Deutsche Bank 2007 Real Estate Outlook Conference wrapup + another lender down.

I waded my way through three of the Deutsche Bank 2007 Real Estate Outlook panels and will give a mini-wrapup here for those who are interested.

The Homebuilders Panel, Ara Hovnanian, CEO of Hovnanian, Joel Rassman, CFO Toll Brothers, and Marc Baker, President of a N.E. local builder called The Baker Companies. Relatively uneventful conference, talked how this downturn surprised all of them and how it was different than most downturns (not recession driven). Both public builders thought cancellations would level out, also spent a lot of time talking about mergers and acquisitions as well as vertical integration. Asked how they will know the bottom is reached, most everyone was looking at the resale market and traffic of prospective buyers. Talked about affordability and was asked about renting being cheaper than buying, they all agreed that renting was cheaper but they believed the intangibles of owning win out every time over renting.

The Capital Markets Panel were mostly talking about where the smart money was going (mostly nowhere, everything overpriced, someone thought Mexico Commercial R.E. and Multi-Family might be good, another thought the same for Japan). They were also universal in their belief that far too much money was chasing far too few deals and people were taking extraordinary risks without comprehending exactly what they are getting into nor pricing appropriately. This theme was prevalent, there are many funds, pension funds for example, that basically have guidelines to invest a fixed percentage of funds in R.E. and expect a historical level of return which doesn't exist in today's market without much higher risk.

And finally the Mortgage Panel talking about what is driving origination's and how the landscape is changing. If you were to listen to any of the conferences this would be the one. Much talk about how Wall Street was driving origination's and how most of these lenders would touch subprime if it wasn't for the ability to lay off all the risk on the secondary market. Peter Norden, CEO of Opteum, said, "The Street really the ones that formed the paper that is out there causing problems. Let's face reality there isn't a mortgage originator out there that would produce a 80/20 subprime loan unless they had somewhere to sell it. Wall Street invented the product, bought the product, and is now forcing everyone to buy the product back.... There will be some some tightening of stated income, stated assets from a credit perspective it invites fraud."

And finally, new that subprime lender Funding America has shut its doors, a note on its website said:

Due to current market conditions in the mortgage industry, Funding America has
decided to discontinue accepting any new business.

Effective immediately, all loans in our pipeline will be processed out of our Houston location and we will work to close those loans in as smooth a manner as possible. For questions concerning any loans that are currently in process, you should contact
our processing team at (866) 782-0100 Ext.1931, 1928, 1924 or 1933 for further
information and status. From our start nearly two years ago, Funding America has provided countless opportunities for numerous team members, brokers,
investors, and home owners to have a more successful life.

Thanks to all of you for your support.

Funding America