Market Meltdown: Your Morning Round-Up
Good morning! Here's the latest news on how the market meltdown is affecting/could impact our local real estate market. Also, more indicators: The New York Times is currently using the slightly terrifying but not panic-inducing 22 size font (best guess) in their headline for their top story about Wall Street.
1) Interest rates: New York Times: "Fed policy makers face their own difficult decision on Tuesday: whether to lower interest rates. For months, Fed officials have held their benchmark interest rate steady at 2 percent in an effort to combat inflation while keeping money cheap for banks and businesses to borrow. But speculation was building on Tuesday that policy makers would cut the rate to free up more money for ailing banks and restore investors’ confidence in the financial sector."
2.) Local real estate firms: LABJ, Forbes: “Maguire Properties Inc. was the top loser among stocks listed on a major index. Downtown L.A.’s leading commercial landlord fell 23 percent to $7.78. Meruelo Maddux Properties Inc., another L.A. real estate investment trust, dropped 18 percent to 91 cents, despite announcing a $10 million stock buy-back. Douglas Emmett Inc., another L.A. office and multifamily REIT, closed down 9 percent $21.78. Los Angeles real estate services giant CB Richard Ellis Group Inc. also lost 8 percent to $13.50. Also: Los Angeles-based KB Home's shares fell $1.11, or 5 percent, to $21.21.
3.) Credit Crunch: LA Times: "On Monday the angst on Wall Street was no less palpable on Main Street....The difficulty of finding financing is likely to vary widely among companies, depending on what business they are in, said Russell Goldsmith, chief executive of Beverly Hills-based City National Bank. 'If you are looking for funding for a speculative housing development, it will be extremely difficult, but a profitable small business should be able to get a loan on reasonable terms,' Goldsmith said."
4.) Banks: Chicago Tribune: “William Strong, Morgan Stanley vice chairman, said he has never seen such upheaval in his 30-year career. Such events as the Russian and Mexican debt crises and the 1987 stock market crash were relatively short-lived. The current crisis has exceeded a year and is bigger in scope because it involves real estate…. Next in the shakeout likely will be smaller banks, particularly those which bet heavily on real estate markets in California, Florida and Nevada, he said.”
5.) More on NY, London: WSJ: "The blast furnace known as the finance industry that has stoked the economies of New York and London for decades is rapidly cooling. Both cities have relied heavily on the securities industry for jobs, taxes and a prosperity that has lifted restaurants, stores, auto sales, fashion, entertainment and a wide range of other businesses. The future of that largess is in doubt a year into the credit crunch, with the bankruptcy filing of Lehman Brothers Holdings Inc. and the sale of Merrill Lynch & Co. adding to the thousands of jobs already lost -- and the likelihood that more will come.”
6) Join the club! "CNN: “…Monday's cataclysm on Wall Street could be the event that finally pushes Manhattan property values downward, said Jonathan Miller, president and chief executive of real estate appraisal and consulting firm Miller Samuel Inc.”