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NEW YORK CITY-The distress facing many in the US residential and commercial real estate market is very market-specific; some markets remain strong, while others have weakened. So says Ernst & Young’s Global Real Estate Center’s Global Real Estate Market Outlook 2008.

According to Dale Anne Reiss, global real estate director at E&Y, the situation isn’t likely to ease in 2008. She explains that with the lack of available financing and the specter of recession in the US, E&Y expects real estate market conditions both here and abroad to be difficult through this year.

Joyce DeLucca, founder and managing principal of Kingsland Capital, has similar views as E&Y’s outlook. DeLucca believes the market hasn’t hit bottom yet and notes that for the near to intermediate term, the outlook of the global credit market is quite negative. “It is not 100% bleak,” She says. “There will be compelling opportunities in the credit markets as the market finds a bottom.”

The E&Y outlook predicts expansion of global capital. “With many US investors still on the sidelines following the credit market dislocation in Aug. 2007, foreign buyers are likely to step into the vacuum for commercial assets and will continue to do so especially in gateway US markets such as New York City, Washington, DC, Miami, Chicago, San Francisco, Los Angeles, and other coastal markets,” the outlook says.

According to E&Y polling research, the credit crunch has had little discernible impact so far on the fledgling infrastructure investment sector. “In fact, many think it will spur greater investment in infrastructure because of the attraction of stable cash flows,” the outlook notes. “This is especially likely in the US where most states are bracing for further revenue declines in 2008 and 2009 as a result of the housing downturn.”

As far as the housing market goes, what started as a problem in the relatively small subprime mortgage market has spread quickly to affect housing markets in the US and abroad, demonstrating just how inter-connected real estate around the world has become, the outlook says. “Although no one knows the magnitude of the housing and subprime problem, defaults and foreclosures in the US are likely to continue well into 2008 when adjustments on ARM and other variable rate mortgages peak.” When the residential markets do eventually recover, the landscape of the housing market is likely to look very different, the market outlook adds.

Deborah Jackson, executive managing director of locally based Weiser Realty Advisors, tells GlobeSt.com that, regarding the housing market, “I believe that few would argue that it will not be before 2009 that we see major improvement in this sector.” Jackson says that in order for this to occur, the housing surplus must be greatly reduced. “As in any downturn, the weaker or smaller builders probably won’t have the staying power to survive this wait.”

E&Y says that while homebuilders and land developers look set to suffer through 2008 while the housing sector works through its deep-seated problems, knowledgeable, patient investors holding cash are likely to find a few bargains, especially in residential land and lots they can hold for the recovery. And, with interest rates once more nearing historic lows, and credit markets likely to ease in the mid-term, even land purchases are likely to be more readily financeable for borrowers with good credit.

Jackson agrees that obtaining financing for large land parcels for residential development is an issue. “One does not need to be a rocket scientist to understand that if the housing sector has weakened and a certain number of bad loans were made to developers, there is going to be great caution by lenders in investing in this sector,” she explains. “Still, there are prudent developers that have ridden out past dips in the market and will again.”

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