Latest Articles by reimodels

Rising Construction Costs Could Offer Offset to Softening Real Estate Market But Could Hurt Affordable Housing.

Wed, 11 Oct 2006 00:00:00 -0500

Rising construction costs could offer a long-term offset or buffer to the softening real estate market and falling home prices.

Housing prices have more than doubled in most regions, but construction costs have risen as well. In many instances material costs have doubled and even tripled, so it may cost twice as much to build that house as compared to what it might have costs ten years ago.

If the median and average selling price of a home continues to decline, then construction of new homes will fall dramatically. Why? Because rising construction costs and falling housing prices will squeeze builder’s gross profit margins forcing them to postpone many future projects.

Subsequently, demand for housing at certain price points which allow builders to earn a reasonable profit will have to catch up with supply before builders resume development. This theoretically would keep the supply of housing in check, thus dampening the possible fall in prices.

This may offer some comfort for those who already own a home and fear how low prices might fall, but it won’t help those who already can not afford to buy a home of their own. Rising construction costs ultimately put a damper on any efforts to provide affordable housing. There are a lot of potential home buyers that might create demand for housing at various lower price points. But the market may never get to those lower price points. Construction costs could just remain too high and other market conditions alone may never create enough affordable housing.

So it is not a lack of demand for housing that is putting a damper on the real estate market, but a lack of demand at current prices that is putting a damper on the real estate market. There is plenty of demand for housing; just for more affordable housing.

Please note that there are many other variables that affect the housing market, such as 1) interest rates, 2) inflation, 3) expenses associated with maintaining a home, 4) economic growth, 5) employment, 6) supply versus demand and 7) general public sentiment.

Analytical Finances Inc.,
RealEstate-Calc.com &
Mortgage Calculators

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I have twenty years experience in the financial services industry with specific experience in financial statement preparation, risk management, financial modeling of interest rate derivative products, and forecast modeling. My forecast modeling experience would relate to financial statement analysis and new product line optimization.

Link: www.RealEstate-Calc.com

Source: http://www.articletrader.com

Real Estate Markets and Their Price Spreads

Wed, 04 Oct 2006 00:00:00 -0500

The price difference between various real estate markets is what many people try to profit from. I call this the spread. For example, Manhattan residential real estate prices are roughly $1000 a square foot. Downtown Jersey City and other equivalent outlying urban areas of Manhattan, such as Brooklyn Heights and Park Slope, might be $600 a square foot. That makes the spread between those markets about $400 ($1000 less $600) a square foot.

Bond traders or people that trade stocks look for or observe price spreads. Bond traders refer to the spread in basis point and in yield to maturity. So if a corporate bond yields 8% and an equivalent term US treasury bond yields 6%, then they would say that corporate bonds trade at a spread of 200 basis points or 2% (8% - 6%) to US treasuries.

In real estate people reach out to more far reaching real estate markets in the hope that those markets may mature or improve and that the price may rise closing the spread between that market and another.

Example: Brooklyn Heights versus Downtown Jersey City.

In Brooklyn Heights versus Downtown Jersey City, I observed there to be a significant price spread. The selling price per square foot for housing in some comparable neighborhoods of Brooklyn Heights can be significantly higher than in Downtown Jersey City.

Recently I previewed several properties in Brooklyn Heights selling for about $750 a square. Since Downtown Jersey City is at about $550 per square foot, then this would imply a spread per square foot of $200 ($750 - $550) between Downtown Jersey City and Brooklyn Heights.

I am looking for those spreads to narrow. A lot of development is transpiring in Downtown Jersey City. This will probably keep prices down in the near term (next couple of years) as a lot of inventory comes on the market and requires market absorption. However beyond the next couple of years as Downtown Jersey City improves, I believe those spreads will narrow.

As larger developers further their projects and advertise their projects on an international level, more attention should be brought to bear on Downtown Jersey City. I speculate that Donald Trump has every intention of marketing his Trump Jersey City beyond the local markets. Plus let’s not forget about the new $130 million dollar international golf course over at Liberty State Park. This is all free advertising on the coat tails of these projects and I further speculate that these projects will bring international attention to Downtown Jersey City.

So expect to see some price spread movements between the above mentioned markets over the next ten years. Although there is no guarantee that the spreads will narrow, I speculate (based on the above circumstances) that the probabilities point to the spreads narrowing rather than widening.

Analytical Finances Inc.,
RealEstate-Calc.com &
Mortgage Calculators

I have twenty years experience in the financial services industry with specific experience in financial statement preparation, risk management, financial modeling of interest rate derivative products, and forecast modeling. My forecast modeling experience would relate to financial statement analysis and new product line optimization. Edward Grano, Analytical Finances Inc.

http://www.RealEstate-Calc.com/

Source: http://www.articletrader.com

RealEstate-Calc.com: Understanding the Numeric Implications of Owning Real Estate

Tue, 03 Oct 2006 00:00:00 -0500

RealEstate-Calc.com is a website specifically geared to online real estate calculation tools. The site is designed to aid the small to intermediate investor in numerically understanding the financial implications of owning real estate. Everyone should be reassessing their real estate holdings at least once annually. Homeowners and investors should be 1) performing a five year forecast (at the very minimum) of their property holdings and 2) should be reviewing their mortgage costs for possible refinancing.

Here are two obvious reasons: 1) most people have the majority of their net wealth allocated to their personal residence, and 2) real estate is truly a fascinating mechanism for wealth accumulation. The average individual should be EMPOWERED by knowing the financial outcome of holding or selling property, either as rental property or non rental property (primary residential property).

Unlike most websites, this website will take some brain power to grasp but with a little effort you will soon obtain significant knowledge! Many websites sell you a lot of absolutely NOTHING. Well I spent twenty years on Wall Street as a bank analyst and I can assure you that you will truly be AMAZED!

At RealEstate-Calc.com you can estimate the tax consequences of selling a property which is 1) non rental property (primary residence), 2) rental property or 3) part rental / part non rental property. Or you can perform a 5 year forecast of a property which is 1) non rental property (primary residence), 2) rental property or 3) part rental / part non rental property.

Choose to perform either a 5 year forecast of the income statement or a 5 year forecast of both the income statement and balance sheet. Forecast calculators of both the income statement and balance sheet are available in 5, 10, 15 and 25 year increments.

In addition you may just want to compare two mortgage loans or understand the effects of present value in comparing two mortgage loans. For those that might be considering a major renovation of an investment property and want a quick analysis, you can calculate the return on investment ROI of a construction project.

RealEstate-Calc.com is the only website on the internet where you will find interactive online real estate calculation tools this comprehensive and technically advanced.

Analytical Finances Inc.,
RealEstate-Calc.com &
Mortgage Calculators

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http://www.RealEstate-Calc.com/

Source: http://www.articletrader.com