LG, I'm a commercial real estate developer and operator here in the Austin, Texas area, and although recently absorption has significantly slowed, I do not see any signs of there being a "real estate" bubble.
To get a bubble typically requires a lot of high leverage debt going into real estate projects (a la Japan and the U.S. in the late 80's) and this simply has not happened, at least around here in commercial.
We have not had an environment where existing product sells substantially in excess of full-boat replacement cost. This is usually a harbinger of a bubble, and it ain't there.
Lenders for at least the past 12 months have significantly tightened underwriting standards for new projects. Spec stuff (not pre-leased/sold) typically requires a minimum of 40% equity.
Having said that, there certainly is a prospect for a leveling out of development activity, and I exclude from these comments anecdotes about laid-off high-tech execs in option-fueled $1MM+ mini-mansions -- which make for good news copy but is hardly representative of the bulk of real estate assets in this country.
Short answer - no overall significant real estate bubble, and no overall crash. Expect a measureable slowdown in new construction of apartments, offices, retail and bulk distribution, however. This is one of the important differentiators between the USA now and Japan of the early 1990's. Keep in mind that Japan also exported a huge amount of its capital to other countries to buy commercial properties at ridiculous prices. We have not done that in the USA to any significant extent.
(The biggest dumb mini-bubble in the USA I am aware of was AMZN's multi-million square foot warehouse building program in 1999-2000, which can be fairly attributed to company-specific brain death. And there may be some overcapacity in So. Cal. manufacturing facilities - No. Cal. looks OK.) |
