Housing and Real Estate

Housing prices are plunging across the country as inventory levels continue to grow and the real estate market continues to grind to a halt. Here’s a look at how to track the housing price declines month by month and by area.

1. It’s the most basic economic principle of them all, it all comes to supply versus demand. In the housing market of late there has been far too much in the way of supply and not nearly enough demand, causing some massive price decreases.

2. For years there was a real estate boom and it seems that many consumers felt that they couldn’t possibly go wrong investing in a home that might have been above their means, but that has all come back to reality of late.

3. The Case Shiller Index is a great way to track housing prices throughout the country. The Case Shiller Indices are based on a three month average of data. A quick look at recent Case Shiller data shows that the largest declines in home values is in California as well as parts of Florida. In some parts of California house prices are now worth almost 50% less than they were less than two years ago. California housing prices have definitely taken the biggest hit. (more…)

The public sees the reality of residential real estate market every day. The profile of the buyer is one that has a lower risk of unemployment and meets minimum requirements in its repayment capacity. This adjustment, which is occurring in the residential, is not as clear in the tertiary market.

The tertiary product has not been set either speed or depth as it has done residential. In addition, for the tertiary sector (hotels, offices, shopping centers), the funding is gone, is only possible subrogation.

There is a wide gap between the expected return of international investors and the patrimonial Spanish are willing to engage with their real estate assets. Now, a new variable, income expectations, binds to the equation when evaluating the properties.

The spread between risk-free assets and the rates demanded by investors has been increasing in recent months, so the fall in rates has not meant a reduction of fees. Currently, there are levels of 200-250 basis points above the yield of 10-year bond.

This differential is justified by the risk of real estate compared to other sectors, but also by the risk premium that Spain suffers compared to other of Europe. The perception that children have negative expectations of the Spanish economy abroad results in that international investors are discounting the worst possible scenarios.

But do not forget that in a global economy, the money goes where it has greater expected returns with lower risk, not that we are not fashionable, but there are better places to invest than Spain because there is already setting has occurred.

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