From the Crain's Chicago Business Newsroom August 31 11:15:00, 2007 By Alby Gallun
(Crain’s) — Prices of homes in the Chicago area continued to rise through the first half of the year, albeit at a slower rate, according to a government report released Thursday.
An index of single-family home prices here rose 3.7% in the 12 months ending June 30, after rising 9.1% in the year-earlier period, according to the report from the Office of Federal Housing Enterprise Oversight (OFHEO). Chicago’s rate of appreciation ranks it 139 among 287 U.S. metropolitan areas that OFHEO tracks.
Home prices in the past year have flattened out or fallen in some areas amid rising mortgage rates, tighter lending standards and growing pessimism among buyers. OFHEO’s national price index rose 3.2% in the 12 months ending June 30, the lowest annual price increase in a decade. The index rose just 0.1% in the quarter.
“House prices were basically flat in the second quarter despite tightening credit policies, rising foreclosure rates, and weakening buyer sentiment,” OFHEO Director James B. Lockhart said in a news release. “Significant price declines appear localized in areas with weak economies or where price increases were particularly dramatic during the housing boom.”
Ofheo tracks average prices based on repeat purchases or refinancings of the same single-family homes. Because Ofheo analyzes data from Fannie Mae and Freddie Mac, the data covers only properties that have mortgages up to $417,000, the limit on loans the government-chartered firms will buy.
Wenatchee, Wash., had the highest annual rate of appreciation in the country, 23.6%, followed by Provo-Orem, Utah, at 18.2%.
Merced, Calif., led price decliners, with an 8.7% year-over-year drop, followed by the Santa Barbara, Calif., area, with an 8.1% decrease.
Chicago-area home prices edged up 0.3% in the second quarter, and rose 45.0% in the five years ended June 30, according to the Ofheo report.
Friday, August 31, 2007
Thursday, August 23, 2007
Why investors should consider real estate
This article struck a chord with me (I hope you like it too):
Thursday, April 12, 2007
By JEFF D. OPDYKE
The Wall Street Journal
With housing prices softening and subprime lenders tanking, investors have been running from anything that smells of real estate. But they may be bailing too quickly, as some parts of the sector are still doing well.
New money going into mutual funds that own real estate has plunged to just $2 million a week, on average, from nearly $400 million a week as recently as mid-February, according to AMG Data Services. Investors in droves are also selling off their shares in real-estate investment trusts, the publicly traded stocks of companies that own everything from apartment buildings to medical centers and shopping malls.
But in some cases, jittery investor sentiment isn't a good proxy for the strength of the underlying assets. It is true that residential real estate is struggling in many parts of the country. But commercial real estate is driven by job growth and the economy, and both are relatively healthy. In fact, commercial-building occupancy is growing nationally, while rents are up about 4.25 percent in the past year, according to Los Angeles-based CB Richard Ellis Group Inc. Midtown Manhattan set a record in March for the city's highest rents ever: $69.99 a square foot, on average.
There is another reason to think twice before fleeing the real-estate sector. From a financial-planning perspective, real estate is an asset that investors should have in their portfolios over the long term. That is because real estate serves as a counterweight to inflation, while REITs, according to data from research firm Ibbotson Associates, have a low to moderate correlation with stocks, meaning Wall Street's trends tend not to impact REIT trends.
Investment pros routinely agree that a portfolio should have between 5 percent and 20 percent invested in real estate that isn't a primary residence. But "real estate" encompasses everything from single homes and duplexes, to skyscrapers and apartments, to strip-malls, medical offices and assisted-living centers scattered around the country.
So where to invest, given the meltdown in some parts of the sector? The options are growing. Just last year, the Chicago Mercantile Exchange began trading futures and options tied to the movement of the S&P/Case-Shiller Metro Area Home Price Indices that track housing prices in the U.S. as well as a variety of cities, including New York, Miami, Chicago and Las Vegas. Meanwhile, just last month, Santa Monica, Calif.-based Dimensional Fund Advisors launched an international real-estate fund that provides investors access to markets where REITs are growing in popularity, including Singapore, Hong Kong, Japan and Turkey.
Here are some of the options to consider:
Real-Estate Mutual Funds and ETFs
The easiest means for creating instant diversity across regions and property styles is to buy a real-estate index mutual fund such as Vanguard's REIT Index fund, or an exchange-traded fund such as the iShares Dow Jones U.S. Real Estate Index fund. Both are low-cost options for owning broad exposure to various types of REITs, and both have fared well over the past year, though each has fallen off in the past couple of months as real-estate woes have mounted.
The drawback: You won't see the potentially big price pops you could by owning individual REITs or even the stocks of home builders.
Sector REITs
Not all real-estate sectors fire on the same cycle, since different sectors play off different economic drivers. Office properties, particularly in urban locations, currently offer the best opportunities, says Bob Gadsden, portfolio manager at New York's Alpine Woods Capital Investors, which runs the Alpine mutual funds. He says companies such as Vornado Realty Trust, in Paramus, N.J., and Boston Properties Inc. are examples of the REITs investors should consider.
Those companies operate in land-restricted markets such as New York City, San Francisco, Boston and Washington, D.C., cities "where there's limited ability to create new supply," says Ken Heebner, portfolio manager for the Boston-based CGM Realty Fund who singles out the same two REITs.
Apartment REITs also offer some potential, as former homeowners slip back into the rental market in the wake of the subprime debacle and the exploding number of foreclosures. The increasing legion of renters is pushing demand higher, allowing apartment companies to raise rents. That is a good combination for leading apartment REITs such as Home Properties Inc. in Rochester, N.Y., and Denver's Archstone-Smith, said Gadsden.
Yet the foreclosure woes are dumping increasing numbers of homes into the residential property market at marked-down prices, and some are certain to land in the hands of real-estate investors who will turn them into rental properties. That means affordably priced rental homes will be competing against apartments for tenants. That is potentially bad for apartment REITs, said Heebner. Moreover, once the subprime crisis abates and interest rates fall again, renters will again become homeowners.
International REIT Mutual Funds
These operate just like domestic REIT funds, but they own real-estate trusts in various countries. A number of financial planners are now including them in client portfolios because "they provide another level of diversification," says Lance Alston, vice president at JWA Financial, a Dallas planning firm that in the past month has begun putting about half of its clients' real-estate exposure in the Dimensional Fund Advisors' International Real Estate Securities Portfolio.
Just like the U.S. commercial property market, commercial real estate globally is doing well amid a strong world economy. CB Richard Ellis global data show that rents are moving up by as much as 30 percent in some markets, while vacancy rates are falling.
Jeremy Mitchell, a financial planner in Sun City, Ariz., says his firm this year has been buying shares in Cohen & Steers International Realty Fund for clients because "you're putting a ceiling over yourself by focusing just on domestic REITs."
The risk: The REIT market in many countries is nascent, as is the local real-estate market. If global economies crumble, real-estate prices — and REIT prices — will come down.
Private REITs
Unlike REITs that trade on Wall Street, private REITs are generally available only through financial planners, advisers and brokers. These REITs typically maintain a constant share price — often $10 a share. And they generate income through their yield, often in the 5 percent to 7 percent range, and provide capital gains only when the portfolios are liquidated, sold to other real-estate companies or go public.
Dean Harman, a financial planner in the Woodlands, Texas, has been putting clients into a handful of private REITs, such as KBS, Wells and Hines real-estate investment trusts.
The benefit: income as well as price stability. When the Dow Jones Industrial Average fell more than 400 points in February, "the value of my clients' REITs didn't move," Harman said.
The drawback: a lack of liquidity. Private REITs allow withdrawals only occasionally, often once a quarter. Moreover, they generally require a holding period of at least one year, and for a few years after that the REIT generally redeems the shares at a discount to the original purchase price.
Home-Builder Stocks
These stocks have been hammered in recent months, yet companies like D.R. Horton Inc., Toll Brothers Inc. and KB Home might not be such a bad play for long-term investors. Their business doesn't need escalating home prices to succeed. They just need volume. It will take some time, but once the subprime and foreclosure shakeout has passed, the builders' stocks — all down roughly a third in the past year — could be fashionable again, says Ernie Ankrim, chief investment strategist at Russell Investment Group in Tacoma, Wash. "If housing prices stay soft, you'll see price declines in land and raw materials, giving the builders stronger margins."
Thursday, April 12, 2007
By JEFF D. OPDYKE
The Wall Street Journal
With housing prices softening and subprime lenders tanking, investors have been running from anything that smells of real estate. But they may be bailing too quickly, as some parts of the sector are still doing well.
New money going into mutual funds that own real estate has plunged to just $2 million a week, on average, from nearly $400 million a week as recently as mid-February, according to AMG Data Services. Investors in droves are also selling off their shares in real-estate investment trusts, the publicly traded stocks of companies that own everything from apartment buildings to medical centers and shopping malls.
But in some cases, jittery investor sentiment isn't a good proxy for the strength of the underlying assets. It is true that residential real estate is struggling in many parts of the country. But commercial real estate is driven by job growth and the economy, and both are relatively healthy. In fact, commercial-building occupancy is growing nationally, while rents are up about 4.25 percent in the past year, according to Los Angeles-based CB Richard Ellis Group Inc. Midtown Manhattan set a record in March for the city's highest rents ever: $69.99 a square foot, on average.
There is another reason to think twice before fleeing the real-estate sector. From a financial-planning perspective, real estate is an asset that investors should have in their portfolios over the long term. That is because real estate serves as a counterweight to inflation, while REITs, according to data from research firm Ibbotson Associates, have a low to moderate correlation with stocks, meaning Wall Street's trends tend not to impact REIT trends.
Investment pros routinely agree that a portfolio should have between 5 percent and 20 percent invested in real estate that isn't a primary residence. But "real estate" encompasses everything from single homes and duplexes, to skyscrapers and apartments, to strip-malls, medical offices and assisted-living centers scattered around the country.
So where to invest, given the meltdown in some parts of the sector? The options are growing. Just last year, the Chicago Mercantile Exchange began trading futures and options tied to the movement of the S&P/Case-Shiller Metro Area Home Price Indices that track housing prices in the U.S. as well as a variety of cities, including New York, Miami, Chicago and Las Vegas. Meanwhile, just last month, Santa Monica, Calif.-based Dimensional Fund Advisors launched an international real-estate fund that provides investors access to markets where REITs are growing in popularity, including Singapore, Hong Kong, Japan and Turkey.
Here are some of the options to consider:
Real-Estate Mutual Funds and ETFs
The easiest means for creating instant diversity across regions and property styles is to buy a real-estate index mutual fund such as Vanguard's REIT Index fund, or an exchange-traded fund such as the iShares Dow Jones U.S. Real Estate Index fund. Both are low-cost options for owning broad exposure to various types of REITs, and both have fared well over the past year, though each has fallen off in the past couple of months as real-estate woes have mounted.
The drawback: You won't see the potentially big price pops you could by owning individual REITs or even the stocks of home builders.
Sector REITs
Not all real-estate sectors fire on the same cycle, since different sectors play off different economic drivers. Office properties, particularly in urban locations, currently offer the best opportunities, says Bob Gadsden, portfolio manager at New York's Alpine Woods Capital Investors, which runs the Alpine mutual funds. He says companies such as Vornado Realty Trust, in Paramus, N.J., and Boston Properties Inc. are examples of the REITs investors should consider.
Those companies operate in land-restricted markets such as New York City, San Francisco, Boston and Washington, D.C., cities "where there's limited ability to create new supply," says Ken Heebner, portfolio manager for the Boston-based CGM Realty Fund who singles out the same two REITs.
Apartment REITs also offer some potential, as former homeowners slip back into the rental market in the wake of the subprime debacle and the exploding number of foreclosures. The increasing legion of renters is pushing demand higher, allowing apartment companies to raise rents. That is a good combination for leading apartment REITs such as Home Properties Inc. in Rochester, N.Y., and Denver's Archstone-Smith, said Gadsden.
Yet the foreclosure woes are dumping increasing numbers of homes into the residential property market at marked-down prices, and some are certain to land in the hands of real-estate investors who will turn them into rental properties. That means affordably priced rental homes will be competing against apartments for tenants. That is potentially bad for apartment REITs, said Heebner. Moreover, once the subprime crisis abates and interest rates fall again, renters will again become homeowners.
International REIT Mutual Funds
These operate just like domestic REIT funds, but they own real-estate trusts in various countries. A number of financial planners are now including them in client portfolios because "they provide another level of diversification," says Lance Alston, vice president at JWA Financial, a Dallas planning firm that in the past month has begun putting about half of its clients' real-estate exposure in the Dimensional Fund Advisors' International Real Estate Securities Portfolio.
Just like the U.S. commercial property market, commercial real estate globally is doing well amid a strong world economy. CB Richard Ellis global data show that rents are moving up by as much as 30 percent in some markets, while vacancy rates are falling.
Jeremy Mitchell, a financial planner in Sun City, Ariz., says his firm this year has been buying shares in Cohen & Steers International Realty Fund for clients because "you're putting a ceiling over yourself by focusing just on domestic REITs."
The risk: The REIT market in many countries is nascent, as is the local real-estate market. If global economies crumble, real-estate prices — and REIT prices — will come down.
Private REITs
Unlike REITs that trade on Wall Street, private REITs are generally available only through financial planners, advisers and brokers. These REITs typically maintain a constant share price — often $10 a share. And they generate income through their yield, often in the 5 percent to 7 percent range, and provide capital gains only when the portfolios are liquidated, sold to other real-estate companies or go public.
Dean Harman, a financial planner in the Woodlands, Texas, has been putting clients into a handful of private REITs, such as KBS, Wells and Hines real-estate investment trusts.
The benefit: income as well as price stability. When the Dow Jones Industrial Average fell more than 400 points in February, "the value of my clients' REITs didn't move," Harman said.
The drawback: a lack of liquidity. Private REITs allow withdrawals only occasionally, often once a quarter. Moreover, they generally require a holding period of at least one year, and for a few years after that the REIT generally redeems the shares at a discount to the original purchase price.
Home-Builder Stocks
These stocks have been hammered in recent months, yet companies like D.R. Horton Inc., Toll Brothers Inc. and KB Home might not be such a bad play for long-term investors. Their business doesn't need escalating home prices to succeed. They just need volume. It will take some time, but once the subprime and foreclosure shakeout has passed, the builders' stocks — all down roughly a third in the past year — could be fashionable again, says Ernie Ankrim, chief investment strategist at Russell Investment Group in Tacoma, Wash. "If housing prices stay soft, you'll see price declines in land and raw materials, giving the builders stronger margins."
International Real Estate
For a great informative study from the National Association of Realtors (NAR):
http://www.goldcoastresidences.com/internationalsurvey
http://www.goldcoastresidences.com/internationalsurvey
Wednesday, August 22, 2007
#5 Chicago
08.21.07, 6:00 PM ET
BEST CITIES FOR SINGLES
RANKINGS
Singles 12
Nightlife 4
Coolness 4
Culture 4
Job Growth 32
Online Dating 2
Cost Of Living Alone 22
Population: 6,453,960
Percent Not Married: 33%
Young Professionals Rank: 16
Drunkest Cities Rank: 6
Most Eligible Bachelor
William Wrigley Jr. II, 43 Chairman of Wrigley
Don't be afraid to crack gum in front of this billionaire date. The divorced Wrigley chairs the world's largest gum producer and is moving the family business into candy land with the recent acquisition of the Life Savers brand. Suggest a baseball game at Wrigley Field or dinner in Wrigleyville.
Most Eligible Bachelorette
Jen Schefft, 30 Reality TV contestant, author
Schefft ended her starring role in the third season of ABC's reality dating-show hit The Bachelorette by rejecting not one but two marriage proposals—and that was after breaking off her engagement to Andrew Firestone, whom she had met as a contestant on The Bachelor. Earlier this year she published Better Single Than Sorry: A No-Regrets Guide to Loving Yourself and Never Settling.
Reported By Elisabeth Eaves
FULL COVERAGE >
from Forbes.com
BEST CITIES FOR SINGLES
RANKINGS
Singles 12
Nightlife 4
Coolness 4
Culture 4
Job Growth 32
Online Dating 2
Cost Of Living Alone 22
Population: 6,453,960
Percent Not Married: 33%
Young Professionals Rank: 16
Drunkest Cities Rank: 6
Most Eligible Bachelor
William Wrigley Jr. II, 43 Chairman of Wrigley
Don't be afraid to crack gum in front of this billionaire date. The divorced Wrigley chairs the world's largest gum producer and is moving the family business into candy land with the recent acquisition of the Life Savers brand. Suggest a baseball game at Wrigley Field or dinner in Wrigleyville.
Most Eligible Bachelorette
Jen Schefft, 30 Reality TV contestant, author
Schefft ended her starring role in the third season of ABC's reality dating-show hit The Bachelorette by rejecting not one but two marriage proposals—and that was after breaking off her engagement to Andrew Firestone, whom she had met as a contestant on The Bachelor. Earlier this year she published Better Single Than Sorry: A No-Regrets Guide to Loving Yourself and Never Settling.
Reported By Elisabeth Eaves
FULL COVERAGE >
from Forbes.com
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