Since my last blog post much has happened. Most of which I had foresaw and wrote about in previous posts. The residential real estate market has continued to decline, now for approximately the past 18-24 months in most markets throughout the United States with the commercial real estate market following a similar path. The economic crisis has worsened to points of disbelief and we have elected a new president who has sworn to bring about change.
As I had also stated in earlier posts the only way this economic mess is going to begin to get cleaned up is through Government Intervention. Low and behold plans of action to strengthen the economy have been in the works for some time now and are finally about to see the light of day.
The House of Representatives voted this past Friday 246 to 183 to spark our nation’s struggling economy with a stimulus package in the amount of $787.2 billion dollars structured for the purposes of providing quick tax relief to Americans as well as to create and save millions of jobs.
Newly elected President; Barack Obama is most likely going to sign off on the bill early next week. Once that happens we should start to see some of the money flowing through our economy rather quickly.
More details on the bill and how it will affect our economy and the real estate market, next.
Often homeowners ask why should I get an appraisal if I am selling my home? A listing appraisal is an invaluable tool whenever you are making a decision concerning the purchase, sale or financing of any piece of real estate. Having a licensed real estate appraiser perform an appraisal on your house will ultimately inform you with the value of your property and the current market conditions in your market area. Once you know what the market value of your property is you can confidently decide on a realistic and competitive listing price. The advantages of a listing appraisal include; to have a confident understanding of what your home is worth, a shorter marketing time (which could save you thousands), the value which a bank is willing to lend a potential buyer off of, what comparable properties are listed for in your neighborhood, what comparable properties are selling for now, and how long they are on the market for. All of these factors are important to consider when selling your home. Many homeowners are encouraged by real estate agents to list their home at prices which is way above what the property would be appraised for. This usually results in a long marketing time and stress about whether a buyer can even obtain financing. A listing appraisal will eliminate these potential problems because you know the value of your home in advanced and are able to act accordingly. Know where you stand with a True Value Real Estate Appraisal.
As was discussed in part one of Real Estate and the Economy the real estate market and economy mirror one another. So we know our economy is doing horrible on a national level and we also know our real estate market isn’t doing great either. So is there light at the end of the tunnel? Will things ever get better? If so, then when?
To answer the above question which many Americans have we must look in two directions, the past and the future. It’s funny because so often people are reluctant to look into the past for answers to questions they have today. But like many wise men say history repeats itself, this quote proves it self to be true time and time again. Now on the contrary history does not repeat in an identical manner, obviously times change and so do circumstances. The quote is more geared toward the theory that mistakes made in the past or events which took place will come back round in the future, even if they come in a different form. This is why it is not only important to know history, in this case economic history, but to understand it as well. If you know history and understand it, including the mistakes made, as well as good decisions made it will enable you to live your life wiser and make better decisions which will positively impact your financial future. To explain the entire history of the economy would be way to long for a blog post. However I did come across a video which briefly sums up some of the main reasons for our current economic conditions.
If we continue to have an unhealthy economy our real estate market wont follow to far behind. People will always need a place to live so real estate will continue to sell, but what people can afford will change. The ever so weakening dollar and rising costs of living are forcing Americans into a recession. Inflation is rising, but what about the annual incomes of Americans? Many people are forced to pay more to live when they are making less. Our currency used to be backed up by gold, which was done away with by the federal reserve in 1933. Basically after this point money was printed at the discretion of the federal reserve (not a good idea). So ultimately they control the supply of money. So is there light at the end of the tunnel? Will things ever get better? If so, then when?
metaphorically speaking at this point and time we are stuck in a major traffic jam inside the tunnel which is caused by a couple of accidents, broken down cars, and maybe even some other things we can’t even see at this point. Politics influence the economy more then any other force. This has been true throughout history. So in essence many decisions made by high level politicians will indirectly impact the economy which will then impact the real estate market. That being said we can look to current events like the war in Iraq for understanding of why our economy is in shambles. We can also look at the world economy that our planet is moving closer toward everyday. There has been much speculation about the amero which is a theorized economic and monetary union of the three principal countries of North America, namely Canada, the United States, and Mexico. Implementation would probably involve the three countries giving up their current currency units (Canadian dollar, U.S. dollar, and Mexican pesos) and adopting a new one, created specifically for this purpose. Although the government has not announced any official plan for the amero many signs point to this becoming a reality in the near future.
This was done throughout Europe with the Euro which was implemented in 1992. The Euro has since grown into one of the most valuable currencies in the world. But this did not happen over night. Like any major transition there were many problems to address along the way. So is the United State headed down a similar road? Nothing is official but we must speculate.
Regards, of whether the amero is in our foreseeable future or not one thing is for sure, the government must take steps and make decisions in the near future to positively impact our economic future. I would not expect however our economic problems to be fixed overnight. History shows that it takes years to recover from an economic crisis like the one we are in. At this time I wouldn’t give a specific date to when our economy will become healthy, but I will say this it will get worse before it gets better. How much worse depends on the influences I discussed. The advice I can give is to keep abreast with what is going on with our economy as well as our country. Money can be made in a good market as well as a bad market, it is always imperative to know your market and anticipate what is to come.
Commercial real estate is a mirror image of the economy, although it is not always quite so apparent. There is usually a three to twelve month lag time. That’s about how long it takes for negative effects on businesses to trickle down effecting real estate values in the very same negative way. For example if office jobs are disappearing then the demand for office space will do the same. I am sure many of you have seen an increasing number of for lease signs in front of many commercial buildings over the past year, and now more then ever in the last five years. The office building market in central and northern New Jersey appears to be hurting as they have experienced negative absorption rates in the first quarter. As a matter a fact statistics show that this is the largest degree of negative absorption the market has felt over the last five years.
The industrial market however has not seen the same fate. It actually appears to be experiencing some positive absorption rates in the first quarter. This isn’t hard to believe either. Considering The United States has become a bigger exporter over the past year as a result of our weakening economy and ever so weakening dollar.
The retail market has not statistically felt the same negative effects that the office market has, as consumers are still spending. However, don’t forget about the lag time. Every specific market will be affected different in bad economic times. The housing market is always the first to go and then usually office is after that. If people don’t have jobs they can’t pay the mortgage. Then if offices don’t have business or employees they can’t pay their rent.
Now depending on how quick of a negative economic turn we are experiencing is going to mirror how quick retail space is affected. Although the residential market has soften and declined in many areas it did so progressively. It did not decline at a large percentage overnight. That being said retailers are seeing their profits dwindle little by little as well. In most cases expenses are going up like in the pizzeria business. The cost of wheat and cheese has risen dramatically over the past year forcing restaurants to raise their prices. In return consumer already have less money overall on a statistical level which means they already can afford less and now they aren’t even getting what they are used to for the same amount of money. This is driving people to buy less and conserve more. In return this is negatively affecting the retailers. Many retailers have already begun to see shrinking profits and depending on how long the current economic crisis last for it could drive many more out of business as well. And you know what that means if retailers are out of business there are more vacant retail spaces which will drive values down.
So there you have it, the real estate market and economy mirror one another and feel each others positive and negative impacts. So is there light at the end of the tunnel? Visit our blog soon for part two of New Jersey Real Estate and the Economy.
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The majority single family homes in New Jersey are owner occupied, however there are ones which are non owner occupied and are rented. But when the market area does not consist of many single family dwelling which are rented the appraisal in based primarily off of the sales comparison approach.
The majority of commercial properties in New Jersey are rented. Although some property owners do conduct their own business out of a building they own, it is much more common that an owner of a commercial property rents to tenants.
Therefore one of the most important aspects of a commercial appraisal is the income approach and all data collected and analyzed to develop this approach. The income approach is developed using comparable rentals as the sale comparison approach is developed using comparable sales. What a properties market rent is will greatly influence what its value is. When collecting market data an appraiser will select a capitalization rate which is derived from the market. Basically the capitalization rate is a rate of return which investors in the area are seeing as a return on similar commercial real estate investments. When a reconstructed operating statement is developed by an appraiser this capitalization rate is applied to arrive at a value.
The sales comparison approach however is not taken lightly. This approach is just as important as it is analyzing what comparables are selling for, and even more specific what they are selling for on a per square foot basis.
Although rarely an appraiser will come out with identical values for the sales and income approaches they are generally within a close range. Both approaches also serve as checks for one another as a typical investor would buy a property for a certain price with the anticipation of receiving a certain rate of return on his or hers investment.
There are many reasons why one might need to order an appraisal, whether it be for financial, legal, investment or personal purposes. If you are buying, selling or refinancing real estate then it is always a good idea to hire a licensed real estate appraiser to report the market value. This will enable you to make informed real estate decisions using knowledge and market data you might not have had. For most Americans buying a home is the largest purchase they will ever make. Its only logical to hire a professional real estate appraiser to report the market value of a home before you sign a contract to ensure you are not over paying. Likewise if you are selling your home. Having a licensed real estate appraiser report the value of your home before you offer it for sale will give you extensive insight on your competition (similar homes in your neighborhood being offered for sale), recently sold comparable homes, and an overall understanding of the current market conditions. This will help you decide on a competitive listing price for your home which in reality could save you thousands of dollars by expediting the sale of your home. All in all a small investment in a real estate appraisal can go a long way, especially in the current market conditions we are experiencing.
"Know where you stand with a True Value Real Estate Appraisal"
For professional real estate advice, consulting, or to order an appraisal in New Jersey, contact us at 732-658-5975 or visit us at http://www.truevaluerealestateappraisals.com
Investors looked past data showing national manufacturing near a five-year low and booked profits instead after a four-day winning streak for the 10-year note last week.
"The market has moved a long way," said Tom di Galoma, head of Treasurys trading at Jefferies & Co. "We are just slowing down a bit."
With the 10-year yield now at a paltry 3.57%, the note is less attractive, but Jefferies is likely to buy the 10-year yield when the yield returns to the 3.65% or 3.70% range, in di Galoma's view. Yields and prices move in inverse directions.
The weakening economy still provides strong impetus to buy Treasurys and Monday's losses are likely to be short-lived, he said.
The benchmark 10-year Treasury note fell 14/32 to 99 11/32 with a yield of 3.58%, up from 3.52 percent late Friday, according to BGCantor Market Data. Prices and yields move in opposite directions.
The 30-year long bond fell 1 1/32 to 98 19/32 with a 4.46% yield, up from 4.42%late Friday.
The 2-year note declined 3/32 to 100 21/32 with a 1.66% yield, up from 1.64% late Friday.
Numerous Treasury rallies since the start of the year have driven yields into sharply lower ranges. The 2-year note yield on Friday traded at 1.64%, its weakest level in four and a half years. Traders have been pushing it lower to reflect their view that the Federal Reserve will continue lowering rates to revive a flagging economy. The 2-year note is the most sensitive to rates policy.
The next monetary policy meeting is March 18. The bond market expects a rate cut of 0.50 percentage point.
The latest economic reports reinforced the view that the Fed, which has been aggressively cutting rates since last fall, will have no choice but to cut rates again soon.
The Institute for Supply Management said its February manufacturing index came in at 48.3. That's its weakest reading in nearly five years. Any reading below 50 indicates contraction.
Separately, the Commerce Department said construction spending in January took its biggest fall in 14 years, declining by 1.7%. The drop was not just in residential building, but also reflecting lower spending on hotels, highways and local government projects.
Bond market investors Monday also kept an eye on other markets, after oil prices surged to a new record and the dollar perched near its lowest historical standing against the euro.
The April crude contract Monday traded as high as $103.95, a new record, before backing a bit lower. The euro Monday stood at $1.5237, just below the $1.5238 intraday high it hit on Friday.
Surging commodities prices are another headache for the bond market, as they threaten to set off higher levels of inflation, even as the economy fumbles.
In another discouraging note for the markets, billionaire investor Warren Buffett Monday added his voice to a chorus of observers who believe the economy is in recession.
By Audrey Barker and Galen Meyer
Nov. 11 (Bloomberg) -- The following list comprises the most-read Bloomberg News reports from the past week.
*T STORIES:
1. Weill's Profit Machine Breaks Down on Citi Writedowns (11/5) 2. Citigroup's Stuckey to Run Subprime Unit After Losses (11/6) 3. Banks Face $100 Billion of Writedowns on Level 3 Rule (11/7) 4. Supermodel Bundchen Joins Hedge Funds Dumping Dollars (11/5) 5. Where Have All the Hedge Funds Gone? To Renaissance (11/5) 6. Goldman Pay Tops Bear Stearns's Slumping Market Value (11/7) 7. Morgan Stanley Marks Down $3.7 Billion, Cuts Outlook (11/8) 8. Gore Nightmare Wins as Europe Pays to Ship U.S. Coal (11/5) 9. Bernanke Says Fed Sees Slower Growth, Inflation Risk (11/8) 10. Dollar Slumps to Record on China's Reserves Plan (11/7)
COLUMNS:
1. O'Neal's Agony, or, in the Bunker With Stan (11/6) 2. Next on Wall Street: `Honey, I Shrunk the Bonus' (11/8) 3. Time to Think the Unthinkable About Bond Insurers (11/6) 4. Citigroup's Subprime Explanation Defies Belief (11/6) 5. Time for Employers to Cut Cord to 401(k) Plan (11/5)
MULTIMEDIA:
1. Bernanke Says Fed Sees Slower Growth, Inflation Risk (11/8) 2. Rubin Says New Citigroup CEO Needs to `Drive a Vision'(11/5) 3. Wittner, Rogers, Comment on $100 Oil, $1000 Gold (11/6) 4. Trichet Says ECB `Ready' to Counter Risks (Statement)(11/8) 5. Jim Rogers Sees `Worst Credit Bubble' in U.S. History (11/5)
**Lists are based on daily statistics through Friday. *T
Weill's Profit Machine Breaks Down on Citi Writedowns
Nov. 5 (Bloomberg) -- Citigroup Inc., the profit engine built by Sanford ``Sandy'' Weill, has seized up.
Citigroup's Stuckey to Run Subprime Unit After Losses
Nov. 6 (Bloomberg) -- Citigroup Inc. named Richard Stuckey to manage most of its $43 billion of subprime mortgage assets, choosing the same executive who helped unwind Long-Term Capital Management LP's bad bets nine years ago.
Banks Face $100 Billion of Writedowns on Level 3 Rule
Nov. 7 (Bloomberg) -- U.S. banks and brokers face as much as $100 billion of writedowns because of Level 3 accounting rules, in addition to the losses caused by the subprime credit slump, according to Royal Bank of Scotland Group Plc.
Supermodel Bundchen Joins Hedge Funds Dumping Dollars
Nov. 5 (Bloomberg) -- Gisele Bundchen wants to remain the world's richest model and is insisting that she be paid in almost any currency but the U.S. dollar.
Where Have All the Hedge Funds Gone? To Renaissance
Nov. 5 (Bloomberg) -- The hedge-fund industry is grappling with its first shakeout in a decade as investors increasingly recoil from startups considered susceptible to the toxic shocks of this year's credit markets.
Goldman Pay Tops Bear Stearns's Slumping Market Value
Nov. 7 (Bloomberg) -- When Goldman Sachs Group Inc. employees cash their year-end checks, they'll have enough money to buy Bear Stearns Cos.
Morgan Stanley Marks Down $3.7 Billion, Cuts Outlook
Nov. 8 (Bloomberg) -- Morgan Stanley joined Merrill Lynch & Co. and Citigroup Inc. in booking losses on subprime mortgage- related assets and said the outlook for credit markets is bleaker than in September. The stock rose after analysts said the loss is ``manageable.''
Gore Nightmare Wins as Europe Pays to Ship U.S. Coal
Nov. 5 (Bloomberg) -- Now that the price of coal is at a historic low relative to oil, there's no stopping consumers and producers alike from embracing Al Gore's nightmare.
Bernanke Says Fed Sees Slower Growth, Inflation Risk
Nov. 8 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is likely to ``slow noticeably'' this quarter while high commodity prices and a weaker dollar may stoke inflation ``for a time.''
Dollar Slumps to Record on China's Plans to Diversify Reserves
Nov. 7 (Bloomberg) -- The dollar fell to a record low versus the euro and the weakest since 1981 against the pound after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves.
O'Neal's Agony, or, in the Bunker With Stan: Michael Lewis
Nov. 6 (Bloomberg) -- When a big Wall Street firm loses a huge pile of money, it's often hard to figure out exactly what happened.
Next on Wall Street: `Honey, I Shrunk the Bonus': Mark Gilbert
Nov. 8 (Bloomberg) -- Coming soon to Wall Street cinemas: ``Honey, I Shrunk the Bonus,'' plus special matinee screenings of the Tom Wolfe classic ``Bonfire of the Vanities.''
Time to Think the Unthinkable About Bond Insurers: Joe Mysak
Nov. 6 (Bloomberg) -- Let's think about life after bond insurance.
Citigroup's Subprime Explanation Defies Belief: Jonathan Weil
Nov. 6 (Bloomberg) -- Citigroup Inc. says it isn't sure how much its subprime-related assets have fallen in value this quarter. Maybe it's $8 billion. Maybe it's $11 billion. On one point, though, Citigroup isn't budging: It says none of these declines began until after last quarter ended.
Time for Employers to Cut Cord to 401(k) Plan: John F. Wasik
Nov. 5 (Bloomberg) -- It's time for employers to spin off their 401(k) plans.
Nov. 8 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke testifies before the Joint Economic Committee in Washington about the outlook for the U.S. economy, inflation expectations and efforts to help distressed subprime-mortgage borrowers.
Rubin Says New Citigroup CEO Needs to 'Drive a Vision'
Nov. 5 (Bloomberg) -- Robert Rubin, chairman of Citigroup Inc., Win Bischoff, acting chief executive officer, and Gary Crittenden, chief financial officer, speak on a teleconference about the New York-based firm's losses associated with subprime mortgages and related securities and the departure of Charles ``Chuck'' Prince.
Wittner, Rogers, Gartman Comment on $100 Oil, $1000 Gold
Nov. 6 (Bloomberg) -- Crude oil and gold prices have surged to records over the past few weeks and many analysts predict oil will rise to $100 and gold $1000.
Trichet Says ECB `Ready' to Counter Risks
Nov. 8 (Bloomberg) -- European Central Bank President Jean- Claude Trichet speaks at a news conference in Frankfurt about the bank's decision today to leave the key lending rate unchanged at 4 percent, conditions in the credit market and the outlook for inflation. Trichet said the bank is still concerned that inflation will accelerate even amid signs that economic growth may slow.
Jim Rogers Sees `Worst Credit Bubble' in U.S. History
Nov. 5 (Bloomberg) -- Jim Rogers, chairman of Beeland Interests Inc., talks with Bloomberg's Kathleen Hays from New York about the outlook for the credit markets, the impact of Federal Reserve monetary policy on the U.S. dollar and gold prices, and his investment strategy. Rogers co-founded the Quantum Hedge Fund with George Soros in the 1970s.
To contact the reporter on this story: Audrey Barker in New York at Abarker3@bloomberg.net ; Vyola Willson in New York at Vwillson1@bloomberg.net
Update: Oct 17 - Inman News: Click Here - A new bill aimed at cracking down on deceptive practices in mortgage servicing and coercion of appraisers has the support of consumer groups and a group representing appraisers.
WASHINGTON, Oct. 16 - The nation's largest professional real estate appraisal organization, the Appraisal Institute, applauds Representative Paul Kanjorski (D-PA) for introducing H.R. 3837, The Escrow, Appraisal, and Mortgage Servicing Improvements Act of 2007.
Introduced today in the House of Representatives, H.R. 3837 is aimed at protecting consumers and financial institutions by addressing shortcomings in the appraisal regulatory structure, among other things.
The proposed legislation includes provisions that ensure an independent appraisal process, strengthen regulatory authority over bad actors and recognize the importance of professional designations when selecting an appraiser. See H.R. 3837 on THOMAS for the official source of information on this bill.
The bill has support from Representative Barney Frank (D-MA), Financial Services Committee Chair, and Congressmen Charlie Wilson (D-OH) and Paul Hodes (D-NH) as original co- sponsors of the measure.
"With mortgage fraud a hot topic and borrowers and lenders feeling the squeeze, this legislation is an opportunity to remedy problems inherent in the system," said Don Kelly, the Appraisal Institute's Director of External Affairs. "We applaud Congressman Kanjorski for introducing H.R. 3837, and we look forward to working with him and other Members of Congress on its swift passage."
The Appraisal Institute has been active in Washington as a vocal advocate of many of the provisions in H.R. 3837.
"We are particularly pleased to see that H.R. 3837 promotes appraiser independence because an independent appraiser is best able to help ensure the integrity of the lending process for the benefit of the consumer and the financial institutions involved," stated Kelly.
For more information on legislation supported by the Appraisal Institute, visit: http://www.appraisalinstitute.org/govtaffairs.
The Appraisal Institute is a global membership association of professional real estate appraisers, with 22,000 members and 92 chapters throughout the world. Organized in 1932, its mission is to support and advance its members as the choice for real estate solutions and uphold professional credentials, standards of professional practice and ethics consistent with the public good. Members of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations. For more information regarding the Appraisal Institute, please visit http://www.appraisalinstitute.org/.
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