Construction Industry Research Board figures show that shoppers shouldn’t expect much in the way of new shopping malls in the near future:
- Future retail construction — as indicated by the value of building permits issued so far this year — fell 61% from the huge upswing that occurred in the first seven months of 2007, according to the board, which tracks California building permit data.
- Just $94.6 million worth of retail building permits have been issued in 2008 so far (a fifth of that for just one retail project in Brea).
- That compares to $245 million worth of retail permits in the first seven months of 2007, and an average of $115 million a year for the past decade.
[ More housing: PRICING | INVENTORY | RENTS | FED | RATES ]
Overall, non-residential construction permits this year have dropped 27% from the same period a year ago. The biggest drops are in hotel construction (-77%), industrial construction (-67%) and office development (-55%), research board figures show. Renovations of buisness and institutional buildings increased nearly 5%.
The estimated value of residential building, by comparison, fell 37%.
The following cities are leading the county in total non-residential building this year so far:
- Irvine: $266.7 million
- Anaheim: $122.2 million
- Newport Beach: $68.7 million
- Brea: $57.4 million
- Fountain Valley: $37.9 million
Here are breakdowns, in millions, for countywIde non-residential development by type for the January-July period:
| Year | Cmml | Indus | Other | Alts/Adds | Total |
|---|---|---|---|---|---|
| 2008 | $341 | $11 | $102 | $511 | $964 |
Source: Construction Industry Research Board; Cmml=commercial; Indus=industrial; Alts/Adds=alterations & additions
Previous posts on construction:
my crystal ball say we are already in a recession.
“U.S. Chicago Purchasing Managers’ Index Rises to 57.9″
(From an expected 50)
“The National Association of Purchasing Management-Chicago said today its business index rose to 57.9 this month, the highest level since June 2007, from 50.8 in July. Fifty is the dividing line between growth and contraction. The index averaged 54.4 last year.”
“Popular selling U.S. mortgage unit assets to Goldman Sachs”
Looks like Goldman thinks subprime is worth at least 60 cents on the dollar.
Can’t get link through.
This gets old. Of course prime loans like ALT-A and option arms are defaulting and going to default more in the next few years. Common sense says:
Why did people take ALT-A loans if they could afford the house?
(Everyone knows the rates are higher on ALT-A’s)
If you could refinanace out of an option arm or an ALT-A why have you not done so yet? (The more equity the better chance of getting a lower rate and easier financing)
Why are Fannie and Fredie in trouble? (what kind of paper do they hold?)
Bill the bulls don’t want to accept common sense…………
Actually that’s not true, they are NOT always higher to go stated, even with Fannie.
Don’t they call Roubini “Dr. Doom”?
I never heard of a lender that if the borrower qualified for an ALT-A loan that they couldn’t get a better rate going full doc. They may have gotten the same rate if they had compensating factors, but it was not the norm. Lets say if they had great reserves with an 800 fico or tons of equity or some kind of combo of the 3, but you know those aren’t the people defaulting. Just like subprime ALT-A and option arms are riskier classes of loans and they normally charge accordingly.
It was commonplace to have no hits of any kind at 70% (for starters). Fannie Mae’s average ltv was around there.
“but you know those aren’t the people defaulting”
This is a circular argument. You are saying that Prime Stated/ALT-A are sure to default in large numbers because the weakest hands are defaulting now.
provider Says:
“Don’t they call Roubini “Dr. Doom”?”
Gee, I really don’t know.
Let’s read the article title again:
‘Dr. Doom’ Economist’s Dire Warnings Proved Right
If you qualified with 70% or below LTV had an 800 score with massive reserves but thought it easier to go lite doc with no income verification those people probably aren’t defaulting. (if they didn’t do an equity line) They may be walking because of being underwater but that is another story. Most of the people who took ALT-A’s aren’t in that category.
Some are defaulting now but others may take a while. There are to many factors and loan types to say when because some ALT-A’s are 30 year fixed but they have been taking equity to pay the house. They will last only as long as they have the reserves to keep paying. Either credit line, 401k loans, CC’s or whatever they do now to supplement an income that was never enough to qualify full doc in the first place. Others will default after recast. Not everyone but enough to create more declines and more problems. Again this is my opinion and only time will tell.
Nice link Eat it. The numbers are potentially worse than the subprime!
hey provider its only DOOMSDAY when youre wrong
August 29, 2008
Let’s Get Real about Real Estate
Once again, real estate market watchers have pounced on a shred of seemingly positive news to proclaim that the long sought “bottom” is in sight. The routine is becoming extremely stale, but somehow the media never seems to tire of it. This time the “good” news was that the percentage declines in national home prices (according to Case Shiller) in July where not as large as they were in June. Although the report contained many other negative data points, including increased inventories and a spike in foreclosure sales, it was the slowing declines that got spotlight. Talk about grasping at straws. The truth is that real estate has been grossly overvalued for years, and the adjustment process back to realistic pricing has only just begun. The problem is few among us seem to appreciate the magnitude of this adjustment and its implication for an economy dependent on inflated assets values.
By most accounts, the decade long housing boom began in 1996 and finally went poof in mid-2006. In January 1996, the Case Shiller 10 city composite home price index stood at 76. By June 2006 it had tripled to 226, by far the largest increase in U.S. history. Since then, the index has pulled back by 20% to 180. For those who believed that home prices could never retreat nationally, this 20% correction is more than enough. In reality, it’s just the down payment.
When real estate prices were expected to rise in perpetuity, the price of a house had two components, one representing shelter and the other investment. The shelter component was the actual utility and desirability of the house and the investment component was the expected future appreciation. My guess is that at the peak of the real estate mania, a $500,000 house might have been comprised of $250,000 for the shelter component and $250,000 for the investment component.
In effect, the appreciation potential, and the ability of the homeowner to tap into it though refinancing and home equity loans, offset the real costs of home ownership, such as mortgage payments, taxes, insurance, and maintenance. So the main reason a buyer would commit to a mortgage that would soak up 50% of his disposable income was that he expected to recover most of that outlay through future appreciation. Absent the expectation of that windfall, buyers would not have been willing to pay such staggering prices for houses or commit to burdensome mortgage payments.
Lenders were caught in the same delusion. Since they too believed prices could only rise, lending standards were thrown out the window. If the collateral (the house) were to always rise in value, what difference would it make if the buyer made the payments? In effect, instead of relying on the borrower’s ability to pay to mitigate its risk, lenders merely relied on the house’s ability to appreciate.
However, now that real estate prices are falling, lenders are beginning to rely solely on the borrower’s ability to pay. As this trend continues, lending standards will tighten and mortgages will be brought back into line with the incomes of borrowers. In addition, down payments will be larger to reflect the greater likelihood of losses should loans end up in foreclosure. When prices were rising the foreclosure risk was negligible. However, now that foreclosures are soaring and recovery rates are less than 50 cents on the dollar, those risks are enormous.
So with falling real estate prices, mortgages are much less appealing to both borrowers and lenders. The only solution is for home prices to fall to where they are cheap enough for buyers to afford the mortgage payments (both interest and principal) without relying on appreciation, teaser rates, or negative amortization, and save enough for a down payment that would protect a lender in the event of default. In addition, the collapse of the mortgage securitization market means houses must be cheap enough for our limited pool of domestic savings to supply the funding, as we will likely lose access to much of the foreign funding that fueled the bubble.
Of course we need to be honest about the winners and losers of this credit crunch. Just because mortgage money becomes scarce and lending standards tighten does not mean people will not be able to buy houses –it simply means they will pay a lot less for them and that fewer new houses will be built. Therefore it is sellers, builders and those holding or insuring existing mortgages who lose, while buyers win big. That is because despite higher interest rates and larger down payments, they end up borrowing a lot less money. In the end they will become true homeowners rather than indentured servants. If home ownership is truly is the American dream that so many realtors profess, then the ongoing collapse in home prices will be a dream come true.
peter schiff
Hey Bill what happen to Melody?
Hey Mel you still out there?
Hey Jon you didn’t bar Mel for yesterday did you?
rants: it is redundant to call it an “atm machine.” Automated Teller Machine machine. :)
Uh anyways, where is melody? Hmmmm….
Thanks stash for missing me… just got home
Hmmm me banned? - whose messages got erased? - not mine.
I did go to the ocregister. That was kinda fun :) They used to give tours there. You can sure see what the effects of technology has caused for newspapers when you go into these places.
Sign of the times.
Girly man - one man band - just leave me alone.
No problem I just want to make sure the URL stands for something Mel. You can’t have freedomblogging in the URL and not allow people to speak. Good to know you don’t get banned for speaking your mind.
Now where were we? Oh yes ALT-A’s and option arms.
Mel you see the link above that Eat it dropped on us?
Now where did everyone go???
Oh well Friday night on a long weekend. Got a baby sitter you won’t hear from me until tomorrow.
I’ll pour a little beer out for all our banks that have passed and the ones getting ready to in the future. ( my wife thinks I’m such a dork sometimes -she’s right ) :)
See ya!
blogging your opinion is one thing. being a phycho tr oll is another. I”ve been on many blogs and have not seen such abuse. It’s ironic, my “source” wasn’t there today but provider states he never heard of me. It’s hilarious but crappy at the same time. I back up what I say and take pride in doing so.
anyways, the link is a good one. I don’t particulary care for realtors but he’s not bad. When he videos a house and it’s in a crime ridden area, he tells you. He shows you the faults of the house. Not a bad site at all.
As far as the wave of foreclosures coming… I’ve stated this all along.
After I went to the register, I had lunch at tommy pastrami’s on 4th street. I love their food!!!
A couple doors down, there was a store - real estate. Everything was in spanish but there were photos of homes with prices (I could understand that much) and the prices were low. Some were in the 100’s and most in the 200’s. I would never live in Santa Ana, but they do have some nice areas there. They had lots and lots listed.
Commercial construction is dead. There is no one knocking on the doors of City Hall to construct anything but maybe big industrial buildings. They are cheap and easy to build.
wow :) thanks
Lansner, how can you leave her claim about the Register employee (the lie) and delete my proof that it never happened?
Have you noticed the vacancy’s in the strip malls? It seems like more and more are popping up. I am not looking forward to our economic times…. that’s for sure.
Wow, the builder’s quote of the day:
“It fell off a cliff. It wasn’t a bungee jump. It was jumping off a cliff with no bungee cord.”
- Bill Rogers, Michigan homebuilder, August 2008
Well I can see Lansner has folded up like a cheap suitcase so Melody the place is all yours. You and Lansner turn out the lights when Blackstone shuts this rag down
oh no the t ro ll is leaving again.
Will he take his mull and provider character with him.
And when will the new characters metastize?
Also beware he is also metastizing as a bull. It is not only tro ll complementing t roll, it is tr oll arguing with tr oll.
This guy has time you and I only dream of. I guess that what happens when you lose your job.
Alph according Melody you were on the t roll list.
That bugs you no?
I am disappointed in you Melody. Truly. It is very sad to see your mind warped by the likes of Jake. Why don’t you inquire with Natinal Bubble, pdu, awgee, Scott A, Mom in CDM, etc. if THEY think I am provider. Go ahead and take a straw poll…
Mulli - I’ve never stopped blogging with you…. stop it already.
Mel, either you believe what Jake does or you do not. He has on multiple occasions now indicated that he thinks I am them. If you do not, you should step up and say so. But you don’t. You are following. That is what is sad. Step up if you think otherwise…
Nope, I’m open but I’m playing on my own drum. We had a conversation a few nights ago (and I already told you this) that the tro ll could never have had. There would have been a slip somewhere and there was not.
This blog would be boring without both sides and I welcome seeing your screen name.
That is good enough for me. Gracias.