This real estate market is seeing a recovery, however small, in the apartment investment sector. The mid west is seeing real traction in the apartment investor segment. High occupancy, high rents, dropping inventory, is this the beginnings of a broader real estate turn around. Only time will tell, but good news is hard to find these days, and we’ll take it.

Today Finance and Commerce published an article on apartment funding and finance.

“There are apartment operators today that are telling us they’re starting to lose some renters to the for-sale market because clearly, there are some bargains out there. But at the same time, there does not appear to be a decline in demand for apartments. There are just as many renters, people coming out of foreclosures,”

said Brent Wittenberg, vice president with GVA Marquette Advisors.

Although, Mr. Wittenberg is referencing the St. Paul, MN apartment market, this trend can be consistently seen throughout many other areas in the U.S.

For instance, the quote below in the Associated Press implies that the current foreclosure environment is fueling an uptick in apartment rental rates as the demand from previous homeowners seeking apartment life to replace their housing needs is outpacing supply.  

The inventory of U.S. houses for sale has soared to the highest levels since 1999 and prices have fallen for the first time in 11 years.

“Late Payments, Foreclosures Hit All-Time High in First Quarter” causing apartment rental increases.”

Associated Press, Thursday, June 14, 2007

Although these “shadow markets” , those where an abundance of foreclosed condos and homes compete with multifamily/apartment properties, have not yet taken hold, we must be cautious of this risk.  As Dan Smith and Sean O’Malley of RBC Capital Markets Real Estate Mortgage Capital state in the August 2008 issue of Northeast Real Estate Business…..

“The shadow market is having a major impact in areas such as South Florida, Las Vegas and other markets that experienced significant condominium development in recent years and are now seeing high rates of foreclosures. The condominium-based shadow market is generally less of a concern in the Northeast, where condominium sales in major markets such as New York City and Boston remain strong. ”

The impact of shadow markets must be observed as the impact on vacancies and rates can be significant.

In summary, the apartment sector of the commercial real estate market remains a viable opportunity for real estate investments and lenders have designed loan programs specifically to meet this growing demand. Also, these programs are designed to be implemented in a fashion so that the processing of these transactions are efficient and quick. As such, common sense underwriting is key (i.e. stabilized properties with good occupancies, experienced borrowers with good credit and available cash reserves, cashflow sufficient to support debt service, etc.) to successfully completing and apartment loan transaction.

Categories: Apartment Financial News, Financial News, Real Estate Trends

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We are at the bottom of the real estate market and we’ve been there for a while. The problem is, everyone wants to continue to think that we are in a depressing market. Sure, we have foreclosures yet to hit the market, we have banks with limited and restrictive loan products and we have buyers awaiting to the infamous bottom. No doubt there are many factors that trend towards a slow and long recovery, however, we, and I mean ALL of us, can effect that change NOW. We are living a self fulfilling prophecy and misery loves company, but it doesn’t have to be that way.

The general belief of a quick recovery occurring now is no different than what most sports fans believed about the 1969 Jets or the 2008 Giants winning their respective super bowls……low, very low. The difference in those games was that those players knew they could win. They knew, man for man, that they had equal talent and they had faith in their coaches to develop a plan that would be successful. The rest was easy, all THEY had to do was execute. 

Albeit, a sports analogy relating to a dire economic situation may seem a little corny or superficial but, the psychology in exactly the same, dead on, I would even add.

We face a situation today that appears to have all the makings of an upset victory. First of all, we need to believe we can turn this thing around….NOW. Obviously, the trends are going to shift back to growth at some point, so why not start it now.  We control it. What we need is for all of us to work together, believe we can do it and start making it happen.

First, the banks need to let the pendulum swing back to the middle. Currently, that thing is so high up the right side the good Lord would have difficulty getting a loan. This knee jerk reaction is typical in the banking industry. Historically, whenever they’ve gotten their hands slapped for doing aggressive loans they over react and get so conservative so that they’ll receive positive audit results when the regulators come back a year or so later. In the meantime, our economy suffers because the lack of credit prohibits creditworthy borrowers from obtaining necessary capital to sustain and grow their businesses. I’ve seen this happen a number of times over my career and it still amazes me why these highly intelliegent business people (yes, these folks in executive management are very smart and savvy business people) can not draft a comprehensive credit policy that is fail safe from stupid lending practices.

Second, Buyers…………….start buying dang it. The values are at the bottom, stop trying to squeeze every nickle out of the property. Don’t get me wrong, I want you to get the best deal you can, but conventional wisdom tells us that by the time you start buying values will already be on the way up. So start buying now and stop blaming the banks. Believe it or not, when the banks see the demand for loans begin to increase they will bring more products to the market.

Lastly, everyone and I mean EVERYONE, start talking it up and let’s support each other. It’s so doom and gloom out there. Call a friend, a business associate or a family member that’s caught in the middle of this thing and ask them how you can help. The more we talk it up and network, the more solutions we’ll find we result in more activity which will ultimately create the positive energy we need to turn this thing around.

We can win this game but it’s going to take US working together to make it happen. So, get out there, call someone and ask them how you can help.

Categories: Real Estate Trends

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For the last week, all the newspapers and news programs, are talking about President Bush’s launch of his new Federal Housing Administration program. I sure hope it works but I cant help but be a little skeptical. Check the article on Money Central about President Bush’s Bailout program and let me know what you think.

Categories: Financial News, Real Estate Trends

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