On April 8, the Burnham-Moores Center hosted approximately 20 residential and commercial real estate professionals in a free-flowing dialogue on current real estate market conditions. The conclusions reached by these San Diego-based professionals were echoed at a mortgage conference I attended in Florida a week later. That program featured senior mortgage bankers from across the country, as well as the CEOs of Fannie Mae and Freddie Mac. Both meetings revealed some sobering insights into where we are and how we must move forward.
The residential real estate markets remain at least 12 to 18 months away from stabilization due to mortgage market problems that are nowhere near being resolved. It's as if the markets — particularly residential — are in quicksand. Prices are sinking in residential and softening in many parts of the commercial markets, but participants cannot yet feel the bottom, so they are biding their time until they can. And while the waiting game is far from over, the lessons we can glean from the current state of affairs are already at hand.
A Fond Farewell
In early June, Lisa Chambers, the Center's academic affairs and administration director, will be leaving San Diego to return to her "Rocky Mountain High" — Boulder, Colo. — where she joined us from more than five years ago.
Since that time, Lisa has been the heart and soul of our graduate degree program in real estate, caring passionately about our students, their well-being, and assuring that their investment of time and money paid dividends that exceeded their expectations. We will miss her welcoming smile, her teamwork on behalf of the Center and our students and her dedication to the smooth functioning and success of the MSRE program.
We will begin recruiting to replace Lisa this month, although it will be difficult to identify anyone with the university administrative experience and skill set that Lisa brought to our program. I deeply appreciate the high standards that she set for herself, which will challenge us greatly as we commence the recruiting process.
If you care to send your personal appreciation and good wishes in her direction, Lisa can be reached at email@example.com or (619) 260-4150. — M.R.
"Back to the basics" was the mantra both groups of meeting attendees repeated more than any other. Price risk properly; require substantial equity from borrowers; underwrite fully; shun exotic loan instruments; and in commercial real estate, pay attention to cash flow, not pro formas. All textbook answers to a situation that got wildly out of control.
Lenders who did not get caught up in the frenzy of a few years ago — who suffered under the pressure of not doing as much business as their less risk-averse competitors in the short run — now are poised to take advantage of financing distressed real estate opportunities somewhere down the road.
Public and private equity capital also is plentiful, just not yet ready to be invested until the equity providers feel that their opportunities are compelling enough. Established real estate professionals who have avoided the worst of this market's pitfalls will be well-positioned to take advantage of the recovery whenever it begins. Established investors who kept their powder dry will get first looks at for-sale properties. Lenders not fighting for their survival by raising capital under duress will thrive on their reputations and operate on the fundamentals that kept them out of trouble in the first place. Renters previously shut out of homeownership for a variety of reasons will find home prices much less onerous than one to three years ago.
No matter how often I hear the phrase "housing price bubble" as the source of today's real estate calamity, I refuse to buy into that concept. Poorly priced risk and a breakdown in the fundamentals of assessing risk caused today's problems. Real estate is a cyclical industry, though one brought on and compounded by breakdowns in risk analysis and pricing and in the trust that is such an integral part of doing business globally.
Survival of the species in real estate is not in question. Nor is the long-term view of San Diego as an incredible place to live, work and play. Everyone just needs to be able to distinguish between sand at the beach and quicksand in the real estate markets and behave accordingly, depending upon where they are at this time.
It was an early start to a long and eventful day as the MSRE students and Center staff boarded a 6:30 a.m. flight to Sacramento April 16 for the California Building Industry Association's Homebuilding Day. The annual Legislative Conference and Homebuilding Day event provides those new to government advocacy a first-hand look at how to impact housing policy. The students' airfare was covered by the Building Industry Association of San Diego County, whose staff members, as well as the association's president Sherm Harmer, served as hosts to the class throughout the day.
Lou Galuppo (far left), Center director of residential real estate, and Paul Tryon (far right, back), executive director of the Building Industry Association of San Diego County, stop for a photo with the MSRE students on their Sacramento Capitol tour.
The students attended a legislative briefing by CBIA staff members in the morning before breaking into three groups for a Capitol tour and a group lunch at a Sacramento restaurant, hosted by the BIA-San Diego. In the afternoon, students continued with their groups for a series of legislative meetings. During the meetings, the students voiced their perspectives as future real estate leaders to legislators and their staff. Several students expressed concerns over San Diego's housing affordability, as well as the challenging job market they will be entering when the program completes this summer.
Mondana Hamniaz said the meetings were "eye-opening" in revealing how strongly legislators were focused on their own agendas. Trevor Jensen agreed. "It definitely gave you some insights into how complicated law-making is and how much of a need there is to educate lawmakers on real estate issues," he said.
Following the afternoon meetings, students headed to the Senator Building for a legislative reception where they networked with industry professionals and politicians from around the state. The day concluded as the Burnham-Moores Center/BIA contingent boarded an 8:30 p.m. flight back to San Diego.
Mark Riedy, executive director, Norm Miller, professor and director of academic programs, and Charles Tu, associate professor, recently attended the 24th Annual American Real Estate Society (ARES) meeting in Captiva Island, Fla. The annual meeting, which took place April 16-19, brings real estate professionals and academics together to discuss pertinent real estate topics and promote research and education within the industry.
During the conference, Tu, along with Elaine Worzala of Clemson University, was in charge of a mentoring program, where they succeeded in finding mentors for all 20 doctoral students attending the doctoral seminar. On the final day of the conference, Tu presented, "Real Estate Journal Quality: Perceptions of the International Real Estate Research Community" with Worzala.
For the fourth year in a row, Miller offered his professional development insights to the doctoral students in attendance through his presentation, "Publishing and Teaching Strategies." Miller also took part in a presentation of the "Does Green Pay Off?" study that he co-authored with Jay Spivey and Andy Florance of the CoStar Group. Additionally, Miller served as chairman of the Awards Committee and moderated the panel discussion, "Career assistance, mentoring, internship and placement."
Two papers co-authored by Norm Miller, professor and director of academic programs, have been accepted for publication by two different journals. The first paper, "Idiosyncratic Volatility and the Housing Market," will be published in the "Journal of Housing Research" this summer. Miller's co-author for the paper, which looks at housing price risk, is Gurupdesh Pandher, associate professor of management at the University of British Columbia.
The second paper, "Price-Volume Correlation in the Housing Market: Causality and Co-Movements" has been accepted for publication in "The Journal of Real Estate Finance and Economics." To develop better forecast models, the paper examined whether sales volume led price movements or vice versa. Miller co-authored this paper with Liang Peng of the University of Colorado at Boulder and Jim Clayton, director of research at the Pension Real Estate Association in Hartford, Conn., and associate professor of Real Estate and Finance at the University of Cincinnati.
A third paper co-authored by Miller, "A Cross-Sectional Analysis of Cap Rates by MSA," was accepted for publication earlier this academic year by the "Journal of Real Estate Research." In this paper, the authors explored different going yields in different cities and found supply constraints were more important than growth rates. The paper was co-authored by Doina Chichernea of the University of Cincinnati, Jeff Fisher of Indiana University, Michael Sklarz of New City Corp., and Bob White of Real Capital Analytics.
The Class of 2008 Alpha Sigma Gamma members were initiated May 1 during a lunch at the Acapulco restaurant in Old Town. Alpha Sigma Gamma, the International Real Estate Honorary Society, was created in 1993 to recognize the scholastic achievements of students in university real estate programs.
The Class of 2008 Alpha Sigma Gamma initiates are joined by honorary member Don Zech, founder and president of CDC Commercial, Mark Riedy, Center executive director, and Charles Tu, faculty president of the USD chapter.
Alpha Sigma Gamma Class of 2008
Don Zech, Honorary Member
Frank Callero, Undergraduate Student
Ted Connolly, Undergraduate Student
Marcus Ejendal, Undergraduate Student
Joel Foust, MSRE Student
Matthew Grosz, MSRE Student
Jason Lambertson, MSRE Student
Andres Mazry, MSRE Student
Elizabeth McKinney, MSRE Student
Michael Sieman, MSRE Student
The USD chapter of Alpha Sigma Gamma was formed in 2003. Each year, an industry professional also is initiated as an honorary member. Don Zech, founder and president of CDC Commercial, was chosen as the 2008 honorary member and luncheon speaker. Zech is a graduate of USD's School of Business Administration and a member of the Center's Commercial Real Estate Committee.
MSRE students enjoyed breakfast and a lively networking experience at the Cushman & Wakefield offices in University Towne Center April 18. Stath Karras, executive managing director, and Alex Perry, associate director, spoke about the broad real estate services that their company provides, while a dozen other brokers and staff joined in on the discussion.
Scott Molloy, public policy advocate for the Building Industry Association of San Diego County, spoke to Real Estate Society students April 24 during the group's final meeting of the academic year. Molloy highlighted for students the political avenues that real estate professionals can take to educate lawmakers about the building industry. Two incoming undergraduate officers also were selected: Shariar Manfared, a finance major, was named the incoming undergraduate chair, and Michael Linn, also a finance major, was elected the incoming associated student body representative.
Kent Griffin Jr., CFO of BioMed Realty Trust Inc., spoke to the MSRE students April 22 as part of the commercial real estate capital markets class co-taught by Norm Miller and Charles Tu. Griffin's guest lecture shored up the students' classroom studies on real estate investment trusts, by offering insight into how REITs raise capital generally and how BioMed operates specifically.
Alan Gin was interviewed by NBC 7/39 regarding unemployment rates in San Diego. The segment aired April 3.
Norm Miller was interviewed by Dean Calbreath of the San Diego Union-Tribune regarding a land bank proposal. The article appeared in the April 6 edition of the paper.
Alan Gin was interviewed by Emmet Pierce of the San Diego Union-Tribune regarding the closing of Washington Mutual's local home loan office. The article was published in the April 9 edition of the paper.
Alan Gin was interviewed by Jim Christie of Reuters regarding home sales in San Francisco. The article was published April 17.
Alan Gin was interviewed by Dean Calbreath of the San Diego Union-Tribune regarding local job losses. The article appeared in the April 18 edition of the paper.
Mark Riedy was interviewed by Jim Christie of Reuters April 22 about the record level of default rates in the state of California.
Tax Considerations in Real Estate · Continuing Education
· Classes start Thursday, June 5, 2008
· To register, contact Jodi Waterhouse, or register online
For more information about the Certificate in Real Estate Finance, Investments and Development, go here.
Second Annual Alumni Golf Tournament June 27, 2008
· 3:15 tee-off time; Sail Ho Golf Course at Liberty Station; To register or become a sponsor, contact Lauren Lukens at (619) 260-7619 or firstname.lastname@example.org
MSRE Graduation 4 p.m. July 11, 2008
· Joan B. Kroc Institute for Peace and Justice
The Burnham-Moores Center for Real Estate is committed to delivering outstanding education, industry outreach, career placement, and research services to advance socially responsible leadership in real estate.
University of San Diego, 5998 Alcalá Park, San Diego, CA 92110-2492