Commercial Real Estate Recovering at a Slower Pace

WASHINGTON, DC–(Marketwire – Aug 27, 2012) – Positive underlying fundamentals continue to support all of the major commercial real estate sectors, but a slowdown in job creation and ongoing tight loan availability has tempered growth in some areas, according to the National Association of Realtors® quarterly commercial real estate forecast.

Lawrence Yun, NAR chief economist, said there are mixed results among the commercial sectors. “Job creation in the second quarter was about half of what we saw in the first quarter, which is moderating demand in the office sector,” he said. “Industrial and warehouse space is holding on better because imports and exports have advanced. While exports to Europe generally are down, trade has been robust with India, China and other Asian nations, along with Brazil, Mexico and our strongest trading partner — Canada.”

Although still positive, dampened demand is slightly moderating rent growth with the exception of the multifamily market. “Sharply higher demand for apartments is causing rents to rise at faster rates,” Yun said. “A return to normal household formation will mean even lower vacancy rates and higher rents in the future.”

The current commercial real estate cycle has been driven by shifts in demand without an oversupply of new construction. “The difficulty small businesses have in getting commercial real estate loans for leasing or purchase is keeping a lid on demand,” Yun explained. “Multifamily is the only commercial sector with a notable growth in new space, with some lending provided through government loans.”

With the exception of multifamily, vacancy rates remain above historic averages seen since 1999. Over that timeframe the typical vacancy rate has been 14.4 percent for the office market, 10.1 percent in industrial, 8.1 percent for retail and 5.8 percent in multifamily.

Vacancy rates are marginally declining and rents are modestly rising in all of the sectors, but significant changes in the outlook are unlikely before the end of the year. Many corporate decisions on spending and job hiring are on hold given uncertainty over the upcoming elections, whether Congress will effectively avoid a “fiscal cliff,” and unsettled issues such as health care and banking/financial regulations.

“Overall companies hold plentiful cash reserves, but they are hesitant to hire without clarity over how these outstanding issues will impact the bottom line,” Yun said.

“Commercial real estate gains could be thwarted if lending from small and community banks dry up from excessive regulatory compliance costs, and if international big-bank capital rules are applied to smaller lending institutions,” Yun added.

NAR’s latest Commercial Real Estate Outlook1 offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS, Inc.,2 a source of commercial real estate performance information.

Office Markets

Vacancy rates in the office sector are expected to fall from an estimated 16.1 percent in the third quarter to 15.6 percent in the third quarter of 2013.

The markets with the lowest office vacancy rates presently are Washington, D.C., with a vacancy rate of 9.4 percent; New York City, at 10.0 percent; and New Orleans, 12.8 percent.

Office rent is projected to increase 2.0 percent this year and 2.6 percent in 2013. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, should be 24.1 million square feet in 2012 and 47.8 million next year.

Industrial Markets 

Industrial vacancy rates are forecast to decline from 10.7 percent in the third quarter of this year to 10.5 percent in the third quarter of 2013.

The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 4.6 percent; Los Angeles, 4.8 percent; and Miami at 6.8 percent.

Annual industrial rent is likely to rise 1.7 percent in 2012 and 2.4 percent next year. Net absorption of industrial space nationally is seen at 59.8 million square feet this year and 67.2 million in 2013.

Retail Markets
Retail vacancy rates are projected to decline from 10.9 percent in the third quarter to 10.7 percent in the third quarter of 2013.

Presently, markets with the lowest retail vacancy rates include San Francisco, 3.8 percent; Fairfield County, Conn., 3.9 percent; and Long Island, N.Y., and Orange County, Calif., both at 5.3 percent.

Average retail rent is forecast to rise 0.8 percent this year and 1.3 percent in 2013. Net absorption of retail space should be 10.3 million square feet this year and 20.1 million in 2013.

Multifamily Markets
The apartment rental market — multifamily housing — is expected to see vacancy rates drop from 4.3 percent in the third quarter to 4.2 percent in the third quarter of 2013; vacancy rates below 5 percent generally are considered a landlord’s market with demand justifying higher rents.

Areas with the lowest multifamily vacancy rates currently are Portland, Ore., at 2.0 percent; New York City and Minneapolis, both at 2.2 percent; and New Haven, Conn., and San Jose, Calif., both at 2.4 percent.

Average apartment rent is likely to increase 4.1 percent in 2012 and another 4.4 percent next year. Multifamily net absorption should be 219,300 units this year and 236,600 in 2013.

The Commercial Real Estate Outlook is published by the NAR Research Division for the commercial community. NAR’s Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR.

The NAR commercial components include commercial members; commercial committees, subcommittees and forums; commercial real estate boards and structures; and the NAR commercial affiliate organizations — CCIM Institute, Institute of Real Estate Management, Realtors® Land Institute, Society of Industrial and Office Realtors®, and Counselors of Real Estate.

Approximately 78,000 NAR and institute affiliate members specialize in commercial brokerage and related services, and an additional 232,000 members offer commercial real estate services as a secondary business.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

1 Additional analyses will be posted under Economists’ Outlook in the Research blog section of Realtor.org in coming days at: http://economistsoutlook.blogs.realtor.org/.

2 Beginning in the third quarter of 2011, NAR commercial forecasts have been generated based on historical data provided by REIS, Inc., and do not correspond with prior historical information from previous forecasts. This source permits coverage of more metro areas than were previously covered.

The next commercial real estate forecast and quarterly market report will be released on November 26 at 10:00 a.m. EST.

Information about NAR is available at www.realtor.org. News releases are posted in the website’s “News and Commentary” tab. Statistical data in this release, as well as other tables and surveys, are posted in the “Research and Statistics” tab of www.realtor.org.

3 Reasons Mortgage Rates Are Rising

NEW YORK (BankingMyWay) — Mortgage rates are up for the fourth week in a row, and that has inquiring minds asking one big question:

Is the most attractive interest rate environment in history coming to an end?”

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The latest numbers from Freddie Mac reveal that 30-year fixed mortgage interest rates are still well under 4%, at 3.66% last week.

The BankingMyWay Weekly Mortgage Tracker has the average 30-year rate at 3.75% this week.

Nevertheless, this is a trend that has economists taking a closer look.

Freddie not only says fixed-mortgage rates are up for the fourth straight week, the mortgage giant also says that the rate of new single-family home construction is at a five-month low. That means less new homes on the market, with higher rates on the ones that are available for homebuyers.

“Fixed mortgage rates inched upward this week along with other long-term yields,” says Frank Nothaft, chief economist at Freddie Mac.

  • Freddie Mac noted Census Bureau data showing residential building permits moving up in July, although builders slowed the pace of construction starts on one-family homes in July to the least since March.
  • Apartment and condominium building picked up to the most since April.
  • Existing home sales rose in July from June’s eight-month low and the median sales price jumped 9.4% from a year earlier, representing the largest 12-month gain since January 2006. The price gain was broad-based, with annual increases registered in all four regions of the U.S. and led by a 24.5% increase in the Western U.S.
  • What’s driving interest rates up? Here are three significant triggers:

    1. Treasury bond yields are up

    As Nothaft notes, bond yields are up of late, with 10-year U.S. Treasury notes yielding 1.68% in the past week, up from 1.5% at the beginning of August. While these rates are relatively low in a historical sense, mortgage rates do track the direction of Treasury rates, and right now, those rates are moving upward.

    2. Housing data has improved

    Freddie Mac also notes that existing home sales are climbing, after months of soft sales activity. In addition, the median home sales price has risen 9.4% from July 2011 to July 2012. In general, the healthier the housing market, the more interest mortgage lenders charge for home loans.

    3. A quiet Eurozone

    For months, economists (and some real estate agents) were wringing their hands over the sovereign debt crisis in Europe. Financial troubles in Greece, Italy, Portugal and other European countries sent tremors across the globe, causing anxiety among financial markets, and among mortgage lenders, who feared a major global financial crisis. But in August, at least, Eurozone debt has held less sway in media headlines and in the market, and the relative quiet across the pond has been good for the global economy.

    In reverse, rising mortgage rates likely had an economic impact. The Mortgage Bankers Association reports that U.S. mortgage applications fell by 7.4% for the week ending August 17, 2012.

    A decline in mortgage applications at a time when mortgage rates are climbing may be a coincidence, but that’s unlikely. Historically, when homebuyers sense mortgage rates are higher (thus making homes more expensive), they’re less likely to try and land a mortgage.

    A one-month snapshot does not a housing market make. But the last 30 days have seen a steady hike in mortgage rates.

    If that continues in September, then it’s a trend, and could be a big one.

    –By Brian O’Connell

    More on housing:

    How to break even on your home before 2022

    Don’t point finger at mortgage points without running numbers

    Sustainable housing recovery underway?

    Follow TheStreet on Twitter and become a fan on Facebook.

    To order reprints of this article, click here: Reprints

    Slowing Job Creation, Tight Lending Hampers US Commercial Market Recovery …

    Thumbnail image for lawrence-yun.jpg

    Lawrence Yun

    According to the National Association of Realtors (NAR) quarterly commercial real estate forecast, positive underlying fundamentals continue to support all of the major commercial real estate sectors, but a slowdown in job creation and ongoing tight loan availability has tempered growth in some areas.

    Lawrence Yun, NAR chief economist, said there are mixed results among the commercial sectors.  “Job creation in the second quarter was about half of what we saw in the first quarter, which is moderating demand in the office sector,” he said.  “Industrial and warehouse space is holding on better because imports and exports have advanced.  While exports to Europe generally are down, trade has been robust with India, China and other Asian nations, along with Brazil, Mexico and our strongest trading partner – Canada.”

    Although still positive, dampened demand is slightly moderating rent growth with the exception of the multifamily market.  “Sharply higher demand for apartments is causing rents to rise at faster rates,” Yun said.  “A return to normal household formation will mean even lower vacancy rates and higher rents in the future.”

    The current commercial real estate cycle has been driven by shifts in demand without an oversupply of new construction.  “The difficulty small businesses have in getting commercial real estate loans for leasing or purchase is keeping a lid on demand,” Yun explained.  “Multifamily is the only commercial sector with a notable growth in new space, with some lending provided through government loans.”

    With the exception of multifamily, vacancy rates remain above historic averages seen since 1999.  Over that timeframe the typical vacancy rate has been 14.4 percent for the office market, 10.1 percent in industrial, 8.1 percent for retail and 5.8 percent in multifamily.

    Vacancy rates are marginally declining and rents are modestly rising in all of the sectors, but significant changes in the outlook are unlikely before the end of the year.  Many corporate decisions on spending and job hiring are on hold given uncertainty over the upcoming elections, whether Congress will effectively avoid a “fiscal cliff,” and unsettled issues such as health care and banking/financial regulations.

    “Overall companies hold plentiful cash reserves, but they are hesitant to hire without clarity over how these outstanding issues will impact the bottom line,” Yun said.

    “Commercial real estate gains could be thwarted if lending from small and community banks dry up from excessive regulatory compliance costs, and if international big-bank capital rules are applied to smaller lending institutions,” Yun added.

    NAR’s latest Commercial Real Estate Outlook  offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets.  Historic data for metro areas were provided by REIS, Inc., a source of commercial real estate performance information.

    Office Markets

    Vacancy rates in the office sector are expected to fall from an estimated 16.1 percent in the third quarter to 15.6 percent in the third quarter of 2013.

    The markets with the lowest office vacancy rates presently are Washington, D.C., with a vacancy rate of 9.4 percent; New York City, at 10.0 percent; and New Orleans, 12.8 percent.

    Office rent is projected to increase 2.0 percent this year and 2.6 percent in 2013.  Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, should be 24.1 million square feet in 2012 and 47.8 million next year.

    Industrial Markets

    Industrial vacancy rates are forecast to decline from 10.7 percent in the third quarter of this year to 10.5 percent in the third quarter of 2013.

    The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 4.6 percent; Los Angeles, 4.8 percent; and Miami at 6.8 percent.

    Annual industrial rent is likely to rise 1.7 percent in 2012 and 2.4 percent next year.  Net absorption of industrial space nationally is seen at 59.8 million square feet this year and 67.2 million in 2013.

    Retail Markets

    Retail vacancy rates are projected to decline from 10.9 percent in the third quarter to 10.7 percent in the third quarter of 2013.

    Presently, markets with the lowest retail vacancy rates include San Francisco, 3.8 percent; Fairfield County, Conn., 3.9 percent; and Long Island, N.Y., and Orange County, Calif., both at 5.3 percent.

    Average retail rent is forecast to rise 0.8 percent this year and 1.3 percent in 2013.  Net absorption of retail space should be 10.3 million square feet this year and 20.1 million in 2013.

    Multifamily Markets

    The apartment rental market – multifamily housing – is expected to see vacancy rates drop from 4.3 percent in the third quarter to 4.2 percent in the third quarter of 2013; vacancy rates below 5 percent generally are considered a landlord’s market with demand justifying higher rents.

    Areas with the lowest multifamily vacancy rates currently are Portland, Ore., at 2.0 percent; New York City and Minneapolis, both at 2.2 percent; and New Haven, Conn., and San Jose, Calif., both at 2.4 percent.

    Average apartment rent is likely to increase 4.1 percent in 2012 and another 4.4 percent next year.  Multifamily net absorption should be 219,300 units this year and 236,600 in 2013.

    Florida Realtors® Honors Award Winners at Convention

    Todd Dantzler Named 2012 Realtor of the Year

    ORLANDO, Fla., Aug. 27, 2012 /PRNewswire/ — Florida Realtors® recognized Todd Dantzler, 2000 president of the state Realtor association, as its 2012 Realtor of the Year. The award – one of several – was presented during Florida Realtors’ recent annual Convention Trade Expo at the Marriott World Center in Orlando, Fla.

    (Logo: http://photos.prnewswire.com/prnh/20110314/DC64568LOGO)

    “This is a surprise,” said Dantzler upon accepting the award. “Being a Realtor – it’s been my life. It’s who I am.” Florida Realtors has presented both the Realtor of the Year and Associate Realtor of the Year awards for more than 50 years. Winners are honored as the greatest individual lifetime contributors to their local Realtor board, community, state association and the National Association of Realtors (NAR).

    On the local level, Dantzler has served on committees and projects for his home Realtor organization, the East Polk County Association of Realtors (EPCAR), as “far back as we have records,” according to Association Executive Marisol Espinoza. He joined EPCAR in 1981 and has since been an active part or chair of almost every committee.

    Speaking of Dantzler, Espinoza said, “He doesn’t serve for the recognition or the prestige of the position. He truly wants the association to grow and be the best it can be. He is always willing to contribute in whatever way he can.”

    Dantzler is just as involved with Florida Realtors – his contributions to committees, work groups and task forces for the state association take up four pages and span 32 years (from 1980 to 2012) in the entry form that his local association submitted for Realtor of the Year consideration. Leading up to the year he was Florida Realtors’ president, Dantzler served the state association in numerous ways, including the leadership positions of secretary, treasurer and president-elect.

    At the national level, he decided to dive into the public policy side of the National Association of Realtors back in 1997. An NAR board member for many years, he also became involved in its Land Use, Property Rights and the Environment Forum.

    Dantzler is as dedicated to his community as he is to his profession. He is a current Polk County commissioner and serves on the board of directors for the Central Florida Development Council and for the East Polk Committee 100. He is a member of the Winter Haven Hospital’s board of trustees, and is active in his church, where he serves as a deacon.

    Associate Realtor of the Year
    Florida Realtors honored Joan Alipo of the Jupiter-Tequesta-Hobe Sound Association of Realtors (JTHS) as Associate Realtor of the Year.

    “Wow – all I can say is honestly, I’m so proud and so overwhelmed by receiving this award,” said Alipo. “I just want to thank everyone, really, and my husband for always supporting me at every Florida Realtors and NAR event!”

    A former president of her local association, she was named JTHS Realtor of the Year in 2005, is a member of its Honor Society and has achieved the Lifetime Professional Achievement Award. As an example of her positive leadership, Alipo was instrumental in forming a partnership between JTHS and the town of Jupiter on several housing initiatives, which resulted in her local association receiving NAR’s prestigious “Ambassador for Cities” Award in 2009.

    She is the current vice chair of Florida Realtors’ Global Business Committee, and served as District 3 Vice President in 2011; as DVP, she advocated for the “Paws For Patriots” program and continues to promote it through her email and website.

    Supporting global business and international real estate opportunities is a cause near and dear to Alipo’s heart: She worked closely with NAR on behalf of JTHS, becoming the International Ambassador Association to Denmark in 2009, and represented her local association during the Embassy visit to Denmark during the NAR Midyear Meetings in Washington, D.C., in 2009; the Peru Embassy visit in 2011; and the Embassy visit to the Netherlands in 2012.

    A long list of community organizations benefit from Alipo’s efforts: She supports Easter and Christmas programs for underprivileged children, rolls up her sleeves for Habitat For Humanity projects and reaches for her wallet to support the military. She developed and organized the “Parade of Neighborhoods,” an affordable home project to help all citizens realize the dream of homeownership.

    Realtor Achievement Award
    Florida Realtors honored Dale Peterson with the 2012 Achievement Award, which recognizes a Realtor who serves as manager, broker of record, or officer in his or her company. The award acknowledges the winner’s previous three years’ contributions to the community, local, state and national Realtor associations.

    A member of the Emerald Coast Association of Realtors (ECAR), Peterson is the current treasurer for his local association, while also serving on its Budget and Finance Committee.

    At the state level, Peterson has long been a fixture at Florida Realtors, but increased his participation in recent years. Last year, he chaired the Property Management Council. He’s an active member of the Resort and Second Specialist Forum and the current District 9 Vice President. Nationally, he was an NAR director in 2010 and 2011, and also served on NAR’s Resort and Second Home Real Estate Committee.

    Within the community, Peterson’s commitment to the local economy includes founding a local fishing fleet. He’s also a trustee of the Okaloosa County Economic Development Council, which he chaired in 2011.

    Commercial Realtor Achievement Award
    The Commercial Realtor Achievement Award honors a Realtor’s lifetime of contributions to commercial activities at the local, state, national and community levels. Receiving the 2012 Commercial Realtor Achievement Award is Cynthia Shelton, president of Florida Realtors in 2009 and a member of the Orlando Regional Realtor Association (ORRA). She was recognized by Florida Realtors as its Realtor of the Year in 2010.

    Shelton has continuously demonstrated a strong commitment to the commercial activities of her local association. She served as a board member of the Commercial Society of ORRA and was an active member of its Commercial Overlay Board and the Retail Subcommittee. Prior to her ORRA membership, Shelton was a member of the Greater Tampa Association of Realtors (GTAR) and served as its president in 1994.

    During her tenure as president of the state association, she helped create the Florida Realtors Education Foundation, which provides real estate-related educational scholarships. And, Shelton was instrumental in the implementation of a branding campaign for Florida Realtors, the first of its kind in the history of the association.

    At the national level, she has been involved in NAR’s commercial activities for 25 years. She has served on NAR’s Board of Directors for many years, most recently from 1997 to the present. Last year, Shelton was NAR Region 5 Regional Vice President.

    Her efforts on behalf of the commercial real estate industry extend to other organizations; in 2002, she served as the national president of the CCIM Institute, the largest network for commercial real estate professionals. She also is a faculty member for CCIM Institute and was honored with the Hank Thompson Award, Florida CCIM Member of the Year. In 2011, the Central Florida Commercial Association of Realtors awarded her with the Wilbur Strickland Award in recognition of her dedication and support. Shelton has been an active member of the Commercial Real Estate Women (CREW) organization since 1999.

    Humanitarian of the Year Award
    Two people were named as co-recipients of the 2012 Humanitarian of the Year award this year, proving that Realtors make a difference in communities. John Castelli, a member of the Realtor Association of Greater Fort Lauderdale (RAGFL), has devoted numerous volunteer hours to helping both children and the elderly.

    For the past two years, he has been president of RAGFL’s Charitable Foundation, established in 1987 to help people with specific needs that cannot be met by any other source. He led the foundation’s largest fundraiser in history – attracting the most attendees and raising the most money.

    For many years, the foundation has hosted a Christmas party for children of families staying at the Broward Partnership for the Homeless, a 57,000-square-foot 200-bed residential facility. These kids know Castelli as Santa – wearing his own Santa suit and a professional wig and beard to play the part convincingly. Last year, the children were encouraged to write letters to Santa with their wish lists. Even though he had just been in the hospital, Castelli gave the performance of a lifetime: 29 children, from toddlers to teenagers, were given hope and trust along with the toys, shoes and clothing on their lists.

    And, in his spare time, Castelli volunteers at Sunserve, a not-for-profit community foundation that provides the elderly with day care, recreational activities and medical services.

    Phil Wilson, a member of the Punta Gorda-Port Charlotte-North Port Association of Realtors, was also honored by Florida Realtors as Humanitarian of the Year for 2012 in recognition of his volunteer efforts spanning more than two decades. He has been the community auctioneer for the American Cancer Society for 25 years. Wilson has used his skills as a professional auctioneer to help raise funds for nearly every community group in Charlotte County, including the YMCA, Red Cross, Boy Scouts, 4H Club, Rotary Club, American Heart Association, Center for Abuse and Rape Emergencies, Leukemia Cup Race, Future Farmers of America, Kiwanis Clubs, high schools, churches, medical centers and many others.

    Wilson was instrumental in the “Save The Courthouse” project with the county historical society. A talented fiddle and saxophone player, he has played fundraisers for nursing homes, the Salvation Army and the Military Heritage Museum among others.

    No stranger to winning awards for his giving nature and kind heart, Wilson received his local Realtor association President’s Award for Outstanding Community Service, and also won the Rotarian of the Year Eagle and “Service Above Self” awards. The Charlotte County Chamber of Commerce recognized Wilson and his wife Linda with its 2011 “Pacesetter” award for community excellence.

    Other Florida Realtor award winners this year:

    Education Individual Achievement: Beverly Pindling, Orlando Regional Realtor Association

    Graduate Realtor Institute Scholastic Achievement: Yara Rodriguez, Miami Association of Realtors

    Florida Realtor Magazine Best Article: Eddie Tybuszynski, Realtor Association of the Palm Beaches, for the article, “Referrals That Won’t Stop”

    Florida Realtor Magazine Editorial Excellence: Joe Adkins, Orlando Regional Realtors Association, for the article, “$100 Company Phone Bill”

    Florida Realtors®, formerly known as the Florida Association of Realtors®, serves as the voice for real estate in Florida. It provides programs, services, continuing education, research and legislative representation to its more than 115,000 members in 63 boards/associations. Florida Realtors® Media Center website is available at http://media.floridarealtors.org.

    Freddie Mac sells $3.5 bln bills at mixed rates


    Mon Aug 27, 2012 7:35pm IST

    Aug 27 (Reuters) – Freddie Mac, the No. 2 U.S. home funding company, said on Monday it sold $3.5 billion of reference bills at mixed rates and demand compared with the most recent sales of similar maturities.
    Freddie Mac said it sold $500 million one-month bills, due Sept. 24, 2012, at a 0.099 percent stop-out rate, up from the 0.085 percent rate for its $500 million of one-month bills sold July 30.
    Freddie Mac said it sold $1.5 billion of three-month bills due Nov. 26, 2012 at a 0.l23 percent stop-out rate, also up from a 0.120 percent rate for its $1.5 billion three-month bills sold Aug. 20.

    The company sold $1.5 billion of six-month bills due Feb. 25, 2012 at a 0.157 percent rate, down from a 0.160 percent rate for its sale of $1.5 billion bills a week ago.
    Demand for the one-month bills was lower with a bid-to-cover ratio of 5.45 compared with 5.85 for the one-month bills sold July 30.

    Demand for the three-month bills was also lower with the bid-to-cover ratio at 4.00 versus 4.65 for bills sold Aug. 20, while demand for the six-month bills was unchanged at 4.30 for its bills sold a week ago.
    A bid-to-cover ratio reflects the amount of bids compared with the amount offered. A lower ratio indicates weaker demand.

    Editorial: Fannie, Freddie become more necessary than evil

    Two cheers for Fannie Mae and Freddie Mac. OK, maybe it’s just one-and-a-half cheers.

    In any case, there has been enough good news lately about Fannie and Freddie to add them to the list of government projects and interventions that don’t deserve a rousing ovation but whose otherwise lackluster performance is preferable to the outcome if they had been allowed to tank during the financial crisis.

    Of course, Fannie Mae and Freddie Mac contributed to the financial crisis. Like the other suckers and hucksters — financial institutions often were both — they dealt in mortgage-backed securities that inflated the housing bubble and then exploded it.

    As “government sponsored enterprises,” they technically were not official arms of the federal government. In fact, they got into such trouble in part because their stockholders and high-ranking employees wanted them to act more like private financial institutions and reap a cut of the profits that private lenders were making by selling fat mortgages to buyers who defaulted when reality hit.

    Fannie and Freddie owned or guaranteed more than half of all the mortgages in America. Their policy role was to increase the pool of money available for mortgages. Like their completely private cousins, though, Fannie and Freddie were influenced by greed to set disastrously low lending standards. When they neared collapse, with potentially disastrous results for the economy, the Bush administration put them into “conservatorship” in September 2008. This was another case of privatizing the profits but socializing the losses.

    And the losses were huge. Taxpayers have pumped about $190 billion into FMFM. They aren’t healthy yet. But without Fannie and Freddie, consumers would have had an even tougher time getting home loans in the past four years. The real estate market would have been even more limp, the recovery even more sluggish.

    Fannie and Freddie even have started having profitable quarters and paying taxpayers back. In the second quarter, The New York Times reports, Fannie Mae had net income of $5.1 billion and Freddie Mac $3 billion. That indicates underlying improvement in the real estate market, which is of particular interest in Florida.

    The Treasury Department also just announced a plan to rationalize the way Fannie and Freddie pay back taxpayers. To this point, they have returned nearly $50 billion in dividends. But, in a case of bureaucratic foolishness, they have been borrowing money from the Treasury to pay mandated dividend payments…back into the Treasury. Under new rules, Fannie and Freddie simply will return all profits to the Treasury.

    The consensus in Washington is that Fannie and Freddie need to shrink or go away. The new Treasury rules require Fannie and Freddie to shed their loan portfolios more quickly. Still, Washington needs to be cautious. Private lenders are nowhere near ready to provide the liquidity and security that the housing recovery still needs. In fact, the need for Fannie and Freddie might never be zero. They’re no longer part of the problem. They should survive as long as they are part of the solution.

    Jac Wilder VerSteeg

    for The Post Editorial Board

    Realtors to offer new measure of home prices

    a href=http://www.shutterstock.com/pic.mhtml?id=55844071Housing statistics/a image via Shutterstock.Housing statistics image via Shutterstock.

    Florida’s state Realtor association will soon begin publishing a home price index that’s based on repeat sales, rather than median home price, and the National Association of Realtors has a similar project in the works.

    The National Association of Realtors and most state and local Realtor associations currently track median home prices. But indexes that track median home price don’t necessarily provide an accurate picture of what’s happening to the value of housing, Florida Realtors said.

    That’s because changes in median home price may reflect a change in the mix of housing sales, rather than an underlying trend in housing values. An increase in the proportion of sales at the lower end of the market, including distressed property sales, may push down median home price, for example. Conversely, an an increase in median home price may reflect increased sales of larger, more luxurious properties, rather than appreciating home prices, the trade group noted.

    To address such issues, the Standard Poor’s Case-Shiller Home Price Indices and the Federal Housing Finance Agency’s Home Price Index track repeat sales or refinancings of the same property.

    But Realtors have questioned the accuracy of the SP Case-Shiller index, and FHFA’s Home Price Index tracks only single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975.

    The new Florida Realtors Real Estate Price Index will use data from the Florida Department of Revenue to chart home prices for the state and metro areas during the last 17 years.

    Florida Realtors will post more information about the index and how it works next month on the research page of FloridaRealtors.org. Soon after that, the group says it will begin publishing a statewide real estate price index, with indexes for individual metro areas available only to Realtors who provide login information.

    “This is really the first of its kind in the nation,” Florida Realtors Chief Economist John Tuccillo said in a statement. “No other state has a real estate price index that’s this comprehensive, and we’re pretty proud of it.”

    NAR is working on its own version of a repeat sales price index, but the the task “is quite a bit bigger” on a national scale, Realtor Magazine reports.

    “It’s an ambitious and complicated undertaking, and it’ll take some time for the database to be robust enough to really give a clear picture of what’s happening, but the effort is promising,” Realtor Magazine Senior Editor Robert Freedman says of the Florida Realtors’ home price index.

    One challenge facing anyone building a home price index is removing anomalies like home price increases that stem from renovations or additions, or price drops due to storm damage or non-arm’s-length transactions.

    Indexes based on repeat sales typically suffer from a time lag, because of the time it takes before data on closed sales data is available from public records.

    Florida Realtors is currently inputting 2011 data that’s only recently been made available. Going forward, the index will be updated on a quarterly basis using state MLS data, which will be reconciled with actual 2012 numbers once the state’s data becomes available next year, Tuccillo told Realtor Magazine.

    In December, NAR said it had overestimated home sales by more than 14 percent since 2007 because of a drift in an adjustment made to MLS data to account for sales that take place outside of MLSs. In publishing “rebenchmarked” home sales statistics going back to 2007, NAR said previously reported estimates of median home prices and months’ supply of inventory were not affected by the error.

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    Netwatch Provides Vital Tips for Securing a Summer Home in the Off Season

    BOSTON, MA–(Marketwire -08/27/12)-
    According to the National Association of Realtors’ 2012 Investment and Vacation Home Buyers Survey, vacation home sales rose 7.0 percent to 502,000 in 2011 from 469,000 in 2010. With summer homes on the rise in a down economy, it is vital for homeowners to protect their investments from the threat of crime in the off-season. Remote visual surveillance company Netwatch USA, an expert in luxury home security, today announced seven tips to keep summer homes safe as Labor Day approaches.

    “Empty summer homes are easy targets for potential intruders, and according to the FBI, the most recent burglary statistics indicate a 3.5% increase in the Northeast region,” says former Boston Police Commissioner and Netwatch board member Kathleen O’Toole. “In today’s world, high net-worth individuals require more sophisticated security solutions to protect themselves, their families, their data and their property.”

    Netwatch uses remote surveillance tactics to prevent crimes in summer homes when owners are unable to be there year-round. As homeowners begin to close up their second homes for the off season, CEO David Walsh provides the following safety tips to keep in mind:

    • Ask a neighbor or professional property manager to help. Enlist people to mow lawns and even park in your driveway while you’re gone if possible.
    • Give local police the heads up. Your town may have a community safety program that allows a police officer to come to the house and do a safety check before you leave to alert you to any potential security issues.
    • Think defensively. Make sure you stop all mail, lock all windows and doors, pull your blinds so thieves can’t see your valuables inside, and even put dowels in sliders so they can’t pull them open.
    • Lighting is key, even when you aren’t there. Take advantage of outdoor lights with motion sensors, solar lights on walkways, or even using lights and radios on timers inside.
    • Don’t forget about your pipes. Make sure to seal up your basement and pull in any air conditioners that may contain copper piping.
    • Keep your driveway plowed, even if you aren’t there. In case something does go wrong, you want to be sure that police and firefighters can easily access your home.
    • Monitor your house remotely. Set up your smartphone to monitor cameras inside and outside of your home. This allows homeowners to rest easier knowing they can see what’s happening at all times.

    “We’ve seen increases of up to 62% in unoccupied housing being targeted in the off season,” said Walsh. “As the advances in technologies and the introduction of more stringent security measures mean commercial properties pose a higher risk of apprehension, criminals are turning their attention to more vulnerable but similarly lucrative targets such as the summer homes of high net-worth individuals.”

    With more than 35,000 crimes prevented since inception in Ireland in 2003, the Netwatch system deploys the most advanced video processing technologies to alert its Communication Hub to unacceptable behavior on a client’s property. Intervention Specialists direct operations through remote CCTV monitoring and intervene as soon as security is breached by alerting the intruders they are being watched and the police have been informed. You can find Netwatch online at www.netwatchusa.com and on Twitter at @netwatchsystem.

    About Netwatch USA
    Established in 2003, Netwatch currently employs 122 staff and, from its Carlow Communication Hub, monitors in excess of 25,000 cameras across the globe. Netwatch was the first company in Europe to combine specialist video processing technologies with satellite communications to provide safe, preventative, immediate and cost effective protection solutions for clients. With over 35,000 crimes prevented since start-up, the Netwatch system deploys the most advanced video processing technologies to alert its Communication Hub to unacceptable behavior on a client’s property. Netwatch operates in four continents with clients across Europe, South Africa, the Middle East and the USA.

    Contact Info:
    Laura Christo
    Email Contact
    978.729.5721

    Shrinking Freddie, Fannie worries some

    Community banks and credit unions could be hit the hardest, because large banks can package mortgages as securities and sell them off to raise more money to lend.

    “The vast majority of the mortgages that we provide are 30-year, fixed-rate mortgages that we sell through partnerships to Fannie and Freddie,” said Juli Anne Callis, president and chief executive of the National Institutes of Health Federal Credit Union in Rockville. “Without them, we would have $15 million to $20 million in mortgage needs that we could not fulfill ever month.”

    “Frankly, anything that’s 20 years or longer, we wouldn’t be able to keep on the books in this low-rate environment,” she added.

    It is still not clear exactly how the wind downs will occur. Both Democrats and Republicans agree that the entities need to be phased out eventually, but have different takes on exactly when and how that should happen.

    “Right now we’re still in a broad theoretical stage with this stuff,” said Joe Pigg, senior counsel at American Bankers Association. “Even though the Treasury calls this an accelerated winding down, Fannie and Freddie can’t be wound down until Congress acts and puts something else in their place.”

    Even so, area banks say they are already looking into private investors to take the place of the mortgage finance giants.

    “Fannie and Freddie have been very strong partners for us,” said Lynne Pulford, manager of the mortgage division at Sandy Spring Bank in Olney. “We’re looking for private investors to fill that void if they were in fact to go away.”

    Other institutions, such as the NIH Federal Credit Union, said they likely would have to turn to shorter-term loans, like five- and seven-year mortgages, and cut back on fixed-rate offerings.

    “For members, it would mean a situation where they’d have to buy variable rate mortgages,” Callis said. “They’re not awful, but you can bet they’ll go up, considering how low rates are now.”

    The Federal Reserve has kept the interest rates for bank-to-bank lending near zero since December 2008, and has said that it will continue to do so at least until the end of 2014.

    “The 30-year, fixed-rate loan is a very popular product,” said Pigg, the bankers association counsel. “I think whatever system we evolve to would have to find a way to meet market demand and continue to serve those loans.”

    Some area banks, though, said they won’t be affected — at least not directly. National Capital Bank in Southeast Washington has never bundled its mortgage loans and sold them in secondary markets, according to Jim Didden, the bank’s president.

    Instead, the bank, which was founded in 1889, backs all loans itself and keeps mortgages on its books.

    “It’s the traditional way banks did business,” Didden said. “We keep the option open in case we want to sell some of these 30-year loans in the future. But for now, we make good loans that we’re comfortable with — and so far it’s served us well.”

    Existing-Home Sales Improve in July, Prices Continue to Rise

    WASHINGTON — Sales of existing homes rose in July even with constraints of affordable inventory, and the national median price is showing five consecutive months of year-over-year increases, according to the National Association of Realtors. Monthly sales rose in every region but the West, where inventory is very tight.

    Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.3 percent to a seasonally adjusted annual rate of 4.47 million in July from 4.37 million in June, and are 10.4 percent above the 4.05 million-unit pace in July 2011.

    Lawrence Yun, NAR chief economist, said housing affordability conditions are very good. “Mortgage interest rates have been at record lows this year while rents have been rising at faster rates. Combined, these factors are helping to unleash a pent-up demand,” he said. “However, the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions.”

    NAR is asking the government to expeditiously release the foreclosed properties it owns in inventory-constrained markets.

    Given population and demographic demand, Yun said existing-home sales could be in a normal range of 5 to 5.5 million if all conditions were optimal. “Sales may reach 5 million next year, but it will require more sensible lending standards and stronger job creation to push beyond that,” he said.

    According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.55 percent in July from 3.68 percent in June; the rate was 4.55 percent in July 2011; recordkeeping began in 1971.

    “Fewer sales in the lower price ranges are contributing to stronger increases in the median price, but all of the home price measures now are showing positive movement and that is building confidence in the market,” Yun said. “Furthermore, the higher median price naturally means more housing contribution to economic growth.”

    The national median existing-home price2 for all housing types was $187,300 in July, up 9.4 percent from a year ago. The last time there were five back-to-back monthly price increases from a year earlier was in January to May of 2006. The July gain was the strongest since January 2006 when the median price rose 10.2 percent from a year earlier.

    Distressed homes – foreclosures and short sales sold at deep discounts – accounted for 24 percent of July sales (12 percent were foreclosures and 12 percent were short sales), down from 25 percent in June and 29 percent in July 2011.

    Foreclosures sold for an average discount of 17 percent below market value in July, while short sales were discounted 15 percent.

    NAR President Moe Veissi, broker-owner of Veissi Associates Inc., in Miami, said pricing is the primary factor in determining how long homes stay on the market. “Correctly priced homes, regardless of price range, are selling quickly these days,” he said.

    “Fully one-third of homes purchased in July were on the market for less than a month, and only 21 percent were on the market for six months or longer. Sellers should carefully consider a Realtor’s(R) advice about marketing their homes,” Veissi said.

    Total housing inventory at the end July increased 1.3 percent to 2.40 million existing homes available for sale, which represents a 6.4-month supply at the current sales pace, down from a 6.5-month supply in June. Listed inventory is 23.8 percent below a year ago when there was a 9.3-month supply.

    Yun said there are distortions in housing inventory. “The total supply of housing inventory appears to be balanced in historic terms, but there are notable shortages in the lower price ranges which are limiting opportunities for first-time buyers,” he said. “The low price ranges also are popular with investors, so entry-level buyers are at a disadvantage because many investors are making all-cash offers.”

    First-time buyers accounted for 34 percent of purchasers in July, up from 32 percent in June; they were also 32 percent in July 2011. Under normal conditions, entry-level buyers account for four out of 10 purchases.

    All-cash sales slipped to 27 percent of transactions in July from 29 percent in June; they were 29 percent in July 2011. Investors, who account for the bulk of cash sales, purchased 16 percent of homes in July, down from 19 percent in June; they were 18 percent in July 2011.

    Single-family home sales increased 2.1 percent to a seasonally adjusted annual rate of 3.98 million in July from 3.90 million in June, and are 9.9 percent above the 3.62 million-unit level in July 2011. The median existing single-family home price was $188,100 in July, up 9.6 percent from a year ago.

    Existing condominium and co-op sales rose 4.3 percent to a seasonally adjusted annual rate of 490,000 in July from 470,000 in June, and are 14.0 percent higher than the 430,000-unit pace a year ago. The median existing condo price was $180,700 in July, which is 7.7 percent above July 2011.

    Regionally, existing-home sales in the Northeast rose 7.4 percent to an annual level of 580,000 in July and are 13.7 percent above July 2011. The median price in the Northeast was $254,200, up 3.5 percent from a year ago.

    Existing-home sales in the Midwest increased 2.0 percent in July to a pace of 1.04 million and are 16.9 percent higher than a year ago. The median price in the Midwest was $154,100, up 5.8 percent from July 2011.

    In the South, existing-home sales rose 2.3 percent to an annual level of 1.77 million in July and are 8.6 percent above July 2011. The median price in the region was $162,600, up 6.6 percent from a year ago.

    Existing-home sales in the West were unchanged at an annual pace of 1.08 million in July but are 5.9 percent higher than a year ago. With pronounced inventory shortages, the median price in the West was $238,600, a jump of 24.5 percent from July 2011.