Posts Tagged ‘recession’
Monday, June 28th, 2010
Two short words are being heard in offices that have been absent for some time. The words are: “I quit.” In the last three months, more Americans have quit their jobs than were laid off, a sharp contrast with the last few years that points to a gradually thawing jobs market. Although some of the quitters have accepted new jobs when they resign, others have no firm offers except for a new-found confidence that they will be able to find employment quickly. “There is a century’s worth of evidence that bears out this view that quits rise and layoffs fall as the job market improves,” said Steven Davis, a University of Chicago economist.
Long-term trends point to a job market that can only improve. Already this year, the economy has created a net 982,000 jobs following a recession that wiped out more than eight million jobs. According to the federal government, the number of people who quit their jobs in April rose to nearly two million, the most in more than a year and a 12 percent increase over January. Workers were afraid to quit during the darkest months of the recession, and with good reason. Jobs were in short supply; others feared facing layoff because of the “last hired, first fired” principle.
Fear kept many people in their jobs, according to David Adams, vice president of training at Adecco, a national staffing firm, who says that his firm had trouble recruiting people for open jobs during the recession. Now, Adams is seeing more people who have jobs looking to interview versus laid-off workers searching for employment. “The hangover is over. It’s really starting to move toward a market where the employee can have a lot more confidence making a move.”
Tags: Adecco, David Kahler, economists, economy, jobs market, layoffs, quitting jobs, recession, Steven Davis, University of Chicago
Posted in Economics | No Comments »
Wednesday, March 17th, 2010
A little-noticed bill was introduced in Congress in January that could bring a new source of liquidity to the commercial real estate sector - foreign investment. Legislation introduced by Congressman Joseph Crowley (D-NY) called the Real Estate Revitalization Act of 2010 would cut taxes that were introduced as part of the Foreign Investment Real Estate Property Tax of 1980 (FIRPTA). This required foreign investors to pay as much as 55 percent on capital gains from the sale of American real estate shares in REITS and other investment vehicles.
Crowley and the legislation’s other supporters believe that repealing FIRPTA could open the floodgates to needed liquidity at a time when commercial real estate loan defaults pose a risk to the nation’s recovery. According to the bill’s supporters, the FIRPTA tax penalizes foreign investors willing to infuse their cash into American real estate because they aren’t taxed similarly when they buy Treasury securities, corporate equities or corporate bonds.
Dan Fasulo, managing director of Real Capital Analytics, points out that foreign investors comprise only 10 percent of commercial real estate acquisitions in the United States. Fasulo notes that “Could (removing the tax) double the amount of investment activity in the U.S.? Sure.”
Crowley’s legislation has received little attention, although it has little vocal opposition, because it is being drowned out by Congress’ preoccupation with the healthcare reform debate. Peter Peyser, managing principal of the lobbying organization Blank Rome Government Relations LLC, believes the legislation will likely be attached to a larger bill to assure passage this year. “A small targeted provision like this one would need to be part of a larger package because it’s unlikely that something like this is going to gather enough steam to get through on its own.”
Tags: congress, Dan Fasulo, foreign investment, Joseph Crowley, Peter Peyser, Real Capital Analytics, Real Estate Revitalization Act, Real Estate Roundtable, recession, REITS
Posted in Development, Financing, Office | No Comments »
Monday, March 1st, 2010
Arizona, Georgia and Texas are the growth centers in terms of new residents in the last few years, according to an Associated Press analysis of Internal Revenue Service migration data. The IRS compared the states where taxpayers filed their returns from 2007 to 2008 to arrive at their conclusions.
Texas led the nation, with 62,827 new households; the largest number of families moved there from California and overseas. Georgia ranked second, with 37,559 new households, many of whom moved there primarily from Florida and New York. Arizona reported a net gain of 20,300 new households, with the majority relocating there from California and Michigan.
The IRS statistics indicate that Americans are not moving much at present, with the annual migration rate at 11.9 percent - the lowest number in decades. United States Census Bureau estimates released at the end of 2009 confirm the IRS numbers. According to the AP analysis, counties with better-educated taxpayers typically see the highest county-to-county migration gains.
“People who move tend to be younger and have lower incomes,” according to William Frey, a demographer with the Brookings Institution. “Normally, if there is a big influx of young people, that could pull down the income of an area; and if there is a big outflux of young people, that can raise income in an area.”
Tags: Arizona, Associated Press Economic Stress Index, bankruptcy, Brookings Institution, demographics, Georgia, Internal Revenue Service, Migration, recession, Texas, unemployment rate, United States Census Bureau
Posted in Development, Industrial, Office, Residential | No Comments »
Wednesday, February 24th, 2010
Commercial real estate will begin its long-awaited recovery in late 2011 or 2012, according to the fourth-quarter Korpacz Real Estate Investor Survey, which questioned more than 100 real estate investors, including REITs, pension funds, private equity firms and insurance and mortgage companies. Confirmation is provided by a PricewaterhouseCoopers survey, which notes that Washington policymakers are increasingly tweaking the strings that impact pricing.
According to the Korpacz survey, “Rental rates will continue to decline until strong, consistent job growth resumes. With $1.4 trillion of commercial real estate debt maturing by the end of 2012, some property owners will not be able to survive the downturn. Problems related to refinancing that debt could further delay a recovery in the sector.”
Government and regulatory policy will have greater impact on pricing than occupancy levels or rents, according to Real Capital Analytics, Inc. “Policymakers control what happens to commercial mortgages in default,” Robert White, the president of Real Capital Analytics, wrote in a report. They “have encouraged loan modifications and extensions even in cases where loans are above a property’s current value. Tax policy, meanwhile, has made it easier for special servicers to negotiate with borrowers, a move meant to prevent a wave of maturity defaults and property fire sales. Keep rates low and easing restrictions on foreign capital will also influence industry prospects.” Real Capital Analytics notes that commercial mortgage-backed securities (CMBS) hold 42 percent of distressed loans; American banks 31 percent; and foreign banks 13 percent.
Tags: CMBS, commercial real estate, Pricewaterhousecoopers, Real Capital Analytics Inc, recession, recovery
Posted in Development, Industrial, Office | No Comments »
Monday, February 1st, 2010
David Tepper’s shrewd bet that the nation would avoid a second Great Depression inspired him to buy bank shares at rock-bottom rates, a move that has earned his Appaloosa Management hedge fund an estimated $7 billion worth of profit during 2009. Last winter, Tepper invested heavily in Bank of America stocks selling for $3 a share, as well as Citigroup, Inc. preferred stock, then priced at a bargain-basement $1 per share.
Tepper, a philanthropist who funded the Tepper School of Business at Carnegie Mellon University, made a gamble that is paying off in a big way - surprising skeptics who insisted that he was making a costly error. “I felt like I was alone,” Tepper said. There were days when “no one was even bidding.” An improving market has seen Appaloosa Management earn a 120 percent return. As a result of those gains, Tepper now manages approximately $12 billion, making his company one of the world’s largest hedge funds.
In general, hedge funds had a bad year in 2008, when they experienced a 19 percent decline. Approximately 1,500 funds - 16 percent of the total - went out of business in 2008. The funds had a far better year in 2009. According to Hedge Fund Research, Inc., they are seeing a 19 percent return, the best annual gains in 10 years.
Alan Shealy, a long-time Tepper client, says “Investing with David is like flying, with hours of boredom followed by bouts of sheer terror. He’s the quintessential opportunist, investing in any asset class, but you have to have a cast-iron stomach.”
Tags: Bank of America, Citigroup, David Tepper, Goldman Sachs, Great Depression, hedge fund, recession
Posted in Economics, Financing | No Comments »
Tuesday, January 26th, 2010
Apartment vacancies in the United States hit a 30-year high during the fourth quarter of 2009 as many would-be renters moved in with family or roommates to save money. According to Reis, Inc., a New York research firm that tracks vacancies and rents in 79 markets across the country, the apartment vacancy rate was eight percent at year’s end.
Rents declined by three percent in 2009, even as landlords upped the ante to attract creditworthy renters. In New York City, effective rents - which include concessions such as one month free rent - fell 5.6 percent last year, the worst performance since Reis first tracked data in 1990. Asking rents fell 2.3 percent from 2008 to an average of $1,026. Effective rents, what tenants actually paid, decreased three percent to $964.
“We’ll shampoo their carpets. We’ll paint accent walls. We’ll add Starbucks cards,” said Richard Campo, chief executive of Camden Property Trust, a Houston-based REIT that owns 63,000 apartments. Complicating the situation is competition from 120,000 new rental units that came on the market last year. These include some failed condominium projects that were converted to rentals. A hefty percentage of these developments had secured loans before the credit markets froze. With new development at a virtual standstill, apartment completions are expected to decline 50 percent in 2011. For apartment owners, the limited new supply means they can increase rents as soon as job growth returns.
“If you are renting a place, now might be a good time to renegotiate that lease,” advises Victor Calanog, Reis’ director of research, who predicts that the apartment sector could recover in the second half of 2010 if jobs start returning or people think the economy is improving.
Tags: Camden Property Trust, Marcus and Millichap, mortgage rates, recession, Reis, rental apartments, unemployment, vacancy rate
Posted in Development, Residential | No Comments »
Wednesday, January 20th, 2010
Foreign banks, American private equity firms and a leading Chinese sovereign wealth fund have been investing in commercial real estate in the United States in the hope that interest rates stay low.
This increasing interest from investors could be a sign that the market is experiencing some stabilization. According to Bob Steers, co-chairman of Cohen & Steers, a real estate investment firm, “We believe the real story is that capital is ready to buy, even though it may not be so visible today.” As one example, the state-owned China Investment Corporation has enlisted several investment firms to identify commercial real estate opportunities in the United States.
Another sign of incipient recovery is the fact that Colony Capital won a Federal Deposit Insurance Corporation (FDIC) auction for $1 billion worth of commercial property loans previously held by banks that had failed. The transaction valued the loans at 44 cents on the dollar and is structured so the FDIC put up $136 million owns 60 percent of the equity. Los Angeles-based Colony put up $90 million for a 40 percent share. Colony’s founder, Tom Barrack, said the investment is “an implicit bet that rates stay low.”
In another example, JPMorgan Chase raised $625 million for Inland Western, which put $500 million into CMBS. The deal was significant because it closed without assistance from the Term Asset-Backed Loan Facility (TALF).
Tags: Bank of China, China Investment Corporation, CMBS, Colony Capital, commercial real estate, Federal Deposit Insurance Company, Inland Western, interest rates, private-equity firms, recession, recovery, SL Green, Sovereign wealth funds, TALF
Posted in Development, Economics, Office | No Comments »
Thursday, January 7th, 2010
Commercial real estate will begin its long-awaited recovery in late 2011 or 2012, according to the fourth-quarter Korpacz Real Estate Investor Survey, which questioned more than 100 real estate investors, including REITs, pension funds, private equity firms and insurance and mortgage companies. Confirmation is provided by a PricewaterhouseCoopers survey, which notes that Washington policymakers are increasingly tweaking the strings that impact pricing.
According to the Korpacz survey, “Rental rates will continue to decline until strong, consistent job growth resumes. With $1.4 trillion of commercial real estate debt maturing by the end of 2012, some property owners will not be able to survive the downturn. Problems related to refinancing that debt could further delay a recovery in the sector.”
Government and regulatory policy will have greater impact on pricing than occupancy levels or rents, according to Real Capital Analytics, Inc. “Policymakers control what happens to commercial mortgages in default,” Robert White, the president of Real Capital Analytics, wrote in a report. They “have encouraged loan modifications and extensions even in cases where loans are above a property’s current value. Tax policy, meanwhile, has made it easier for special servicers to negotiate with borrowers, a move meant to prevent a wave of maturity defaults and property fire sales. Keep rates low and easing restrictions on foreign capital will also influence industry prospects.” Real Capital Analytics notes that commercial mortgage-backed securities (CMBS) hold 42 percent of distressed loans; American banks 31 percent; and foreign banks 13 percent.
Tags: CMBS, commercial real estate, Price Waterhouse Coopers, Real Capital Analytics Inc, recession, recovery
Posted in Development, Industrial, Office | No Comments »
Tuesday, November 24th, 2009
When President Bill Clinton signed legislation to repeal the Depression-era Glass-Steagall Act in 1999, he handed Wall Street a victory that likely contributed to the recent financial meltdown. Glass-Steagall’s repeal eliminated barriers between normal banking activities - deposits and lending - and riskier areas such as derivatives trading.
“The capital-market rules are going to change,” says Brad Hintz, an analyst at Sanford C. Bernstein & Company in New York. “It’s going to be much more difficult to trade in the illiquid parts of the market” beyond corporate and government bonds, as well as to finance investments.
President Barack Obama is working with his advisors and Congress to fill the regulatory void that Glass-Steagall’s repeal left. Former Federal Reserve Chairman Paul Volcker, now a financial advisor in the Obama administration, prefers a “two-tier” financial system that limits risk taking. Current Fed Chairman Ben Bernanke has increased surveillance of the systemically important firms and believes that these companies require “especially close oversight.”
To quote then-candidate Obama in a spring of 2008 speech, “A regulatory structure set up for banks in the 1930s needed to change. But by the time the Glass-Steagall Act was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.”
The result? Commercial banks seeking to compete with investment banks took on significant trading risks and created off-balance-sheet financing methods to reduce the capital they required to avoid loan losses. At the same time, investment banks started lending more aggressively to companies and increased their own borrowing to purchase securities or real estate.
All that has occurred clearly demonstrates the need for effective new regulation.
Tags: Ben Bernanke, Department of the Treasury, depression, Federal Reserve, Glass-Steagall Act, hedge funds, President Bill Clinton, President Obama, recession, Timothy Geithner, Wall Street
Posted in Economics, Financing | 2 Comments »
Tuesday, November 17th, 2009
Because the United States is producing an increasing number of high school graduates who go on to attend college, student housing apparently is recession-proof real estate. This is the finding of a recently released report from the National Multi Housing Council (NMHC) that studied the recession’s impact on college enrollment and on-campus dormitory vacancy rates.
According to Jim Arbury, NMHC’s senior vice president, the study - entitled “Special Student Housing Report: Has the Recession Had an Impact?” - examined freshman application data for 63 universities and compares 2009 levels to 2008, as well as to statistics from 2003.
“This report offers valuable benchmarks on the toll the economy is taking on universities, and, by extension, current demand for student housing,” Arbury said. “And it provides vital enrollment data a full six weeks or more before the universities release their numbers. Our research indicates that applications and enrollments are up at most universities. The only places we generally find declining or flat enrollments are in states where the higher education budget has been dramatically reduced or where the university itself is geographically constrained from any further growth.”
Tags: college enrollment, National Multi Housing Council, recession, Student Housing
Posted in Development, Student Housing | No Comments »