Are ghost malls going to haunt the economy?

The Other Real Estate Crisis: Are ghost malls going to haunt the economy?

So far, America’s real-estate agony has been confined largely to the vast residential sector. Commercial (office buildings) and retail (malls, strip malls, big boxes) real estate have held up rather well, even though those markets were propelled by the same factors that sent housing into orbit: easy credit, an abiding faith in perpetually rising asset values and misplaced optimism about economic expansion.

But when the economy slows and threatens to go into recession, it’s usually bad for all classes of real estate. And despite President Bush’s measured happy talk on the economy earlier this week, indicators are rising that American consumers are keeling over from exhaustion. Shoppers unwilling to shop spells trouble for the tenants of malls and strip malls—and for their owners and lenders. All of which suggests: get ready for the ghost mall!

The retail real-estate market has already started to slow. In the third quarter of 2007, 7.4 percent of retail space nationwide was vacant, according to Reis Inc. A vacancy rate of 7.4 percent isn’t tragic by any means. But it’s the highest level since 2002, and it’s up from 6.8 percent at the end of 2005. The third quarter of 2007 marked “the 10th consecutive quarter of flat or deteriorating retail occupancy at the national level,” noted Sam Chandan, chief economist at Reis, in a recent report. Thanks to continuing growth in supply and flagging demand, there was about 140 million vacant square feet of retail space in the third quarter of 2007, up from 124.4 million vacant square feet at the end of 2006.

Real estate market continues to soar [Toronto]

Real estate market continues to soar [Toronto]

Canada’s red hot real estate market continued to soar in the fourth quarter of 2007 with little sign of the traditional winter slump, according to new data released Tuesday by Royal LePage.

Many markets reported double-digit gains in the final months of last year, likely driven by booming energy sectors across the country, says the House Price Survey report.

“The fourth quarter of 2007 was surprisingly strong, with unseasonably high price increases and unwavering demand,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services.

Soper cites the value and export demand of Canada’s natural resources as one factor for the strong market, along with high employment rates fueling confidence in job stability.

Buddy LeRoux; was part owner of Sox, real estate baron; at 77

Buddy LeRoux; was part owner of Sox, real estate baron; at 77

Buddy LeRoux, who rose from team trainer to part owner of the Boston Red Sox in the 1970s and 1980s, died of natural causes Monday night. He was 77.

Often a controversial figure in Boston sports – both with the Red Sox and later with his ownership of Suffolk Downs – Mr. LeRoux started as a trainer in the mid-1950s with a minor league affiliate of the Boston Bruins after serving in the US Marine Corps.

Even by then, Mr. LeRoux had begun to build a real estate empire in New England. By 1977, he reportedly had tens of millions of dollars in assets and, with partner Haywood Sullivan, led a group that sought control of the Red Sox, after owner Tom Yawkey died. When some questions arose about the group’s financing, Yawkey’s widow, Jean, joined the consortium and a sale was approved by Major League Baseball.

Ithaca sheltered from real estate bubble

Ithaca sheltered from real estate bubble [Ithaca, NY]

With relatively low prices for houses, a stable housing market and steady employment, Ithaca hasn’t experienced the real estate crash some places have.

“People talk about the real estate bubble bursting, but in Tompkins County the bubble never really got that big to begin with,” said Elia Kacapyr, economist and Ithaca College professor.

Ithaca was at the top of a list compiled by the Federal Financial Institutions Examination Council of cities with the lowest percentage of high-cost subprime loans in 2006, drawing the attention of the New York Times. A Nov. 4 article noted that many of the safe spots were small cities with big colleges, oases surrounded by areas where jobs are dwindling, keeping house prices low.
While in places like Las Vegas, new houses sold several times before they were even built a few years ago, Kacapyr said Ithaca never got in over its head.

Ways to cope despite real estate’s dire outlook

Ways to cope despite real estate’s dire outlook

If you’d asked housing economist David Seiders at this time last year to forecast the real estate industry’s future, he would have told you to expect “a recovery year” in 2008.

“That outlook has been cut dramatically from what I was saying a year ago,” Seiders, chief economist for the National Association of Home Builders, concedes. He’s slashed his projection for home construction by 35% and says 2008 will be “another down year” for housing overall.

How far down? Most economists caution that their real estate forecasts for this year stand on shaky ground. The depth of the downturn will depend on whether the overall economy slips into recession, how fast and how sharply home prices fall, whether more turmoil rocks the credit markets and how many more foreclosures lie ahead.

“We’re really in a danger zone in terms of overall economic activity,” says Seiders, who sees a 40% chance of recession this year, up from his earlier estimate of 30%.

With Builder in Bankruptcy, Buyers Are Left Out

With Builder in Bankruptcy, Buyers Are Left Out

Ettore and Larisa Costanzo are showing off their new house, which they love madly.

“Notice how we upgraded so there’s tile on all the floors,” said Mr. Costanzo, a retiree from Brooklyn. He pointed to the Kashmir granite in the kitchen. “It’s nice, no?”

Now if only they could get the keys and go inside, instead of peering in the windows like a couple of Peeping Toms.

The house, on which the couple made a down payment of $88,820, is empty. Their belongings are in storage. They live, unhappily, in a hotel.
“It’s very upsetting, not to be allowed in our own house,” said Ms. Costanzo, a Russian immigrant. “Please take our money and let us move in.”
Their builder is Levitt & Sons, a unit of the Levitt Corporation, which ran out of cash in October and declared bankruptcy in November. All work on this planned 460-home development for retirees, grandly named Seasons at Prince Creek West, has ceased. The Levitt employees were laid off, the subcontractors put down their tools, and the Costanzos found themselves in limbo.
The collapse of Levitt, the first big home builder to fail in the current slump, illustrates how the turmoil in real estate is spreading far beyond subprime borrowers who cannot pay their mortgages. Levitt had a fabled brand, decades of experience and enthusiastic customers with good credit, but none of that was enough to save it.