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Commercial Real Estate Remains Grim, But is Bottom Near?
The reckoning is finally on the horizon
-Richard Green
Commercial real estate (CRE) experts know that their market will be in shambles for months (if not years) to come. However, a recent survey reveals that many industry professionals believe that the market will hit bottom in 2010:
Real estate industry leaders who are meeting at the Urban Land Institute’s annual gathering in San Francisco are more optimistic than they were at this time last year because they can see the reckoning finally on the horizon, said Richard Green, director of the USC Lusk Center for Real Estate.
Low Mortgage Rates Drive Applications Increase
Realtors and mortgage brokers are clamoring to get the $8,000 first-time homebuyer tax credit extended. Certain market observers fear that as soon as the tax credit expires, home sales will retract to the lower levels observed prior to the tax credit’s introduction (see our story on how Cash for Clunkers created a false sense of demand).
However, the recent surge in mortgage applications which coincided directly with last week’s drop in mortgage rates suggests that, one, it takes far more than just a tax credit to get borrowers interested in housing, and two, borrowers have and will continue to react to lower mortgage rates more strongly than any other homebuying incentive.
Used-Car Demand, Prices on the Rise
Why? The answer is as simple as supply and demand.
What presents itself as great news for sellers, comes as unwelcome news to consumers looking to buy. You don’t have to be an economist to know that during an economic downturn most of the car-buying demand will be shifted to the used-auto market.
Granted, a majority of the pent up demand from July and August of this year was focused on the new-car market, but that was only because the Cash for Clunkers (C4C) program was up and running. Part of the criticism surrounding C4C was that it would dually result in a false sense of demand and cause the used-vehicle market to suffer. Critics don’t have to worry about used-car dealers anymore; demand for used vehicles is rising substantially enough that prices have risen right along with it: More »
Update1 What Would Mortgage Rates Be Like Without the Fed?
The Fed has some important decisions to make before year’s end — like whether or not to purchase more than $1.25 trillion in mortgage-backed securities (MBS).
Today, as the Federal Open Market Committee (FOMC) begins day one of their two-day meeting, analysts are expecting that, when the FOMC meeting concludes tomorrow, the Central Bank will keep the target for the Fed funds rate between 0% and 0.25%, and that the Fed will likely phase out their MBS program by December as previously planned.
But what will happen to mortgage rates when this program comes to a close? Since the MBS purchase program began, the Fed has bought some 80% of the mortgages sold in this country, the Wall Street Journal estimates. How badly will affordability be affected if there is no longer a strategy in place to keep rates subdued? More »
Well, That Didn’t Last Long
The Cash for Clunkers (C4C) honeymoon is over. The Federal program which provided vehicle buyers with up to a $4,500 voucher for their used “gas guzzler” managed to increase the vehicle sales rate in August to 13.7 million units — the “first year-over-year increase since October 2007,” according to Autonews.com.
However, just one month later, according to Edmunds.com, light-vehicle sales have tanked to historic lows. Their sales rate in September plummeted to 8.8 million — the lowest rate in nearly 28 years. That dismal figure ties the worst on record:
COP Tells Taxpayers to Kiss Auto Bailout $ Goodbye
Remember when Chrysler took out that full-page ad thanking the American people for their generous bailout money? Oh, you forget about it…sorry to bring that up again.
Since we’re already on the subject, we’d like to add that the Congressional Oversight Panel (COP) — the group in charge of overseeing government bailouts — reiterated that taxpayers will likely see little to none of that ‘generous’ bailout money.
Update1 Top 10 Clunker Trade Ins and New Cars
We have been interestingly waiting to see which vehicles were most commonly traded in, and which new vehicles were purchased as a result of the Cash for Clunkers program. After all the drama surrounding C4C, would the program propel sales for domestic automakers?
Here are the supposed “final statistics” from CARS.gov –
Update1: Appliance Rebates Coming Soon
(hat tip: Fundmastery)
Update1: Despite the fact that the premise behind the Cash for Clunkers (C4C) auto program has been criticized as “crackpot economics,” the strategy of replacing (and in some cases destroying) older goods with more energy-efficient products has been a hit with consumers, and several other industries are taking note (whether it’s a good or bad thing is certainly up for debate).
Earlier this month we reported that the C4C theme made it’s way to the world of old refrigerators (see original post below). Like many other products, appliance sales have suffered during the economic downturn. In a combined effort to spur sales and to create a more energy-efficient society, the Energy Department has allocated $300 million from the Federal stimulus package for states to develop their own appliance rebate initiative.
Update1: Cash for Clunkers Ends Monday
UPDATE1: The Associated Press reports that Cash for Clunkers will expire Monday, August 24 at 8 p.m. EDT, since the funds supporting the program have expired:
President Barack Obama said in an interview Thursday that the program has been “successful beyond anybody’s imagination” but dealers were overwhelmed by the response of consumers. He pledged that dealers “will get their money.”
Latest Cash for Clunker Numbers Are In
Here is a random assortment of some of the latest Cash for Clunker numbers/statistics:
- 167,000 of the 457,476 repayment requests made by dealers have been “handled”, according to the U.S. Dept. of Transportation (DOT).
- 37% of the C4C applications have been processed.
- So far, C4C has generated $1.91 billion in transactions.
- The number of individuals processing the trade-in applications has risen to 1,000, up from less than 200 when C4C first began.
