Real Estate Roller Coaster

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Where will the coast roll in 2008, ‘09, ‘10?

House Approves Economic Recovery Plan

The key point to really pay attention to is the last paragraph where they honorably mention the impact this plan will have on raising conforming loan limits; especially in high-cost areas -woohoo!  It might as well have been in light grey color, font size 2.  For the entire article, see below.

By Julie Hirschfeld Davis, Associated Press Writer

WASHINGTON (AP) — The House, seizing a rare moment of bipartisanship to respond to the economy’s slump, overwhelmingly passed a $146 billion aid package Tuesday that would speed rebates of $600-$1,200 to most taxpayers.

The plan, approved 385-35 after little debate, would send at least some rebate to anyone with at least $3,000 in income, with more going to families with children and less going to wealthier taxpayers.

It faced a murky future in the Senate, though, where Democrats and some Republicans backed a larger package that adds billions of dollars for senior citizens and the unemployed, and shrinks the rebate to $500 for individuals and $1,000 for couples. That plan, written by Finance Committee Chairman Max Baucus, would deliver checks even to the richest taxpayers, who are disqualified under the House-passed measure.

Both versions would provide tax breaks to businesses to spur equipment and other purchases.

President Bush and House leaders urged the Senate to take the bipartisan agreement and pass it quickly, even as Baucus, D-Mont., planned a Wednesday vote in his committee on a larger package that could face a slower path.

“We need to get this bill out of the Senate and on my desk,” Bush said in the Oval Office.

Congressional leaders are aiming to send the measure to Bush by Feb. 15. But the divergent plans — and bids by Senate Democrats and Republicans to swell the package with more add-ons — could drag out that schedule.

House Speaker Nancy Pelosi, D-Calif., said she hoped the Senate would “take this bill and run with it.”

Senate Majority Leader Harry Reid, D-Nev., said that was unlikely in the freewheeling Senate, where members have elaborate wish-lists for adding to the bill, including food stamps, Medicaid and heating assistance for low-income people and spending on infrastructure projects, among other things.

“I think that there’s 51 Democratic senators without exception who believe this package can be made better,” Reid said, adding that he also expected to have enough GOP support to change it.

Sen. Mitch McConnell, R-Ky., the minority leader, said reopening the deal would be inappropriate.

“This is not a time to get into some kind of testing of wills between the two congressional bodies. This is a time to show we can rise above partisanship, do something important, and do it quickly,” McConnell said.

The House plan brought together Democrats and Republicans, both of whom surrendered cherished proposals to reach a deal.

Pelosi cautioned against adding items that could hinder an economic recovery or scuttle the bipartisan agreement.

“It’s important that this bill not get overloaded. I have a full agenda of things I would like to have in the package, but we have to contain the price,” Pelosi said. “We made a decision, because that’s where we could find our common ground.”

Republican leaders, too, described the measure as an imperfect compromise that would provide a needed jolt to the economy.

Americans “expect us to find ways to work together, not reasons to fight with each other,” said Rep. John A. Boehner, R-Ohio, who forged the agreement with Pelosi in consultation with Treasury Secretary Henry M. Paulson.

“The sooner we get this relief in the hands of the American people, the sooner they can begin to do their job of being good consumers,” Boehner said.

The measure would send rebates to some 111 million people, including roughly 35 million families who don’t make enough to pay income taxes. Individuals with adjusted gross income of $75,000 and couples making $150,000 would get rebates equal to the taxes they paid, up to $600 for individuals and $1,200 for couples. Those making more than that would see their rebate go down by 5 percent of every dollar of income over the limits.

Taxpayers would get at least $300, even if they paid less than that in taxes — or $600 for couples. That’s also the case for those who don’t pay income taxes but earn at least $3,000.

All eligible people would get an additional $300 per child.

In the Senate, Baucus’ proposal removes the income caps and would send rebates to some 20 million senior citizens not covered by the House plan because they don’t have income.

Reid blasted the proposal to send rebates to those with higher incomes, saying it “causes me to want to gag.” The feeling is widespread among Democrats, he added, saying the “the gag reflex is coming upon everybody” over the plan.

Baucus’ plan also extends unemployment payments for 13 weeks for those whose benefits have run out, with 26 more weeks available in states with the highest jobless rates.

The Senate measure would restore a business tax break dropped during the House negotiations that would permit corporations suffering losses now to reclaim taxes previously paid.

Both packages include roughly $50 billion worth of tax incentives for businesses to invest in new plants and equipment.

Baucus said he, too, wanted to avoid burdening his proposal with extras.

“The more that this is kept slimmed down and it’s clean and simple, the better. I do not want it loaded up with lots of other provisions,” Baucus said. “Nobody wants to be held responsible for stopping this from going through.”

To address the mortgage crisis, the House bill would raise the limit on Federal Housing Administration loans from $362,790 to as high as $729,750 in expensive areas, allowing more subprime mortgage holders to refinance into federally insured loans. To widen the availability of mortgages nationwide, it also would boost the cap on loans that Fannie Mae and Freddie Mac can buy, from $417,000 up to $729,750 in high-cost markets. Those measures would expire at the end of the year.

Sen. Charles Schumer, D-N.Y, said Tuesday that he plans to ensure those changes are part of the Senate stimulus bill.

Proposed Mortgage Plan Could Aid Markets

January 24, 2008 2:42 PM ET WASHINGTON (AP) - A component of the government’s tentative economic stimulus package announced Thursday would give an immediate lift to buyers and sellers in higher-priced housing markets.

The package agreed upon by Democratic and Republican members of the House would allow government-sponsored Fannie Mae and Freddie Mac to buy mortgages 50 percent more expensive than the current $417,000 limit. The Senate and White House still must sign off on the proposed stimulus plan, which also includes tax rebates for Americans.
House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio announced the deal in a press conference Thursday.

The higher cap of $625,000, to apply for one year, would breathe life into housing markets in New York, California and other pricey areas because lenders would feel more comfortable knowing Fannie and Freddie can buy and package the loans into securities that investors consider to be relatively safe.

A Freddie Mac spokesman said in an e-mail message that such an increase “would be in the best interest of the market and consumers.”
To address the mortgage crisis, the package also raises limits on Federal Housing Administration loans, which are insured by the government in event of default, congressional aides said.

Groups representing Realtors, bankers and home builders, which have been hit hard by the mortgage market downturn, have been lobbying for such changes for months.
The National Association of Realtors has been pushing for a permanent expansion of the Fannie and Freddie limits to $625,000. It calculates that borrowers could save $3,000 to $5,000 per year in reduced interest costs as a result and projects up to 210,000 foreclosures could be prevented since refinancing into lower-rate loans would be easier.
Dale Stinton, the group’s chief executive, said in a statement Thursday that increasing the loan limits “is a truly meaningful economic stimulus and should be enacted quickly.”
House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio announced the deal in a press conference Thursday.

The higher cap of $625,000, to apply for one year, would breathe life into housing markets in New York, California and other pricey areas because lenders would feel more comfortable knowing Fannie and Freddie can buy and package the loans into securities that investors consider to be relatively safe.

A Freddie Mac spokesman said in an e-mail message that such an increase “would be in the best interest of the market and consumers.”

To address the mortgage crisis, the package also raises limits on Federal Housing Administration loans, which are insured by the government in event of default, congressional aides said.

Groups representing Realtors, bankers and home builders, which have been hit hard by the mortgage market downturn, have been lobbying for such changes for months.

The National Association of Realtors has been pushing for a permanent expansion of the Fannie and Freddie limits to $625,000. It calculates that borrowers could save $3,000 to $5,000 per year in reduced interest costs as a result and projects up to 210,000 foreclosures could be prevented since refinancing into lower-rate loans would be easier.
Dale Stinton, the group’s chief executive, said in a statement Thursday that increasing the loan limits “is a truly meaningful economic stimulus and should be enacted quickly.”

Workers Needed For Bubble Clean-Up

Peter Slatin, Forbes/Slatin Real Estate Report 

For anyone looking for a straw to grasp in the swirling waters of real estate finance, a new report by executive search firm Ferguson Partners may look tempting.

According to the firm’s annual Industry Hiring Trends Forecast & Compensation Survey, compiled from the responses of 275 real estate professionals nationwide, the jobs outlook for commercial real estate–outside of what Ferguson Partners CEO Bill Ferguson calls the “dead” commercial mortgage-backed securities (CMBS) sector–is surprisingly steady, and even upbeat. Sort of.

“Despite recent turmoil in the markets, respondents generally indicate a continued positive outlook with respect to hiring and compensation in 2008,” the report concludes.

Some key points from the report.

–A clear majority of respondents anticipate adding staff in 2008.

–Hiring demand is strongest among globally oriented entities.

–Demand for asset/portfolio management has increased, and now matches transaction/development needs.

–Don’t look for a big raise.

Of course, the picture has plenty of dark spots. In an interview, Ferguson says–without irony–that with the exception of companies expanding opportunistic investing activity, the residential and commercial mortgage-finance businesses have “hit a brick wall.”

The homebuilder world, he added, “has dropped off the face of the earth.” And as for the CMBS world, once “a huge contributor to the demand for human capital, Wall Street is pretty much dead in that space.” Demand on a year-over-year basis has declined dramatically.

Today, Ferguson notes, demand “is primarily for people who are underwriting restructuring or workouts,” the latter being a word that’s been “forgotten by a whole generation of real estate professionals.”

Large institutions–”the GEs, the MetLifes”–are active in that arena, and are “taking advantage of the vacuum created by Wall Street.” That’s creating opportunities for one professional niche: “From the top on down, there is much more rigor on underwriting, so there is more demand for people who might run credit in the underwriting space,” says Ferguson. Many of the inquiries his company is getting for workout specialists, predictably, are coming from companies that lent to homebuilders.

“A number of privately owned homebuilders won’t survive,” he says, pointing to Neumann Homes, a Chicago-based builder that filed for bankruptcy last fall.

On the flip side of the commercial lending downturn, Ferguson says the “equity investment side is still surprisingly vibrant,” with projections for hiring “much more in sync with those of the prior year.”

Commercial development, an activity that has not slowed to a standstill as it did in the late 1980s and early 1990s, remains strong in some markets and property types. For example, says Ferguson, REITs and private firms are developing apartments and hotels, as well as senior housing and more commercial health care properties. There is also still some office development and industrial construction, especially in key transportation hub markets such as Chicago, Dallas and the coasts.

Another area that is “very robust”: companies looking at–or already involved in–global investment. “The rationale is that a lot of the capital that has pushed U.S. expansion over the last seven to 10 years is now interested in other parts of the world,” notes Ferguson. “Increased allocations for investment managers have allowed a lot of U.S. firms to have capital to invest around the world.”

One sector that has emerged in the past two years as an important investment target is also still seeing impressive growth: infrastructure, which Ferguson notes is “a very active area for investors.” With major engineering and construction firms building projects “all over the world, from power plants to highways, investment managers and private equity firms are hiring people out of the Fluors and Bechtels who know the sector, have the necessary relationships and can underwrite these investments,” he says. “A number of our clients are looking for people with that kind of expertise.”

Continued hiring, promotion and increased compensation–just like good investment opportunities–will be confined to very specific areas, says Ferguson. “Clearly, the CMBS shops are basically stalled, and hundreds of people around the world have no business. On the investment banking side, you’re going to see layoffs and downsizing.” At the same time, he notes that “the private equity sides of the investment banks are quite robust. You have to be careful not to paint Wall Street with one brush.”

And though we have, in the past couple of years, seen more hedge funds become active in real estate, the asset class has remained largely untapped by these vehicles–until now. “Hedge funds are increasingly interested in the business, more so than they’ve been,” says Ferguson. Indeed, “most investment managers are looking at broadening their product lines.”

That could explain two recent high-profile hires by major opportunity funds: Earlier this month, former Starwood Hotels (nyse: HOT - news - people ) CEO Richard Nanula joined Colony Capital, while Barry Sternlicht’s Starwood Capital Management has snagged Barden Gale, the highly regarded head of real estate investment for Dutch pension giant ABP. “They brought Barden on board for two reasons,” says Ferguson. “Firms can use people like that with advanced management skills, and Barden also has a great investor following.”

What would Ferguson say to the junior-level employees who will find themselves back on the street?

“I would tell them all to go to medical school,” he wisecracks (we think). “Smart people follow the capital. Try to get involved with the private equity firms, hedge funds and individuals who have capital and are salivating at the correction in the market.” While those groups attack the changing marketplace looking for opportunities, he says, “the more traditional players are going to have a harder time.”

Peter Slatin is editor of the Forbes/Slatin Real Estate Report.

Recession looming in US housing-boom states

California and Florida - the biggest and fourth biggest state economies in the US - are either in recession or on the brink, many economists now believe.

For the entire article, click here.

 What do you think?

Do you have what it takes for the ‘08?

It would be an understatement to say that the last year has been pretty rough for real estate industry professionals.  For those able to withstand the barrage of obstacles plaguing us; the subprime credit woes, wholesale lenders shutting their doors, brokers, title and escrow offices also shutting down or reducing staff to the barebones minimum, declining home values throughout most of the nation…the list goes on and on.  Is it too much to handle and does the new year bring new resolutions that include getting a new job?  Some say there are reasons to find a new job in 2008.  

If you can weather the storm and retain your clients while simultaneously prospecting for newer ones, then you’ll come out bigger and better when the storm settles.  Coincidentally, its raining cats and dogs here in California.  I hope you brought your umbrella.