JP's predicition about a real estate crash... - Posted by Daniel Lubell

Posted by Rene Perrin on October 15, 1998 at 06:33:56:

The market is not being too kind to the “sub-prime” lenders either. The “sub-prime” market is what many of us use to either fund our own deals when buying or having our buyers use these lenders when selling.

“Sub-prime” refers to those with less than perfect credit, no downpayments, funky properties, etc. The problem is that there is a limited market for the securitization of these loans because of all of the refinancing and some poor credit quality. Wall Street’s appetite has waned for these pools of funds. Several lenders have cut back drastically and have begun making decisions based on strict criteria instead of common sense.

This may be a brief situation but, probably some of the changes are permanent.


JP’s predicition about a real estate crash… - Posted by Daniel Lubell

Posted by Daniel Lubell on October 15, 1998 at 01:13:58:

Commercial credit crunch

Developers watch funds disappear

Friday, October 09, 1998

Inman News Features

Real estate developers and investors around the country are finding themselves ensnared in the worst credit crunch the industry has seen since the 1990 recession.

During the last 60 to 90 days, debt for most speculative development has begun to evaporate in markets nationwide, leaving many builders and buyers high and dry.

“The spigot is being turned off on the supply of funds for real estate,” says Stephen B. Siegel, president and chief executive of New York-based Insignia/ESG Co.

“Speculative development is now on the back burner or totally canceled.”

Siegel was one of the speakers at Thursday’s meeting of the Urban Land Institute in Dallas.

Worries about the national economy and a sharp decline in commercial real estate activity are the central topics of discussion at this annual commercial property industry conference.

The suddenness of the pullback of many lenders and buyers has caught even the most cautious investors and builders by surprise.

“This has been the fastest (credit shutoff) I have ever seen and the most viscous,” said Michael Fascitelli, president of New Jersey-based Vornado Realty Trust. “I think it?s going to get worse ? a lot worse ?before it gets better.”

With debt for new deals drying up and most real estate investment trust buyers pulling back, the property investment market is in turmoil.

Just a few months ago the news was record prices paid for properties. Now, sellers are in a panic as the line of potential buyers for deals has vanished.

“I know of eight or nine people that have put off investments,” Fascitelli told ULI members. “In New York there is $8 billion of stuff for sale and there is not enough money.”

With their stock values down by more than 20 percent this year, real estate investment trusts in particular have no appetite for new investments.

“We have not gone forward with a single transaction virtually in the last 90 days,” said Douglas Crocker II, president of Equity Residential Properties Trust, a Chicago-based REIT.

As property prices retreat from recent peaks, lenders still

in the market are in a quandary.

“We don?t have a good sense what value is,” said Stuart Silberberg, with New York-based Capital Corporation of America. “It?s going to take quite a while to sort things out. Before you see a market comeback is probably six months.”

Not everyone is complaining about the slowdown in real estate activity.

During recent months concerns about potential overbuilding and fears that some investors were

overpaying properties had begun to grow.

“It would appear that the capital markets are going to save us from ourselves,” said Dallas real estate broker Jerry Fults. “There isn’t much opportunity to develop new speculative space going forward. It would appear we are in for a soft landing.”

While most analysts concede a national economic slowdown is beginning, they say the real estate industry can expect a quick comeback.

"We are going into a recession with every high occupancies and with a fairy quick cutback in

construction," said Jonathan Litt, senior real estate

analyst with Paine Webber Inc. "Real estate is going to

come out of it with flying colors."

Copyright 1998 Inman News Features

I think JP may be on to something! - Posted by Daniel Lubell

Posted by Daniel Lubell on October 15, 1998 at 01:18:53:

I found the above article on Inman news features.
If this is any indicator, then JP was right about the
coming real estate decline.
Although it applies to large commercial stuff, can
single family residences be too far behined? I can’t
wait! Bring on the bargains.

Daniel Lubell