A 10% fall in rental rates is enough to reduce net operating incomes, which will in turn lead to less (or zero) cash flow, which will lead to distressed assets, reduced sales prices and cap rates, and rising rental competition.

Moreover, falling rents lead to falling home prices: as the difference between average rent and average mortgage payment increases, renting becomes increasingly appealing to individuals and families who might otherwise buy homes.

National apartment and retail vacancy is now at record highs (going back to the 1980s), and office vacancy is approaching the highs of 1992. Hotels have had a disastrous year (revenue per available room is down over 18%); malls are still wretched investments (and will likely remain so after what is expected to be a poor holiday shopping season); and industrial properties have been hurt by continuing convulsions in the manufacturing sector, shipping and storage sectors. Even real estate such as parking lots, storage sheds, and farmland has been undercut by the recession.

Cushman and Wakefield say the glut of empty retail space is good (unless you’re an investor who already owns retail space, in which case you probably believe C&W is in league with the CRE devil for even daring to suggest retail conditions are good; part of me wants to agree with C&W, for cheap retail space will ultimately provide opportunities for cash-rich companies to expand at a steep discount, but part of me has to acknowledge that retail sales and the insatiable American consumer will not recover any time soon; in summary, C&W seems to be jumping the gun on this one) (GlobeSt.com)

Mortgage modification is happening very, very slowly (mortgage modification is both good and bad: it’s good because it creates warm fuzzies in voters, stabilizes families and helps raise consumer confidence, but it’s bad because it doesn’t solve key problems: these homes are over-valued, these mortgages will continue to be problematic and shouldn’t have been made in the first place, and these modification do not add any productivity to the economy) (NY Times)

Homeowners still have trouble believing their home is losing value, and if they believe in even the slightest signs of artificial recovery, more than 31% are “somewhat likely” to put their homes up for sale on the market (that’s a lot of homes, people) (Reuters)

Past housing appreciation was consumed, not saved (The Stash)

A condo auction in Birmingham fails: “It may take years before prices return to as much as 50% of what the owner thinks is “regular pricing” (I agree) (Mish’s Global Economic Trends)

Commercial loan originations declined again in Q1 (Calculated Risk)

Be prepared for an artificial boost to home sales: first-time buyers might soon be able to use their $8,000 tax credit as a down payment (WSJ)

The northern neighbors saw home resales up 11% m-o-m but down 12% y-o-y (Bloomberg)

The World

London’s retail rent is back to 1991 prices (Bloomberg)

Vietnamese home buyers can now increase their leverage after reductions in mortgage requirements (probably not a good thing if the entire collapse of a global financial system based on overleveraging is any indication) (Property Wire)

REITs may come to India (The Economic Times)

The absence of western cash is contributing to Dubai’s RE decline (Guardian)

Problems in Tunisia (The North Africa Journal)

Greenspan calls the bottom (again) (The Big Picture)

AIG is worried about CRE (surprise) (WSJ)

MITs CRE index is continuing to fall (MIT)

A bottom in the single family market? (no) (Cleveland Fed)

Foreclosures were up 32% in March y-o-y (Yahoo)

Redfish Emerging Markets concedes that CRE is in trouble (these people understand that real estate is local, but they’re also able to find sunlight in five-mile mineshafts; that even they acknowledge CRE is getting the bad press it deserves is either a) a contrarian indicator or b) evidence that things are pretty bad out there) (Redfish Emerging Markets)

Malls continue to be bad investments (investors of retail space need to understand that the current shift in consumer habits is going to be massive, is going to take time, and is going to have very significant long-term implications for how Americans spend; here’s a Futronomics post with graphs that document the fundamental shifts in consumer habits) (WSJ)

Freddie says borrower behavior is changing (i.e., borrowers are just walking away) (Calculated Risk)

Median home prices fell in 88% of cities (AP)

The World

Deglobalization (via Economist’s View) (The Korea Times)

Japanese exports to China are greater than those to the U.S. (EconomPic Data)

Record losses for Land Securities in the U.K. (Bloomberg)

Credit in India seems to be loosening (Business Standard)

Recovery in Moscow (at least according to RE companies) (The Moscow Times)

Speculators are back out in force in much of Korea (JoongAng Daily)

Real estate volume fell 32% y-o-y in Jordan (Jordan Times)

Payroll figures don’t look good once you actually analyze them (the birth/death component is particularly egregious right now) (The Big Picture)

One and done: why first-time buyers flocking to the market will not drive up prices (Calculated Risk)

Home prices dropped the most on record in Q1 2009 (Bloomberg)

Ads are occupying spaces once reserved for stores (NY Times)

Experts anticipate price drops of 20% or more in CRE, a bad sign for small banks (FT)

No cause of optimism in CRE says the S&P (New York Observer)

All real estate is local (true in the past, still true) (WSJ)

The World

During times of crisis, don’t think of all developing markets as a group (VoxEU)

Is China really recovering? Power generation says, “No” (ChinaStakes), exports say, “No” (Naked Capitalism), inflation says, “No” (EconPic Data)

Expect 25% or more of projects to be canceled in Dubai (WSJ)

Angola: one of the strongest RE markets in the world (NPR)

Real estate is still the center of the crisis and the stress tests (Baltimore Investing Examiner)

Retail rents down 11% in Manhattan (Crain’s New York Business)

The decline in RevPAR is the worst on record (Calculated Risk)

USA Today calls the housing bottom (part of me thinks, “Great. If you want to sell your home at foreclosure prices at a 20% to 50% loss, you can”; another part of me thinks, “At least the inventory is beginning to clear”) (USA Today)

The rich are defaulting, too (Bloomberg)

How long will it take for the CRE market to recover, and what will it look like (Ann Arbor Business Review)

The RE market for solar requires quite a bit of hand-holding (Real Property Alpha)

After housing prices stop falling, don’t expect them to rise (ValuePlays)

What are you paying attention to? (a bit off-topic, but important for those worried about the short-term) (Defining Better Futures via Infectious Greed)

Commercial mortgage delinquencies are up (Bloomberg)

In case you own a mall, make sure it caters to the poor and to teens (EconomPic Data)

Developing in the right order (Residential Property Analytics)

The World

Dubai real estate market = getting smoked (Zawya)

Brazil’s real estate companies seem to have risen too quickly following the news of government support for the RE market (Bloomberg)

Lithuania: a glut of malls and office space (The Baltic Times)

The effect of the Red River floods on the Winnipeg RE market (North Bay Nugget)

Trade collapse and vertical FDI investment (VoxEU)

A weak global recovery after the recession (VoxEU)

Talk of economic recovery in China is premature (Naked Capitalism)

Asia’s old growth models are broken, says Roubini (Bloomberg)

The U.S.

Shiller says its time to buy (Bloomberg)

More than 20% of homeowners are underwater (WSJ)

RE indicators are showing mixed results (NASDAQ)

CRE is not recovering but residential may be (Audio) (MarketWatch)

The World

Indian banks are actually increasing RE loans (despite saying the opposite) (The Business Standard)

Small banks are going to get hit hard by CRE defaults (WSJ)

Moody’s downgraded $52.9 billion in commercial CDOs (WSJ)

Signs of a single-family housing rebound (or a complete disregard for the effect of foreclosures, depending on your interpretation) (NY Times)

The single-family market is not recovering, according to some (Times)

Credit is still tightening (The Business Insider)

Another reason the single-family market (and the economy) will not see a v-shaped recovery (Economist’s View)

Low-income Americans are much less likely to be married (VoxEU)

Rent or buy? (NY Times)

The World

Canada’s single-family market may be recovering (but it looks like a cyclical recovery to me) (Calgary Herald)

Argentina’s retail sales are down 13.3% y-o-y (scary statistics for owners of malls and other retail space; note that the statistics are measured by units sold, not value) (WSJ)

Why Russia continues to be the least favorable BRIC market: a highly inefficient and inequitable real estate tax system (The Guardian)

India’s growth is being stifled by a lack of FDI (NY Times)

Wages are contract in Japan, the UK and the U.S. (Mish’s Global Economic Trend Analysis)

The effects of global pension collapse on real estate have yet to be addressed, but the collapse is likely coming (Pension Pulse)

The U.S.

Pending existing home sales and nonresidential construction spending both rose; these are good signs for the market, although foreclosure sales (which made up half of all sales) preclude any type of rapid recovery and may actually hide weak points in the data; nonresidential spending is essentially a false positive (Bloomberg; Econompic Data; Calculated Risk)

Data points aside, Warren Buffet says the RE market is nowhere near recovery: “There’s no signs of any real bounce at all in anything to do with housing, retailing, all that sort of thing” (Bloomberg); then again, maybe he disagrees with himself: “We see something close to stability at these much-reduced prices in the medium to lower part of the market” (MarketWatch)

Bankers are worried about credit card debit and commercial real estate loans (CNN)

The stress tests and real estate (GlobeSt.com)

While you were worrying about the swine flu, the Fed just bailed out CRE (Reuters)

We touched on this theme several weeks ago, but look for increased REIT mergers and acquisitions (Real Property Alpha)

The World

Global sales are down, capital is retreating, and defaults are rising (Reuters)

Still no recovery in the Norwegian housing market (Reuters)

Governments are trying to bring international real estate capital back to their markets (WSJ)

Demographic trends: change is underfoot (The Wilson Quarterly)

Unemployment is likely to set a post-war record in the Eurozone (Yahoo)

Yet another reason to doubt the the optimistic real estate numbers coming out of China: far too much supply coming online by 2011 (not for the weak-willed international investor) (All Roads Lead to China)

You know the past year has been bad when an 18.6% annual decline has this headline: “Home prices falling at a slower pace in February” (MarketWatch)

More on the home price declines (Calculated Risk)

What commercial real estate market? Properties are not trading (Seeking Alpha)

Expect commercial real estate CDO litigation to increase (Mondaq)

It’s cheaper to bulldoze new homes than to sell them (Mish’s Global Economic Trend Analysis)

Bad new for the CRE world: portfolios are looking sickly (Calculated Risk)

Sam Zell says most CRE financings made between 2003 and 2007 are above water (Zero Hedge)

The World

Home prices fell 41% in Dubai year-over-year (Forbes)

The unmet demand for housing in India is amazing (Reuters)

Developers who have had to lower prices are elliminating real estate speculators in Viet Nam (Thanh Nien News)

Currency fluctuations are disrupting the European real estate market (Property Wire)