Adieu 2008 - Rest in Peace

A Historical Year Comes to a Close

An optimist stays up until midnight to see the New Year in. A pessimist stays up to make sure the old year leaves. Bill Vaughn

I have just a few modest wishes for 2009 ...

May the real estate market stabilize,

May we turn our 201ks into 401ks,

May the credit markets ease,

May blogging not become obsolete.

Thanks for joining me through the bumpy ride of 2008.

2009 ushers in hope of better days.

Signing off for 2008 ... Gerry

Help For Troubled Homeowners From An Unlikely Source - The IRS

Even though the Feds are moving heaven and earth to right the economy, and in the process rescue the housing market, I never expected the IRS to throw a cooperative cap into the ring. Now the only thing we can count on is Death, since the IRS may be turning into “the nice guys.”

In these trying economic times, the Internal Revenue Service is offering some assistance to beleaguered homeowners offering an “expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.”

Now, a homeowner or the lender may request to have the IRS make the tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan.

The agency said there are also options that would allow the home to be sold, even if a federal tax lien has been filed. “Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.”

OK that is a sizable caveat, but still, that’s pretty big on the part of the IRS. Forgive a tax lien? Forgiven as to a lien on the real estate but I'm sure personal liability remains (it's still the IRS.) Notice, the term “may request”.

The IRS Press Release provides links for the necessary forms and further instructions.

While the process to request discharge or reorder a lien takes about 30 days after the paperwork is submitted, the federal agency said it “will work to speed those requests in wake of the economic downturn,” according to the press release.

“We don’t want the IRS to be a barrier to people saving or selling their homes,” said IRS Commissioner Doug Shulman. “We realize these are difficult times for many Americans. We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.”

The agency advises individuals to contact the Collection Advisory Group if they are in the process of selling or refinancing their homes to expedite the process of their requests. Homeowners with tax liens should inform the lender immediately upon starting any loan process so that transactions are not unduly delayed.

As of late, more than 1 million federal tax liens are outstanding against properties. The IRS issues more than 600,000 federal tax lien notices annually.

Here is how the IRS explains the re-placement of the tax lien to a secondary position:

"In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral."

Additional Source: Atlanta Business Chronicle

The Latest Outrageous Excess in Dubai - An Air-Conditioned Beach

The House of Versace is not known for restraint, but good grief - an air-conditioned beach? Dubai may be one of the few places in the world that, even in the face of a slowing economy, is just not able to forgo excess to the extreme.

Something tells me the environmental police will have something to say about the plans for Dubai's newest hotel, the Palazzo Versace, to artificially air-condition their beach. Wait, I don't think environmentalists are allowed into Dubai. Next hurdle ... how in the hell do you air-condition a beach? Even the resort's engineers aren't sure, or at least their public relations department is very vague about the technicalities.

The developers are planning on this quirky amenity to be a draw for the rich and famous. O.K.

USA Today reports that the beach is to be part of the $609 million, 12-story luxury hotel and residence complex, designed by the Milan-based fashion house that developers say is to be finished in 2010. "The audacity of an artificially cooled beach is typical of Dubai's relentless pursuit of tourists and ultra-rich visitors."

Just add this cool beach in the desert to the long list of over-the-top "stuff" in Dubai: an indoor artificially cooled ski slope; the world's tallest skyscraper; and a growing archipelago of man-made islands off its Gulf shore.

Versace is not the only fashion house intertwined with Dubai's real estate industry. "Karl Lagerfeld of Paris-based Chanel has signed up with state-owned investment company Dubai Infinity Holdings to design 80 homes on artificial island called Isla Moda, or Fashion Island."

And Armani "partnered in 2005 with a Dubai's development giant Emaar to build a luxury hotel with 175 suites in Burj Dubai — a residential and commercial tower that aims to be world's tallest skyscraper when completed next year."

An air-conditioned beach on the edge of one of the hottest deserts in the world? Absolutely outrageous. Only a fashion designer, perhaps only Versace, would consider this a possibility, even in Dubai.


You can register your interest in Palazzo Versace here. Thank you, I'll take two.

Defer All Cliff Jumping - Help May Be On The Way

Before we all head for the nearest high cliff to take a leap, let's remember one thing ... we're still in holiday territory. Let's table the cliff idea for the time being; the Calvary may be around the bend.

Unless you have been in the malls lately scooping up the holiday deals, or under a rock, I'm sure you're aware that the November housing numbers were not particularly positive. But before we take the depressing bait, hook, line and sinker, there are some extenuating circumstances that paint a darker picture for the short-term.

Such as ....

• As I've said before, the fourth quarter does not usually play well with the housing market, but add to that the presidential election (now over if you haven't heard) and all the myriad of other economic crises that made an appearance in the latter half of this year, make for 4th quarter market stress.


• There was also a number of states that put a moratorium on foreclosures and some banks that did the same until after the holidays to see where TARP shakes out.

• There might be plenty of money in the banks now, but they are sore to part with it if we put in any measure to the free wheeling money we grew accustomed to in the last years. Now amazingly enough banks are taking risk aversion seriously and requiring that borrowers actually be able to repay the loan instead of refi-ing their way out of the frying pan into the fire.


• Growing unemployment has put a damper on the enthusiasm of buyers even with prices down and mortgage rates dropping to record levels. Once again the new era of sound fiscal decisions requires a job in order to pay the mortgage.


• Now that we have moved into a recessionary-correct mindset that abhors overly visible excesses, it seems almost too showy to move into the new house, even if you're lucky enough to sell the house you're in.

The point here is that any hardship that could be laid at the feet of a housing slump was done so in November and December. Although the pain is not over, things may not be as bad as the number show. The rescue plans and lower interest rates should begin to positively effect housing, infusing the economy and boosting the confidence of the nation.

Here are the November numbers reported by BusinessWeek:

Existing Home Sales
Sales of existing homes fell 8.6%, to an annual rate of 4.49 million in November, below the market consensus of 4.92 million. Sales are down 10.6% from a year ago. The median home price fell to $181,300, down a record 13.2% from last November. Single-family home sales fell 8.0%, to 4.02 million, while multifamily sales dropped 13.0%, to 470,000.

"The data are weaker than expected, showing no turnaround yet for the housing market. Housing data are always volatile during the winter months, however," says S&P senior economist Beth Ann Bovino.

New Home Sales
Sales of new single-family homes dropped a further 2.9% in November, to an annual rate of 407,000. The level was slightly below the market consensus of 415,000. October sales were revised down to 419,000 from the 433,000 reported a month ago. Sales are down 35.3% from a year earlier. The median sales price rose to $220,400 from $214,600 in October, but is still well below the $249,100 last November.

The sales declines for both existing and new homes chased the precipitous 18.9% November drop in housing starts and the 15.6% fall in permits. The NAHB index fell to its all-time low of 8 in November, where it remained in December, while the MBA purchase index fell by 0.9% in November, before initiating a similar-size bounce in December, notes Action Economics.

Consumer Sentiment
The University of Michigan's U.S. consumer sentiment improved to 60.1 in the final December reading, up from 59.1 in the preliminary and 55.3 in November. Expectations rose to 54.0 compared with the preliminary 52.4 reading and 53.9 in November. The current conditions index edged up to 69.5 from 69.4 in the preliminary reading and 57.5 in November.

"Overall, current sentiment readings continue to reside in deep recessionary territory, although today's data bring hope that the worst of the news is behind us," says Action Economics.

Worthy Nods

Waiting on 2009 ...

This week's Worthy Nods from the news and from around the blogs ...

Wall Street Journal: New Code of Conduct on Home Appraisers Reached - Fannie and Freddie have reached an agreement on a code of conduct for home appraisers which will continue to tighten credit availability by adding further guidelines for appraisals. Appraisers are no longer operating under the radar and are under pressure to provide the goods, but not over estimate property values. Indications are that appraisers are erring on the side of conservatism.

New York Times: Saying Yes, WaMu Built Empire on Shaky Loans - Read this unbelievable account of a supervisor at a WaMu mortgage processing center who snorted meth on the job and was praised for "getting it done." School teacher applicants with stated incomes to rival brain surgeons were routinely overlooked. "Yes" and "Approved" were the rubber stamps of the day. One of the few borrowers that raised an eyebrow was a mariachi singer claiming a six-figure salary. This was a real challenge. The solution was to photograph the singer in front of his home in his mariachi costume and put the photo in the file. There ... income verified. "Approved!"

Matrix Blog: Contrarian Move - Staying Put - Take a look at these interesting data that indicate Americans are settling down. Only 13% of Americans changed residences between 2006 and 2007, the smallest share since the government began tracking this trend in the late 1940s. "On the surface, this seems to contradict the surge in sales activity in 2004, 2005 and 2006 during the housing boom. However, NAR indicated that roughly 36% of all sales in 2004 were investor or vacation home sales. I interpret this as a surge of secondary housing, not primary, which is one of the reasons the surplus housing stock is going to be difficult to absorb over the next several years."

For a 360 degree perspective on the effects and benefits of the lower interest rates and government rescue efforts read both these articles:

MSNBC: Mortgage Applications Hit Almost 5-Year High - Will these refis prevent a large number of foreclosures?

Continue reading for the rest of the story ...

Mr. Mortgage Guide: Low Mortgage Rates to Spur New Wave of Defaults - "Talk about unintended consequences. The following is significant insight from the street level. This is especially important for those of you thinking that these low mortgage rates will lead housing and the consumer to the Promised Land."

WSJ: Real Time Economics: Economists React: Home Sales Still Waiting to See Rate Effects - Economists and others weigh in on the decline in sales and prices of both new and existing homes.

MSNBC: Green Building Stalls Amid Falling Home Prices - With soaring energy costs during the first part of 2008, eco-friendly amenities were selling and buyers were willing to pay the premium. Not so for the latter half of 2008 when lower energy costs and downward pricing pressure sidelined the pricey green appointments like solar panels. Price is the name of the game exiting 2008.

Wall Street Journal: Developers Ask U.S. for Bailout as Massive Debt Looms - Credit simply dried up for commercial real estate - here one day, gone the next. "With a record amount of commercial real-estate debt coming due, some of the country's biggest property developers have become the latest to go hat-in-hand to the government for assistance."

The Huffington Post: Bin Laden Latest Madoff Casualty - I actually fell for this when I first read it. Even turned to my husband with the "Did you know ...?" This is a take from Andy Borowitz, a comedian, on how the interview may have gone had the mighty terrorist been duped by the Ponzi king.

Seth's Blog: Hubris vs. Humility - On the value of investment managers ... "Confidence is often a self-fulfilling prophecy, particularly in marketing or investing. Arrogance, on the other hand, is hard to reward. My favorite combination is the quiet confidence of knowledge, combined with the humility that comes from realizing that you're pretty lucky and that you have no idea at all what's guaranteed to work tomorrow."

See Real Concepts Archives for more articles.

Despite Staggering Losses, Some at Beazer Have a Merry Christmas

Beazer Homes at Capital Village

Being the CEO of Beazer must feel kind of like being the President of the United States. How did I get in this mess and how am I going to get out?

Being the head of a building company during the current housing and credit crises, particularly a publicly held company, is no cake walk. Beazer deserves credit for remaining vertical so far during the housing hurricane when many of their competitors are faltering and even knocking at the bankruptcy doors.

Compared to the trillions of dollars that we are increasingly becoming immune to hearing when it comes to the government rescue programs, a mere few million, or even a billion dollars seems of small consequence. The large CEO compensation packages that are bandied about seem incomprehensible when viewed in the rear view mirror of a crumbling balance sheet and employee layoffs.

So it was when I read that Beazer, an Atlanta-based home builder, paid its top executives $1.4 million in bonuses this year, it initially washed over me as ho-hum. It was a paltry sum compared to the Wall Street bonuses I've been accustomed to hearing to the tune of eight or nine figures. The punch line is that Beazer posted losses of nearly $1 billion in fiscal 2008 and a loss per share of $24.69 according to the Atlanta Business Journal. All this in a time when construction CEO compensation has decreased 22.4 percent

I've mentioned in the past the self-imposed roadblocks Beazer has faced. SEC settlement of the investigation into their accounting procedures, justice department investigations, negative Internet campaigns on their customer relations, lawsuits and general negative press has plagued their last years. Watching Beazer as a hometown outsider, I see evidence of a corporate culture that is lacking in buyer and homeowner interactions, never mind the balance sheet, when compared to most of their builder counterparts.

Here's just a few past issues plaguing Beazer that caused the Motley Fool to label BZH as the worst stock for 2008:

An SEC investigation and a subpoena from the U.S. Attorney's Office in the Western District of North Carolina, regarding the company's lending practices. Subsequent settlement.

Sizable job cuts.

Suspension of its dividends.

The expectation of $230 million in impairments in its fourth quarter.
Being forced to negotiate waivers on its debt defaults.

A shareholder advisory group calling for the ouster of Beazer's CEO, who collected a substantial salary while presiding over the mess we've discussed and who sold $7.7 million worth of Beazer's stock in November 2006, less than two months before the stock's freefall.

But not only did they not fire the CEO,"Beazer Homes USA Inc. reported Monday it paid Ian J. McCarthy, president and CEO, a bonus of $600,000 in 2008. According to a Securities and Exchange Commission filing, the reward was half his base pay of $1.2 million. Michael H. Furlow, executive vice president and chief operating officer, was rewarded with a $400,000 bonus, half his $800,000 salary, and Allan P. Merrill, executive vice president and chief financial officer, garnered a $300,000 bonus. All three men were paid under the company's discretionary bonus plan, according to a filing with the Securities and Exchange Commission." Atlanta Business Chronicle


For fiscal 2007 Beazer posted a net loss of $411.1 million and a loss per share of 10.70.Annual revenue plummeted 40 percent to $2.07 billion. As bad as 2007 was for Beazer, it paled in comparison to the losses for 2008 which garnered bonuses for the top dogs of $1.4 million.

Wonder what next year will hold for Beazer? Perhaps their bonuses should be paid in unsold houses.

See Real Concepts Archives for more articles.

All Santas Look Alike to a Child

Thanks to Seth's Blog for the Santa Brigade ...

I guess Santa has transcended cultures and religions with more success than any world leader, politician or humanitarian.

All for the joy of a child ... maybe it is a wonderful world.

Merry Christmas!

Greenspan Once Again Caught By Surprise

Bill Allen breaks the story for The Huffington Post:


Former chairman of the Federal Reserve Alan Greenspan today expressed surprise that Rudolph the Red-nosed Reindeer actually required batteries for his nose.

Some reporters noted that the language was virtually identical to what Mr. Greenspan had used several times previously, including during the meltdown of the U.S. financial structure this fall. They pointed out that all of the press releases have the same typographic error in the second paragraph -- "surprise" missing the first "r" in the second paragraph.

Testifying before Congress in October regarding the collapse of Lehman Brothers, Fannie Mae, Freddie Mac, AIG, other financial firms, the loss of multimillion dollar bonuses and the cancelling of really hot parties at "retreats," Greenspan said he believed that banks and other financial businesses would act in their own self-interest to protect shareholders and their institutions. Discovering things hadn't quite worked out that way, he confessed that he found himself in a state of "shocked disbelief."

Rumors also surfaced that "the little people" had lost homes, jobs and their life's savings, although no one testifying had ever had direct contact with such people.

See Greenspan Rule Book Goes Missing, Global Financial Markets Collapse … and He’s Shocked?

Bush Dost Protest Too Much

Bush (excuse me, I mean his press secretary) could have gone a few decades without splaying the country with his repudiation of Sunday's New York Times' article on the mortgage crises. So they didn't claim Bush was a genius. What's new? Although Bush's pen is not tagged to this final harangue on the press, he can be heard barking in the background.

Don't get me wrong. The New York Times, and other journalistic ventures, are often in error, never in doubt, but what the hey, there are papers to sell, blogs to promote, and ad revenue is the holy grail. The New York Times may have been too simplistic in naming Bush's duplicity in the evil mortgage plot to put every American into a home, but with all the press coverage to shoot at, it is a mystery why this one really got the White House's knickers in a wad.

There is plenty of blame to go around. Nobody that I've heard on the podium merits a VSOP award. But you decide. Here's the New York Times' article that raised the White House shackles and below is an excerpt from the Statement by the Press Secretary on Irresponsible Reporting by New York Times.

Most people can accept that a news story recounting recent events will be reliant on '20-20 hindsight'. Today's front-page New York Times story relies on hindsight with blinders on and one eye closed.

The Times' 'reporting' in this story amounted to finding selected quotes to support a story the reporters fully intended to write from the onset, while disregarding anything that didn't fit their point of view. To prove the point, when they filed their story, NYT reporters were completely unfamiliar with the President's prime time address to the nation where he laid out in detail all of the causes of the housing and financial crises. For example, the President highlighted a factor that economists agree on: that the most significant factor leading to the housing crisis was cheap money flowing into the U.S. from the rest of the world, so that there was no natural restraint on flush lenders to push loans on Americans in risky ways. This flow of funds into the U.S. was unprecedented. And because it was unprecedented, the conditions it created presented unprecedented questions for policymakers.

In his address the President also explained in detail the failure of financial institutions to perform normal and necessary due diligence in creating, buying and selling new financial products -- a problem that almost no one saw as it was happening.

That the NYT ignored such an important economic speech to the American people and the complex causes of the crises is gross negligence.

"We make no apology for understanding the concept of regulatory balance." Is that statement a series of double negatives that finally ends up as an illusionary positive? Forgive me, obviously those smarter than I am will have to explain that one.

Follow me brothers and sisters and I will tell you what is not the root of the problem. Money in itself, and too much of same, is not intrinsically evil to the point of causing the mayhem that is the housing and credit mess. Money in itself never is.

Usually it is just as simple as greed. So how do you stop greed once you leave the Garden of Eden?

Like I said, Bush could have let this wash over him, after all he hasn't taken offense at much else. This really rings spiteful. I don't think anyone is blaming Bush for single-handedly creating the worst bleeping mess since the Great Depression.

And the White House's parting shot:

There are many more reporting failures in this story -- failure to consider the impact of monetary policy; ignoring the regional nature of housing markets; and ignoring the Bush Administration's historic proposal to overhaul the nation's regulatory system, for example. But then a review of these issues would wave complicated the reporters' myopic point of view that only Bush Administration policies could possibly be responsible for the housing and finance rises.

Bush took the shoe throwing episode better than the affront from the New York Times. See the video where the Administration declares, "No hard feelings." What gives?

Worthy Nods

WSJ Developments: 10 Home Improvement Stocking Stuffers - Take a look at these really interesting and cool eco-friendly home helpers in time for holiday giving. And if you find none of these in your stocking, go out and treat yourself. Recessionary-correct stuff.

WSJ Developments: Friday's Diversion - Timber Magnate Offers Up Island for $75 million (Or a Jet) - Definitely not recessionary-correct, but an entertaining look at outrageous excess. Check out the links for even more over-the-top real estate listings.

Forbes: America's Extreme Home-Sale Tricks - This could turn into a reality realty show. How about a builder who announced a two-for-one sale in which buyers got a free $400,000 home if they purchased a $1 million property. "No one actually took the two-for-one," says the builder. "But we sold all of the expensive homes."

WSJ - Real Time Economics: Fed Researchers: Credit Vertigo Bigger Problem Than Funds to Lend - What's the real story on the credit freeze? There's plenty of money out there ... "The common assumption that the credit crunch is the result of banks being short of cash to lend is not accurate, the researchers found. Instead, there is a complex mix of lower demand, higher standards and poor credit quality at play in pushing down loan volumes." Credit is available but there are strings attached and demand for loans has slumped because of concern over the economic outlook.

Rollins Financial Blog: Cash is Trash - Since when? "The Federal Reserve System clearly has a plan: They are attempting to make cash so unattractive from an investment standpoint that even the most unknowledgeable investor will redeploy their cash into something that has the potential for a higher rate of return." If you're brave enough to look at your investment statements take a gander at the returns coming in from money market accounts - never mind, they're invisible. So where's the smart cash going? That's right ... read on.

The Economist: Interest Rates Are, In Effect, at Zero, as the Fed Promises More Unconventional Measures - The Fed's moves are nothing short of "a formidable display of monetary aggression." What else is in their arsenal?

Wall Street Journal: Lenders in Dubai Face Growing Risk of Defaults - "Et tu Dubai?" Nowhere has the drunken exuberance of high prices and high leverage reveled more than in Dubai. The bubble burst leaves many banks facing either a very steep learning curve or failure. Banks are facing mortgage defaults and foreclosures as the party ends. In a land where 95% mortgages could be arranged in as little as two hours, the Dubai fantasy real estate market is now all but sinking into the sea.

Barron's: Struggling to Survive at the Mall - Some retailers won't survive the downturn in consumer spending -- at least not without a trip to bankruptcy court. How to spot problems on the balance sheet and at the mall. An In depth assessment.

Wall Street Journal: Madoff Created Air of Mystery - Like his investment returns, Madoff's recorded golf scores are remarkable only for their consistency, never moving below 80 or above 89 from 1998 to 2000, the last year he recorded a score. So who would trust this guy? This article is a great inside look at the man and the mystique. Maybe even a precursor to a book on Madoff. The question is who is going to the first out of the publishing blocks.

Mr. Mortgage's Guide to the Truth - Prime Mortgages May Get Transparency - "Most loans, even ‘Prime’ 30-year fixed with 20% down, made from 2003-2007 should have been classified as ‘exotic’ at origination." A skewed sense of risk caused "everything but the very worst to get dumped" into the "Prime" bucket. By virtue of the extremely lax underwriting guidelines and falling house prices (and now a recessionary economy) many loans made during that time are definitely ‘at-risk’ and exotic now. So where's the transparency ... read on.

and just because I can ...

The Economist: The Most Popular Queries on Google - The number uno query is, of course, LOVE. I put "love" into Google search and pulled up over 2 billion entries. See what else is worthy of our attention on-line.

and,

WSJ - Real Time Economics: A Christmas Poem - The Year of the Grinch - Nomura Securities chief economist David Resler has penned his latest holiday poem, featuring the Grinch as a home-mortgage lender and hope that a “brighter future will start this Christmas Day.” Combining Dr. Seuss' Grinch with "Twas the Night Before Christmas" we have a new classic, at least for this year.

Lucy, A Woman After My Own Heart

No matter how hard the real estate market gets ...

No matter how low real estate prices go ...

There is only so much real estate and it will never be replaced ...

Prices will eventually go up and demonstrate that long term investment in real estate will see a positive side ...

There is no greater personal satisfaction than to own real estate ...

So, no matter what the market does, Lucy and I are of like minds ...



Click here is video does not appear.

For those of you that have been searching for the appropriate Christmas present for yours truly, I only have one suggestion - real estate.

Thanks to WSJ Developments for bringing this clip to my attention. It has been many years since I've seen A Charlie Brown Christmas. It always made me cry ... something about real estate and good tidings.

See what I mean?


Merry Christmas

Builder Confidence, New Home Starts, and Building Permits at New Lows

From the annuls of "Tell me something I didn't know," builder confidence remains at an all-time low. Take a look at the graph below from the National Association of Home Builders (NAHB)that shows the history of builder confidence ratings through the years since 1985.

Click on chart for an enlarged view.


The builder confidence index for December came in at 9, tying the record low set in November. "Usually housing bottoms look like a 'V'; this one will probably look more like an 'L' " as the housing market stabilizes before begining a climb from market lows (not yet expected).

The following is an excerpt from the NAHB's press release, Builder Confidence Remains At Record Low In December:

Builder confidence in the market for newly built single-family homes held at a record low in December as deepening economic turmoil, a deteriorating job market, and an ongoing flow of foreclosed homes onto the market continued to negatively impact sales conditions. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) did not budge this month from November’s all-time low reading of 9, with two out of three component indexes losing further ground.

Two out of four regions posted declining builder confidence readings in December, with the Midwest and South edging down one point and two points, to 6 and 10, respectively. The Northeast held even with the previous month’s 11 reading, while the West posted a one-point gain to 7.

Housing Starts Sink With Builder Confidence

Click on chart for larger view.

But this is good news right? Not that builder confidence is low but that housing starts and building permits for new single-family homes are decreasing. A reduction in inventory being added to the for-sale housing market is critical in order to stabilize the market. Just as the foreclosure inventory has to be absorbed and the flow stemmed before we can enjoy a recovering housing market.

Here's what the Census Bureau data shows for December as to new single-family activity;

Single-family starts were at 441,000 in November, the lowest level recorded since the Census Bureau began tracing housing starts in 1959, an almost 17% decrease from October starts of 531,000.

Single-family building permits declined from October to November by 12.3% to 412,000 from authorizations in October of 470,000.

Completion of new homes was up substantially for December. With starts and permits down and completion up, the markets should expect a decrease in puchasing of materials and a further drop in construction employment, yet a continued and further stress on the economy.

Sources: Calculated Risk, NAHB, Census Bureau.

Worthy Nods

Worthy nods for the week from the news and from around the blogs:

BusinessWeek: Housing: What the Experts See Ahead - An economist, a consultant, an academic, and a fund manager weigh in on where housing is headed, and whether the proposals being debated will help stabilize the battered residential sector. And of course they try to locate the bottom. Excellent short quad-box insights.

Vanity Fair: Profiles in Panic - Or, "Lifestyles of the Not-So-Rich Anymore. Most widely read article of the week but published before the Madoff story broke. A new world of disappearing wealth.

Wall Street Journal: Mortgage Rate Plan Has Precedence - Lessons in history. A plan to stabilize home prices by luring nervous buyers into the housing market with federally subsidized mortgages may seem radical, but it is not unprecedented. Below-market-rate mortgages for some borrowers was offered up during Ford's administration to spark building activity and to lift the economy out of the sharp downturn of the mid-1970s. The 1970s program had a negligible impact on the housing market and the broader economy.

Big Builder On Line Blog: JP Morgan Sues Builders Over Inspirada Development Near Las Vegas - JPMorgan Chase Bank has filed a lawsuit against the builders who formed a consortium to buy and develop Inspirada, a 2,000-acre parcel of raw land near Las Vegas. The bank alleged breach of contract by the subsidiaries of Beazer Homes USA, KB Home, Meritage Homes, Pardee Homes, Toll Brothers, Weyerhaeuser Real Estate Co., and the Woodside Group. The suit says that by not closing on the land as agreed the builders caused the developer to default. JP Morgan is seeking a minimum judgement of $164,723,251, plus attorney's fees. This is one to watch. How many more nails is it going to take for Beezer?

BusinessWeek: A Standoff Over How to Rescue the Housing Market - Clashing proposals. Paulson vs. Blair lead housing recovery debates with plans that may or may not rescue the housing market. We might have to just wait for Obama, but we really don't know what his plans are.

Mr. Mortgage Blog: Who Can Really Benefit From Lower Interest Rates - The prospect of lower interest rates sounds like a panacea to our current housing markets, but not so fast. When drilled down, the number of people who will be able to take advantage of this program is problematic. Lenders are in a risk avoidance mode that will negate cheap money for all. Excellent post with a realistic viewpoint on exactly who will be eligible for these mortgages and the overall effect on the housing recovery.

Knolwedge@Wharton: For Modern Urban Growth, Don't Forget the Ballpark and River Walk - The smart guys at Wharton weigh in on what buyers, families, residents really want. Makes sense to me.

The Big Picture Blog: Foreclosures Rise 28% - RealtyTrac released its November foreclosure numbers, and they were not pretty. And what did you expect?

MSNBC: Major Hurdles Stand in Way of Foreclosure Relief - Day in the life wading through the morass of the mortgage modification program where massive amounts of patience is required - Georgia woman's struggle to save home leads into red-tape nightmare.

Wall Street Journal Developments: Home Builders Pull a 180, Lobby for Mortgage "Cram Downs" - The National Association of Home Builders is breaking with its allies in the lending industry and calling for mortgage “cram downs” — the proposal that would allow bankruptcy judges to dramatically alter loan terms to stem foreclosures. The NAHB has long opposed cram downs because they feared it would cause higher interest rates. But desperate times require desperate measures says NAHB. (Please don't go there.)

The Economist: Mortally Wounded - Housing markets look grim all over the world. In the third quarter of 2008, house prices fell in 11 of 16 countries measured by The Economist’s house-price indicators. The worst fall was in Britain, where prices tumbled a whopping 5.5% in the three months to September.

The Real Estate Bloggers: $100,000 Home Sweet Sport in San Francisco Bay Area Market? - What just a couple of years ago would have been thought preposterous, there are 600 homes in the San Francisco Bay area selling for under $100,000. Wow! Sounds like a bottom to me. At least for San Francisco. Needless to say, those houses are getting a lot of attention.

Air Transport for English Bulldogs Carries Higher Death Rates

Posted by Travel Sentry

Thanks to the Wall Street Journal blog, The Middle Seat, I learned about a very odd statistic. There seems to be a higher than normal death rate for English Bulldogs who are transported by commercial airlines. Looking further, air transport seems fraught with danger not only for bulldogs, but for "other short-nosed, known as brachycephalic, breeds such as Boston terriers, boxers and pugs," as well.

According to an August 2005 story in the Atlanta Journal-Constitution, “many airlines refuse to carry [short-nosed dogs] during the summer because the higher temperatures make it harder for such animals to breathe.”

Being an avid dog lover, I found the information extremely valuable for other owners who fly with their dogs. Just look at that sweet mug. It is easy to see how the respiratory channels may be challenged.

Every month the Department of Transportation issues a consumer report that includes data on everything from baggage mishandled to on-time arrivals, delays and also a section on dead pets.

According to The Middle Seat each injury, loss or death of any pet is cited with a description of the breed and a description of what could be determined visually upon arrival.

Here are a few examples from the blog:

For example, take the saga of Katya, a cat who managed to escape from her kennel while traveling on Northwest from Seattle to Chicago’s O’Hare: “Passenger checked four cats in four kennels. On arrival one kennel was empty. Cat was found later same day at SEA airport and returned to owner next day 07Aug2008. Owner reported Katya had cut lip, chipped tooth and grease on back.”

Other stories, such as the tale of Bradley, an English bulldog, don’t have such happy endings. On Oct. 13, Bradley was traveling with his owners on United Flight 87 from Los Angeles to Honolulu. Alas, Bradley never made it to paradise — at least not on earth. The dog “was discovered deceased upon arrival of aircraft. No signs of distress on the animal and kennel was intact,” the report said.

Bradley’s passing rang a bell. In July, another bulldog expired during an Alaska Airlines flight from Reagan National to LAX. “This appears to be a natural death,” read the report. “There is no evidence to suggest that the airline’s handling contributed to the animal’s condition in any way.” Then, in May, a three-year-old “English Bulldog Mixed” was found dead on arrival at Houston’s George Bush Intercontinental Airport after being unloaded from a Continental flight. “He may have gotten excited during transportation causing him to become dyspneic resulting in a cardiovascular collapse,” the report said. That same month, still another English bulldog was found dead after being unloaded from cargo on United flight from LAX to Boston’s Logan.

More English bulldogs died during flights in March and in October and November 2007. In the latter case, a 14-month-old “Bulldog Terrier” was found dead after a Delta flight from Atlanta to Buffalo, N.Y. “Autopsy report indicates the dog had a preexisting heart condition. The stress of the flight possibly caused his death,” the report said. (Between October 2007 and October 2008 — the last month for which data is available — 30 pets were reported to have died in transit. So by our count, bulldogs alone, represented at least 23% of the deceased.)

For more information on traveling with your pet, check out this site from the American Veterinary Medical Association.

Thanks for the warning and information!

Emerging Trends in Real Estate 2009 - Charts & Graphs

To receive the following select charts and graphs in a PDF format send an email to Gerry@GRDavidson.com. Below is a listing of the Emerging Trend blog series.

Emerging Trends in Real Estate 2009

Charts & Graphs

• Importance of Issues Affecting Real Estate Investment and Development in 2009


• U.S. Capital Sources 1998-2008


• U.S. Markets to Watch: Commercial/Multifamily Investment


• U.S. Markets to Watch: Commercial/Multifamily Development


• U.S. Markets to Watch: For-Sale Homebuilding


• Prospects for Major Property Types in 2009


• Prospects for Property Subsectors in 2009


• Prospects for Capitalization Rates and Internal Rates of Return


• Prospects for For-Sale Housing in 2009


• Canadian Markets to Watch


• Canada - Prospects for Major Property Types in 2009


• Canada - Prospects for For-Sale Homebuilding
  

Real Concepts Series based on ULI's Emerging Trends in Real Estate 2009:

Part I - Hold On and Try to Lose Less

Part II - Best Bets for Real Estate in 2009

Part III - Where's the Money?

Part IV - Markets to Watch

Part V - Property Types in Perspective

Click here to obtain the entire Emerging Trends report from the Urban Land Institute.

Emerging Trends in Real Estate 2009 - Property Types in Perspective

Emerging Trends – Property Types in Perspective - Part V

The Urban Land Institute’s 2009 Emerging Trends report predicts a declining market for all property types: apartments, industrial, office, hotels, retail, and housing. Once again, the perspective from the interviewees is to gauge the degree of downside expectation.

“Hold on and lose less” is the mantra for 2009. It is too late to sell and with the bloom off the rose, smart money is on a hold position. Buyers are only looking for opportunistic pricing from distressed owners, often those who were last to the game and overpaid and overleveraged for properties at the height of the market. Rescue saints or vultures, take your pick, will be there to scoop up properties from owners who just can’t hold on.

As we move through the different property types, keep in mind that with a prohibitive development climate, the ratings refer to existing properties. Developers resign themselves to a quiet 2009.

“Construction financing for major projects is virtually impossible to obtain, homebuilding is redlined, and retail makes lenders especially nervous. Only rental apartment and some warehouse projects have much chance to register profits worth the risk. The lid on construction raises hopes that markets can recover more quickly in the near term with pent-up demand generating a round of sustained development activity after 2010.

Let’s get down to the Emerging Trends survivors and losers. With the hand we’ve been dealt, there are few winners. Perhaps we should add to the mantra “do no harm.”


APARTMENTS

“Modestly good rating.” Emerging Trend’s “Best Prospects” winner for 2009 is the apartment sector. It is ironic that residential real estate marks the top and bottom of the heap with multifamily rental at the top and for sale housing at the bottom. The housing market collapse contributes to the rise in rental prospects reversing occupancies to the up side and firming up rates. Signals show more weakness for high-end apartments as defunct condo projects convert to rentals placing too much inventory in the luxury rental market.

“Over time, apartments solidify their position as the best risk-adjusted core real estate investments. "

Strengths: Demand from GenY/young adults kick rentals into high gear just as a crumbling housing market refills apartments. Tougher underwriting also makes the move from rent to buy difficult. Apartments weigh in as a bright spot for investors.

Weaknesses: Landlords can’t give away rental units in overbuilt residential markets (Florida, Las Vegas, and Phoenix) especially where unsold condos turn rental. The stressed economy doesn’t allow for driving rates up and rising unemployment leads to lower tenant quality. Fannie Mae and Freddie Mac hold the key to a house of cards for investors, especially for affordable housing. Investors need their liquidity – credit trumps.

Best Bets: Rehabbing older product into workforce housing where demand is strong. Also look for bargains in overbuilt areas where demand can rebound quickly when markets revive. Projects near mass transit and infill where congestion is an issue are no-brainers.


INDUSTRIAL

“Fair to modestly good” marks. The Energizer Bunny of real estate remains an investor favorite. Stable but plain. Steady cash flows for now but weakening economy, lower inventories and less shipping could put pressure on the bottom line.

“Institutional investors’ appetite never subsides for big-box warehouse properties located near leading gateway ports and primary international airports. Solid core-style investments. No other real estate sector faces the potential for greater adjustment and transformation of its markets.”

Strengths: Steady cash flow with little volatility. Values get cushioned in downturns as demand from investors is steady. “Short construction lead time keeps markets from getting too overbuilt.”

Weaknesses: Loss of consumer power leads to declines in import traffic, slowing warehouse activity. Housing slump also has negative impact as builders have little need for warehouse space for materials.

Best Bets: Despite short-term mediocre prospects attributable to the economic slowdown, premier coastal markets will continue to increase service to the global marketplace. West coast ports and northeast coast markets face ultimate capacity issues creating opportunities for Charleston, Savannah, Jacksonville and Houston if those secondary ports can handle oversized container ships. With infrastructure improvements other secondary markets could thrive, but for now, it’s a risk. Research and Development tech properties hold much promise for certain markets.


OFFICE

“Fair” marks for office. Downtown office space will generally fare better than suburban space. Investors favor Class A buildings in major business centers over suburban nodes and outlying office parks where rates and occupancies are the first to suffer. Sector a definite hold.

“Long leases protect office owners after markets crest and lack of development activity, especially in most downtown markets, should help buffer against any serious investor dislocation. ‘We can weather this storm.’ ”

Strengths: The credit crisis keeps new projects at bay while any overbuilt space is absorbed. Respondents felt that “when recovery comes, rents may recover quickly.” During this last upcycle, tenants did not overlease anticipating growing into future space. Interviewees expect more measured layoffs and fewer sublease vacancies than during other market bottoms.

Weaknesses: Current conditions promote tenant’s market. Leasing slows leading to more concessions and rent erosion, especially in markets deep in financing and investment offices. Suburban markets suffer. Over the cliff markets: Phoenix, Orange County, Buckhead, N. Virginia. Developers can take the year off, maybe two.

Best Bets: Once again … flight-to-quality. Primary core properties will rebound first. Landlords must court tenants aggressively to sustain occupancies through tough times – “it may make sense to trade concession for better credit.” Financing is key for owners with loans coming due.


HOTELS

“Fair to poor.” Hotels become volatile in recessionary economies with less travel and more budget conscious considerations. Nevertheless, full-service hotels in major markets are expected to outperform limited-service brands outside core markets including interstate properties.

“Major coastal cities should continue to attract offshore euro and yen visitors who flock along global pathways to these U.S. destinations as long as the weak dollar makes them bargains. But owner anxiety increases.”

Strengths: Upscale luxury segments and mid-scale hotels without food and beverage historically perform better in declining markets. The party appears to be over after a long run of healthy retail growth. A lousy economy impacts hotels earlier and harder than most other property sectors, but hotels can respond to the market quicker when room rates adjust on a nightly basis.

Weaknesses: Domestic travel turns south with recessionary pressures leaving empty hotel rooms. Airline cutbacks leave some secondary and tertiary cities high and dry. The easy to develop suburban markets with limited-service product tend to be overbuilt during market highs which will be the hardest hit in weak economies. “New supply comes on line just as demand falls off” further flooding the market. Big hotels will start offering enticements and concessions to fill rooms.

Best Bets: In the U.S. investors have little choice but to hold onto hotel assets. Buying opportunities will emerge from bad development timing – especially involving distressed owners who can’t service debt on newly opened properties. Until the market shakes out, there is little upside for lodging. Forget about new development. Subject to the length of the recession, hotels face either little to no growth or serious declines.


RETAIL

“Modestly poor.” Retail’s great run is over. Consumers are tapped out and with unemployment threatening to continue and even worsen, prospects dim for a black 2009. The housing mess, both psychological and real, causes more spending pull-backs. Again, the flight-to-quality sensibilities among investors favors prospects of Class A malls and centers in infill markets over B- and C-quality properties.

Respondents remain “relatively positive about urban retail in the prime 24-hour markets.” Flight-to-quality is the only saving grace for retail. Shopping center owners brace for value losses and declining operating incomes.”

Strengths: “Monopolistic fortress malls, owned mostly by REITs, and high-income-area neighborhood shopping centers should weather the ongoing consumer retreat better than other retail segments.”

Weaknesses: Shopping centers are considered “high risk.” Shoppers are unnerved by the economy and job losses. Retailers land on their backside in a long overdue correction in addition to overbuilding of unnecessary product in response to shareholder pressure to show growth. “A disaster waiting to happen.” Interviewees see many retailers going bankrupt. Some chains would have gone bust sooner but for being propped up by easy debt. Retail survivors will concentrate in top centers and malls, leaving some B and C malls behind with mounting vacancies.

Best Bets: Buy or hold mall REIT stocks. Their portfolios are dominated by fortress malls and although they may take some hits, most damage has been factored into share prices. Outlet centers, discount clubs hold their own. Well-located strip centers anchored by top supermarket chains should hold their own. Forget about developing! It will take time for retail to recover.


HOUSING

Housing is off the charts dismal, I hate to say, and comes in “at record survey lows.” Another difficult year anticipated by interviewees while trying to clear the market of foreclosures and distressed sales. Lenders foresee a slow recovery.

“Despite the most significant declines in housing prices since the Great Depression, most long-term homeowners, who mortgaged rationally, should retain significant value gains from many years of steady appreciation.”

Strengths: Interviewees expressed confidence that a price bottom approaches “probably by the end of 2009” as foreclosures and distressed sales increase. Homebuilder inventories slowly sell off at significant discounts. But “the worst is over.”

Weaknesses: “Devastation visits land developers,” many of which were leveraged to as much as 95%. Land prices continue to fall. Distressed assets have to move through the system before stability is seen again. “We need to move back to pricing levels from 2003-2004 before a floor establishes.” Credit remains tight for housing and lenders are not backing off higher equity requirements and stricter underwriting guidelines. “Every sale is a struggle.” The worst may be over but “there is more pain to come.”

Best Bets: Homes closer to prime commercial cores will outperform. McManions are out. At some point the high-end Miami condos overlooking the Atlantic will be good buys. “Ocean views always find a market.” Avoid outer suburbs. Development prospects? “Ha. Ha.”

The country has figured out that too much of a good thing, overleveraged with easy money, can be disastrous. “Expect a slow, lurching recovery.”

Real Concepts Series based on ULI's Emerging Trends in Real Estate 2009:

Part I - Hold On and Try to Lose Less

Part II - Best Bets for Real Estate in 2009

Part III - Where's the Money?

Part IV - Markets to Watch

Part V - Property Types in Perspective

Emerging Trends Charts & Graphs

Click here to obtain the entire Emerging Trends report from the Urban Land Institute.

Emerging Trends in Real Estate 2009 - Markets to Watch

Emerging Trends - Markets to Watch -Part IV

When the Urban Land Institute set out to compile the data that was the basis for the Emerging Trends in Real Estate 2009, one thing stood out clearly and consistently; the interviewees expect that the 24-hour coastal centers, also known as global pathway cities, will hold value better and recover more quickly from a downturn. Inversely, it was predicted that investors and lenders, in a downturn, will retreat from secondary and tertiary markets.

The favorites of investors, developers and lenders are Seattle, San Francisco, and Los Angeles along the Pacific; and New York, Boston, and Washington D.C. to the east. (Consideration of Miami for market significance is nonexistent for 2009.) Global pathway cities located inland – Chicago, Dallas, and Atlanta – also act as players in global commerce by way of large international airports, although their potential is not as highly regarded as the coastal markets.

These gateways can prosper in the evolving global marketplace and “they pose less risk.”

The ULI respondents concur that we are looking at a trend toward the “vertical wave” where urban centers gain importance and are revitalizing city centers with high-rise residential buildings. Even though gas prices are well off the summer highs, the long term prognosis will render our 50-year love affair with the suburbs and a car for every driver, unsustainable. We’ll eventually go in and up. “Urban centers will be the driving force in the future.” The prediction is that people will return to the cores where a combination of “entertainment, shopping, culture, and action” can be found.

The evidence of the demise of the suburban lifestyle is fascinating. For families seeking good public school districts and a family-friendly environment will continue to favor the big house - large lot in the suburbs. But that lifestyle is increasingly in jeopardy because of the mortgage crisis, high car-related costs including commute times, and increasing property taxes to sustain low density housing with a high level of community services. “People are making incredible sacrifices to bring up their kids,” observed one respondent on life in the outer rings.

The infrastructure cost for the mostly residential, low density districts is completely out of the realm of sustainability. Subsidizes from Federal grants for roads and utility expansion are over. The Federal coffers are empty for highway development which allows for further suburban expansion (a result of not raising gas taxes.) The responsibility of building more roads, sewers and schools then defaults to the local governments who have a hard enough time filling pot holes much less raising tax revenue on property owners already financially stretched beyond their means. Mix in the recessionary economy and well, it’s just not pretty. You can forget about mass transit development in most suburban areas due to lack of funds.

Water issues and rights will plaque many hot-growth Sunbelt regions.

A perfect example of water issues is right here in my own backyard in Atlanta. We are in a drought with an insufficient reservoir system and an on going water rights war with the states to the south of Georgia that share the water of the Chattahoochee River. We have been on a complete outside watering ban for a year and I’m not sure we will ever have sufficient water to allow the sprinklers to resume. This summer there was a real threat of running out of drinking water for the city. Lack of water is a huge deterrent to growth for the Sunbelt regions.

Water for the markets of Las Vegas, Phoenix and California are even more threatened than the eastern markets. Increased conservation or either new sources for water will be the only way to accommodate future population growth.

Major Market Review

The global pathway cities may be the darlings for investors and developers but for today’s market it is a matter of picking the lesser of evils. Let me paraphrase … it means you have a chance of losing less. As compared to previous years all market ratings for all regions are down except for oil-rich Dallas and Houston which showed an uptick this year. The Southeast and Southwest both crested on a homebuilding wave which crashed and burned. And no need to even mention the Rustbelt and heartland cities; they have been shunted off the economic growth tract by the Emerging Trends' respondents.

The following is a listing of the Best-In-Show winners worthy of acknowledgement in “Markets to Watch.” They are listed here in order of ranking.

SEATTLE – “It is a city of great creation, new ideas, and new businesses,” more than just Microsoft and Boeing. The center of brainpower industries, Seattle proves itself to be a sturdy real estate market with a diversity of corporate giants and cutting-edge companies. But even Seattle will suffer from the current economic conditions. Office vacancies will rise and unemployment is growing from recent layoffs with more expected to come. Washington Mutual collapses and Starbucks downsizes. Microsoft is a satellite office market unto itself and may be vulnerable to future recessionary layoffs. Housing demand slips and prices drop, but Seattle values remain well above national averages. There is greater pricing erosion in the suburbs with no mass transit. Condo sales crashed. Markets are changing daily in current conditions but at the time of publication, the recommendations were to buy apartments, a hold on retail, and the Puget Sound is ranked the nation’s number-one buy among industrial markets. All in all, considering the current mess, Seattle gets “better than” marks. Kudos.

SAN FRANCISCO – Always near the top of the Emerging Trend list, the City By the Bay is an excellent global gateway with an excellent quality of life. And now with more affordable housing. At the time of publication there was no construction glut and the economy should outperform the national average. “The city actually ranks first for development and homebuilding (despite scoring mediocre marks), and rates as the leading ‘buy’ market for apartments and office.” Although rankings are very optimistic for San Francisco, some interviewees warn that software companies won’t be immune to the recessionary downdraft. “That’s a disaster waiting to happen.”

WASHINGTON D.C. – D.C. thrives when the overall economy struggles. The “ultimate hold market” benefits when the printing presses are minting (so this should be exemplary market conditions – sorry completely editorial on my part.) Downtown office space is expected to stay below 10% and it’s a go on apartments which “lease up no matter what.” The exception to the good news is that builders may have overstepped good sense north of Massachusetts Avenue. Infill however looks solid in Bethesda, Alexandria and Arlington, but office vacancies soar in northern Virginia, a result of overbuilding. “Condo and housing prices increase about double the national average” and respondents were comfortable with retail remaining strong from good job growth. The only Achilles' heel noted is over congestion from poorly planned suburbs where mass transit is desperately needed. “Any transit-oriented development hits a ‘grand slam’.”

NEW YORK – Hold the presses, we need an update in light of recent market implosions on Wall Street. The real estate picture and local economy is changing daily. Near term prospects are threatened by Wall Street’s upheaval. Puny year-end bonuses for surviving traders and the “daisy chain” effect of lost investment jobs spills into feeder businesses. Office vacancies ramp up and rents drop from stratospheric to “comfortably high levels”. Owners and investors take heart from the absence of speculative development but are still nervous. With the global economy hotels can’t count on foreign visitors to fill their rooms and with 50 new hotels planned or underway, there could easily be a glut of rooms. Retail fares OK in primary spaces. Condo and co-op prices finally weaken and suburban markets catch a nasty cold. But still, it's New York.

LOS ANGELES – Best market in housing-ravaged southern California, but that's not exactly an accolade. This large geographical area enjoys a diverse economy. Office may suffer from building wave into 2010 and financial crashes hurt prime western Los Angeles. Orange County shadow office space may take 3 to 4 years to absorb. Multi-family has legs. “It’s almost impossible to lose money on apartment investments, if you have a five- to ten-year investment horizon.” Hotels benefit from global pathway location. Housing is a disaster where nearby suburbs spawn foreclosures like drops of rain and housing prices drop even faster. Weak housing threatens retail throughout southern California. Warehouse development was pushed too far at the nation’s largest port.

HOUSTON – A hot market as long as energy is hot. Let’s see where things shake out with the drop in energy prices. The oil surge allowed the market to catch up with development in an environment where rampant development is the norm. Cost of living is cheap and so is land and housing. Office vacancies drop to 10% and signal a buy, but apartments are soft from too much building. Traffic congestion and no mass transit signal limited future sprawl development.

BOSTON – Beantown hangs in there despite ongoing financial job losses, but plenty of investment and money management jobs remain. The area’s excellent colleges and universities feed the workforce. Office space is “tight” but new harborside hotels threaten older product. Suburban markets still show some softness. Housing values will shore up since taking a beating after steep gains.

DENVER – Denver continues to enjoy steady population growth with a diversified business base. “Alternative energy businesses have been on fire.” This is not a huge market but showing signs of more stability than in the past. Downtown revival has been successful and housing is enjoying greater balance than in many other places. Excellent and expanding mass transit system for the market size. Transit-oriented mixed-use development along suburban rail stops is running ahead of itself, but will eventually outperform.

DALLAS – Enjoying higher rankings these days from an energy-related boom. A large international airport makes Dallas an important inland global pathway city. Office vacancies however remain at about 20% and even higher downtown. Local developers tend to overbuild but the stone wall now fblocking financing possibilities will slow down construction activity. Texas has turned urban with high-rise condos and apartment buildings going up around commercial centers. Lower-income demographics fare well for apartments. Housing did not suffer as much when the bubble burst because they never experienced the same run-up in prices as other major market areas. Government is being assertive when it comes to mass transit expansion of Metroplex.

CHICAGO – “Looks like New York, behaves more like Atlanta.” Buildings “pop up too easily” and office rents show little to no rent growth. Low-teen office vacancies will probably deepen with the economy in recession. Condos are overbuilt and prices weaken and about 25% of buyers have been speculators. Housing values slump in suburbs and steady the closer the location to city core. “Chicago’s not slow and not fast, nice and steady.” Good airport for global pathway and enjoys “good buzz.”

SAN DIEGO – San Diego is a solid hold market despite the deflating housing market which blankets enthusiasm. Employment stagnates and office vacancies slump to mid teens in a correction from unsustainable levels. Retail appetites suffer from depth of housing crises and credit defaults. Marginal airport stifles the hotel and convention markets.

ATLANTA – “Tough times” ahead for Atlanta in 2009 as the leftovers from overbuilding and slipping demand stymie investors and lenders. The Atlanta regional market thrives on growth but the lack of high energy and high-tech engines that drive other markets, brings Atlanta to its knees for 2009. Atlanta is a “no buy” in all property sectors. Office developers are “playing chicken” in Buckhead where “a bloodbath is coming.” Ditto for condo and apartment developers who are trapped in the irrational exuberance of Atlanta-style building – constructing new projects well ahead of demand. Like I said, it’s a “no buy” for now.

PHILDELPHIA – Consistently off the radar screens of ULI respondents, but the city has favorable 24-hour attributes. Suffers from little job growth but is on the all sector buy/sell list, albeit at the bottom.

MIAMI – What can be said other than, “All of Florida seems to be dropping into the ocean economically.” If so, Miami is the dive master. “The condo market is so bad even vultures won’t go there” and prices have plummeted 30% pounding homeowners and killing speculators. But the good news is that office ranks a solid hold and industrial properties sustain strong demand. Hotels have peaked after a strong run.

PHOENIX – This Phoenix will definitely have to rise from the ashes after residential builders over reached the market. “Office is on its butt.” Population growth will continue and businesses like the lower-cost environment. Volatility is the name of the game in this desert market. Locals need to temper sprawl, deal with water issues, and develop mass transit.

Real Concepts Series based on ULI's Emerging Trends in Real Estate 2009:

Part I - Hold On and Try to Lose Less

Part II - Best Bets for Real Estate in 2009

Part III - Where's the Money?

Part IV - Markets to Watch

Part V - Property Types in Perspective

Emerging Trends Charts & Graphs

Click here to obtain the entire Emerging Trends report from the Urban Land Institute.