December 20, 2005 - Successive interest rate increases by the
Fed have left everyone wondering what is going to happen next
with Real Estate. Will the boom continue or is this the
beginning of a gradual slow down?
As Jim Jubak, writing in Jubak's Journal, points out, the effect
of steady increases will have a much broader impact than just on
those who have adjustable-rate mortgages or are locked in
because of bad credit ratings. He reports that many large
mortgage companies are now selling off riskier holdings to third
and fourth parties -- parties prepared to put their faith in the
ever upward march of prices. But as Jubak says, "It's never a
good sign when the folks that know an asset best are selling."
**Commercial Real Estate Prices in Japan Show Increase**
Tokyo's commercial land prices are still down 80 percent from
the peaks of 1990, but are starting to make a come back. With
interest rates at record lows and Japan's economy showing growth
for four straight years, commercial property prices have
actually increased this year for the first time in 15 years.
As a sign of their confidence in the Japanese economy, American
International Group Inc., the world's largest insurer, has begun
negotiations for the purchase of a $3.4 billion office tower in
downtown Tokyo.
**Builder Confidence Declines Slightly in US**
Builders of single-family homes across the US showed slightly
decreased confidence in the market going into December.
According to a recent survey of members, the National
Association of Home Builders/Wells Fargo Housing market Index
(HMI) showed a slight decline from November.
The December index was down from 61 to 57, with anything above
50 indicating "good" sales conditions. Ratings are based on
total traffic, resistance to current pricing, interest rate
concerns and several other factors. While December's number is
still above 50, it is at its lowest point since April, 2003. The
national average was brought down by a 33 reported for the
Midwest.
**Magna owner misused influence according to minor shareholder**
The founder of Magna International Inc, Frank Stronach, is being
accused of misusing the assets of MI Developments, a
publicly-traded company that acts as the real estate wing of
Magna International.
According to lawyers for Greenlight Capital, Inc., a 10% owner
of MI Developments, Stronach used "oppressive conduct" to direct
the resources of MI Developments towards propping up another of
his companies, Magna Entertainment Corp. This third company runs
several racetracks across North America.
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