Class 9: August 5, 2010

DFW area has been growing a great deal. It will be another year or so before the market works its self out. 12,000 units are expected to be delivered in DFW in year 2010. This shows that construction is still taking place in the area. A lot of this because it makes economic sense to go ahead and finish building then leaving the project partially finished. Multi-family will continue to do well in the coming years because many people have to rent because they are scared of home prices dropping or cannot get loans and it just makes more sense to rent than to own.

One of the things slowing single family home construction is that banks are not allowing AD&C lending. This could be a problem if demand picks up for homes and the lending will not be there.

iPad is being used a lot in construction. Project and construction managers have all drawings and schematics on hand and it saves them on printing costs but also just streamlines the process when you can straight to the specs on site. Also, if an architect and engineer need to change plans it can be instant on the iPad.

D.R. Horton reported earnings of $50.5 million but with the expiration of the new home tax credit they are looking at some hard times ahead. However, D.R. Horton is known for slashing prices.

Investors are looking more favorably upon apartment REITs because of current market trends. If REITs were smart they would hire up all the excellent property managers because that is where the value comes from in a REIT. The higher occupancy you can achieve and the more you can lower your OPEX and just run the property more efficiently that is where the value in a REIT lies.

Because of oil spill the governor of Florida wants all residential and commercial real estate values to be re-appraised to calculate the loss in property values. He wants to send this loss to BP to foot the bill for the value decline. This causes a problem for some cash strapped counties as staff time and cost will be tough.

A lot of private equity swooping in on apartment communities in markets that have bottomed out or become somewhat stabilized.

Economists project many different outcomes for the comeback of the housing market. One economist thinks the market will increase by 37% and another thinks it will decline by 18% over a five year span. It is funny how a so-called expert can say one thing and it is perceived as fact.