http://brigodfrey.cbvegas.com/blog/archive_201009/sort_entrydatetime-desc/ We have just concluded our study of commercial real estate trends in Las Vegas. There are several takeaways from the report.    Distressed properties, reflect weakened fundamentals and deleveraging, leading prices downward.    Industrial buildings are approaching the same price-per-square foot that they were near the beginning of the decade.    Many office sector businesses have downsized or gone out of business and the existing demand seems to be coming from building users already in the market place.   Visitor volume, a key gauge of the health of the local economy, has regained some footing although gaming revenues have yet to demonstrate a perceivable recovery.    Retail sales do appear to be showing signs of bottoming out.   Vacant buildings, many of which are in grey shell, must be bought with deep discounts as the lease-up period is going to be prolonged.   Like residential, commercial real estate values are being driven to decade lows. As a result, national reports are listing Las Vegas as one of the best places to purchase real estate. click here to view http://brigodfrey.cbvegas.com/blog/820/las-vegas-commercial-real-estate-report/ Wed, 29 Sep 2010 09:38:57 -0800 Yesterday, Standard & Poor's released the S & P/Case-Shiller home price indices. Major news outlets were all over the place when quoting these. Some said it went up, some down, some sideways. I would like to highlight a few features of these indices:-There are seasonally adjusted and non-adjusted indices. Standard & Poor's, in a technical bulletin, recommends against using the seasonally adjusted series because it can misinterpret variations in the choppy real estate markets with seasonality.-S & P releases tiered price indices and composite indices of all of the metro areas they track. The tiered indices are broken out into three tiers. We find that this is very useful as we don’t like to over generalize the market.-The indices are lagged by two months and use a 3-month moving average. These are repeat sale indices so same homes are tracked as they resell. This alleviates the problem of median price series where a changing mix of homes sold in each sample period alters the series.-These are single family only, except for Los Angeles, San Francisco, Chicago, Boston and New York City.Source: Standard & Poors. http://brigodfrey.cbvegas.com/blog/819/price-index-update/ Wed, 29 Sep 2010 09:17:32 -0800 David Leonhardt had an interesting post in the New York Times business section today. He provides an exibit of home prices against mortgage rates. As you can see from his chart, the relationship is not very close, that is they are not cointegrated. The relationship betweent the two series is not direct, presumably because the borrowing rate is not the only variable people need to think about prior to their home purchase. Job growth, family size, comparable rents and other factors are mixed in there too. Nevertheless, a combination of low prices and low rates does make a purchase more attractive (though many still use cash). People really do care about a monthly payment and in many cases in Las Vegas, a monthly payment is often lower than in a comparable rental. The other factor in the decision is how a home purchase may effect your mobility and where you want to raise your family. http://economix.blogs.nytimes.com/2010/09/07/mortgage-rates-and-home-prices/ http://brigodfrey.cbvegas.com/blog/883/home-prices-and-mortgage-rates/ Wed, 08 Sep 2010 09:49:19 -0800 HAMP, or the Home Affordable Modification Program, an initiative that the Obama administration has been pursuing recently, is missing quite a few of its intended marks. Like its name suggests, HAMP was intended to target 3 million struggling homeowners at risk of foreclosure by working with their lenders to lower or modify monthly mortgage payments so that these individuals could stay in their homes. Of course, like any program the government pushes, there are many flaws. HAMP is no exception.According to the U.S. Treasury Department, there have been over 5,800 trial modifications and over 9,200 permanent modifications in Nevada through 2010. These numbers pale in comparison to the numbers that the Obama administration wanted to see. That is, if the true policy intention was to make permanenant modifications.That is always the hard part about judging policy effectiveness. You really don't know what the policy architects actually had in mind. Namely, because polititians won't tell you what the policy is actually for. Instead you get a sales pitch about "helping out homeowners" and other tales. If the point of this policy was to slow down the rate of foreclosurs while the banks where being recapitalized, than perhaps their was an element of success in HAMP. On the other hand, if the recovery depends on home prices falling to levels that will clear the excess inventory in many parts of the country, the program, along with others, is actually prolonging the recovery.One stated objective of the program was a goal of 3-4 million permanent modifications. Weighing the policy on these grounds, with 435,000 total permanent modifications, it is not looking very good. Ultimately, short selling still remains one of the more realistic options for homeowners. The good news is, for conventional home financing, many lenders will loan two years after the completion of a short sale. While two years feels like a long time, it is certainly not cosmic time.Sources:http://portal.hud.gov/portal/page/portal/HUD/documents/august_scorecard.pdfhttp://www.nytimes.com/2010/08/21/business/economy/21housing.html http://brigodfrey.cbvegas.com/blog/880/hamp/ Tue, 07 Sep 2010 09:21:00 -0800 National commercial real estate trends continue to reflect weakness. Housingwire.com (Gaffney, 8/26/10) notes that 88 percent of respondents to a development survey stated that development was almost non-existent in their markets. Such is the case here in Las Vegas as well and while there is still some construction in office, retail and industrial, there is almost no planned product and no planned product that we are aware of in industrial.Similarly, on REIT.com, Green Street Advisors analyst Steven Frankel also notes weakness in the industrial sector with "subdued net absorption." Rents are also expected to remain weak. A rebound may be a way's off. This is also the sentiment of many in the Las Vegas market. While Las Vegas' industrial market is very small compared to coastal cities, it is an important component of our economy and is very connected to the hotel & casino sector, since that is the key driver of activity in the region and since industrial space is often absorbed or vacated depending on the level of convention activity, slot machine manufacturing, food storage and whatever else you can think of. Until we see a stronger rebound in the hotel sector, we can expect some muted responses in net absorption.Nevertheless, there has been leasing activity, often to lower occupancy costs by existing firms. There have also been investor deals. As always, as long as things are priced right, buildings can still sell. It has just been difficult to obtain a meeting of the minds between buyers and sellers, whose expectations about the future of the sector has been a wide chasm.Overall, tenants are the ones who have been finding deals, sometimes within sublease space and have been able to drop their costs by substantial amounts by either finding cheaper space or smaller space that better suits the level of their current business activity. http://brigodfrey.cbvegas.com/blog/865/incentives-in-commercial-real-estate/ Thu, 02 Sep 2010 09:11:05 -0800