact, people moving, its all, whether its foreclosed sales, short sales, normal sales, its all into the same bucket, so it doesnt really matter too much because it depends upon the country. If one person goes to places like Dallas where prices are holding on, Charlotte, theres very little short sales, foreclosed sales. If people want to buy a home in California, it will be a short sale. It will be a foreclosed sale."
I have to say, and no offense to Mr. Yun, but I think thats a tap dance. It does matter. It says that sales of normal existing homes with no financial issues, that is Americans who are fine with their mortgages, have fallen to somewhere just above a two million dollar annualized rate. It means that the two million people buying all those foreclosed properties are not buying regular properties where sellers are more apt to hold prices higher. Think about that, and what it will mean down the road.
For some reason, I cannot stop wondering what the function of a conjunction is.
Radioactive granite counterops...whether real or hooey, what a resonant symbol of the current malaise, like the strawberry pickers who supposedly got a $700K mortgage...
I'm involved in commercial plumbing contracting in Atlanta (suburbs primarily) and can confirm the screeching halt. Private projects out for bid have all but dried up. This has been the case for several months now.
There are still a lot of public projects in the bid pipeline. I see school additions, police and fire stations, parks/recreation, and libraries flooding the channels that used to bring me office, medical, retail, and industrial projects.
Elvis writes:
For some reason, I cannot stop wondering what the function of a conjunction is.
AND?
Elvis writes:
For some reason, I cannot stop wondering what the function of a conjunction is.
One of the only stories I remember from grade school english (i'm more a math person) was that conjunctions were created so that monks could conserve paper when they were writing or copying books...
I have absolutely no idea how true that really is, I did go to a podunk school!
..................
off hand, I'd think that among the people to whom the mix of traditional transactions/auctions, foreclosures and short sales mattered most would be Mr. Yun's employer, the National Association of Realtors. The impact on realtor commission income of auctions and foreclosures, if not short sales, has got to be severe (and even the short sales probably involve negotiated reduced commissions). Those guys must be starving.
Yun is always fun!
fun yun
fun yun
fun yun
............
SRS at $83 sumpin yesterday was a GIFT.
Fed Weighs Three Plans to Spur Bank Investments by Buyout Firms
- Bloomberg.com
One proposal would permit buyout firms to use so-called silo funds walled off from their other investments to buy the stakes without subjecting the rest of their holdings to more federal oversight, said the people, who declined to be identified because the talks aren't public. Under another scenario, the Fed would allow private equity firms to exercise more control of banks they invest in. A third plan would encourage buyout firms to invest together.
"Those guys must be starving."
Many real estate agents are pretty. They have alternative methods to gain income like hooking and stripping to prevent them from starving. You should worry about the ugly ones, though.
The big engines in Mpls right now are the stadium, the bridge and 35W. They are not technically CRE, but they are buying a lot of concrete and steel and lumber and are paying tons of very high wages. One year from now will be rather different, I'd say.
wally | 07.24.08 - 1:50 pm | #
Just in time for the Vikings new stadium...
CR,
You've been one of the best analysts of the emerging CRE collapse. Good work.
As the economic train wreck continues, CRE will probably be one of the next cars to derail. Right now our crisis managers are too preoccupied with housing, oil, BSC, the dollar, GSEs, FDIC, GM/Ford, etc. to notice. I wish some of them would read your blog instead of blaming bloggers for spreading panic.
The only line I remember from schoolhouse rock is what a conjuntion is. Conjunction junction what's your function? Puttin together words and phrases.
ha hahahaaa
thats a contraction, like i said i'm not an english buff....
............
I remember Olly, Olly, Olly get your adverbs here...
Actually, this was my favorite. Interjections.
YouTube - Schoolhouse Rock "Interjections!"
VERB....That's what's Happenin'
Ciao
MS
Finally, the fire engine arrived.
The main job of adverbs is to modify verbs:
The word finally can also be used, e.g, like this here:
She finally got her greasy hair finally cleaned better and then it looked real good!
"FORMER NASA astronaut and moon-walker Dr Edgar Mitchell - a veteran of the Apollo 14 mission - has stunningly claimed aliens exist."
LOL.
I can't believe people still buy in this nonsense.
And why haven't we gone to Mars yet? With all the advancements in computer technology it should cost a whole lot less to fake the Mars landing than it did the Moon landing.
Well, if you are not scared now, you will be.
Start to contemplate the next sabots to fall into the machinery.
Commercial real estate.
After that comes a ton of industrial companies that are up to their eyeballs in construction.
Eventually you get to the raw materials areas that will also suffer due to dropping demand.
Otoh, the federal government is about to embark on a huge keynesian spending spree to fill the exhausted consumer gap.
The dollar will continue falling.
Anybody have a bright side?
Someday this war's gonna end...
The fog was gone the seventh day and they saw the morning sun
Ten hours away from homeland the Bismarck made its run
The Admiral of the British fleet said turn those bows around
We found that German battleship and we're gonna cut her down
The British guns were aimed and the shells were coming fast
Where's the 2nd half recovery going? please... come back...
Allen M,
I don't see a bright side. Seriously.
Stagflation is the best we can hope for imo.
Too many have spent too much.
I heard real estate never goes down in Mars!
And for those who say this won't effect the big markets like DC and NYC, we have this bit:
A 21-story office building planned in East Harlem for Major League Baseball is shrinking.
The tower's developer, Vornado Realty Trust, had planned to begin construction in April on what would be the home for professional baseball's newly created cable network, which is scheduled to make its debut in January with 50 million subscribers.
But, according to real estate executives and city officials, Vornado's inability to finance the $435 million project, known as Harlem Park, has delayed construction and is doing what critics who had complained about the tower's size could not: reduce its height by about a third. That is in part because the developer seems to have had problems signing up other tenants for the building.
Where's the 2nd half recovery going? please... come back...
The second half recovery was based on subprime being a 50 billion dollar contained problem. No joke. Just go back and review Bernanke's 2007 congressional testimony.
WATCH FOR JAPAN COMPARISONS!
First we have a bubble, then we have deflation, then we have a move toward ZIRP, then we have efforts to save the banking intsitutions through bailouts and refusal to take losses, concurrently we have a stock market that makes no sense to buy for years on end, and finally we have an attempt to pump up employement and business through massive public debt used to build infrastructure.
Don't believe anyone who says we are not Japan.
I don't see a bright side. Seriously.
Stop whining!
Also on yesterday's call Boston Properties danced around the question about why their new NYC building isn't all leased up.
I live in Midtown Atlanta near the High Museum and work in Midtown Atlanta near the Georgia Tech campus. For the first time in 7 years, I can work in my backyard on a Saturday morning without a power saw or jackhammer from a residential or CRE construction project splitting the air. All I can say is Amen Jesus and I'll be looking for the F-150's at the local Mannheim auto auction soon. There are 1000's of houses on the market and NO activity. I'm hearing stories of friends in residential/ commercial real estate market taking BIG losses just to get out of the carrying costs. Loans are GONE. Residential homes that recently sold for $600K-$800K are going for $550K.
I know the Buford area well and my "local" guess is that it is just the start of a 1-3 year vicious downward real estate spiral.
Japan was a net creditor and its citizens were huge savers. I believe our situation is worse. Although our valuations are not as extreme.
What's with Wamu?
If one person goes to places like Dallas where prices are holding on, Charlotte, theres very little short sales, foreclosed sales.
Wow, Yun is finally to Sebastian's "It's diferent here in Mt. Pilot" fallacy. Median in Charlotte is up, volume is down and Wachovia is about to terminate a couple of thousand employees at HQ alone.
So they're where Phoenix was a year ago.
REBear writes:
What's with Wamu?
Nothing , nothing at all. everything is a-ok!
Next
Stock Market got in touch with reality today,...any more of good earning reports for the financials in the pipeline this week?
...and that great American Silverstein was on television the other day saying how all the new WTC construction is "spec."
"I think it is time for congress to allow the dark twins (F&F) and FHA to get involved in CRE. Let's do it right this time!"
FNMA does a ton of cmbs. I think when we get into all the yuckiness we'll find that the most toxic stuff was originated at Wachovia, Wamu, and Wells Fargo. Which makes me wonder...
If fnma was created to create liquidity for home purchases, WHY were they allowed to buy commercial loans? The bail-outs are going to help billionaire developers and the large commercial owners as well???
Regarding the moon landing...In a previous life I was the general manager for Space Camp in California and we always had a "guest speaker" for the kiddies at the end of each week. We got Buzz Aldrin for one week and some child's parent was railing him about the whole thing being a hoax....well "Mr. Aldrin" decided to take matters into his own hands and had a little scuffle with said parent-didn't hit him but came close....all in full view of the kids. My voice-mail was full for two weeks after that. Most of the former astronauts are all VERY big drinkers, especially the ex Mercury ones. I've been around all of the ex mercury ones...the two thatt were great to be around were Jim Lovell and Wally Schirra. Alan Shepard....BIG DRINKER..actually showed up (at 10:00am no less) already having had a few.....
I have pictures of me with all of them ...I even went to John Denver's funeral ( a big Space Camp benefactor)but boy he could pound them too.
Ciao
MS
Rocky mounain high!
I can't believe it, but I think that moron Cramer recommended Sears today. It's up on no news.
They are the worst positioned retailer there is, I couldn't resist buying another put spread.
This reminds me of how he repeatedly recommended DSL all the way down.
How exactly does an idiot like that maintain a viewership?
The cost to insure the debt of Washington Mutual Inc jumped on Thursday and began trading at terms that indicate stronger concerns about the bank's credit quality, and its stock fell more than 18 percent.
Washington Mutual stock down on credit concerns
| Reuters
YA THINK!
This is such a crying shame. The US Cavalry is on the way, and F&F are about to surrender to the Indians!
enough negativism, bend over I'll brighten your day.
Tangentially related to commercial re:
Sliver of land in Laguna Beach, owned by Cal-Trans, previously appraised for $1.5M, sold to city for 18,000.
To make it easier for the city to care for the day laborers?
Laguna Beach buys hiring site used by day laborers - Los Angeles Times
The justification: no commercial or residential use for the property. Boy that must have been one embarassed appraiser.
Dubya should take that fargin pen and write on the 1st page of that GSE bailout provision that the first nickel that the Treasury sinks into those PoS institutions occurs simultaneuosly with a wipeout of equity - period. That will get people to think good and hard about equity ownership for money losing institutions with zero prospects.
Then sign it and send it back to Barney the purple dinosoar
And why haven't we gone to Mars yet?
We've gotta find buyers somehwere - maybe from Mars? According to our scopes, their real estate is less than desirable. It's about as plausible a plan as I've heard yet.
that many creditors have quietly been pulling funds from the bank,"
nonsense...
paging bizarro, come in bizarro!
Horrible unemployment number, dismal housing, crashing CRE, Ford reporting staggering losses...and the market responds in a somewhat rational manner. If the market is rational, someone must no longer be solvent.
ms, you'd be a big drinker also had you seen really smart telekentic green man from mars.
is there pony's on mars?
You don't believe in UFOs until you see a UFO. Then you believe in UFOs. These aren't some two bit commuter prop pilots. I give them the benefit of the doubt.
Gotta get
this comment section to
Japan was a net creditor and its citizens were huge savers. ...
But much of Japanese savings is invested in bonds that financed monstrous public works projects that will yield no return. Bridges and tunnels to nowhere. Expressways with tolls so high they're nearly empty, while traffic takes the parallel local roads. Savings accounts in banks that lend at ultra-low interest to unprofitable companies to keep them alive and avoid write-offs.
That's why Japanese government bonds pay nearly zero interest.
And that's why a lot of Japan's savings have gone into US Treasuries and GSE securities -- though they may yield no net return long-term due to exchange-rate losses, in the near term they do pay significantly higher interest. (In Japan, kicking the can down the road is called, "tobashi".)
There's no such thing as "saving", only investment. If the investments your "savings" have been put into yield negative long-term returns, do you really have as much in "savings" as you think?
JM
There's no such thing as "saving", only investment.
If you believe in our national accounting: Savings = investment.
Over the past five years a big pile of our savings (and the savings of foreigners) went into real estate. Just like Japan prior to their bust. The massive public works in Japan came after and in response to the real estate bust.
Lack of domestic savings mean we rely on foreigners for capital and is why I think our interest rates will rise or our dollar will continue to fall. Somewhat different than Japan, but a bad outcome nonetheless.
Elvis writes:
100. Done.
Elvis | 07.24.08 - 3:57 pm | #
Whew, close one. Glad to see you're on the job. Wouldn't want to make a liar out of Business Week.
Thanks, sdtfs. It's tough work, but somebody has got to do it. Instills confidence in the advertisers.
there were 6 moon landings , not one..
but yes, hundreds of highly educated people are lying and 'covering it up'
we haven't gone to Mars because the USSR collapsed and we don't have to prove we're better than a competitor.
Also, NASA is broke.
When China lands on the moon ,then you'll see more outcries for a trip to Mars.
"...FNMA does a ton of cmbs...If fnma was created to create liquidity for home purchases, WHY were they allowed to buy commercial loans?..." - Uncle Billy Vs. Mt. Pelerin
FNMA purchases a relatively small amount of CMBS, Freddie a little more - many of the multifamily classes of standard Conduit/Fusion CMBS deals are sold to these two agencies. The collateral is mostly low LTV (averages 70%, < 80%), 10-year loans, with stabilized properties. FNMA has a very small program called DUS (designated underwriting and servicing) that actually issues deals, and GNMA issues deals back by multifamily as well. Fannie and Freddie also have a relatively small prop-like desk that can invest in non-resi investments.
These GSEs mandate is to expand affordable housing, and that includes multifamily projects. So, to your first point, they are not outside of the mandate. To take it a step further, though, the deals that they are invested in are likely to have some losses (I don't think anyone would argue that CRE is not going to have issues), but the big problems in the CRE space are going to more heavily impact short-term financing, such as bridge loans, construction and development loans, etc. - these types of loans are not in the Conduit/Fusion CMBS deals that Fannie/Freddie/Ginnie are involved with on any scale.
I work in Buckhead. If I look out my office window, all I can see is cranes everywhere. Some of these developments do surprise me at this point. I cannot believe these are moving forward.
"How exactly does an idiot like that maintain a viewership?"
Haven't you heard?
There is a sucker born every minute.