In Honor Of Halloween: The Creepiest Houses For Sale In The U.S.

Take a tour with me through the spookiest, creepiest old houses for sale in America.

PERFECT for a Halloween adventure!!!

If Interest Rates Go Lower

Up and down. Rollercoaster or see-saw?

About every two or three weeks we see a huge stock market sell off.  Then the market -- as it historically always has done -- slowly creeps back upward.

Worries over the strenth of the entire European Union. The strength and viability of hte Euro. Greece may default on its loan obligations -- on purpose -- which has Portugal and Ireland panicking Headlines on many news services late this afternoon say roughly the same thing: Investors in the stock market are dumping everything.

George Soros (not someone I put a lot of stock in -- he is not about "progress," he is about his own self interests at the expense of many American liberties, but thats a subject for another day) has said we are entering a second recession. Guess why he's saying that? Might be true, but my thinking is he wants to drive markets lower. If I had to bet, he is buying stocks right now. You know, buy low now-sell it later when it rebounds after the market realizes they are articificially depressed. His defense will be that he was asked what he thought. He can't control how people respond to his words. But I'd bet anything he's hopeful people panic based on media reports of his remarks, and he quietly buys up stronger, more valuable stocks that are being hammered irrationally by emotional sellers.

At the same time, Robert Zoellick, president of the World Bank, says the world is "in a danger zone." Mutual assured destruction of the Cold War has been replaced by economic reliance on each other. Nations needing others to succeed financially, thereby no need for war. But what happens when mounting debt creeps so high that nations decide to welch on their obligations?

Much of the sell off last week and today, IMHO, is emotional. Asia panics, Europe reacts, and like lemmings American investors follow everyone else over the cliff. Smart investors are carefully looking at buy opportunities. If they didn't get in today, depending on what happens tomorrow, Friday, there will likely be some folks getting in a rock bottom prices courtesy of those who are bailing.

With that said, Moodys Investors Service reoprted recently that U.S. commercial real estate prices advanced 5 percent, marking a third straight month in July as deals for smaller properties. The Moody's/REAL Commercial Property Price Index gres 5 percent from June. It is up 1.2 percent from a year ago, and nearly 13 percent from its post-peak low in April.

Still, realistically, this rebound may slow depending on the economy. President Obama sent mixed signals, as did Federal Reserve Chairman Ben Bernanke, when he both noted that the Fed's actions will likely further reduce interest rates. But then he said we are in a second recession, sparking the latest panic. Moody's report noted that the gain is more likely a continuation of "the bottoming process" than a harbinger of recovery. "Slow job growth will crimp expectations for the absorption of vacant space and for rent increases, which in near turn will constrain near-term price increases."

Still a buyers market for commercial/investment real estate. Depending on the property type, of course. Multifamily is still strong, but it is getting more difficult to find commercial lenders willing to back a lot of different acquisitions. Cash buyers -- whether they are private investors REITs, pensions, or insurance companies -- are quietly swooping up better quality properties of all kinds.

Now, back to whether interest rates will drop futrher. There are some things to think about; even if interest rates go lower, two thirds of the market would have to sit out any opportunity. Why? Look at it this way --

     -- the lower third  couldn't qualify anyway due to credit problems, too little income, etc..
     -- the upper third don't need it; this group is paying cash for property these days (in fact sales of luxury homes $5M and higher are up 20 percent year to date over 2010)
    -- the middle third previously had to go with alternate financing, and that has pretty much dried up now.

So lower interest rates might not really do to much to stimulate real estate sales. So then who IS buying commercial/investment real estate today?  Wealthier investors getting out of the stock market are converting funds to self-directed IRAs and picking up investment properties. I have two such clients I am working with now in this category, with a third who is making the move and wants to start looking for available properties within two weeks.

Today's continued stock market drop prompted the latter investor place a call a few days ago, telling me he is ready to pull the trigger. That, combined with rumors that interest rates may be lowered as a gasping means to jump start borrowing for any number of types of acquisitions. with plenty of money are being begged to use even more money. and even they are feeling the squeeze to some extent.

But everyone else is just standing there.
Less than 1 percent of investors are in CDs. Those still in the market, which is increasingly volatile, are looking at projections that we are going to have another significant "correction." Wealthy are in a good position now to pull out and wait until it is advantageous to get back in.

Rates are going to be 4 percnet on a 30 year fixed.  Financing is HALF of what it was five years ago, so now -- if you are development minded -- you can pay a lot more for a project now than you would have in 2005.

And in all this, the cap rate compression we are seeing with rates this low are unbelievable. It just defies explanation.

New chapters on all these sagas to be written in world financial and CRE markets on Monday ....

Worth Noting

"Your time is limited, so don't waste it living someone else's life."

"Don't let the noise of other's opinions drown out your own inner voice. Have the courage to follow your heart and intuition."

"Sometimes life is going to hit you in the head with a brick. Don't lose faith."

-- Steve Jobs

Stocks Suck

Not my words but headlines found on a handful of news sites today.

Which would be why, IMHO, we are seeing an uptick once more in investors who want to move money from the market, which just experienced a very depressing quarter, into CRE. Which creates more of the interesting dynamic of which I have written before. Only so much quality product, and more and more capital eager to purchase. In effect, private investors in some of the heaviest competition I've ever seen with public and private REITs, pension funds, insurance companies, and other institutional entities.

Markets Down Sharply, CRE Stats Up But For How Long? And Good News About Shopping Centers and Medical Tenants

Markets are off sharply this morning, with more than 700 points lost on the Down Jones average in the past two days, and European and Asian markets down significantly over fears of a default by Greece, general uncertainty, actions by the Federal Reserve that will push interest rates lower, and a statement by the Fed chair two days ago that we are likely entering another recession.

I'm not sure we ever left the first one.

Some good news. Medical groups are renting retail space in strip malls. Seems to be a trend in different parts of the U.S. According to Globe Street news, in Tampa the Florida Orthopaedic Institute has leased a former Borders bookstore. It will be converted to a clinic skedded to open in January, and will feature x-ray, MRI, clinical offices and facilities for physical and occupationsl therapy.

Retailers that would have shunned medical office in their centers -- even excluded them via mandates -- are welcoming the approach because shopping plaza restaurants and other retailers benefit from the the foot traffic coming to and from healthcare providers. Its all part of a trend of vacant office and retail sites working to reposition themselves as ideal homes for medical/dental space and related businesses.

Interestingly, healthcare has been one of the steadiest of commercial real estate sectors. No matter how badly someone is getting along financially, they still get sick and need to visit their own personal physicials or , worst case, visit emergency rooms. This healthcare sector, still, has been slowed by the economy.

And what is causing the slowdown? Hospital reports are the key: elective procedures have been down during the worst times of the recession. Plus, physkicians are less confident of their long-term status considering the implementation of the controversial healthcare iniatives coming out of the White House, and some worry whether they will continue to be employed by hospitals in the next six months to one year.

Still, acquisition and disposition of medical office buildings seems to be trending back up a bit. A

How Do We Continue Stifling The Economy? Let Me Count The Ways .....

Elizabeth Barrett Browning wrote of love beautifully in the 1800s when she penned Sonnet 43. The first two lines are very well known: "How do I love thee? Let me count the ways."

Let me count the ways . . . those words resonate with me these days as I view what is happening to the U.S. and world economies, what is happening with lending, and its impact -- consequences you might say -- on commercial/investment real estate.

The Associated Press is reporting that President Barack Obama this week will announce $1.5 trillion in new taxes on an already beleagured American economy. The core of the president's plan totals just more than $2 trillion in deficit reduction over 10 years. It combines the new taxes with $580 billion in cuts to mandatory benefit programs, including $248 billion from Medicare. Hmmm..... THAT will be mighty popular. My guess is there will be so much pushback from the public about cuts to Medicare that that option will be dropped. But the tax increases will stay in place.

I play chess, too. That's how these things usually work.

Congress, historically, has had a way of fixing serious problems by instituting financial regulations that often make no sense. But the Members of Congress mean well, just ask them! Now the White House, while the printing presses continue to hum 24 hours a day cranking out American greenbacks and flooding the world with a plethora of inflation-raising paper (yes there is inflation; been to the grocery lately?), is poised to further stifle hiring by heaving far higher taxes onto the very people and organizations most sorely needing relief so that they can create sorely needed jobs.

Why the tax spike? All in the name of balancing the budget and reducing the national debt. Both of these issues are important. But so very often, the "solutions" coming out of Washington cause far more harm. Unintended consequences, as I have written about previously.

It is no wonder no one is hiring. Regulations of all kind are a moving target. No one can put together anything as simple as a two-year plan because the rules for doing business may change next month, or next year. Or not. No one knows.

Case in point. My partner and I have a transaction we are trying to close. Every lender we have talked to agrees -- this is a hell of a deal. A transaction that makes sense. Strong buyer. Great property. Nationally known tenant. Willing seller. And immediately afterward, each lender says the following, "this deal makes sense." they promptly hem and haw as to why they can't do the deal.

Banks and mortgage companies are incredibly risk averse these days. If there is any finger-pointing to be done, it would lead in a straight line to Washington DC. The administration, despite its recent clamor urging the public to push Congress to "pass this jobs bill," has more or less declared war on job creators via rhetoric, plans for additional taxes, and an orgy of crushing, oppressive, ponderous regulations designed to punish industry rather than protect consumers. From new financial regs that irrationally directly impact CRE practitioners' ability to advise certain clients, to contradictory labor relations board missives prohibiting companies from expanding. The list is long. The media doesn't help, chiming in without asking any hard questions of those who propose additional onerous regs. Trust me, I know. I am a former working journalist and the dearth of questions from the Fourth Estate of this administration is odd, if not troubling.

A lender's job is not to lend money, it is to make money. As is any other public or privately held business. a CEO is held responsible for such. If the company is publicly held, like most big banks, the CEO is beholden to shareholders, which by the way are comprised of moms and dads' mutual funds, pension funds owned by unions (among other organizations),  teachers retirement funds, and so on. These days to lend very much without knowing what regs are going be is a huge risk. In some cases, risks not worth taking unless the lender charges unrealistic interest rates. Which stifles CRE transactions.

When you think about it, risk and reward used to go hand in hand. But with this administration, risk takes on a far more draconian meaning.

Is CRE moving now? Yep, in starts and stops, with many projects being funded by pensions and REITs, and the balance being funded by traditional lenders dealing with buyers with whom they already have a relationship. A contact of mine at a one such huge traditional bank said recently, and this was widely suspected but he confirmed it,  that having accounts there, or transferring funds there, only gets you a look by them. No guarantee they will have any interest at all in your project.

Back to the deal. Smaller transactions are requiring buyer and seller to get VERY creative, utilizing seller financing, lease to own, combination transactions, indentured/collateralized notes held to maturity, and more.

In the larger scheme of things, several CEOs have flat out told Washington the way to grow the economy, and jobs, is for lawmakers and the White House to get out of the way. Proposing trillions of dollars in new taxes at a time when the economy is at a dead stop isn't just getting in the way. It is is all about people who don't understand Economics 101 putting up roadblocks (with a smile and a speech), roadblocks that are candy-coated populist "solutions" being described as needed for growth. Right.

Ever hear of perfuming the pig?

How is the economy stifled? . . . let me count the ways. Did you know the federal government borrows money from banks? Its a guaranteed 3 percent or so return, which is safer than lending to industry that is is sputtering because of regs imposed by that same federal government. No wonder traditional lenders are hesitant to take risk.

Profligate, isn't it?

Until Washington gets out of the way and quits trying to fix things (this White House and its associates in Congress desperately want to be seen as "doing something") that clearly and historically have the ability to heal themselves, we will continue to be plagued with untold and exponentially harmful unintended consequences.

The Standard of Living You Enjoy . . .

. . . Depends on which side of the check you sign.

Owning commercial/investment property is a personal choice. One that frequently has investors weighing personal needs against pure, cold business analysis and decision making.

But what it really comes down to is this:  The standard of living you enjoy depends on which side of the check you sign!

Signing the front of all your checks? You likely work for someone else and pay your bills and taxes like a lot of Americans. Signing the back of lots checks on a monthly basis? Then you are llikely invested in income-producing real estate and enjoying all the benefits associated with homes, an apartment building, a commercial building, a warehouse or two, perhaps even a ground lease or a Triple-Net single tenant structure.

Further, if you leveraged the property at closing you know all too well that the lender was sitting at far greater risk than you on Day 1. Every buyer does it their own way, but there are distinct advantages to borrowing to make a purchase rather than paying cash. Especially since investment real estate is one of the few opportunities in which lenders will loan money for speculative ventures. Think about it -- Lenders will not loan money on stock purchases. They won't loan you money to buy gold. So if lenders are willing to lend, why wouldn't you borrow?

Simply put, use real estate to leverage your money.

Here's another one. Who received at closing -- and continues to receive -- all the tax benefits? That would be you, the investor. Not the bank, which took the majority of the risk. Pretty cool, huh?

In several years, whether you own a small commercial building, that 55-unit apartment complex, or the NNN leased property belonging to a successful national restaurant, when equity increases, you can refinance your property in order to give yourself "a raise" by way of reducing your monthly mortgage payments. Or, you can use your growing equity to acquire more real estate to build your portfolio, and ultimately, your wealth.

So there you have it. Friday's lesson. The standard of living you enjoy depends on which side of the check you sign......

Enjoy your weekend!