United States Real Estate Report Q2 2009

Abstract

This is the first edition in BMI' s new series of reports on real-estate sectors around the world. We have sought to incorporate data and insights from our reports on infrastructure and commercial banking, as well as our own forecasts for the economies of the various countries that we survey.

Key issues - USA

We suggest that the following are the key issues to monitor for the real estate sector in the coming year or so:

• Any growth in construction spending - whether as a result of the government' s fiscal stimulus package or not. For all the past problems of the economy, the absolute level of activity remains enormous.
• A pick-up in the volume of house sales in the majority of markets - given that this would indicate that prices have fallen to market-clearing levels.
• Any improvement in conditions in the markets for non-government bonds, given that these are (and over the long term will likely continue to be) the main source of funding for the real estate sector.
• Premiums and discounts to Net Asset Values (NAVs) on Real Estate Investment Trusts (REITs) - which will give an indication of investor sentiment towards the real estate sector or, more precisely, the various sub-sectors.

These conclusions are based on our proprietary Real Estate/Construction Business Environment Rating (RECBER), the component factors of which we discuss in detail. The conclusions are also set against recent conditions in the commercial office market, for which we have used office rents in major cities as a proxy and in the residential real estate market, for which we have used housing prices as a proxy. A major trend throughout all our real estate reports is that, mainly owing to the global financial crisis, access to funding will be more important than in the not too distant past. Accordingly, we have incorporated overviews of conditions in the commercial banking sector, both globally and in the region of each country. We have also looked at the issues that will drive the fortunes of Real Estate Investment Trusts (REITs) over the coming months.