Tuesday, May 6, 2008

A Tale of Two Property Markets

While commercial property owners are worried about property market, much of the commercial property market remains stable or strong. In contrast, the residential market is still spiraling down and take lots of people and companies with it.

First up, the summary of REIT earning reports show that most of the public real estate companies are still hitting their earnings targets: REITs Cautious Despite Strong Quarter.
Given fears that a sagging economy and a crippled credit market might wreak havoc on the commercial property market, real-estate investment trusts delivered surprisingly strong earnings for the first quarter, with many companies beating analysts' estimates.
The implosion of the residential markets is taking down builders: Falling Prices Hit Builder Horton - Home Cancellations, Write-Downs Spur $1.31 Billion Loss.

The implosion is also showing the weakness in the underwriting and origination processes for mortgage lender. It was apparently bad enough at Countrywide that it is giving Bank of America second thoughts about its takeover: Acquisition of Lender Is Possibly in Jeopardy. According to an older WSJ.com story, Loan Data Focus of Probe:
The investigators are finding that Countrywide's loan documents often were marked by dubious or erroneous information about its mortgage clients, according to people involved in the matter. The company packaged many of those mortgages into securities and sold them to investors, raising the additional question of whether Countrywide understated the risks such investments carried.

Many of these companies mentioned are clients of The Firm. I have no knowledge of the background except what was in these stories.

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