Tuesday, 31 March 2009

2009 Best Cities for Business and Careers

Forbes has issued 2009 Best Cities for Business and Careers.


The ranking is based on the following criteria; Colleges; Cost of Doing Business; Cost of Living; Crime Rate; Culture and Leisure; Educational Attainment; Income Growth; Job Growth; Job Growth Projected; Net Migration; Subprime Mortgages.


- Metro area without real estate bubble and with steady economy (such as Raleigh-Dhuram and Austin) are ranked in Top 25 metros (out of 200 metros).

- In general, metros in North Carolina and Colorado is doing very well.

- Among metros with 1 million or more population, ranking is; 1Raleigh NC; 2Austin TX 3Oklahoma City OK 23; 4 Denver CO; 5. San Antonio TX

Rank Metro Area Cost Of Doing Business Job Growth Projected Educational Attainment Metro Area Population
1 Raleigh NC 16 15 11 1086
2 Fort Collins CO 60 13 6 292
3 Durham NC 36 53 8 487
4 Fayetteville AR 11 16 143 442
5 Lincoln NE 21 24 24 296
6 Asheville NC 2 67 125 411
7 Des Moines IA 49 122 44 553
8 Austin TX 143 5 14 1645
9 Boise ID 17 47 87 601
10 Colorado Springs CO 89 28 25 614
11 Albuquerque NM 34 27 55 847
12 Oklahoma City OK 23 31 97 1203
13 Wilmington NC 3 34 107 348
14 Denver CO 130 63 20 2506
15 Huntsville AL 88 2 27 393
16 San Antonio TX 15 6 120 2032
17 Seattle WA 158 14 15 2566
18 Winston-Salem NC 7 64 112 469
19 Charlotte NC 57 52 51 1688
20 Boulder CO 126 8 1 294
21 Eugene OR 20 99 81 346
22 Little Rock AR 31 29 104 674
23 Olympia WA 100 45 41 241
24 Atlanta GA 114 49 34 5363
25 Nashville TN 42 59 79 1547

* Austin Tx, my investment place of choice, is ranked No.8 among 200 metros and has special article in Forbes Magazine.



Below is worst 25 metros ranking. 6 of worst 10 metros are in California Central Valley cities! These metros are damaged severely by 1) real estaet bubble burst and 2) subsequent recessions. Other worst performing metros are in Rust Belt area.

Rank Metro Area Cost Of Doing Business Job Growth Projected Educational Attainment Metro Area Population
200 Modesto CA 135 190 192 513
199 Merced CA 180 93 200 248
198 Vallejo CA 159 167 139 407
197 Flint MI 97 199 183 433
196 Salinas CA 150 114 136 409
195 Stockton CA 183 100 187 680
194 Bakersfield CA 161 180 193 799
193 Detroit MI 160 200 179 1958
192 Atlantic City NJ 182 44 159 271
191 Utica NY 190 131 174 297
190 Visalia CA 152 75 199 429
189 Fresno CA 148 119 172 910
188 Miami FL 166 198 135 2387
187 Youngstown OH 61 175 185 568
186 Binghamton NY 137 171 130 248
185 Canton OH 44 169 180 408
184 Erie PA 141 135 148 279
183 Camden NJ 149 105 89 1246
182 Kalamazoo MI 123 192 66 322
181 Fort Lauderdale FL 142 154 90 1739
180 Los Angeles CA 177 147 104 9895
179 Beaumont TX 43 153 191 379
178 Newark NJ 185 110 28 2129
177 Oakland CA 192 152 18 2497
Brownsville TX 117 4 195 392

I believe these data is useful to check as strong economy tend to boost real estate markets! I also believe that metros with strong economy and business will recover first in this nationwide real estate slump (real estate market recovery takes time for metros with bad economic outlook).

Happy investing!!!!

Saturday, 28 March 2009

Massive City Center Project is in Danger in Las Vegas

Anyone who thought (or is thinking) about investing in Las Vegas know how massive City Center Project is. This project is joint venture between MGM Mirage and Dubai World, Dubai's government investment outlet with project budget of $9.2 billion. This massive mixed use project is made of hotels, condomium, retail and office space.

This project is extremely important for Las Vegas economy as it is suffering from real estate bubble burst, decline in tourism and increasing unemployment.

As Las Vegas economy has been declining, City Center project also faces more troubles. Dubai World sued MGM Mirage for cost over-run. One of condo project has been reduced dramatically.

City Center got huge media attention on March 27th 2009 as it faced deadline for $200 million payment to lenders as Dubai World decline further payment and MGM faces cash shortage. This issue was tentatively solved by MGM paying entire $200 million to get project going.

It is very interesting to see how this project end up. MGS and Dubai World have jointly invested billions in it, walking away from this project is not option for them. However, under current economy, revenue from hotel, office, retail and condo are significantly lower than it was projected.

City Center is very critical in revising Las Vegas economy. One economist forecast that failure of the project will increase unemployment rate to 11.1% from 10.1%.

As you may have seen from my previous posting, Las Vegas economy is seriously stagnant. Number of visitors are down by 11% and room rate is down by 37%. Therefore existing hotels and business are hoping for failure or delay of City Center completion so that they do not lose more business. It is very ironic situation.

Anyhow, City Center projects is symbol of luxury bubble at Las Vegas. Its future somewhat depends on this project. Let's keep eye on how it turns out!

Happy Investing!!!!

Wednesday, 25 March 2009

Why College Towns Are Looking Smart?

Real estate investments in college towns has been always considered very safe bet. Here are brief reasons

- In United States, total college enrollment is expected to increase for next 10 years.
- During recession, college (especially graduate school) enrollment tend to go up.
- Many graduates start business or remain in town to get the jobs --- this contributes economic advancement of college town.
- College town is full of entertainment such as museum, college sports games, etc...
- College town is also very popular relocation destination for 75 million baby boomers.

This is one of the main reason why I invest in Austin Tx, home of nationally recognized University of Texas at Austin. In fact, while nationwide economy are sluggish, Austin Tx consistently gaining populations and jobs.

Anyhow, this is article from Wall Street Journal, titled "Why College Towns Are Looking Smart".

It features Morgantown WV, home of West Virginia University, as quintessential college town where job is abundant and town is booming. As seen from this chart, unemoloyment rate is very low at 3.9% in Morgantown. Logan UT (Utah State University) and Ames IA (Iowa State University) also enjoy super-low unemployment. This is exactly the reason why college town investment are considered very secure one.

I feel strongly about continuous investment in Ausitn Tx for same reason. In addition, since Ausitn Tx is capital of Texas, investor can also expect some boost moving forward as government stimulous money is trickling down to Austin.

Below is some of good article regarding college town real estate investments:

WSJ - How to Earn Money Off Campus As Rest of Housing Market Cools

WSJ - Seven Tips for Managing College-Town Rentals

WSJ - The Pros and Cons Of Living Off Campus

WSJ - Recommended Reading: Investing In College Town Real Estate

Business 2.0 - Own Where Kids Are

Kiplinger - Attraction of College Town

Forbes - Exploiting College Boom

Happy Investing!!!!!

Monday, 23 March 2009

Which Metro has Population Increase?

US Census has announced population increase/decrease by MSA (Metropolitan Statical Area). The data is based between July 1 2007 and July 1 2008.

Among 363 MSA, here is Top 25 MSA with growth rate:

Rank Metropolitan statistical area % in 2008 % in 2007
1 Raleigh-Cary, NC 4.3 4.7
2 Austin-Round Rock, TX 3.8 4.3
3 Kennewick-Pasco-Richland, WA 3.5 2.4
4 Palm Coast, FL 3.5 7.2
5 Gainesville, GA 3.5 4.5
6 Provo-Orem, UT 3.4 2.6
7 Charlotte-Gastonia-Concord, NC-SC 3.4 4.2
8 Idaho Falls, ID 3.2 NA
9 Logan, UT-ID 3.2 NA
10 St. George, UT 3.1 5.1
11 Grand Junction, CO 3.1 NA
12 Myrtle Beach-North Myrtle Beach-Conway, SC 3.1 4.2
13 Bend, OR 3.0 NA
14 McAllen-Edinburg-Mission, TX 3.0 3
15 Olympia, WA 2.9 2.3
16 Greeley, CO 2.9 3.6
17 Phoenix-Mesa-Scottsdale, AZ 2.8 3.3
18 Ogden-Clearfield, UT 2.7 2.9
19 Sioux Falls, SD 2.6 2.5
20 Valdosta, GA 2.6 NA
21 Midland, TX 2.6 NA
22 Yuma, AZ 2.5 NA
23 Durham, NC 2.5 2.2
24 Dover, DE 2.4 NA
25 Coeur d'Alene, ID 2.4 NA

Among MSA with 1 million population, here is Top 25 MSA with the highest growth rate.

Rank Metropolitan statistical area % in 2008 % in 2007
1 Raleigh-Cary, NC 4.3 4.7
2 Austin-Round Rock, TX 3.8 4.3
3 Charlotte-Gastonia-Concord, NC-SC 3.4 4.2
4 Phoenix-Mesa-Scottsdale, AZ 2.8 3.3
5 Dallas-Fort Worth-Arlington, TX 2.4 2.7
6 San Antonio, TX 2.3 2.8
7 Houston-Sugar Land-Baytown, TX 2.3 2.2
8 Atlanta-Sandy Springs-Marietta, GA 2.2 2.9
9 Denver-Aurora, CO 2.2 2.2
10 Las Vegas-Paradise, NV 2.1 3.3
11 Nashville-Davidson--Murfreesboro--Franklin, TN 2.0 2.3
12 Portland-Vancouver-Beaverton, OR-WA 1.9 1.9
13 San Jose-Sunnyvale-Santa Clara, CA 1.8 1.6
14 Seattle-Tacoma-Bellevue, WA 1.4 1.4
15 San Diego-Carlsbad-San Marcos, CA 1.4 0.9
16 San Francisco-Oakland-Fremont, CA 1.4 0.9
17 Sacramento--Arden-Arcade--Roseville, CA 1.3 1.4
18 Orlando-Kissimmee, FL 1.3 1.7
19 Riverside-San Bernardino-Ontario, CA 1.2 2.2
20 Washington-Arlington-Alexandria, DC-VA-MD-WV 1.1 0.9
21 Minneapolis-St. Paul-Bloomington, MN-WI 1.0 1.1
22 Chicago-Naperville-Joliet, IL-IN-WI 0.8 0.7
23 Los Angeles-Long Beach-Santa Ana, CA 0.7 0.1
24 Boston-Cambridge-Quincy, MA-NH 0.7 0.4
25 New York-Northern New Jersey-Long Island, NY-NJ-PA 0.4 0.2

Following trend from July 2006 - 2007 data, affordable MSA without real estate bubble such as Raleigh, Ausitn, Charlotte and major Texas metros are steadily increasing population.

Among real estate bubble area, Phoenix is doing fairly well.

If you look at this data from 3-4 years ago, real estate bubble MSAs such as Las Vegas, Phoenix, Florida and California's Central Valley were ranked very high in population growth rate. These MSAs have been hit hard by real estate related job degrease and recession. Therefore population growth has been slowed down dramatically.

One of the key criteria to determine place to invest, population (and job) growth is critical as it directly increase the demand for housing (thus increased property value or rental income). I truly think that, once real estate market hit the bottom, MSAs such as Austin Tx, where population and job is growing, will see first rebound in real estate markets!

Happy Investing!!!!

Wednesday, 18 March 2009

Hardest Hit Markets Unlikely to Get Relief From Obama Rescue Plan

Homeowner Affordability and Stability Plan was announced in mid February and starting early March, lenders finally started working with borrowers on the modification applications.

* I got official underwriting guideline --- shoot me email if you are interested.

While I posted details of the guideline previously, key eligibility criteria is 1) borrowers' mortgage must be guaranteed by Fannie Mae / Freddie Mac and 2) underlying mortgage does not exceed 105% of property value.

Here is the issue for homeowners in the hardest hi markets such as Florida, Nevada and California's Central Valley (many of mortgage has 105%+ LTV) and Coastal California and New York City area (many of the mortgage are jumbos).

Zillow.com, leading real estate information website, has done analysis on eligibility by MSA for rescue plan. On US average, it looks like 25% of existing mortgages are qualified. In the MSA like Toledo OH, more than 45% mortgage are qualified.

However, in the hardest hit markets, eligible mortgage goes down dramatically. Here are the data from a few harest hit markets:

- In Miami, only 17% of mortgage are eligible for rescue plan. Because of siginificant decline in real estate price, 25% of mortgage have too high negative equity, exceeding 105% LTV. I believe market like Las Vegas/Phoenix fall into this category.

- In San Jose CA, where median real estate price is one of the highest in the US, only 7% of mortgage are eligible for the rescue plan. The issue is that 25% of mortgage are ineligible because of jumbo loan, exceeding limit of conforming mortgage.

- San Diego falls into somewhere between Miami and San Jose.

MSA Eligible Too High LTV Jumbo
Miami-Fort Lauderdale 17% 25% 6%
New York / NJ 16% 3% 9%
Los Angeles 9% 8% 8%
San Diego 12% 13% 17%
San Francisco 8% 7% 21%
San Jose - Santa Clara 7% 3% 25%

* I believe, in market like Austin Tx, where 1) most of existing mortgage are conforming mortgage and 2) real estate price has not declided much, approx. 40% of mortgage are eligible.

This data clearly shows the limit of the rescue plan to hardest hit area. Especially in high priced area, goverment is saying "you stupid Californian/New Yorkers bought **luxury house** with jumbo mortgage --- take care of your own mess".

It is kind of ironic that Californian/New Yorkers are penalized on these issues as Obama administrations were strongly supported by high-income white color workers in these markets. As tax hike on high income family ($250,000+) maybe in effect soon. One thing that is clear is that government always aim for "salaried employees" for tax revenue. For regular people with regular income, to live in the place with low cost of living (like Austin Tx), continue to make more sense........

Happy investing and happy mortgage modifications!!!

Monday, 16 March 2009

Northeast US to suffer most from future sea rise

My previous posting was effect on sea rise in California.

This article from Huffingtonpost.com points out very interesting points; damage is bigger in Northeast US, compared to California.

- In general, 3 feet sea rise is expected by the end of this century.

- Extra 8 inches or so is expected for New York, Boston and other spots along the coast from the mid-Atlantic to New England.

- That's because of predicted changes in ocean currents, according to a study based on computer models published online Sunday in the journal Nature Geoscience.

- The study suggests Miami and much of the Southeast would get about 2 inches above the global sea rise average of perhaps 3 feet, and San Francisco would get less than an extra inch. Parts of southern Australia, northern Asia and southern and western South America would get less than the global average sea level rise.

Oh well, this certainly provide good perspective on damage to major Northeast cities.

Happy investing!!!

Sunday, 15 March 2009

California Sinking?

Pacific Institute, the environmental research institution, has issued THE IMPACTS OF SEA-LEVEL RISE ON THE CALIFORNIA COAST.

Brief summary of 100+ page report is:

- By the end of this century, due to global warming, water level will go up by 5 ft.

- This is cause $100 billion in damage to California.

- Below damage analysis by the county,

County Potential Cost ($Billion) People Affected
San Mateo 26.0 120,000
Orange 17.0 110,000
Alameda 15.0 66,000
Marin 8.7 39,000
Santa Clara 7.8 31,000
San Francisco 5.1 10,000
Los Angeles 3.8 13,000

Well, I live in Marina neighborhood in San Francisco, a few blocks to SF bay and have been attracted ocean front real estate (who wouldn't?), this is very important topic. Luckily, in Marina neighborhood, while Marina Blvd might be damaged, my house seems to be ok!

The other key finding for me was that the most damaging area is existing low-laying flood zone such as:

- Low-laying area along San Francisco Bay (from SF to Santa Clara to Richmond.

- Low-laying area in San Rafael in Marin county.

‐ Wetland from Novato in Marin county to Vallejo in Fairfield county.

- Low-laying area in Huntington Beach in Orange county.

‐ Venice and Marina Del Rey in Los Angeles county.

One of the key attraction of living in California is proximity to ocean. Ocean front real estate will continuously be highly sought after (at least while we are alive!). I think the most important take away from this research is vulnerability of existing low-laying area and its surrounding. So check out this map from Pacific Institute and make sure that your property is on solid land.

Happy Investing!!!!!

Sunday, 8 March 2009

Beijing's Olympic building boom becomes a bust

Very interesting Los Angeles Times article about Beijing's massive over-supply of office and luxury residential real estate.

  • It is said that China has invested $43 billion on Beijing Olympic infrastructure (3 times larger than other Olympic cities).
  • From 2006 and 2008, 500 million sqf of office space has been build (equivalent of total office space in entire Manhattan). This number exclude government-led projects.
  • There are still 100 million sqf of vacant office space --- it takes 14 years to absorb this vacancy.
  • The National Stadium, known as the Bird's Nest, has only one event scheduled for this year: a performance of the opera "Turandot" on Aug. 8, the one-year anniversary of the Olympic opening ceremony. China's leading soccer club backed out of a deal to play there, saying it would be an embarrassment to use a 91,000-seat stadium for games that ordinarily attract only 10,000 spectators.
  • The supply of residential real estate is skewed toward luxury properties, out of reach for "regular people" and they are expected to drop 15-20%.
As China's economy is drastically slowing down, it make office vacancy and price drop much worse.

It make me realize that world was so "bubbly", especially in emerging countries and emerging cities to name a few such as Dubai, Macau, Beijing, Moscow, etc...... And history of bubble certainly repeat by itself.

Happy Investing!!!!!

Long way for Las Vegas residential real estate recovery

I have been quite negative on Las Vegas real estate for a couple of years and have been advising my clients to hold off investment for a while. I have even write in my Japanese blog about negative statistics on Las Vegas real estate in January.

I have observed a few interesting article/statistics on Las Vegas real estate as below.

I. Las Vegas Suffers a Recession Hangover

This is Business Week article. Las Vegas is very well known as conventions and corporate event destination. In fact, it generate 85 billion revenue to the city. However, under severe pressures from government and share holders, US large corporations (especially financial firms) are canceling events and visits to Las Vegas. This is huge blow to sagging tourism revenue in Las Vegas.

II. America's Unhappiest Cities
Las Vegas, Nev.
Overall rank: 7
Depression rank: 42
Suicide rank: 1
Crime (property and violent) rank: 9
Divorce rate rank: 6
Cloudy days: 73
Unemployment rate (December 2008): 9%

This is also Business Week article. Las Vegas is ranked 7th Unhappiest City in USA. LV is particularly weak in No.1 suicide rate; No.9 crime rate; No.7 divorce rate.

III. 2008 First American CoreLogic and LoanPerformance Home Price Index Analytics

As of December 2008, Las Vegas residential real estate is down by 27.90% compared to same period previous year. This is 3rd worst drop among major MSA.

IV. 58.2 percent of Las Vegas homes have negative equity

First American Corelogic estimate that, 58% of mortgage in Las Vegas have negative equity, loan amount is larger than property value. This is the worst negative equity rate in entire United States and negative equity is the most important reason for foreclosure.

V. 10 Best And 10 Worst U.S. Housing Markets

Based on 20 Cities Case-Shiller Index, Forbes analyzes best and worst market for future appreciation/depreciation. Las Vegas is considered decline in price the fastest.

Las Vegas economy relied quite bit on real estate and tourism. In addition, there are large share of income-strapped-retirees. Therefore this recession has damaged Las Vegas' economy more severe than other markets.

As I wrote in my blog, I think future growth of service-and-manufacturing-job-oriented Sun Belt cities (like Las Vegas) is quite limited.

Thus, it probably make sense to stay away from Las Vegas real estate for a while as correction takes more time.

Happy Investing!!!!!