This article is a press release of a meeting that went on in the Chinese government regarding the housing market. The current situation is that, as a result of policies established to stimulate housing consumption, prices for housing has now risen too fast (5.7%  in November). The government is now planning to regulate themselves out of this situation as well by stimulating supply and reducing speculation. The most striking aspect of this article to me, as an American, is the degree to which the Chinese government intends to manipulate the market for homes. A free market system would naturally direct the market in the way the government wants, however they still intend to stimulate and regulate the shifts. This involvement tends to over exaggerate changes and cause steep fluctuations in the market. This is evidenced by the situation they are currently in.

By legally making homes cheaper by lowering interest rates and other measures, they have created an excess demand and prices have risen too fast. Now rather than letting the market settle, the government intends to regulate again to stop the price increases. I predict that this change will again overshoot the goal and only perpetuate the need for regulation where it was never needed in the first place.

This kind of behavior would not be accepted in the United States as investors are looking for economic freedom and more rationally predictable market conditions. The philosophy of a socialist government mentality in China is to attempt to regulate away all shifts in the market, but by doing so they only exacerbate these fluctuations and perpetuate the need for government involvement.

This article is a press release of the Urban Land Institute’s claim that the commercial real estate bottom is coming in 2010. I have heard many sources and cases for the fact that the commercial real estate crash has yet to come. This article is also concurrent with that. However, this article proclaims a bottom sooner than other sources have suggested. Although the release does not provide logic for chosing the early date, the author does go in to great detail regarding why the crash has yet to occur and what factors will cause the demise.  The analysis points the finger at many different factors in the developement process as well as many aspects of the real estate market. The most prominent cause right now is the lack of financing available. This is a crucial part of the developement process so a break down in this system has caused a complete halt in developement. There is a humourous quote in the article that describes this phenomenon, “If you want to see if a banker has a good sense of humor, go and ask him for a construction loan.” This deficient availability of financing also disrupts the operation of current buildings. These currently existing buildings are unable to roll over their short-term financing. This misevaluation of financing risk on a wide scale has caused the foundations for a projected 40% drop in commercial real estate values.

This article is an announcement of the leadership change at Grubb and Ellis Company. Grubb and Ellis is a commercial real estate brokerage company. This article was particularly interesting and eye-catching to me after we had Mr. Andy LaDow come speak to our class regarding the real estate brokerage business. His presentation was an excellent overview of the business on both a macro and micro level. I had previously worked as an intern for the comparable company in San Diego, Cushman and Wakefield. This interest in the industry prompted me to go visit Mr. LaDow at his office in La Jolla and discuss his career in more detail. This was an excellent opportunity for me as I got to observe an even more inside perspective in the market. We discussed everything from his day-to-day activities to the ethical issues in his industry.

Within this article in particular the quotation by the CEO discusses his plans to use the recent economic downturn as a means to grow the marketshare and profitability of the company. The downturn refered to is an example of how Grubb and Ellis and many other comparable companies experienced Economic risk. The newly hired CEO in this case is planning to use the recent inefficiencies in the market and the pain created by the fruitation of economic risk as a competitive advantage.

This article discusses a new feature of Google maps. Google maps, the popular directions finding mapping site, is expanding the amount of information it provides in order to increase its value. There have been issues related to this in the past as Google Maps became so sophisticated that it had satellite images which were claimed to invade privacy. The improvement discussed in this article however is perfectly legal and it is regarding the addition of property information to the traditional map site. This feature which adds information such as store names and locations, will be helpful to the average user looking for directions but it will also help the national real estate investor. This feature, by nature increases the amount of available information regarding the real estate in the area. The scarcity of information is one of the tenets of real estate which makes the market less efficient. This inefficiency can also me worded as profit opportunity. This step by google increases the amount of information available to potential investors on a global scale. These people may now easily search nearby competition with out ever visiting the area. This makes the real estate market more efficient which is a significant change for an industry built on scarce information.

This article is the author, Katie Benner’s, opinion as to why the commercial real estate sector is the next sector to experience the pinch of the real estate market down turn. I found this article interesting because in my Principles of Real Estate class we have talked extensively on this issue, and we have heard many angles of the story. First, we saw a video of a news clip which looked at the problem from the most macro scale, and it related the commercial sector to other real estate sectors and how it is to follow the same path. This article highlights the issue from the bank’s perspective. The article discusses how banks are burdened with the task of dissecting and repackaging complicated commercial loans much like was the case in the residential market recently. Finally, the speaker which came to our class on Wednesday October 21, 2009, Mr Ladow, discussed this problem primarily from a developer or owner’s perspective. Mr. Ladow is a broker with Grubb & Ellis in San Diego and he said that the difference between the commercial and real estate market is that typical commercial leases and building loans are more like 5 year terms rather than 30. This is to say that buildings must refinance more often. In the boom this led to ever increasingly complicated loan structures but it was manageable, but now in the downturn, it is exponentially more difficult to refinance and maintain ownership of properties that have drastically decreased in value. Mr. Ladow gave an excellent speech to our class, and he seems to agree with the author of this article that the worst is yet to come for commercial real estate.

This article is focused on vacancy rate data for San Diego county office real estate.  The average county wide direct vacancy rate for the county is 15.3%. The number is relatively high as a result of the over all downturn in the economy. As the economy weakens business can no longer afford to rent space and new construction projects are unable to rent out space. These factors result in a higher vacancy rate county-wide.

An interesting  point in this article is in relation to what landlords are doing to combat this low vacancy rate. High vacancy rates reduce developer’s Net Operating Income, and for that reason they attempt to lease the vacant space as soon as possible. One person quoted in this article points out that rather than reducing rates, landlords are giving months of free rent and increasing their tenant improvement budgets in order to attract new customers. A reason for this is that the landlords would like to maintain the higher rent levels in the contract because as the economy recovers they increase rent payments on a percentage basis. When this begins to occur durring recovery, it is beneficial to be doing so from a higher basis rent rather than lowering rents now and being permanently behind the curb from a rent increase standpoint. Giving discounts such as months of free rent and more tenant improvements are more profitable ways to lease space and reduce vacancy rates when also preparing for the market recovery. Landlords who adopt this technique will be in a better position for recovery than those that reduce their contract rent rates now and must begin increasing their rents by percentage growth from a lower basis .

This news release is an announcement of a forum regarding smart growth. This is an interesting situation because it is in regards to an area previously devastated by a natural disaster. The government in the area is now considering implementing smart growth principals in the revitalization for this area. It will be interesting to see if the smart growth ideals triumph because this could turn into a prime location to demonstrate the smart growth principles. Most smart growth projects require working and developing within the constraints of existing buildings and infrastructure, but this project may pose a unique opportunity to start with a blank slate. This forum is including presentations from professionals in this sector of planning as well as an open house to the public for their thoughts on the issue. I consider Iowa to be a more conservative political environment against government intervention so it will be interesting to see if the ideas brought forth by the smart growth people will gain any public traction. If these principles do prevail, however, then, it will be a perfect location to install all of the principals to the creators optimal form with the lack of existing constraints in the post natural disaster environment.

This article points out the rather intuitive conclusion that Initial Public Offerings of Real Estate Investment Trusts are currently met with bearish investment forces. REITs focusing in mortgage backs securities are being met with the strongest of these negative forces. Mortgage backed securities have been tagged by the media, public opinion, and fact as the seed of the real estate and national economic collapse. Thus it is intuitive that any new equity offering tied to this investment vehicle is not being met with favorable public oppinion . As we learned in class, REITs are the real estate investment vehicle most liquidly available to the average small investor. The price of REITs are thus more heavily tied to the mood of the average investor than any other real estate investment vehicle. This is why IPOs (which have limited historical information available for due diligence to begin with) of REITs of mortgage backed securities are hit hardest by the downturn in the real estate economy and the negative sentiment regarding mortgage backed securities. According to this article, the only IPO which is not hit by this trend is the one where public confidence in a recognizable investor’s name has out weighed the public pessimism towards mortgage backed securities in general.

This article discusses the debate regarding the extension of the real estate tax credit initiated by President Obama. This article leans towards the oppinion that the tax credit should be extended or else the recovery will not continue at its current pace. I believe this is the wrong oppinion. Following our discussion regarding the cause of the current real estate melt down, I have reviewed this issue from a new perspective. A major cause of the current real estate recession is the fact that many people signed up to live beyond their means. More specifically many people bought houses they could not afford.

 I belive this tax credit is encouraging similar behavior. The tax credit is allowing people to put more down on a home and possibly take on mortgages that they can not afford. This tax credit is acting as a steroid to the economy. The economy is on a rush from this stimulus but the treatment can not continue forever. The longer the tax credit continues, the farther the economy gets from equilibrium as demand is artificially reduced. This is just as a weight lifter continues to take steroids to prevent the inevitable crash.  It is better to end the artificial stimulation before the consequences become worse.

This news release highlights the magnitude of the slowdown in real estate deals as a result of the credit crunch. It is well known that this slowdown, or dramatic halt, as the author of this article may prefer, in the real estate market is caused by a lack of credit from lenders available to finance new projects or secondary market transactions. However, this article has drawn my attention to a new dimension to this problem which may not have caused the original issue, but has had a crucial role in prolonging the situation. This is the fact that, among the many other inhibiting factors, banks and individuals are hesitating even more to lend money to facilitate transactions because there is not enough volume in the market to provide necessary data for valuation by comparison to other projects. Where there are no other similar projects in the area the lack of comparison data provides yet another obstacle in the already bumpy road to financing in this economy. This fact seems to create somewhat of a downward spiral wherein the less deals that close, the less data there is, which in turn makes future deals even more difficult.  This article draws attention also to other common talking points regarding the real estate depression, however, the aforementioned point seemed the most unusual and interesting to me. That opservation regarding the prolongation of the real estate melt down draws attention to the chain reaction that occurs as a result of a disturbance anywhere along the extensive value chain in the real estate market stretching from the developer to the source or financing.