Thursday, March 31, 2005

NEWS: GM's woes one more blow to housing bubble

Bill Fleckenstein, MSN Money

Along with Fannie Mae GM is a significant cog in the financing of the housing ATM. Why does that matter? Because last Wednesday, the yield on GM's debt widened to 454 basis points (4.54 percentage points) over Treasurys. In my opinion, it won't be much longer before that debt is downgraded. GM has been trying to finance autos, homes and second mortgages at record-low interest rates, but it's hard to see how the company can continue to do so.


Wednesday, March 30, 2005

BLOGS: Other Coverage that Can Provide Some Tid Bits

Tuesday, March 29, 2005

NEWS: Japan's real estate still under bubble shadow

www.chinaview.cn 2005-03-28 21:09:29
TOKYO, March 28 (Xinhuanet) -- Whereas land prices in large citiesacross Japan are picking up, the overall market is still on the decline, a lingering repercussion of the 1990s property foam, recent government statistics showed.
The statistics released last week by the Land, Infrastructure and Transport Ministry showed that the nation's average land prices dropped 5.0 percent in the year to Jan. 1, 2005 for the 14th consecutive year.
The residential land prices dropped 4.5 percent in the year, while that of land for commercial use fell 5.6 percent.
Compared with 1991 when the bubble economy started breaking, the residential land prices have dropped by 46 percent to the pre-bubble year of 1985, and the commercial land saw its prices shrinking by 70 percent to the lowest since 1974.

...In 1991 alone, the 12 leading banks poured 50 trillion yen (470billion US dollars) in loans into the property sector, a sum accounting for one-fourth of the total loans they gave in that year.

...The firms in the property and construction sector accounted forthe bulk of the bankrupt companies.
In 2000, some 6,000 such companies went broken, or 33.6 percentof the bankrupt businesses.
A total of 28 listed went bankrupt in 2002 with property firms taking up more than one-third, both setting a record after the World War II.


Friday, March 25, 2005

REPORT: The State of the Nation’s Housing 2004


Despite job losses in the rest of the economy, housing had another record-breaking year in
2003. Home sales, single-family housing starts, residential fixed investment, homeownership
rates, mortgage originations, refinances, and home prices all reached new peaks. The only
weak spots were the uneven rental market and the depressed manufactured housing sector.

ACADEMIC: 2003 Analysis of Housing Bubble

Karl E. CaseWellesley College
Robert J. ShillerYale University
Is There a Bubble in the Housing Market?An AnalysisPrepared for the Brookings Panel on Economic ActivitySeptember 4-5, 2003

The popular press is full of speculation that we are in a "housing bubble" that is aboutto burst. Barrons, Money Magazine and The Economist have all run recent feature storiesabout the irrational runup in prices and the potential for a crash in home prices. TheEconomist has had a series of articles with titles like "Castles in Hot Air" "House ofCards" "Bubble Trouble," "Betting the House." These accounts have necessarily raiseda lot of concerns among the general public. But, how do we know if the housing marketis in a bubble?

The basic question is whether expectations of large future price increases aresustaining the market, whether these expectations are salient enough to generate anxietiesamong potential homebuyers, and whether there is sufficient confidence in suchexpectations to motivate action.


Housing Bubble May Be Global

Long Term Demand for Housing is BIG


Arthur C. Nelson
Virginia Polytechnic Institute and State University
A Discussion Paper Prepared for
The Brookings Institution Metropolitan Policy Program

Most American states and metropolitan areas have some idea as to the amount of growth
they expect over the next several decades, based on estimates of projected demographic,
household, market and industry trends. These estimates form the foundation of public policies and are vital for use in goal setting, planning, and implementation of a variety of growth and development However, there is not a general sense of how the projected changes in demographic, household, and market trends will impact our nation's built environment—that is, how many new homes, office buildings, and other physical structures will need to be built to accommodate future growth. To that end, this paper examines a series of projected trends at the national, state, and metropolitan level to determine the estimated demand for new housing, commercial, and industrial

In short, this paper finds that:
• In 2030, about half of the buildings in which Americans live, work, and shop will have
been built after 2000. The nation had about 300 billion square feet of built space in 2000.
By 2030, the nation will need about 427 billion square feet of built space to accommodate
growth projections. About 82 billion of that will be from replacement of existing space and
131 will be new space. Thus, 50 percent of that 427 billion will have to be constructed
between now and then.
• Most of the space built between 2000 and 2030 will be residential space. The largest
component of this space will be homes. Over 100 billion square feet of new residential
space will be needed by 2030. However, percentage-wise, the commercial and industrial
sectors will have the most new space with over 60 percent of the space in 2030 less than 30
years old.
• Overall, most new growth will occur in the South and the West. There is tremendous
variation in the total amount of buildings to be built between regions. In the Northeast, for
example, less than 50 percent of the space in 2030 will have been built since 2000, while in
the West that figure is about 87 percent, a near doubling of built space. Fast growing
southern and western places—states like Nevada and Florida and metropolitan areas like
Austin and Raleigh—will see the most dramatic growth.
• Though a small component of overall growth, the projected demand for industrial
space in the Midwest outpaces that of the other regions, unlike the other major land
uses. States with a strong industrial presence will see the largest amount of growth in
industrial space even though other areas may witness faster growth. After California, which
far outpaces the nation in terms of absolute square feet of new industrial construction, the
next four largest producers of industrial space are all Rust Belt states in the Midwest: Ohio,
Michigan, Illinois, and Indiana. By 2030, 70 percent of the Midwest’s industrial space will be
less than 30 years old.
• While these projections may seem overwhelming, they also demonstrate that nearly
half of what will be the built environment in 2030 doesn’t even exist yet, giving the
current generation a vital opportunity to reshape future development. Recent trends
indicate that demand is increasing for more compact, walkable, and high quality living,
entertainment, and work environments. The challenge for leaders is to create the right
market, land use, and other regulatory climates to accommodate new growth in more
sustainable ways.

Office Real Estate Bubble

An reall good analysis by Grubb & Ellis screams bubble, but the author conclude that there is none, leading to a concern that they have a conflict of interests.

Retesting the Theory of Rational Exuberance in the Office Market, March 2004, Produced with PNC Real Estate Finance and Real Capital Analytics

Another earlier report by them is OK.

Myth or Reality?... Catching Up With the Office MarketOctober 2003Produced with PNC Real Estate Finance

Finally a more recent repot:
Is the Office Investment Market Ready to Implode?August 2004Produced with PNC Real Estate Finance and Real Capital Analytics

Thursday, March 03, 2005


Sickened By Fraud, A Real Estate Appraiser Turns In His Pencil

by Blanche Evans,

"I have only practiced real estate appraisal in the state of Texas, but in my 53 years of being on this planet, without a shadow of a doubt, real estate appraisal is the most corrupt 'profession' I have ever seen," says a disgusted Burnitt. "It is my belief at this point it is no different in any other state."


Wednesday, March 02, 2005

Speculative buying in real estate rising

A new study by the National Association of Realtors shows that 23% of all homes purchased in 2004 were for investment, while another 13% were vacation homes.

Yikes ! These numbers are national. I've seen reports that in areas of Florida and California as much as 70% of condo purchases are being done by people who never plan to live in their units.

Given that buying and selling homes are a lot more work than day-trading you would have thought this kind of speculation would be hard... That is what Greenspan was counting on last year. But this seem not to be true.

Tuesday, March 01, 2005

Some good reports

This report looks at the office market and is very interesting approach to thinking about what is driving the bubble there. Strangely, the say there is no bubble but most of the report seems to point to bubble behavior in all parts of the market.
Bubble Re(W)rapped, Retesting the Theory of Rational Exuberance in the Office MarketMarch 2004