Emerging Trends in Real Estate 2012 - Urban Land Institute

More documents

Recommendations

Info

Housing Strengths New inventories “aren’t out of whack.” Surviving homebuilders manage to endure in near-shutdowns, “affordability is the best in decades,” and the interest rate environment cannot get better. Markets continue to bump along the bottom, and stronger neighborhoods register some modest pricing gains. “If you take out the distressed, foreclosed product, values increase modestly” in most places, but to levels substantially below pre-crash peaks. Problems are concentrated in bubble-burst cities where the premise for building new homes was not job growth but selling to speculators and retirees. Formerly hot growth places with more diversified economies like Phoenix and south Florida can rebound faster than Las Vegas or central Florida. Banks necessarily go into slow motion on foreclosures, heeding nervous regulators. “They won’t dump product and make things worse.” Exhibit 4-22 The S&P/Case-Shiller Home Price Composite-20 Index Index 250 200 150 Weaknesses The surfeit of existing homes for sale and the discouraging dimensions of underwater homeowners harpoon the prospects for already-reeling homebuilders “stuck with land they can’t develop.” Any sudden move to clear the market without some cushion—either from lenders or the government—could upend millions of Americans, further deflate already-imploded values, and rattle the fragile economy. But enormous public sector deficits and antitax sentiment short-circuit proposals for government support (“bailouts”) to overleveraged homeowners. Relatively few potential homebuyers have the confidence, equity, or credit ratings necessary to acquire homes, and the lugubrious jobs Exhibit 4-21 U.S. Single-Family Building Permits Thousands of Units 2,000 1,500 1,000 500 0 1991 1993 1995 Source: Moody’s Economy.com. *Forecasts as of August 2011. 1997 1999 2001 2003 2005 2007 2009 2011* 2013* 2015* 100 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* Source: Standard & Poor’s. Notes: Seasonally adjusted. *Data as of June 30, 2011. scene will continue to depress the number of house hunters. The government, meanwhile, delays action on Fannie Mae and Freddie Mac. Any reasonable regulatory solution likely will restrict licentious lending practices, necessarily moderating any future ramp-up in mortgage activity. “We won’t have the same old formula of homeownership subsidized by the federal government,” and the long-held belief in buying housing as a secure investment dies. Deflated second-home markets rely on luring a shrunken group of affluent buyers who have cash and shop for bargains. Does America really need another championship golf course community Best Bets Now is a great time to purchase that dream home or retirement condo in a prime location, but that’s out of the question for most cash-strapped folks. In good neighborhoods, well-heeled private investors buy houses to rent and eventually will convert them back to for-sale homes when the market finally allows. In the meantime, they can secure rents to more than cover taxes and other expenses. Land bankers could eventually score by purchasing tracts for cents on the dollar, but they need to be prepared to hold nonproductive assets for (quite) a while. The seniors’ housing wave has only just begun. Developers should cater to rising demand from downsizing empty nesters who want urban lifestyles and greater convenience without car dependency. In-town seniors’ apartment housing could gain over suburban models. One caveat: the demise of pensions 56 Emerging Trends in Real Estate ® 2012
Chapter 4: Property Types in Perspective and recent stock market losses leave many aging Americans, and particularly baby boomers, in problematic financial straits. Larger percentages may not be able to afford seniors’ housing product, living instead with children and grandchildren to pool resources, or staying in existing homes as long as possible. Student housing still has legs. The bulging generation-Y tail has about six or seven years to run, “but after that, the pig will have moved.” Investors need to monitor impacts of reduced student aid on admission trends. Exhibit 4-23 Prospects for Residential Property Types in 2012 Seniors’ Housing 5.88 Student Housing Infill and Intown Housing Investment Prospects 5.63 5.39 Avoid Commodity subdivisions look sketchy, especially in areas with high default and foreclosure rates. Flagging living standards spell ongoing trouble for workforce housing neighborhoods; pricing could be chronically impaired. Oversized homes in fringe areas look like white elephants: on top of plunging values, who wants to pay the heating and maintenance bills Many foreclosed or near-foreclosed assets exist in a wasting mode: nobody wants them and nobody maintains them. “It’s ugly.” Affordable Housing Single-Family: Moderate Income Manufactured- Home Communities Single-Family: High Income Multifamily Condominiums Second and Leisure Homes 5.08 4.21 4.08 3.89 3.79 3.22 Development Here’s a news bulletin: don’t expect any large-scale homebuilding activity “for quite a while.” About “3 percent of existing stock sits empty,” while residential developers concentrate on the multifamily sector. Infill and in-town projects have much better prospects than greenfield subdivisions. Golf Course Communities 2.89 Development Prospects Seniors’ Housing 5.44 Student Housing 5.30 Outlook Broken homeowners’ psyches will take a long time to fix, and more Americans come up empty: they just cannot afford to buy in the Era of Less. Expect three to four more years of bottom slogging until the employment outlook improves enough to buttress buyer self-assurance and pocketbooks. Wealth-island neighborhoods will begin to strengthen and many infill markets have overcorrected, but any pricing rebounds will be measured, damped by anemic demand. The boom/bust’s legacy may be generational tepid growth. Infill and Intown Housing Affordable Housing Single-Family: Moderate Income Manufactured- Home Communities Single-Family: High Income Multifamily Condominiums Second and Leisure Homes Golf Course Communities 4.93 4.73 2.90 3.60 2.88 2.89 2.19 1.97 1 abysmal Source: Emerging Trends in Real Estate 2012 survey. Note: Based on U.S. respondents only. 5 fair 9 excellent Emerging Trends in Real Estate ® 2012 57
Page 1 and 2:
Emerging Trends in Real Estate ® 2
Page 3 and 4:
Emerging Trends in Real Estate ® C
Page 5:
Executive Summary F or 2012, U.S. r
Page 8 and 9:
Exhibit 1-1 Importance of Various I
Page 10 and 11: Exhibit 1-3 Index Returns: Real Est
Page 12 and 13: gateway cities at or near market bo
Page 14 and 15: Exhibit 1-8 Firm Profitability Fore
Page 16 and 17: occasional build-to-suits, the odd
Page 19 and 20: chapter 2 Real Estate Capital Flows
Page 21 and 22: Chapter 2: Capital Flows Exhibit 2-
Page 27 and 28: Chapter 2: Capital Flows and deleve
Page 29: Chapter 2: Capital Flows Exhibit 2-
Page 32 and 33: Exhibit 3-1 Investment Prospects fo
Page 34 and 35: Exhibit 3-5 Metro Area Investment P
Page 36 and 37: Edmonton 6.24 Vancouver 6.61 Calgar
Page 38 and 39: 8 7 6 5 4 3 2 1 Boston 0 '94 '96 '9
Page 40 and 41: 8 7 6 5 4 3 2 1 0 '94 '96 '98 '00 S
Page 42 and 43: caught fire, too: condos turned to
Page 44 and 45: the urban growth track for the next
Page 47 and 48: chapter 4 Property Types in Perspec
Page 49 and 50: Chapter 4: Property Types in Perspe
Page 59: Chapter 4: Property Types in Perspe
Page 64 and 65: y exports of oil from Alberta oil s
Page 66 and 67: markets to build synergistic reside
Page 68 and 69: Exhibit 5-9 Prospects for Capitaliz
Page 70 and 71: Exhibit 5-13 Canadian Office Buy/Ho
Page 72 and 73: and environmental regulations will
Page 74 and 75: conditioned by all the condo units
Page 76 and 77: esources business leads to new deve
Page 79 and 80: chapter 6 Emerging Trends in Latin
Page 81 and 82: Chapter 6: Latin America Exhibit 6-
Page 83 and 84: DLC Management Corp. Adam Ifshin DL
Page 85 and 86: The Sorbara Group Edward Sorbara Pa
Page 88: Emerging Trends in Real Estate ® 2
show all

Emerging Trends in Real Estate 2012 - Urban Land Institute

Create successful ePaper yourself

Delete template?

Save as template?