Vivenda Real-Estate Newsletter

As Thanksgiving is approaching, I am hoping the end of year will bring some soothing news for the real estate industry. The recent news coming out of builders, developers and the financial industry hasn't been very rosy! I also attended a ULI (Urban Land Institute) Meeting where there was a presentation on 2008 Emerging Trends in Real Estate. See below for more information. Happy reading.  You can also go to our website - www.vivendasoftware.com - to view additional information about the real estate industry and Vivenda.

• Real Estate: Buy, Sell or Hold
• America's Big, Fat Housing Inventory
• Wall Street Focuses on Housing Data: the financial view of where we are headed
• 2008 Emerging Trends in Real Estate

Real Estate: Buy, Sell or Hold

Fortune Magazine took a stab at predicting where the real estate market is heading across the country. Over the next 5 years, on average across the country, they estimate that prices will have to drop 16% (June 07 prices used as a base). That average masks some disparities: for example Orlando, Miami, and Tampa, prices need to fall 28% to 34%. It's a similar story in inland California markets such as Sacramento (-26%) and the East Bay (-31%). Other markets like Dallas, Indianapolis or Cleveland should see a slight increase in price.  Finally, a few markets will continue to see better price support such as Seattle or Portland. See the article in Fortune Magazine for additional details.

America's Big, Fat Housing Inventory

At the current existing-home sales rate of 5.04 million units a year, it would take a full 10.5 months to sell the 4.4 million existing homes now on the market, according to data released by the National Association of Realtors (NAR) on Oct. 24. The supply of existing single-family homes was at 10.2 months in September -- the highest since February, 1988. Compare that with the height of the housing boom in January, 2005, when it reached a record low 3.6 months.

Experts Disagree on the Outlook: tighter lending standards, which are dampening sales, aren't helping housing inventories, though the NAR thinks mortgage availability is starting to improve (BusinessWeek.com, 10/24/07). "Once the pent-up demand begins to move, we'll see housing supplies begin to ease and then prices will edge up," said NAR Senior Economist Lawrence Yun in a statement issued Oct. 24. Others aren't so optimistic. Home prices are still falling -- the national medium home price is down 4.2% from a year ago, to $211,700, according to the NAR -- a sure sign that demand is weak. "With prices remaining stubborn, inventories will remain relatively high," says Jonathan Smoke, president of housing market consulting firm Rating Insights.

The housing supply is particularly bloated in Los Angeles, Chicago, and Miami -- the top three on the list of the cities with the biggest housing inventories based on data from San Francisco brokerage ZipRealty. Tampa, Phoenix, Washington, Dallas, Boston, Sacramento, and Houston form the rest of the top 10.

US Wall Street Focuses on Housing Data: the financial view of where are headed 

At this point, Wall Street expects the U.S. housing market to keep wilting through next year, and perhaps into 2009. It also assumes financial institutions will be taking another giant round of write-downs during the fourth quarter, one that may be larger than the third quarter's approximately $45 billion in credit-related losses. What investors remain unsure of is how long it will take the Wall Street banks to bounce back from their losses, and if consumers and the broader economy will survive the worst housing market in decades. On Monday, investors will hear from the National Association of Homebuilders on their November forecast for the housing market. Economists surveyed by Thomson/IFR anticipate the index will hold at 18, having fallen to that level in October after eight straight months of declines. On Tuesday, the Commerce Department is scheduled to report on housing starts and building permits. Economists believe housing starts fell again in October after declining in September to their lowest level since 1993.

2008 Emerging Trends in Real Estate

The one-line summary was: 2007 was a difficult year, 2008 will be worse. As of now, we all have heard the bad news so I will focus on 2008 positives. Some of the suggested "best bets" include: developers with cash can acquire land or projects deeply discounted, capital will be attracted to quality projects, megacities will have more upside potential, focus on senior housing, baby-boomer resorts / second-homes, low-income housing, think green, mixed used communities will continue to benefit from the back to city-center trend. Best Markets in 2008: New York City (Overall), Seattle, Washington (Overall), San Jose, San Francisco. Best property type in 2008 (from best to worst): industrial/distribution, Apartment (Rental), Office, Hotels, Retail, Residential (for Sale). Go to the ULI website for more information on the Emerging Trends report.