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“Gimme Shelter” with Daniel Gehman: Bail Out Burn Out

There’s a great line in Young Frankenstein, when the crew is exhuming a body from a creepy cemetery, in the middle of the night, to harvest sundry useful parts, where Dr. Frankenstein asks, “How? How could this possibly be any worse?” to which Igor offers the cheery rejoinder, “Oh, I don’t know . . . it could be raining.” Naturally, thunder cracks, lightning flashes, and a downpour ensues. Be careful what you wish for. Ah, such is the case with Washington’s tireless printing press. As senator Everett Dirksen once supposedly remarked, “a billion here, a billion there; pretty soon you’re…

“Foong on Finance”: The $775B Stimulus Plan May Mean Money for Us

I remember the recession of the late-1980s-early-90s. Wave upon wave of news kept coming in 1989-‘90 of layoffs at corporations. I thought at the time, “They are laying off so many people that there will be no one left to buy the goods they produce.” Sure enough, by the early 1990s, the situation was pretty bad. But one bright spot at the time was the Low Income Housing Tax Credit (LIHTC) program, which played a large part in driving this magazine’s recovery. The reason? Although the market-rate apartment industry at the time was not doing so well, money was still…

“Gimme Shelter” with Daniel Gehman: There Must be a Pony

Part 1  This weekend I had the opportunity to introduce to the public a family that had worked very hard to gain equity in a property they were about to purchase—a Habitat for Humanity home in Fullerton. In presenting the keys for the home to this Mexican-American family of five, I was struck by the irony of the situation; while something like one in ten of their peer group was either behind in mortgage payments, or facing foreclosure outright, this clan was about to enter the precious heart of the American dream—a home of their own. But the descriptor “their…

Foong on Finance: How Bad Can it Get in 2009?

How bad can it get? What a question to ask just before we head into the peak of the holidays. Nevertheless, here are some forecasts for the apartment industry for the new year. Among the industry experts we are in touch with, at worst there is the prediction that the vacancy rate next year may get as high as during the end of the recession of the late-1980s/early-1990s. Mark Obrinsky, chief economist of National Multi Housing Council (NMHC), says that the vacancy rate (for professionally managed apartments), now 6.2 percent, may head to at least the 7.9 percent level last…

Foong on Finance: Real Estate Bubbles

When reporting on multifamily finance in the 2000s, I came across a common refrain from desperate mortgage bankers again and again: “There is a surplus of money chasing a limited amount o f product.” This intensely competitive environment—for lenders, that is—went on for years, seemingly never-ending. But the capital “surplus” environment did come to an end. What Sam Chandan, chief economist of Reis, said recently at the company’s third quarter briefing throws light on the situation. He cited an essay about banking crises. Such a crisis happened, famously, in Japan in the 1980s. The cycle begins thus: There is some…

Foong on Finance: Real Estate Bubbles

By Keat Foong, Executive Editor When reporting on multifamily finance in the 2000s, I came across a common refrain from desperate mortgage bankers again and again: “There is a surplus of money chasing a limited amount of product.” This intensely competitive environment—for lenders, that is—went on for years, seemingly never ending. But the capital “surplus” environment did come to an end. What Sam Chandan, chief economist of Reis, said recently at the company’s third quarter briefing throws light on the situation. He cited an essay about banking crises. Such a crisis happened, famously, in Japan in the 1980s. The cycle…

Foong on Finance: Turning Point

The apartment sector had been holding out relatively well compared to other industries, but it too will succumb to the massive loss of jobs that is expected to accelerate as we go into 2009. Through the third quarter, the national apartment vacancy rate according to the Census Bureau was 10.7 percent, only 0.3 percent higher compared to the same period a year ago and still below the level in 2003-04, reported the National Multi Housing Council (NMHC). And rents continued to rise through September, albeit at a slower rate and less than the rate of inflation. The apartment fundamentals however,…

Foong on Finance: The Apartment Sales Market Slows Down

The apartment investment sales market since the financial market crisis occurred in mid-September has “freezed up” as apartment buyers and sellers face deep uncertainty over the future of the nation’s—indeed, the global—economic condition. According to the results of one study, reported here in the previous issue, apartment sales volume has plunged a whopping 69 percent. Indeed, one broker, Kitty Wallace, senior vice president at Sperry Van Ness, says that in her experience in California, multi-housing transactions have dropped 70 to 80 percent. The severe drop in apartment investment sales volume generally is attributed to a combination of negative sentiment and…

Foong on Finance: Relative Calm in the Midst of Turmoil

By Keat Foong It was certainly hair-raising to watch the stock market in the past week. By Friday, the Dow Jones industrial average had fallen from 9,955.50 on Monday to 8,451.19 points—a drop that was reportedly even worse percentage-wise than the 17 percent plunge in the week ending July 22, 1933. Part of the current panic has to do with the suspended financing markets—which one would think at its worse can lead to economic collapse. In this regard, the Treasury’s announcement this week of the plan to inject $250 billion into banks, guarantee inter-bank lending and backstop the commercial paper…

House Rejects Bailout Package

By Keat Foong, Executive Editor We are going from crisis to crisis. The House voted down the $700 billion bailout plan, and the Dow Jones Industrials plunged by 777.68, or nearly 8 percent—its worst drop in two decades. In the immediate aftermath, it looks as though banks’ short term  interest rates are spiking. That means higher benchmark for short-term, LIBOR-based multifamily borrowing. On the positive side, Treasury yields have fallen further. This is a plus for longer-term, fixed-rate loans, provided spreads do not widen further—which is a big if. If the bailout plan should eventually pass, that should have a…