NAR - commercial real estate to improveDepressed conditions in the financial and small business sectors
continue to negatively affect the commercial real estate industry
and the nation’s economic recovery. That’s according to
economists at the Economic Issues and Commercial Real Estate
Business Trends Forum at the 2011 Realtors Conference & Expo
yesterday. During the forum, National Association of Realtors
(NAR) Chief Economist Lawrence Yun shared his predictions for the
commercial real estate market in 2012 and 2013, anticipating a
steady improvement in commercial real estate markets. According
to Yun, the U.S. economy remains sluggish and continues to
perform well below the desired pace of economic expansion. Still,
he said at the current rate of growth, about 3 to 4 million jobs
will be generated over the next 2 years. While corporate
profits have surged in the past year, Yun said that business
spending and hiring remain low. Despite record-low borrowing
conditions, he said that many businesses are also not taking out
loans. As for why businesses are not spending their profits, Yun
cited concerns about over-expanding during times of low economic
activity and uncertainty about future government policies.Another area of concern for the U.S. economy is small businesses,
a major driver of new jobs. Yun said small businesses are not
recovering from the downturn since small businesses owners
don’t have access to startup capital since they lack large cash
reserves and often use their personal savings and housing equity
as a source of funding. “I anticipate a small recovery in the
next year in home values, which would help small business owners;
however, that’s only if legislators and regulations don’t add
obstacles to hinder the housing market recovery, such as
modifying or eliminating the mortgage interest deduction or
increasing down payment requirements,” said Yun. Yun predicted
moderate improvements in commercial real estate markets and the
broad economy because job growth and other economic factors are
slowly improving. He said that despite the stock market’s
volatility, it is performing higher than it was in 2008, making
it easier for companies to raise capital and for consumers to
gain wealth. Yun doesn’t anticipate a second economic
recession in the near term, because of the strong cash potential
that businesses could release into economy, which would help the
country avoid a second recession. He said that international
trade is expanding and that international home buyers are taking
advantage of the weaker dollar and investing in commercial and
residential real estate.A majority of the commercial real estate sectors are still
experiencing rising absorption and little improvement in rents.
The multifamily apartment sector remains the strongest with net
absorption rates increasing and vacancies decreasing, causing
rents to rise across the country. Yun said that’s because
rising foreclosures and short sales are driving many individuals
into renting and that the lack of available credit to qualified
home buyers is keeping many in the rental market. However, high,
increasing rents combined with record-low interest rates are
enticing some individuals into the housing market. At the
session, Yun was joined by Kenneth Riggs, president and chairman
of RERC and chief real estate economist of the CCIM Institute,
and Robert White, founder and president of Real Capital
Analytics, who shared his outlook for slight improvements in
commercial real estate markets in the year ahead.Students head for McMansionsIn Merced, a city in the heart of the San Joaquin Valley and one
of the country’s hardest hit by home foreclosures, the downturn
in the real estate market has presented an unusual housing
opportunity for thousands of college students. Facing a shortage
of dorm space, they are moving into hundreds of luxurious homes
in overbuilt planned communities. The finances of subdivision
life are compelling: the university estimates yearly on-campus
room and board at $13,720 a year, compared with roughly $7,000
off-campus. Sprawl rats sharing a McMansion — with each getting
a bedroom and often a private bath — pay $200 to $350 a month
each, depending on the amenities. A confluence of factors led to
the unlikely presence of students in subdivisions, where the
collegiate promise of sleeping in on a Saturday morning may be
rudely interrupted by neighborhood children selling Girl Scout
cookies door to door. This city of 79,000 is ranked third nationally in
metropolitan-area home foreclosures, behind Las Vegas and
Vallejo, Calif., said Daren Blomquist, a spokesman for
RealtyTrac, a company based in Irvine, Calif., that tracks
housing sales. The speculative fever that gripped the region and
drew waves of outside investors to this predominantly
agricultural area was fueled in part by the promise of the
university itself, which opened in 2005 as the first new
University of California campus in 40 years. The crash crashed
harder here. “Builders were coming into the area by the
bulkload,” said Loren M. Gonella, who owns a real estate
company here. “It was, ‘Holy moly, let’s get on this gravy
train.’ ” But visions of an instant Berkeley materializing
in the cow pastures were premature. The stylishly designed
university planned for a gradual expansion, adding 600 new
students a year. That has meant phased dorm construction, which
is financed with tax-exempt bonds repaid by student revenue.
There is room for only 1,600 students in the campus dorms, but
5,200 are enrolled. With hundreds of homes standing empty, many
of them likely foreclosures, students willing to share houses
have been “a blessing,” said Ellie Wooten, a former mayor of
Merced. Five students paying $200 a month each trump families
who cannot afford more than $800 a month.
continue to negatively affect the commercial real estate industry
and the nation’s economic recovery. That’s according to
economists at the Economic Issues and Commercial Real Estate
Business Trends Forum at the 2011 Realtors Conference & Expo
yesterday. During the forum, National Association of Realtors
(NAR) Chief Economist Lawrence Yun shared his predictions for the
commercial real estate market in 2012 and 2013, anticipating a
steady improvement in commercial real estate markets. According
to Yun, the U.S. economy remains sluggish and continues to
perform well below the desired pace of economic expansion. Still,
he said at the current rate of growth, about 3 to 4 million jobs
will be generated over the next 2 years. While corporate
profits have surged in the past year, Yun said that business
spending and hiring remain low. Despite record-low borrowing
conditions, he said that many businesses are also not taking out
loans. As for why businesses are not spending their profits, Yun
cited concerns about over-expanding during times of low economic
activity and uncertainty about future government policies.Another area of concern for the U.S. economy is small businesses,
a major driver of new jobs. Yun said small businesses are not
recovering from the downturn since small businesses owners
don’t have access to startup capital since they lack large cash
reserves and often use their personal savings and housing equity
as a source of funding. “I anticipate a small recovery in the
next year in home values, which would help small business owners;
however, that’s only if legislators and regulations don’t add
obstacles to hinder the housing market recovery, such as
modifying or eliminating the mortgage interest deduction or
increasing down payment requirements,” said Yun. Yun predicted
moderate improvements in commercial real estate markets and the
broad economy because job growth and other economic factors are
slowly improving. He said that despite the stock market’s
volatility, it is performing higher than it was in 2008, making
it easier for companies to raise capital and for consumers to
gain wealth. Yun doesn’t anticipate a second economic
recession in the near term, because of the strong cash potential
that businesses could release into economy, which would help the
country avoid a second recession. He said that international
trade is expanding and that international home buyers are taking
advantage of the weaker dollar and investing in commercial and
residential real estate.A majority of the commercial real estate sectors are still
experiencing rising absorption and little improvement in rents.
The multifamily apartment sector remains the strongest with net
absorption rates increasing and vacancies decreasing, causing
rents to rise across the country. Yun said that’s because
rising foreclosures and short sales are driving many individuals
into renting and that the lack of available credit to qualified
home buyers is keeping many in the rental market. However, high,
increasing rents combined with record-low interest rates are
enticing some individuals into the housing market. At the
session, Yun was joined by Kenneth Riggs, president and chairman
of RERC and chief real estate economist of the CCIM Institute,
and Robert White, founder and president of Real Capital
Analytics, who shared his outlook for slight improvements in
commercial real estate markets in the year ahead.Students head for McMansionsIn Merced, a city in the heart of the San Joaquin Valley and one
of the country’s hardest hit by home foreclosures, the downturn
in the real estate market has presented an unusual housing
opportunity for thousands of college students. Facing a shortage
of dorm space, they are moving into hundreds of luxurious homes
in overbuilt planned communities. The finances of subdivision
life are compelling: the university estimates yearly on-campus
room and board at $13,720 a year, compared with roughly $7,000
off-campus. Sprawl rats sharing a McMansion — with each getting
a bedroom and often a private bath — pay $200 to $350 a month
each, depending on the amenities. A confluence of factors led to
the unlikely presence of students in subdivisions, where the
collegiate promise of sleeping in on a Saturday morning may be
rudely interrupted by neighborhood children selling Girl Scout
cookies door to door. This city of 79,000 is ranked third nationally in
metropolitan-area home foreclosures, behind Las Vegas and
Vallejo, Calif., said Daren Blomquist, a spokesman for
RealtyTrac, a company based in Irvine, Calif., that tracks
housing sales. The speculative fever that gripped the region and
drew waves of outside investors to this predominantly
agricultural area was fueled in part by the promise of the
university itself, which opened in 2005 as the first new
University of California campus in 40 years. The crash crashed
harder here. “Builders were coming into the area by the
bulkload,” said Loren M. Gonella, who owns a real estate
company here. “It was, ‘Holy moly, let’s get on this gravy
train.’ ” But visions of an instant Berkeley materializing
in the cow pastures were premature. The stylishly designed
university planned for a gradual expansion, adding 600 new
students a year. That has meant phased dorm construction, which
is financed with tax-exempt bonds repaid by student revenue.
There is room for only 1,600 students in the campus dorms, but
5,200 are enrolled. With hundreds of homes standing empty, many
of them likely foreclosures, students willing to share houses
have been “a blessing,” said Ellie Wooten, a former mayor of
Merced. Five students paying $200 a month each trump families
who cannot afford more than $800 a month.
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