Soaring Property Values, Record CMBS Volume Feeding Off Each Other

Soaring Property Values, Record CMBS Volume Feeding Off Each Other

CMBS Outlook for 2007 Calls for More Record Issuance, Keep Markets Awash in Liquidity

Costar Group - December 13, 2006 Written by Mark Heschmeyer



Total issuance for U.S. CMBS is expected to top $240 billion next year -- a $40 billion increase over the record amount Fitch Ratings expects to have been issued for all of 2006. All of which tells us a lot about Wall Street's expectations for commercial real estate next year: Another banner year.

The record activity is being driven by the increasingly popular use of CMBS as a vehicle for packaging and reselling the debt used to finance commercial real estate acquisitions and the continued influx of capital being allocated to commercial real estate products. Indeed the two are fuelling each other...

Economists Say the Worst Of Housing Bust Is Over | REJ

Economists Say the Worst Of Housing Bust Is Over

The worst of the housing bust is over, economists said by nearly 2-to-1 in the latest WSJ.com economic forecasting survey. But they still predict that the average selling price of a house will fall next year.

After several years of double-digit percentage increase, housing prices stopped soaring this year. The 49 economists responding to the WSJ.com forecasting survey expect home prices, measured by the government's Office of Federal Housing Enterprise Oversight index, to rise 2.8% this year and to fall by 0.5% next year. That contrasts with a 13.4% increase in 2005.

"We're nearing the end of the slowdown for most markets," said Ethan S. Harris at Lehman Brothers. Prices still have some ways to fall before they'll stabilize, but there are signs that most drastic parts of the downturn - marked by a sharp pullback in demand and new construction - have run their course...

What to Do in a Market That Is Headed for a Falloff | WSJ

What to Do in a Market That Is Headed for a Falloff

By Matthew Heimer
From The Wall Street Journal Online

After hurtling along for years, the nationwide real-estate boom has come to a screeching halt. In 2005, home prices in the U.S. rose more than 12%; this year, the National Association of Realtors expects appreciation to reach just 1.9% -- the lowest gain since 1992.

Rising mortgage rates and selloffs by skittish real-estate investors have helped depress housing prices in many metropolitan areas. But there's another factor that many observers miss: the relationship between home prices and incomes.

When the cost of housing in a given area grows far faster than local wages and salaries, the pool of potential buyers shrinks, and prices are much more likely to sink.

For the past five years, SmartMoney magazine has worked with Ingo Winzer, president of the consulting firm Local Market Monitor, evaluating home-sale prices against local income to determine whether a given market is overvalued, undervalued or fairly valued. Mr. Winzer relies on more than 15 years of housing and income statistics to find out where prices are headed.

According to Mr. Winzer, any market that's more than 30% overvalued...