Thursday, October 11, 2007

Real Estate - Capital Markets

As you all know Real Estate is vital to my business. Many of you may be aware of the Florida "residential slump". But commercial has a different effect and thought this following article may give you a better understanding of what is going on with the capital markets, including its effects on the economy, residential and commercial real estate.

Summary:
In the past 20 years, there have been four other times when fear has defeated greed, triggering a capital markets crisis -- the 1987 stock market crash, the S&L debacle of the early 1990s, the 1998 Russian ruble crisis, and the 9/11 2001 terrorist attack," said Linneman in a report titled "Making Sense of the Current Capital Markets Disarray." "We are now experiencing the fifth credit crisis in the past 20 years, with sub-prime debt as the trigger."
As was the case in 1987 and ‘98, the crisis is occurring in a strong economy and won’t harm the general economy, with the exception of the nation's financial capital, New York City. As in the past, it will take roughly 18 months for pricing and spreads to return to normal.
Debt and equity financing picked up some steam over the last week, with several large office and mixed REITs demonstrating their liquidity by increasing their available credit capacity, while several others tapped the unsecured debt and equity markets to gain more liquidity.
"By the latter half of 2008 and certainly in '09, transaction volume will resume at cap rates that are 40-60 basis points higher than prevailed in early 2007."

1 comment:

Lorraine said...

I actually wrote an article that was published last month in the Legal Journal about subprime lending... if anyone is interested, you can tell me. HA.

In all seriousness, I thought this was really informative.