Social Networking

December 2, 2008

Things have slowed down a bit now that the economy has gone into a temporary permafrost.  So I decided that it was time to try to connect more directly with those of you who have written to me in the past or who follow my doings in Paris.

For me, the easiest way is to connect is via a couple of the various social networks like Facebook, LinkedIn and Xing.  If you are like me, it just feels a little better if you know a tad more about the people you interact with.  On these sites, especially Facebook, I try to share a  piece of my life that is not always about business.  Yes, sometimes it’s a little silly, and sometimes a little personal, and I always worry about protecting my family’s privacy.  But at the same time, I love what I do, and in these difficult times, it helps to be out there sharing experiences, giving encouragement, and helping others through the rough patches.  I have been through times like these before, and ultimately, things will get better.

That reminds of of a cute play on a famous saying that I saw yesterday: “The light at the end of the tunnel has been turned off to conserve electricity.”  I had to chuckle at that one and then I realized how important it is to maintain a sense of humor when times are challenging.

If any of you would like to connect with me on Facebook (www.facebook.com), please do not hesitate.  Drop me a line at steve@navaro.com, or just pop up my page. Maybe we can get to know each other a little better, share stories, laugh a little and find our common ground!

Dollar Pounds Euro – Again

October 24, 2008

Currency

It seems like I am writing a commentary on the strengthening US dollar every two weeks or so.  Today, the dollar broke through the $1.26 barrier, trading briefly in the $1.25 range, before settling down in the $1.26 range.  Once again, this rate has not been seen in over 2 years.  Technically, the dollar is extremely overbought versus the euro, bought underlying market conditions in Europe, together with the receding price of oil, and overall uncertainty in world markets, makes the US dollar (along with the yen) the safe haven to park one’s money as investors worldwide exit the equity markets.

How low will it go?  At this point, it is anyone’s guess, but I suspect that the bottom could be near, unless another round of cataclysmic economic events occurs.  Then all bets are off.

Paris Prices Continue Their Climb

October 24, 2008

According to the most recent figures published by the Notaires of Paris, prices for Parisian real estate continued their decade long upward trend, rising by 2.4% for the 2nd quarter of 2008.  On an annual basis, Paris real estate has appreciated 10.4%.  However, a portent of the future may be the finding that the volume of sales was down 15% in the 2nd quarter.  Overall, I think that these findings continue to support my belief that Parisian real estate will generally buck the prevailing trend of price depreciation felt elsewhere, particularly in the UK, Spain and the US markets.  To review the details, you can visit the Notaires website at http://www.paris.notaires.fr.

Paris – Safe Haven in a Troubled Real Estate Climate?

September 27, 2008
Autumn in Colorado

Autumn in Colorado

Yesterday, I came across two interesting articles, both British based, about real estate prospects in France, and Paris in particular.  One was a commentary in the Financial Times, which you can read here.  The other was on BBC – America television. Both highlighted the differences between the French real estate market and that in America and the UK.

As is well known, the American housing market is in a severe downturn, resulting from overbuilding, rampant price speculation and lenders feeding the process with poorly underwritten loans to unqualified borrowers.  All of this started to unwind in 2006 and the process could take another year or two to resolve itself – if credit is available to purchasers.  Right now, the credit markets are all but dried up, and if that continues, there will be no loans available under any terms to allow the free market to resolve the situation. Simply put, banks have no money to lend, because all of their reserves have been set aside for the bad loans they currently own. Many are on the brink of failure.

The situation is not much different in the UK, albeit on a lesser scale.  The UK and Ireland experienced their own version of the housing bubble. They are going through the same process of rapidly falling house prices and lack of available credit.  Their banks are looking for government bailouts.  Banks are merging in a last ditch effort to survive. Barclay’s is no more, Bank of Scotland is gone, and the taint of the poisoned US subprime market permeates the portfolios of all of the remaining UK banking institutions as well.

So why has Paris, and the rest of France to a lesser degree, survived this housing meltdown relatively unscathed? There are several underlying reasons, as pointed out by the BBC.  First, there is not the fever in France to get into the “home ownership” game.  France traditionally has been a country of renters, and much of the property that is owned has been in the same family for generations.  Speculative “flipping” is simply unheard of.  Second, the French people have no credit card debt.  They are a country operating under the philosophy that you do not buy something if you do not have the money to pay for it.  Of course, that financial philosophy went out the window long ago in the US.  Most French credit cards are actually debit cards.  If the funds are not in the account to pay for the transaction, it simply does not happen.  Third, French banks are and have traditionally been far more conservative than their American and British counterparts.  Home loans are amortized for 15-20 years and usually require a minimum 20% down payment.  No 125% financing here.  Loan qualification is a rigorous process.

As a result, the financial underpinnings of the French banks and the French real estate market are more along the lines of what we in the US knew in the 1970’s and 1980’s.  This is also why, to a large degree, French real estate has appreciated much more slowly in the last 10 years than, for example, the US or UK housing markets.  The Spanish housing market is a totally different creature, having been overbuilt, rife with corruption and now crumbling.  That reality adds a double whammy to the many Brits who bought a 2nd home in the sun there with the suddenly realized home equity in their homes in Great Britian. Now, they are upside down in both Spain and at home, and for many this represents the loss of their entire pension savings.

The French real estate market is not immune to what is happening in the rest of the world, of course.  Unemployment is increasing, their trade exports are dropping due to the recent strength in the dollar, oil and food price rises are impacting the everyday Frenchman, and tourism is way down.  Home prices in many parts of France have seen a downturn, particularly in the southwest regions like the Languedoc.

In Paris, buyer demand for properties has tapered off dramatically.  Most Parisians cannot afford to live in their own city.  Foreign demand is also down.  However, like London and New York, demand for premium properties continues to remain strong.  Notwithstanding the volume slowdown, the prices in Paris continue upward, to the astonishment of most of the rest of the world. The most recent study shows Paris prices appreciating 9% in the last year.  I do not think this will continue indefinitely.  I would suspect Paris prices to flatten out or even drop slightly in the short term, until the global economy gets back on its feet. After all, Paris is an international city, and international money, particularly oil money at the moment, continues to play a key role in sustaining this market. Paris too is not totally immune to what is happening with the rest of the global markets. However, with beautiful architecture, a rich and colorful history and a fixed supply of real estate, Paris will continue to be in high demand, so long as it does not follow down the road of mistakes made by other real estate markets.

Perhaps, for those of us who feel more comfortable with our investments in real estate instead of the stock market, Paris may be the last truly safe haven for rational long term real estate investment, at least until there is some stabilization in the markets we have been more familiar with in the past, whether they be in the US or elsewhere.  Whether we like it or not, the French got it right, and we didn’t.

US Dollar Tests $1.40 support level

September 12, 2008

The dollar continues to show strength in the currency exchange markets, due primarily to the continued reduction in the price of oil futures.  This week the dollar briefly broke through the $1.40/euro support level, reaching a low in the $1.385 range, before rising today to above the $1.41 level.

All of this is good news to US travelers planning their travels to Europe.  We have not seen these rates of exchange in over a year, and I think that more good news is coming, even though some currency specialists consider the US dollar overbought at the present.  Everything hinges on what oil prices do in the near future.

Paris Prices Continue to Climb

September 12, 2008

The Paris Notaires (http://www.paris.notaires.fr/) have issued their latest report on the state of the Parisian housing market, covering the period from May 2007 through May 2008.  In a nutshell, here are the findings:

1.  The volume of sales in Paris has decreased 20% in the last year.  I am sure that this is due both to the higher prices in general, as well as a reflection of softer economic conditions throughout France and the Eurozone.

2.  The average price of apartments in Paris increased 9.4% over the last year, continuing the steady appreciation of the last 10 years.

Here is the summary table posted by the Notaires:

Notaire Price Report - May 08

Notaire Price Report - May 08

Go Dollar Go!!

August 10, 2008

Maybe I should take more vacations!  I have just returned from a week of family vacation, and my jaw dropped to see how dramatic the dollar’s recovery has been in the last week!  Kicking Butt, as my kids would say. 🙂

The dollar blew through the 1.53 resistance level, without even taking a breath.  It surged to below 1.50 to the euro on Friday.  Supposedly the next resistance level is $1.4920.  Well, I just checked and the dollar is toying with that level today, trading around 1.494.  What a turnaround!

This can only be good news for everyone traveling to Europe, or contemplating a purchase there.  The word on the street is that we have hit bottom and the dollar is now recovering round almost as quickly as it lost it.

YEAH!!!

US Dollar Makes Some Gains

July 31, 2008

There appears to be a subtle but positive shift for the US Dollar vis-a-vis the Euro and other benchmark currencies recently.  After toying with a new record low in the $1.60-1.61 range against the euro, the dollar rebounded impressively in the last week.  As of this moment, the mid-market rate sits at $1.558.

Contributing to the dollar’s renewed strength is the remarkable decline in oil prices in the last two weeks, due to rapidly increasing inventories and a short term diminishing of global demand because of weak economies around the world.  Couple that with some better than expected economic news on the home front, and signs of continued inflationary problems abroad, and the US dollar signaled that it wasn’t Charmin’s equivalent of currency just yet.

For currency traders, the dollar/euro ratio has been “range bound” for the last month or two, trading narrowly in the 1.56-1.63 range.  But an important charting threshhold was passed late last week, when the euro dipped below it’s 100 day average.  This can often be a precursor of a long term trend, namely a weaker euro.  Traders are now talking of a new floor for the exchange rate of 1.53, should the dollar strengthen to 1.555 or more.

All of this is good news for US buyers and travelers heading to Europe.  While the situation remains highly volatile, and the dollar could weaken again with only the slightest of bad news, at least there is now hope that the movement is not a one way street into oblivion.

Chez La Tour – Work Finishes!

July 14, 2008

After a little over 3 months of renovation, Chez La Tour opened its doors to it first Owner for the month of July.  In a race against the clock, the construction dust was swept up, tools hauled out, pictures hung, furniture placed, and a myriad of small details tackled.  There are still some details to finish, but the apartment was fully functional and ready to go when our first Owner arrived on the 4th of July.  Here are a couple photos.  To see all of the photos, go to our website at www.parishomeshares.net/cltphotos.html.

The US Dollar Continues to Struggle

July 14, 2008

Us poor Americans.  Our US dollar continues to be the whipping boy of the currency market. As I have discussed earlier in this blog, I think that there are several reasons underpinning the weakness of the dollar.

1.  Oil prices. While I feel that there is a certain amount of speculative fluff in the current dramatic rise of oil prices, the reality is that oil is purchased in US dollars, and as long as oil prices trend upward, this puts pressure on the US dollar. We have seen prices cross the $100/barrel threshold and head close to $150/barrel, all in the last 6 months.  There is no current shortage of oil, but continued unrest in the Mideast region, including the Iran/Israel threats, and the war in Iraq continue to make an assured supply of crude an uncertain prospect at best.  Couple this with unprecedented demand from emerging countries like China and India, and the picture gets even more fuzzy.

2.  Our economy. The current credit market crisis continues to weaken the chances for an economic rebound at home in the near future.  No one will say we are in a recession, but the reality is that the economy is in dire straits, with the housing market decimated, the banking industry in shambles (today the US announced that it may have to rescue Fannie Mae and/or Freddie Mac from insolvency), the airline industry is planning huge employment cutbacks this fall, and we haven’t yet hit bottom. This does not inspire confidence in the international investment community.

This weekend, IndyMac was shut down by Federal regulators.  This represents one of the largest bank failures in US history.  Teetering on the edge are Washington Mutual and National City.  Both banks have a significant amount of their assets in sub-prime mortgages. I suspect the situation will worsen before it gets better.

3.  Interest Rates. Money flows to the area of highest return.  The US is caught between a rock and a hard place.  It has finally signaled an end to the lowering of interest rates, but a return to increasing rates, which would make the dollar more attractive, would further hamper any near term prospects for a housing recovery.  Further, inflation poses a serious concern, both here and abroad, with the dramatic increase in costs of basic food supplies and raw materials such as steel and copper.

The good news is that the Fed has indicated that they are now watching the dollar more closely, and are prepared to shore up its value should it continue its precipitous decline.  I think their benchline is somewhere in the $1.60/euro range, but I could be completely wrong.

Future Prognosis: In the short term, the currency experts are bearish on the dollar, which signals further weakness.  Longer term, the prospects may be brighter, but only if positive action is taken to get our own economic house in order.