MODULE 0
70
MODULE 0
description
MODULE 0. Real Estate Markets & The Economy:. An Empirical View. Real Estate Markets & The Economy:. A Conceptual View. Digital Economy Paradigm. Information Flows @ All Levels Integration & Globalization of Markets Securitization of Debt & Equity Speed of Adjustment & Volatility. - PowerPoint PPT Presentation
Transcript of MODULE 0
MODULE 0
Real Estate Markets & The Economy:
An Empirical View
Real Estate Markets & The Economy:
A Conceptual View
Digital Economy Paradigm
• Information Flows @ All Levels
• Integration & Globalization of Markets
• Securitization of Debt & Equity
• Speed of Adjustment & Volatility
Three Evaluation Elements
• Efficiency
• Effectiveness
• Equity
The Three Stages of IT Economic Development
• Development of Technology
• Gestation for Aggregation, Access, Integration, Implementation, Adoption and Branding
• Maturation- Reintegration of Cyberspace with Bricks and Mortar
Real Estate Investment Analysis
IS
Risk Management
Risk Management
• Identify Risks
• Risk Modification Strategies
• Alter Risk
• Evaluate Risk Removal Strategies
Yes, Virginia, there are three things that matter in Real Estate Investment
Decision Making
LOCATION, LOCATION, LOCATION
LOCATION
LOCATION
LOCATION
Macro-Environment
Sub-Region, City Level, Neighborhood
Property Specific
GDP Growth
-3-2-1012345678
70 72 74 76 78 80 82 84 86 88 90 92 94 96 9820
00
%
Source: Dept. of Commerce
Consumer Confidence Index
0
20
40
60
80
100
120
140
160
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 9920
00
Source: Conference Board
Personal Consumption Growth Rate
-2-10123456789
90 91 92 93 94 95 96 97 98 99 2000
%
Source: BEA, DOC
Real Retail Sales Growth:Less Autos
0
1
2
3
4
5
6
7
8
9
90 91 92 93 94 95 96 97 98 99 2000
%
Source: US Census
Growth in Consumer Credit
-4-20246
810121416
89 90 91 92 93 94 95 96 97 98 99 2000
%
Source: Federal Reserve
Unemployment Rates: US & California
0
1
2
3
4
5
6
7
8
9
10
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
USCalifornia
%
Source: BLS
Employment Growth Rate by Sector: December 1998 to December 1999
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Total NonfarmManufacturingServicesFIRE
%
Source: BLS
Annual Employment Change, California and US, 1973-Q2 2000
-3%-2%-1%0%1%2%3%4%5%6%7%8%
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
United StatesCalifornia
Source: FCREUE from BLS data.
Capacity Utilization in Manufacturing
747576777879808182838485
86 87 88 89 90 91 92 93 94 95 96 97 98 99 2000
%
Source: Federal Reserve
Growth Rate of Real NonResidential Fixed
Investment
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
87 88 89 90 91 92 93 94 95 96 97 98 99 2000
%
Source: Bureau of Economic Analysis
Fixed Business Investment AsProportion of GDP (Including Structures
& Equipment)
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
80 82 84 86 88 90 92 94 96 9820
00
Source: BEA
Residential Fixed Investment AsProportion of GDP
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
80 82 84 86 88 90 92 94 96 9820
00
SFMF
Source: BEA
Interest Rates: 6 month vs. 30 year
0
2
4
6
8
10
12
14
16
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 9920
00
6 mo.30 yr.
%
Source: Federal Reserve
Spread Between MBS and 10 yr. Treasuries
00.20.40.60.8
1
1.21.41.61.8
2
90 91 92 93 94 95 96 97 98 99 2000
Source: FNMA, Federal Reserve
%
Change In Consumer Price Index & Producer Price Index
-4
-2
0
2
4
6
8
10
12
14
16
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 9920
00
CPIPPI
%
Source: Bureau of Labor Statistics
Change in Labor Productivity in Manufacturing
0
1
2
3
4
5
6
7
8
87 88 89 90 91 92 93 94 95 96 97 98 9920
00
Source: BLS
%
Change in Unit Labor Costs: Nonfarm Business Sector
0
1
2
3
4
5
6
87 88 89 90 91 92 93 94 95 96 97 98 99 2000
Source: BLS
%
US Exports & Imports as Percentage of GDP
0
2
4
6
8
10
12
14
16
70 72 74 76 78 80 82 84 86 88 90 92 94 96 9820
00
Exports/GDPImports/GDP
%
Source: Dept. of Commerce
US Trade Balance in Goods & Services
-500
-400
-300
-200
-100
0
100
96 97 98 99 2000
GoodsServices
$, Bill.
Source: US Census Bureau
US Export Performance1999
-25
-20
-15
-10
-5
0
5
10
15
20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
AsiaEuropeAmericasTotal
% Change
Source: US Census Bureau
US Import Performance1999
-2
0
2
4
6
8
10
12
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
AsiaEuropeAmericasTotal
% Change
Source: US Census Bureau
Growth Rate for Prices of Asian Imports
-10
-8
-6
-4
-2
0
2
4
6
95 96 97 98 99
Asian NICs Japan
%
Source: DOC
Growth Rate of Export and Import Price Indices (EPI & IPI)
-4-3-2-1012345
90 91 92 93 94 95 96 97 98 99
EPI IPI
%
Source: DOC Note: EPI is ex-agricultural goods & IPI is ex-oil
Asian Exchange Rates: 1989=1
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
89 90 91 92 93 94 95 96 97 99 2000
Japanese YenKorean WonHong Kong $Singapore $
Source: Asian WSJ
Asian Exposure: US vs. California
05
1015
2025
3035
4045
50
Exports Imports
USCalifornia
Percent of trade with Asia in total foreign trade
?
Source: FCREUE calculations from US Dept. of Commerce & Census Bureau data
California Metro Areas: Share of Exports to Asia, NAFTA
0%
20%
40%
60%
80%
San Jose Oakland SanFrancisco
LosAngeles
San Diego California
Asia NAFTA Countries
Source: FCREUE, Exporter Locator Series, US Dept. of Commerce
California's Computer Industry & Asia
0
20
40
60
80
100
120
140
Total CA exports
CA computer exports
Total CA exports toAsiaCA computer exportsto Asia
Source: FCREUE from MISER
$, Bill.
Countervailing Drivers For US Economy
• Consumer is Happy (For the Moment)
• Employment Growth is Uneven
• Fixed Business Investment Remains Strong
• Housing Sector is Relatively Robust
Countervailing Drivers For US Economy
• Stable Energy Prices
• World-wide Generated Price Inertia
• High Real Interest Rates
• Low Nominal Interest Rates
Countervailing Drivers For US Economy
• Monetary & Fiscal Policy Prerogatives
• Export-Import Imbalance
Debt Owed By Non-Financial Sectors: As of 4th Quarter 1999
Domestic Fin.Sector24%
Corporate17%
State/Local Govt5%
Federal Govt18%
Mortgages27%
Foreign 3%
Consumer Credit6%
Source: Federal Reserve Flow of Funds
Commercial Mortgages: Assets Held by Sector
0
200
400
600
800
1000
1200
92 93 94 95 96 97 98 99
OthersNonfinancial BusinessABS IssuersLife Insurance Cos.Commercial Banks
$, Bill.
Source: FRB
Net Commercial Mortgage Flows
-100
-50
0
50
100
150
87.2
87.4
88.2
88.4
89.2
89.4
90.2
90.4
91.2
91.4
92.2
92.4
93.2
93.4
94.2
94.4
95.2
95.4
96.2
96.4
97.2
97.4
98.2
98.4
99.4
$, Bill.
Source: Federal Reserve; Annualized quarterly data
CMBS Issuance
0
10
20
30
40
50
60
70
80
90 91 92 93 94 95 96 97 99 2000
$, Billions
Source: Commercial Mortgage Alert, Lehman Brothers, CMBS Quarterly
Equity Capital Raised By REITS
0
5000
10000
15000
20000
25000
30000
82 84 86 88 90 92 94 96 98200
0
Secondary equityInitial equity
$, Millions
Source: NAREIT, Lehman Brothers
Fixed & Adjustable Mortgage Interest Rates
United States, 1980-2000p
0
2
4
6
8
10
12
14
16
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 9920
00
%
Fixed AdjustableSource: FHLMC
Median Sales Price of Existing Homes: US & California
0
50
100
150
200
250
300
70 72 74 76 78 80 82 84 86 88 90 92 94 96 9820
00
California
United States
$, Thousands
Source: NAR, CAR
Existing Single Family Home Sales
0
1
2
3
4
5
6
88 89 90 91 92 93 94 95 96 97 98 99
2000
Source: NAR
Millions
US Housing Starts: Single Family & Multi-Family
0
200
400
600
800
1000
1200
1400
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 9920
00
SF MF
In Thousands.
Source: US Bureau of the Census
Home Price IndexNorthern and Southern California
60
70
80
90
100
110
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Southern California Northern California
Source: Real Estate Research Councils of Northern/Southern CA
Price Index, April 1990=100
United StatesOffice Vacancy Rates
4
9
14
19
24
29
80 82 84 86 88 90 92 94 96 98 99
Office, CBD
Office, Suburban
%
Source: CB Commercial
US Residential Vacancy Rates
4
4.5
5
5.5
6
6.5
7
7.5
8
8.5
9
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
US
West
MidWest
%
Source: CB Commercial
California’s Fastest Growing Large SectorsAnnual Percent Change, Midyear 1998-1999
0% 2% 4% 6% 8% 10% 12%
Construction
Business Services
Amusement & Recreation
Engineering and Mgt.
Retail Bldg. Materials
Nondepository Inst.
Security/Com Brokers
Local Educ.
Source: FCREUE from California EDD data.
California’s Fastest Growing Metropolitan AreasAnnual Percent Change, Midyear 1998-1999
0% 1% 2% 3% 4% 5%
Val/Napa/Fairf
Riverside/San Bern
Santa Rosa/Pet.
Ventura
Monterey Co.
Orange Co.
Modesto
Fresno
Source: FCREUE from California EDD data.
California Metropolitan Areas with Largest Annual Employment Increases
Midyear 1998-1999
0 20 40 60 80 100
Los Angeles
Orange County
Riverside/San Bern
Oakland
San Diego
San Francisco
Sacramento
Thousands of Employees Added
Source: FCREUE from California EDD data.
California Population and Household GrowthAnnual Percent Change, 1981-1999
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1981
1985
1995
1999
PopulationHouseholds
Source: FCREUE from California Dept. of Finance data.
Percent Change in Median Home PriceMajor California Metropolitan Areas:
July 1999 to June 2000
0 5 10 15 20 25 30 35 40
Los Angeles
Orange Co.
Riverside/San Bern
San Diego
Ventura
San Francisco*
Santa Clara
Sacramento
* Includes Santa Clara.Source: California Association of Realtors.
Housing Affordability Index: US Vs. Selected California Areas, 1989, 1991, 1993, 1999, 2000
0
10
20
30
40
50
60
70
SanFrancisco
Sacramento Los Angeles California United States
1989 1991 1993 Apr-99 2000
Source: California Association of Realtors.
California Residential Building PermitsTotal Number of Units, 1967-1999
0
50000
100000
150000
200000
250000
300000
350000
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
Single Family Multifamily
Source: FCREUE from Construction Industry Research Board data.
US Apartment Rents per Sq.Ft.:1985-1999
0
2
4
6
8
10
12
14
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
$/Sq.Ft
Source: NREI
US Apartment Price per Sq.Ft.:1985-1999
0102030405060708090
100
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
$/Sq.Ft
Source: NREI
US Office Price per Sq.Ft.:1985-1999
0
50
100
150
200
250
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
$/Sq.Ft
Source: NREI
US Office Rent per Sq.Ft.:1985-1999
0
5
10
15
20
25
30
35
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
$/Sq.Ft
Source: NREI
US Warehouse Rent per Sq.Ft.:1985-1999
0
1
2
3
4
5
6
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
$/Sq.Ft
Source: NREI
US Warehouse Price per Sq.Ft.:1985-1999
0
5
10
15
20
25
30
35
40
45
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
$/Sq.Ft
Source: NREI
US Retail Price per Sq.Ft.:1985-1999
0
20
40
60
80
100
120
140
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
$/Sq.Ft
Source: NREI
US Retail Cap Rates.:1985-1999
88.28.48.68.8
99.29.49.69.810
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
Source: NREI
US Warehouse Cap Rates.:1985-1999
8.4
8.6
8.8
9
9.2
9.4
9.6
9.8
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
Source: NREI
US Office Cap Rates.:1985-1999
7
7.5
8
8.5
9
9.5
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
Source: NREI
US Apartment Cap Rates.:1985-1999
8
8.2
8.4
8.6
8.8
9
9.2
9.4
9.6
9.8
1985
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1999
Source: NREI
