Weekly News & Capital Markets Perspective

This week’s perspective is provided by Jim O’Connell:

When Good News is Actually Bad News

James_OConnell_OptimizedI’m sure all of you do many of the same things that we do when it comes to reading about our industry.  You scan all the published resources we monitor for headlines and when something catches your eye you read it.  Such was the case this Wednesday when there was an article in The Property Report of The Wall Street Journal with the curious headline, “When Good News for Real Estate is Bad”.

Now I would expect that most of you would agree that the words ‘good news’ and ‘real estate’ haven’t been used in the same sentence very often over the last four years.  And even though the market is improving, good news is still a relatively special event.  So imagine my disappointment when I see somebody writing that one of my primary sources of good news about the improving market is now being called bad news.

I won’t go into the details covered in the article because we’ve included (below) a link to the article for you to read for yourself.  But the news seemed to carry with it the same emotional high/low situation that comes with things like a sunny Ground Hog Day in Alaska.  It is a nice sunny day but that means a longer cold winter season.  The article confirms something that we’ve been saying now for a while; sale activity is increasing and that’s because values are increasing.  This would seem to be the good news, but as is pointed out in the article, it isn’t good news for everyone.

Jim O’Connell

ARTICLES OF INTEREST___________________________

When Good News for Real Estate Is Bad
A new worry is threatening the rally in the rebounding market for commercial mortgage-backed securities: Property owners have started to pick up the pace of resolving problems with distressed loans.

That is bad news for bondholders who paid up to buy such securities on the assumption they would keep paying a high interest rate for a longer period.
Read more…

Source: The Wall Street Journal

Real Estate Is in a ‘Goldilocks Period’
The spread between historically low interest rates and the money that real estate generates is “truly astonishing,” Starwood Capital Group Chairman and CEO Barry Sternlicht told CNBC on Tuesday.

“You can buy assets below replacement costs still,” he said in a “Squawk Box” interview. “You can finance them with positive leverage — meaning the cost of borrowing is much lower than the yield on the property.” Read more…

Source: CNBC

Eurozone Economic Confidence At 7-Month High
Eurozone economic sentiment strengthened more-than-expected to a seven-month high in January, suggesting that the region’s economic downturn may have bottomed out, results of a closely watched survey from the European Commission showed on Wednesday. Read more…

Source: RTT News

U.S. Economy Stumbled To End 2012: Q4 GDP Down 0.1%
The U.S. economy greatly slowed in the fourth quarter, driven lower by reduced government spending and lower inventories.

U.S. gross domestic product fell for the first time in three and a half years in the fourth quarter, declining by an annualized 0.1%, new Commerce Department figures show. Economists had expected GDP to increase 1%. Read more…

Source: Forbes

The Investment Rate Warns Of A Major Market Turn Down
This is the third time the market has been at these highs since 2000. We
saw these levels in 2000, 2007, and now in 2013 these same highs are being
tested. The S&P 500 peaked near 1520 in 2000, it peaked at about 1560 in
2007, and here it is again at those same levels in 2013. After each of the last
two peaks the market has turned down aggressively too, so another
logical question is if that process will repeat itself as well. Read more…

Source: Seeking Alpha

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