Moody's: CRE Prices Continue to Decline
Submitted by
CalculatedRisk on Wed, 08/20/2008 - 8:55am (60 comments)
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Gonna get hammered.
Good thing I bailed on the last thread.
Those people were nutz.
Don't ya just love that new thread smell?
The architectural billing index hit the highest level since January in June. The just asking index did, too. Very odd. Do hospitals take a lot more billing and asking than malls?
What's the best way to profit on a continued decline in CRE?
SRS?
Puts on REITs like SPG and GGP?
Puts on Regional banks?
Anyone have any good plays on this?
Can I STILL get no respect on calling the retail deposit bleedout of DSL and FED? From today's FED press: "Retail deposits, however, dipped 8 percent from the prior month to $2.91 billion."
8% drop in retail deposits. IN ONE MONTH.
Some lovely person recently noted all the declines... in just about everything, except on the expenses side.
(The list causes epilepsy so I won't repeat it.)
But is it any wonder that huge segments of the over-built over-sold economy are collapsing?
My mother in law informed me that a month ago on her visit to the chiropractor, whose office is in a strip-mall, nothing seemed amiss. Businesses nearby in the mall flourising.
After her visit yesterday, she estimated that 40% of the businesses in the same strip-mall were closed and out of business.
This downturn is just starting to hit my main street.
DialM,
"8% drop in retail deposits. IN ONE MONTH."
Anyone notice a spike in Denny's traffic around their headquarters?
Cheers,
Rob Dawg, you around?
What the hell is that ginormous particle board thing being built by the airport on Las Posas. That thing looks like a real good investment in these conditions.
Cheers,
"This downturn is just starting to hit my main street."
I live in a medium-sized tourist town; while I'm seeing vacancies in the more marginal retail areas, the few retail vacancies in the prime areas are taking a very long time to fill.
And the guy who's just completing a five-story 50,000 sq-ft. office/retail complex on the main drag has not a single tenant pre-leased. Not at the prices he needs to get.
We also have two new downtown condo buildings with first-floor retail spaces -- all empty. High-priced, and not the best location.
No one has ever gotten rich betting against the American Consumer.
No one.
ARGHHHHHHHHHHHHHHHHHHHHH.
I need a commercial bldg and I can't find one priced normally!
ARGHHHHHHHHHHHHHHHHHHHH.
Like this one: purchased in 1998 for $378K wants 1.8MM, no repairs, has trashed the place, actually and it's a brownfields which he failed to keep records of...
Another: purchased for $270K in 2000 wants 2.2MM did some nice cosmetic upgrades, no build on/out, though...on 1/4 acre lot across street from all day and night go-go bar...
ARGHHHHHHHHHHHHHHHHHHHHH.
Please, please, please!!!!!!!!
Make CRE fall!!!!!
I'm banging my head on my desk daily looking at CoStar and Loopnet listings...
regarding AIGs last quarterly report:
The "more bad news" is that there's more on the horizon. As one example: AIG listed about $21B of CMBS (Commercial Mortgage-Backed Securities). Of their CMBS investments, 24% were 2007 vintage; 32% were in either New York or California.
They're gonna have a fun next few Q
k harris writes:
The architectural billing index hit the highest level since January in June. The just asking index did, too. Very odd. Do hospitals take a lot more billing and asking than malls?
In Cali you wouldnt even believe the difference....
Probably ten times the amount of time... (literally)
..............
You people spend month's ridiculing Moody's and now you want to belive them?
"While the June uptick may be the first sign of stabilizing transaction volumes that in turn could portend future price stabilization, it may also be a transient or seasonal effect, and future data will need to be examined in order to identify any trends," said Moody's managing director Nick Levidy.
Honestly, do you trust anyone who uses two forms of the word "stabilize" and then drops a "transient" on you? Moody's, please!
Good point Harry!
..........
Anonymous writes:
Don't ya just love that new thread smell?
lol
Around here, a CRE valued at about $450,000 in 2000 just SOLD for $1.4 mil. Seems the landlord's strategy of finding first time businesses to pay above market rents (for the 6 months they'll last) paid off.
sheesh
"Good point Harry!"
I didn't even mention that teh Moodys used the word "portend"
I'm going shopping.
Just waiting for Jas to chime in "CR do you still believe that CRE will not fall as much as residential?"
Like this one: purchased in 1998 for $378K wants 1.8MM, no repairs, has trashed the place, actually and it's a brownfields which he failed to keep records of...
If you think people played games on residential loans, what do you think went on with commercial loans?
"Despite having its highest score since January, the Architecture Billings Index (ABI) continues to point to difficult conditions for the nonresidential construction market. There have been six consecutive months with negative scores..."
Fannie and Freddie -- if they keep this up (or down, rather) they'll be fully tanked by Friday (as will I, but in a good way).
Elvis,
If the post isn't punctuated with "dopes", then it isn't really Jas.
Dopes,
One and a half months for a year. I bet we reach 15% yoy.
Especially around here. There still bringing new stuff on line.
Cheers,
When the cover of Barron's says "Born and Bred Dopes?" I'll consider it a contrary whatsyoumacallit and go long URE.
I'd be damn careful messin' with FED, as today's action proves. With float of 11.7MM shares and short interest of 8.7MM, you could see a short-covering rally that would tear you a new one.
Anybody know who owns this: First Merced Mortgage
"Golden Squirrel Investments writes:
No one has ever gotten rich betting against the American Consumer.
No one."
I think a few people did quite well shorting the market during the Great Depression. Merrell?
"Around here, a CRE valued at about $450,000 in 2000 just SOLD for $1.4 mil. Seems the landlord's strategy of finding first time businesses to pay above market rents (for the 6 months they'll last) paid off."
Around here, a "design center" complex added to an existing office/R&D complex was offered at 99 cents a square foot -- for the first year. They filled it, eventually -- with web design studios, massage therapists, photographers, a high-end "decor" consignment shop, a wholesaler of French tableclothes, and the odd insurance agent. We'll see how many stick, for how long, when the rent more than doubles. The consignment shop's already history.
Golden Squirrel Investments writes:
No one has ever gotten rich betting against the American Consumer.
well then i guess yer in for a new experience...enjoy the ride
new paradigm...america, no longer the privileged 5% that gets 50% of the pie
"Russia will respond with more than diplomatic protests to U.S.-Poland missile shield deal: Russian foreign ministry 1:24pm EDT"
Kinda funny if they dump F & F paper, no?
"Macklowe writes:
You people spend month's ridiculing Moody's and now you want to belive them? "
Lately, the source doesn't matter as much as the tone. If the news is bad, it's probably truth. If you think the source is unreliable, that probably just means that they aren't being straight about how bad it is.
Geez Dobbs,cut that builder some slack,he is counting on all them free spending college students maxing out their credit cards! and if that don't work the Uni has lots of support staff getting fat on $10 an hour salaries.Once he puts out some balloons to get peoples attention he'll be fine,just fine.
Barely,
I can't even find there web site.
Odd...
Cheers,
FDIC extends responsibilites...
"WASHINGTON (Reuters) - Thousands of homeowners with distressed mortgage loans linked to failed lender IndyMac IDMC.PK may soon be able to avoid foreclosure under a program announced on Wednesday by U.S. banking regulators.
The Federal Deposit Insurance Corp, which seized Pasadena, California-based IndyMac on July 11, said 4,000 mortgage modification proposals were going out this week"
FDIC: Press Releases - PR-67-2008 8/20/2008
My last piece of dirt under contract since juneteenth does not look to close.
The developer has 50% of it presold to various medical people but they have lost their lead banker.
Just signed a 10 day extension. Damn.
We may very well be overbuilt but the complete lack of financing will bring CRE to a stand-still.
Where is the problem with CRE?
Lots of eBay reseller businesses can fill that space.
RE - FDIC
Friggen moral hazard. Where is Darwin when you need him!!
"modifications could adopt a combination of interest rate reductions, extended amortization, and principal forbearance"
Dobbs, are you the one that posted the other day about the Carmel area? I was really struck (at least on zillow) by how MANY sales there were. In our area, (met nyc) there are almost NO sales, but the ones that do sell seem very high to me.
Example: sold 8/15/08 zestimate $756,500 sold for $1,175,000
Realtors say they are coming from the city and just don't know any better.
it's so darned confusing...
who's bailing out fannie and fredie?
ben or hank?
"Kinda funny if they dump F & F paper, no?"
Think they'll save that option for a little longer, the US is doing a pretty good job of bankrupting itself for now. They just have to stand back and stir the pot once and awhile.
Barely,
I think we've been making ourselves very vulnerable for years....
Sure seems like a possibility to me...
Funny not sure, but definitely ironic!
..............
I just got a new handle
1.\tthe act of forbearing; a refraining from something.
2.\tforbearing conduct or quality; patient endurance; self-control.
3.\tan abstaining from the enforcement of a right.
4.\ta creditor's giving of indulgence after the day originally fixed for payment
mmmmm...indulgence.
No one has ever gotten rich betting against the American Consumer.
Lots of people have gone bust trying to cater to them.
Fanny and hubby Freddie are down 20 and 25% again today. How can this do this day after day without getting to zero? LOL.
ades - Rule 1 is always hit 'em where it hurts
Unfortunatly, the dollar would fall like a stone
sdtfs writes:
No one has ever gotten rich betting against the American Consumer.
Nor has anybody ever made money from buying a receivable generated from the sale of any product to a consumer who has overspent his/her income and previously borrowed every penny he/she could get their hands on to maintain the fiction that housing only goes up.
Freddie down 27%
154 online.
For what it's worth, here are the weighted percentages of what is in the Dow Jones US Financials Index -- which, as many people here know, SKF attempts to correspond to 200% the inverse:
Asset Managers\t7%
Banks\t37%
Consumer Finance\t6%
Diversified REITs\t1%
Full Line Insurance\t4%
Hotel & Lodging REITs\t1%
Industrial & Office REITs\t3%
Insurance Brokers\t2%
Investment Services\t12%
Life Insurance\t7%
Mortgage Finance\t1%
Mortgage REITs\t1%
Property & Casualty Insurance\t9%
Real Estate Holding & Development\t0%
Real Estate Services\t0%
Reinsurance\t1%
Residential REITs\t2%
Retail REITs\t3%
Specialty Finance\t1%
Specialty REITs\t3%
Interestingly, fannie & freddie are only 0.55% of the index.... I guess it was higher before their stock prices plummeted 90% from the 52 week high.
Anybody thinking that Freddie is a good flip at $3? I'm going to test the waters and see if I can catch a quick bounce. Might be good for a 75-100% profit over the next couple days.
Principal Forbearance: 4. a creditor's giving of indulgence after the day originally fixed for payment
From the Catholic Encyclopedia:
The word indulgence (Latin indulgentia, from indulgeo, to be kind or tender) originally meant kindness or favor; in post-classic Latin it came to mean the remission of a tax or debt. In Roman law and in the Vulgate of the Old Testament (Isaiah 61:1) it was used to express release from captivity or punishment. ... But in the special sense in which it is here considered, an indulgence is a remission of the temporal punishment due to sin, the guilt of which has been forgiven.
Sheila Bair's new business: sin forgiveness. For the "homeowners", however, temporal punishment is (most likely) just delayed.
ChefVisar
FRE/FNM freefall predictable.
That volume coming out of them on 7/13 was the indication (I recall noting here that those prices would get tested - and yes taken out).
They're toast.
didn't our ancestors buy "indulgences" at one point ? Did they ever realize a return on that investment ?
"Tom Stone writes:
Geez Dobbs,cut that builder some slack,he is counting on all them free spending college students maxing out their credit cards! and if that don't work the Uni has lots of support staff getting fat on $10 an hour salaries.Once he puts out some balloons to get peoples attention he'll be fine,just fine."
The $10/hr uni workers are just fine with the starvation wages. They're so fine with it they showed up en masse at the chancellor's inauguration to tell him so. Funny, the chan brought the cops to his reception, but wouldn't let the workers in. I blogged on it, with lots of nice pictures of campus cops in riot gear.
Tales from the Coast: George Blumenthal Vs. the Class Divide
I need some refreshment...
If F&F tank fully, bailout 'supposed' to happen, but will it? And what if it doesn't?
"Dobbs, are you the one that posted the other day about the Carmel area? I was really struck (at least on zillow) by how MANY sales there were. In our area, (met nyc) there are almost NO sales, but the ones that do sell seem very high to me."
I must admit, I didn't check Zillow, just went by stats in the local paper I picked up.
Gavshire Hathaway writes:
Anybody thinking that Freddie is a good flip at $3? I'm going to test the waters and see if I can catch a quick bounce. Might be good for a 75-100% profit over the next couple days.
So your reward to risk is 1.
spam spam bacon spam wrote:
Make CRE fall!!!!!
I'm banging my head on my desk daily looking at CoStar and Loopnet listings...
hahaha! I pity the fool who searches CoStar and Loopnet for properties, 99.9999% of those listings are in FANTASY LAND.
Yeah, right, I'm going to pick up a 50 unit complex in Los Angeles with a 5% CAP!
Hell, single family properties in the MLS yield WAY more than the multifamily on there...