The Apartment Market – Strong and Getting Stronger!

Nationally, the apartment market (both in sales transactions as well as new development) is the strongest sector in real estate. Since mid-2010 all four of NMHC’s indices have been positive, showing greater demand for apartments and more availability both debt and equity. (from the National Multi-Housing Council’s Quarterly Survey, via Calculated Risk).

In California, multifamily construction has more than doubled since the trough of 2009, but single family construction has been flat to slightly down over that same period.

Doug Bibby, president, National Multi-Housing Council, noted that not only are multifamily developers eagerly buying land and filling development pipelines, but also many single-family businesses are looking at the multifamily sector, as this product type continues to be weak. (from MHN Online)

The job market is continually improving (if more slowly than most would hope for).

chart of the day, unemployment rate, job growth, feb 3 2012

One Newspaper’s Perspective on Redevelopment Agencies

Monday’s Orange County Register posted a story (Doomed redevelopment agencies leave debt of $30 billion) warning that the Successor Agencies to the 25 RDAs in Orange County will inherit $29.8 billion in unpaid long-term debt (their emphasis). First, of course it is unpaid, otherwise it wouldn’t be a debt. The story goes on to summarize recent events and state that there is much confusion in the air over what will happen to the employees and assets (financial and real estate) of dissolving RDA’s after February 1.

But nowhere is the “risk” of existing RDA bonds addressed after the first paragraph. To be clear, there is always a repayment risk when money is being loaned, even to bond investors. But as to the risk of RDA-issued bonds, a key provision of the RDA dissolution law is that debt service for any bonds issued by the RDA will be paid before property tax revenue is distributed to the other agencies (school districts, city general funds, etc.) in the line. Fitch and Moody’s have both commented negatively on the credit quality of California RDA bonds (Fitch here, Moody’s here), as the dissolution process is moving too quickly for anyone to know what will happen on the other side of February 1st.

But it sure is making it fun!

Redevelopment – Looking Through a Thick Fog

The California Supreme Court’s ruling in CRA v Matosantos has been widely reported and is beginning to be digested by the more than 400 redevelopment agencies (RDAs) and cities that have to begin unwinding their agencies, accounting for all of the funds on hand, projects in progress, debts owed (mostly bonds), and determine the best course for their city (or county). There are, of course, several emergency legislative efforts underway to delay and/or soften the blow from dissolving every RDA in California, especially with the potentially huge impact on affordable apartment development. But there doesn’t seem to be serious effort to reverse the decision, which is wise – the Senate and Assembly votes to end redevelopment agencies are on record, very difficult to walk those back (from David Smith’s learned Affordable Housing Institute blog).

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How Much Have We Lost, Really?

Today’s headline from Zillow, a well-respected online real estate marketplace with a good research arm, was:

“U.S. Homes Expected to Lose Nearly $700 Billion in Value in 2011”

That’s pretty alarming, but not much different from what others have been telling us for the past five years of so.   Everyone knows the housing bubble popped and home values across America have deflated, setting off one of the worst recessions since the 1930s.  Right?  I mean, isn’t that right?  Aren’t we all poorer and hasn’t the wealth of the nation been decimated?  Read more

The Mission Fannie and Freddie Are Good At


There has been a lot of (perhaps well-deserved) criticism of the two big Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, lately.   Certainly, the housing bubble popping left Fannie and Freddie on their knees, and forced the federal government to seize them to keep the home purchase mortgage market from completely collapsing and taking most of the financial industry with them.  But lost in the mud being thrown over who to blame, and how to restructure Fannie and Freddie, there is a nugget of gleaming gold that gets overlooked.



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State Assembly Hearing Debunks the Myth that “Foreclosures = Housing Affordability”

On December 5th, the State Assembly Housing and Community Development Committee heard from economists, for-profit and nonprofit developers, and state agency heads who explained to policymakers the current state of California’s housing market.

Three themes wound through the testimony of the six witnesses:

First — The continuing glut of foreclosed homes has NOT increased housing affordability for the vast majority of Californians;

Second — Multifamily construction is increasingly important; and

Third — The state is comprised of numerous housing markets, resulting in a locational mismatch between vacant homes and Californians who need affordable places to live.

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Is This the REAL Issue Facing the Housing Industry?

While much though is expended on how the financing side of the housing market needs support for a recovery, a BusinessWeek article by Steve Matthews posits an interesting and powerful, if underappreciated, factor in the recovery of the housing market – a slowing birthrate in the United States. Data from the National Center for Health Statistics show that births in the US numbered just slightly more than 4 million in 2010, the fewest since 1999 and down by 6% from 2007 (table below). Why do fewer children matter to the housing market? When couples delay marriage and starting a family because they lack of confidence in the economy, the move from apartment (renter) to a home (owner) is also delayed. This may be a good sign for continued strength in the apartment industry, but it will certainly keep the single family residential market down, in most the country, for the next several years.

[from BusinessWeek article] The fall-off in births is part of a vicious cycle that stems partly from the housing slump. States with the largest economic declines in 2007 and 2008 were most likely to have relatively large declines in babies from 2008 to 2009, based on an analysis in October by the Pew Research Center.

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