The Latest on Residential and Commercial Real Estate

Jupiter, Fla. (PRWEB) March 22, 2008 -- Mike Larson examines the real estate marketplace in the U.S. and how neither commercial nor residential is ready for a turn around. Mr. Larson takes a closer look at the U.S. real estate markets and determines the troubles that might lie ahead.

Wall Street's largest banks weren't the only ones treated to a gift recently. The regulatory body that oversees Fannie Mae and Freddie Mac also loosened capital requirements for the two firms. The Office of Federal Housing Enterprise Oversight will now require they hold surplus capital of just 20%, down from 30%. It also suggested that threshold will fall with time. The goal is to free up money that the firms can use to buy or guarantee billions more dollars worth of home mortgages. That is designed to lower the spread between rates on mortgage-backed bonds and U.S. Treasuries, something that would lower the rates borrowers pay on home loans. It's not such a bad idea for the mortgage market. But home prices continue to fall, and housing inventories remain extremely high.

But there is not really any evidence of a turn yet:

? The National Association of Home Builders, which tracks how builders perceive sales activity and buyer traffic, said its benchmark index remains mired in the muck. The index held at 20 in March, just off its record low of 18 in December and far below the year-ago level of 36.

? Single-family home starts dropped another 6.7% in February to 707,000 units at an annualized rate. That's the lowest since January 1991.

? Building permit issuance for both single-family and multi-family property dropped to the lowest since 1991. That indicates future construction activity will be even weaker.

There is troubling news trickling out of the commercial real estate side of the market as well. For example, a key architectural billings index plunged 8.9 points to 41.8 in February. That's the lowest level since October 2001, right after the 9/11 terrorist attacks. The index is a major leading indicator of future construction activity since someone needs to be hired to draw up plans before work on an office tower, warehouse or hotel can begin. It also confirms an earlier report from Reed Construction Data, which showed the value of non-residential construction tanking 13.1% year-over-year in January. What's more, the Moody's/REAL Commercial Property Index dropped 0.6% in January. That was the third monthly decline in a row. Prices are still up from year-ago levels. But the rate of appreciation is slowing rapidly, exactly what was seen in the residential market before values started falling.

"The bottom line: Be defensive in this market. The pattern of large short-term, short-covering rallies followed by fresh moves to new lows is classic bear market action. Until we see some panic selling, this grinding process is likely to continue playing out," Mr. Larson states.

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About Mike Larson and Money and Markets

Mike Larson joined the company in 2001, and has more than 10 years of experience researching and writing about personal finance, investing, and the housing and mortgage industry. In 2003, Mr. Larson was named associate editor of the company's monthly Safe Money Report. In this role, he is responsible for writing and editing as well as analyzing trading opportunities for clients. Mr. Larson is also a regular contributor to the company's daily e-letter, Money and Markets.

Before joining Weiss Research, Mr. Larson was a personal finance reporter for Bankrate.com, where he wrote extensively on mortgage lending, banking, residential real estate, and Federal Reserve Board policy. His responsibilities included analyzing economic data and interest rate trends for a weekly column and developing rate forecasts for a regular index feature. Previously, Mr. Larson held positions at Bloomberg News and the Boston Herald.

Recognized as an interest rate and mortgage market expert, Mr. Larson's views have been quoted in the Washington Post, Chicago Tribune, Dow Jones Newswires, Reuters, Sun-Sentinel and the Palm Beach Post. He has also appeared as an investment expert to discuss the housing market on CNBC, CNN, and Bloomberg Television. His writing has been acknowledged by both the National Association of Real Estate Editors and the Massachusetts Press Association.

Among the first analysts to call the housing slide, Mr. Larson's new policy paper, "How Federal Regulators, Lenders and Wall Street Created America's Housing Crisis: Nine Proposals for a Long-Term Recovery" has received broad media coverage following its July 2007 submission to the Federal Reserve and FDIC. Mr. Larson holds B.A. and B.S. degrees from Boston University.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

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