Deutsche Bank Report: The Outlook for U.S. Home Prices

While I generally don't post on residential real estate, there has been a lot of buzz regarding this recent report from Deutsche Bank on the Outlook for U.S. Home prices, so I thought I would share it with you.

I'm sure you will find this report surprising in its preditions, as DB is certainly not painting a rosy outlook. They predict that U.S. home prices will decline an additional 14% from Q1 2009, and that New York home prices will drop an additional 32% to reach an affordability level in line with other markets. The report goes on to say that factoring in othe risk factors, there will be a 40.6% decline from Q1 2009 in New York.

Without further ado, here's the report. Enjoy!

Tenant Demand Stalls; Available Space Continues to Grow—Grubb & Ellis NYC Office Market Trends—June 2009

June 2009 Office Market Highlights

• Leasing velocity is down 40% through May compared to one year ago

• The professional services sector accounts for 31% of 6.3 million square feet leased this year

• Availability (13.5%) and vacancy (7.8%) continue to rise

• Generous concessions and falling prices are making transactions more cost-effective for tenants

Here's the report

Good News Friday - From Bob Bach

Bob Bach, Chief Economist of Grubb & Ellis has started sending out weekly Good News Friday reports to Grubb & Ellis employees (ok, he has for a few months and I haven't been on the ball). Anyway, I've decided I'm going to start passing these on for your enjoyment. We can all use a little bit of good news right now.

Trifecta of Good News

Here are three hopeful indicators released just this week:

• The Conference Board Leading Economic Index rose sharply for a second consecutive month. Vendor performance, the interest rate spread, real money supply, stock prices, consumer expectations and building permits pushed the index higher in May, outweighing negative contributions from weekly hours and initial unemployment claims. Over the past six months, the index rose 1.2 percent, the first time the index has increased over a six-month period since July 2007.
• The Labor Department reported that continuing jobless claims fell by 148,000 to 6.69 million during the week ending June 6^th. It was the largest decrease in seven years and breaks a string of 21 consecutive increases. Initial jobless claims rose slightly during the week ending June 13^th, however.
• The American Bankers Association's economic advisory committee, a group of economists for large banks, predicted that real GDP will turn positive in the third quarter, thus bringing an end to the recession. The committee also expects housing starts to move up later this year and home values to increase moderately in 2010. Here is a link to a Bloomberg article on the committee’s findings.

Not all recent news is optimistic, and not all aspects of these indicators are positive. But this is the norm when the economic cycle is shifting from recession into recovery. Do not be surprised if the data releases are positive one day and negative the next with a gradual migration toward positive news as the recovery approaches.

If You've Ever Wondered about 190 Bowery

After walking by 190 Bowery several times, perplexed by this seemingly abandoned beautiful building covered in graffitti, I finally decided to try to find out what was going on with it. What I found was so interesting, I thought I'd share this article with all of you: New York Magazine: The 72-Room Bohemian Dream House.

Deutsche Bank Commercial Real Estate Outlook 1Q 2009

Sorry for the delay in getting timely information like this out there. Again, like last quarter, not too many big surprises in the DB outlook. Some items of note:

• Deliquency rates on older loans have greatly increased, coming close the deliquency rates on more recent loans.
• Monthly deliquencies are at a historic high.


• Hotel deliquencies and retail deliquencies are way up and multi-family deliquencies are the highest to date.


• Declining property prices pose a significant threat to loans needing to refinance over the next decade.

Click Here for the Report