The Commercial Market’s Hot Sector

The Commercial Market’s Hot Sector. Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net

In the U.S. commercial market, analysts are pointing to the sizzling warehouse sector as the industry to watch. Robust leasing for warehouses the last few quarters have prompted developers to scour the nation looking for new sites to accommodate the growth in warehouse demand.

The need is growing: Many markets have little or no available warehouse buildings that are 500,000 square feet or larger, CoStar Group reports.

Spec developers are increasing their purchases of industrial land. In the first three quarters of this year, developers have made at least $1.59 billion in land sales for proposed warehouse, industrial park, and light industrial projects. That exceeds the total industrial land sales from last year. It’s also the highest sales volume for industrial land since 2008, when it stood at $2.3 billion, according to CoStar Group national data.

Assuming planned projects aren’t delayed, the sector could reach a record-breaking level of construction in the final quarter of this year, according to Rene Circ, director of U.S. industrial research for CoStar Portfolio Strategy.

Currently, about 120 million square feet of industrial space is under construction in the U.S., with the most active markets centered in Dallas, southern California, Philadelphia, Chicago, northern New Jersey, and Houston, the CoStar Group reports.

“Overall, there is a lack of available supply across the U.S., supporting the growth of development pipelines and delivery of new product into the marketplace,” says David Toti, REIT analyst with Cantor Fitzgerald.

Source: “Spec Developers Scouring Markets for New Warehouse Sites,” CoStar Group (Oct. 15, 2014)

Mortgage Rates Dip Below 4% Threshold

Mortgage Rates Dip Below 4% Threshold. Image courtesy of cooldesign / FreeDigitalPhotos.net

Borrowing costs sank to the lowest amounts in more than a year as the 30-year-fixed rate mortgage averaged 3.97 percent this week, Freddie Mac reports in its weekly mortgage market survey. The 30-year fixed-rate mortgage is at its lowest average since the week of June 20, 2013, when it averaged 3.93 percent.

“Mortgage rates were down sharply following the decline in the 10-year Treasury yield for the second straight week,” says Frank Nothaft, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 16:

• 30-year fixed-rate mortgages: averaged 3.97 percent, with an average 0.5 point, posting a big drop from last week’s 4.12 percent. A year ago, 30-year rates averaged 4.28 percent.
• 15-year fixed-rate mortgages: averaged 3.18 percent, with an average 0.5 point, dropping from last week’s 3.30 percent average. Last year at this time, 15-year rates averaged 3.33 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.92 percent, with an average 0.5 point, dropping from last week’s 3.05 percent average. A year ago, 5-year ARMs averaged 3.07 percent.
• 1-year ARMs: averaged 2.38 percent, with an average 0.4 point, also down from last week’s 2.42 percent average. Last year at this time, 1-year ARMs averaged 2.63 percent.

Source: Freddie Mac

Useful Tips for Clients with Nosy Friends

Useful Tips for Clients with Nosy Friends. Image courtesy of franky242 / FreeDigitalPhotos.net

Clients who recently purchased a new home might find themselves in an awkward place when an inquiring mind – a friend, neighbor, colleague, or relative – questions them about the price of their home. Time Inc’s Money magazine has some helpful tips for people who don’t feel comfortable answering that question directly. Passing this information onto your clients could help them get out of sticky situation in the future.

Deflect the question with a joke. The writer of the Money article, Antonia Messa, suggests that recent home buyers could say something like, “How much did we pay? More than I would have liked!” Clients can use the joke as a “jumping-off point” for a bigger discussion about the current real estate market, bringing the attention away from their specific home and making the conversation more broad.

Present a unified front with your partner. Messa states that “some of the blame” can be shifted onto a spouse or significant other when an inquiring mind asks about the price of your home. Home buyers can say that they agreed with their partner not to discuss the home price, which hints that responding to the question is non-negotiable.

Be upfront. If home buyers want to be more direct with their nosier friends or relatives, they can simply respond to the question by telling the truth and stating that they just don’t feel comfortable discussing the cost of their new home. This is an authentic, honest answer that should get the message across to the inquirer.

Source: “Here’s What to Say When A Nosy Friend Asks How Much Your House Cost,” Money magazine (Oct. 14, 2014)

Lower Mortgage Rates Revive Refinancing Housing Boom

Lower Mortgage Rates Revive Refinancing Housing Boom. Image courtesy of hywards / FreeDigitalPhotos.net

As interest rates tumble, home owners are rushing to take advantage of the lowest rates of the year. Overall, mortgage applications rose 5.6 percent on a seasonally adjusted basis during the week ending Oct. 10, led by an 11 percent week-to-week surge in refinance applications, the Mortgage Bankers Association reports.

“Growing concerns about weak economic growth in Europe caused a flight to quality into U.S. assets last week, leading to sharp drops in interest rates,” says Mike Fratantoni, the MBA’s chief economist. “Mortgage rates for most loan products fell to their lowest level since June 2013. Refinance application volume reached the highest level since June 2014 as a result.”

The 30-year fixed-rate mortgage dropped to a nationwide average of 4.20 percent last week, from 4.30 percent the week earlier, the MBA reports. However, average mortgage rates reportedly have dropped even more this week, with many lenders reporting a 4 percent average as of Tuesday and some even offering 3.875 percent to creditworthy borrowers, according to Mortgage News Daily.

Low rates, however, aren’t spurring greater homebuying activity. Mortgage applications for home purchases, viewed as a gauge of future home buying, dropped 1 percent last week. Purchase applications are 4 percent lower than they were for the same week one year ago, the MBA reports.

“Purchase application volume continues to run behind last year’s level, but to a lesser degree,” Fratantoni says. “We continue to expect that the strengthening job market should lead to an increase in purchase activity next year.”

Source: “Mortgage Rate Drop Sparks Refinancing Boomlet,” CNBC (Oct. 15, 2014)

Major Incentives for Home Buyers This Fall.

Major Incentives for Home Buyers This Fall. Image courtesy of amenic181 / FreeDigitalPhotos.net

Home builders are throwing in some extras to lure home buyers back this fall. For example, 10 home builders in a new suburban Phoenix community called Bridges at Gilbert are offering swimming pools, built-in barbecues, and subsidized mortgages.

Joseph Beben, a home buyer in the Phoenix area, says he chose to have a house built by Woodside Homes, which agreed to cover up to $10,000 of his closing costs as well as the price of a swimming pool. Beben will pay $332,000 for a 3,000-square-foot house.

“Builders in volatile housing markets, such as Phoenix, Sacramento, Las Vegas, and Orlando, are sweetening offers as sales slow,” Bloomberg Business reports.

The large increases in home prices last year have discouraged some buyers. The number of new-home communities in Phoenix rose by a third in the past year to 457, but sales per community dropped 45 percent last month from a year prior, according to Jim Belfiore, president of Belfiore Real Estate Consulting.

Builders in Nevada also saw a big drop in sales this year. In Las Vegas, new-home sales surged 32 percent in 2013 — but in the first eight months of this year, they have fallen 26 percent from the previous year, says Dennis Smith, president of Home Builders Research, a Las Vegas-based consulting company. A similar trend is taking hold in Sacramento, Calif., where new-home sales plunged 16 percent last month year-over-year.

Builders are beginning to discount homes and look for ways to boost sales. Orlando builders, for example, reportedly are advertising discounts and appliance packages, as well as offering to cover closing costs, after new-home sales dropped 19 percent year-over-year in June.

Buyers are enjoying being the drivers at the moment in some of these markets. Bob Berg, a retiree from Chicago, was looking for homes in the Phoenix area. “A couple of builders said to me, ‘What will it take for you to buy this home?'” Berg says. “That’s kind of drastic when they say something like that. It tells me they want to move that home.”

Source: “Homebuilders Offer Goodies as Sales Slow,” Bloomberg BusinessWeek  (Oct. 9, 2014)

Low Rates Aren’t Enough for Buyers\

Low Rates Aren’t Enough for Buyers. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Federal Reserve Chair Janet Yellen and housing forecaster Robert Shiller said earlier this year that they expected low rates to serve as a stimulus to home buying this year.

Freddie Mac reported the 30-year fixed-rate mortgage dropped to 4.12 percent for the week ending Oct. 9, near the lowest average rate of the year. The rate is far less than a 20-year mean of more than 6 percent for the 30-year fixed-rate mortgage. Yet mortgage rates hovering near annual lows for the past few weeks have not spurred the market. What’s going on?

However, home sales are facing major challenges that even low borrowing costs can’t help. The Wall Street Journal explains that 2014 home sales “have been hit by poor weather, a low number of homes available for sale, and tight credit.” Also, the most popular home sales season—typically the spring and summer—has already come to an end.

“Families buying houses need to be done with that by the time that school starts,” says Guy Cecala, publisher of Inside Mortgage Finance. “Rates have been hovering around 4 percent for the better part of the peak home-buying season. I don’t think anybody has been sitting on the sidelines, waiting for rates to drop.”

Second, high credit standards in the wake of the financial crisis are still preventing many would-be buyers from getting a loan and taking advantage of the low rates.

“Right now the real issue isn’t the price of credit, it’s more the availability,” says Robert Denk, an economist with the National Association of Home Builders. Eighty three percent of homebuilders recently surveyed by NAHB say they have lost sales over the last six months due to buyers not qualifying for a mortgage. Tight credit has resulted in about 18,700 new-home sales lost, NAHB estimates.

Source: “Housing Needs More Than Mortgage Rates of 4%-ish to Boom,” The Wall Street Journal (Oct. 9, 2014)