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SubPrime Panic

It's official. According to the media outlets the residential real estate market has fallen apart.

It's true, HSBC Holdings, one of the largest players in the subprime market and New Century Financial are halting loans to subprime borrowers and according to Wharton Real Estate professor Susan Wachter, this may cause residential sales to drop off this year by one percent (1%).

Subprime borrowers are those borrowers who can't get a prime mortgage or conventional bank mortgage. They tend to have lower credit ratings or little cash to put down. But, other mortgagees were caught in the subprime shakeup, borrowers who jumped on the A.R.M. (adjustable rate mortgage) bandwagon. They refinanced or bought property at lower teaser rates expecting that their property values would increase before their mortgage rates jumped in year two or three of the A.R.M. Everyone was banking on the real estate boom and overvaluation of property to continue. Sadly it didn't and the subprime mortgage market is caught in the fray.

This means that in the near future, saavy investors will probably see a spate of foreclosure sales on homes. They won't be able to buy and flip as they had in the past but here on the Connecticut shoreline, the rental market is always strong. The commercial real estate market remains strong. What really remains to be seen with this shake up and foreclosure sales is, will the skyrocketing energy prices in both Connecticut and across the nation affect the housing market?

While the subprime market shakes out, and investors find themselves able to buy single family homes at market discounts, will they be able to resell them or are rising energy costs and taxes in the Nutmeg State going to keep the buyers away?
- Kristin

March 22, 2007

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The Next Big Thing in Connecticut’s Commercial Market?

Here on the East Coast, we often say all trends begin in California. What would fashion be without the surfer look, Haight Ashbury’s quintessential peasant top and of course, Jeans, made indespensible first by the gold rush and then by James Dean in Rebel without a cause?

In real estate California practically invented the mall, only to rip the roof off and transform it over the last decade thus birthing the lifestyle center. Spas becoming wellness centers began out west, raw food. So, what is California telling us about real estate trends? Private tennis clubs are the next hot property. Courts cover a lot of valuable land. Redevelopment will most certainly maximize value.

Similarly in Connecticut Commercial Real Estate, our former Industrial Warehouses and Mills are becoming luxury condos. But that trend is homegrown. In New York City, Dumbo formerly home to cardboard box warehouses is home to up and coming residential developments. Back in California, both Residential and Commercial Realtors and Real Estate agents are leaving the business. We will see that on the East Coast and New Haven shortly, as the market becomes tighter, interest rates rise and transactions continue to become more difficult to close. It’s not a business for the faint of heart.

March 6, 2007

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