Case Shiller And Housing Markets

There is an across the board improvement in home prices if you look at
2009 compared to 2008. But as you drill down, the latest Case Shiller
reports show only five markets saw price increases in November vs
October and four markets, Charlotte, Vegas, Seattle and Tampa posted
new four year lows. Standard & Poors notes that any gains they
might have seen in recent months have been erased.

Conclusion
To add more mixed signals, we are in a seasonally weak period for home
prices, so the seasonally-adjusted data are generally more positive,
with 14 of the markets and both composites showing improved prices in
November. On balance, home prices are far more stable than they were a
year ago but its not yet a sustainable, broad-based recovery.

Whats Holding Us Back
The Usual Suspects

Banks
Barry Sternlicht, chairman and CEO of U.S.-based Starwood Capital noted
that no net new debt has been created by banks in real estate. Instead,
banks are merely rolling over existing debt and buying debt from other
failed banks in transactions where they had some exposure as
participants. Banks are not lending; if they say they are lending, it’s
not true. The capital environment is different, and worse, he added,
noting that much of the current investment activity is being powered by
government spending and not private money. (Via Knowledge @ The Wharton
School of Business)

Unemployement
The worst year of job losses since the Great Depression ended with a
loss 85,000 jobs. The unemployment rate stood at 10%, but actually
might be higher because it doesnt count workers that quit trying to
find work and dropped out of the labor force. There are promising signs
though. In the first quarter of last year, we were losing an average of
691,000 jobs a month. That number has fallen dramatically in the fourth
quarter.

Commercial Real Estate
According to REIS Media, we have close to $3.5 trillion of loans
outstanding and at least 12 to 24 more months of rent declines, I
expect to see more commercial properties defaulting on loans. One very
big reason, banks are not taking on any new risks unless they have to.

Last week, Tishman Speyer BlackRock, one of the largest commercial
property owners sent their $5.3 billion investment in 11,000 apartments
in New York back to their bankers. Both Stuyvesant Town and Peter
Cooper Village on Manhattans lower east side were solid middle class
properties. The key driver was loans made to developers between 2005
and 2007 assumed ever rising rents and low vacancy rates. Speculators
acted on rosy projections will drive many properties back to the bank
as the better business decision.

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