Premature Enthusiasm: All We Have To Fear Is Hope Itself

Home builders and real estate investors seem to have a bad case of premature enthusiasm, sparked by the hope that everything is better now that we’ve avoided a global financial melt down.  Many economists and Wall Street analysts now believe we’re likely to see a significant downturn again later this year, and that the economy, real estate and banking all have a long, hard slog ahead.

According to Bloomberg News, Alec Phillips, head of Goldman’s Sachs Washington office, said in an Oct. 23rd note to clients, “The risk of renewed home price declines remains significant.  Our working assumption is a further 5 percent to 10 percent decline by mid- 2010.”  And, on October 23rd, Bloomberg quoted investor Jeremy Grantham as stating that, “ stocks will drop painfully from current level in the coming year amid disappointing economic data and shrinking profit margins.” Grantham is the chief investment strategist at Boston-based Grantham Mayo Van Otterloo & Co., which oversees about $89 billion.

Why?  Well read on….

Selling Free and Clear of Mechanics Liens Thru Receivership: The Basics

An experienced receiver working closely with a sophisticated title insurance company can usually obtain free and clear title for the sales of new condo and tract tract home subdivisions on a retail basis. Here’s how….

2009: The Year Lenders “Recapitalize to Survive”

If 2008 was the Year of Denial, 2009 will be the Year of Recapitalization.  How much recapitalization? Investment bank Keefe, Bruyette & Woods projects that United States Banks might need as much as an additional $1 trillion in capital, according to the April 24, 2009 edition of the New York Times.

Housing Prices, BB’s and the Bottom of a Bucket

How long will it take before housing prices go up again? In reply to that question, I typically respond, “It will probably take a while longer than most people think and will look a lot like the bottom of a bucket.” When I’m asked why, I’ll usually ask them a question in return: “How long would it take to pick up two million BBs off the beach?” Whomever I’m speaking with usually gives me a puzzled and slightly annoyed look and says, “What’s that got to do with the bottom of a bucket, or, more importantly, when the real estate market will hit bottom or what the bottom will look like? And, for that matter, what’s the bottom of a bucket got to do with anything, anyway?”  Its been the best way I can think of to explain my view of the housing market.

SB 800 Construction Defects Liability: Why Should Construction Lenders Care?

As a receiver completing new condominium and tract housing projects, the subject of California SB 800 long term construction defects liability comes up a lot.  So I asked noted subdivision and DRE lawyer Robert Smylie of Robert Smylie & Associates to recap the issues for me.  His explanation follows (with some paraphrasing on my part with his permission). Of course, I’m not a lawyer, so those of you with further questions should contact him directly at rsmylie@smylieandassociates.com, or read his article at  http://www.waldrealtyadvisors.com/downloads/download.html:

Hey Buddy, Wanna Buy A Note?

Hey buddy, wanna buy a watch?   It’s the refrain that immediately conjures up the image of a shadowy figure in a back alley opening his trench coat to reveal a selection of watches hanging from the inside of his coat.  Not exactly the most progressive way to sell watches (or anything else for that matter), but it’s not that far off from the way that most lenders have been marketing their non-performing commercial real estate loans this year (commonly referred to as notes, as in note and first trust deed).  To be more accurate, lenders have been quietly offering their non-performing loans primarily to a small circle of good customers and business relationships.

Bid/Ask Pricing Gap Widened By Scarcity of Debt and High Cost of Capital

My friend and veteran land broker, Larry Lynch of Korek Land, emailed me recently to remind me that the scarcity of debt (the Wall Street folks call it deleveraging) and very high investor return expectations are also helping to drive prices of commercial real estate and land lower.