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Updated: 31 min 9 sec ago

Vacancies Decline in REALTORS® Commercial Markets in Q2.2015

Tue, 08/18/2015 - 11:18

Commercial fundamentals in REALTORS® markets continued gaining strength during the second quarter of 2015. Based on NAR’s Commercial Real Estate Market Trends report vacancy rates mirrored regional and product variations, as most properties posted availability declines. With rising new supply, apartments experienced availability increases, as the national average rose from 6.0 percent in the second quarter of 2014 to 6.6 percent in the second quarter of this year.

Office vacancies declined 65 basis points to 15.9 percent compared with a year ago. Industrial availability posted the largest year-over-year decline—246 basis points—to 10.8 percent. Retail vacancies declined 137 basis points on a yearly basis, to 13.2 percent.

Lease concessions declined 8.1 percent. Tenant improvement (TI) allowances averaged $10 per square foot per year nationally. In keeping with higher vacancies, office properties recorded the highest TI rates at $17 per square foot per year. Apartments posted the lowest TI rates—$3 per square foot per year.


To access the latest Commercial Real Estate Market Trends report, visit: http://www.realtor.org/research-and-statistics/commercial-real-estate-market-survey.


Spring’s Mortgage Market Thaw Continues This Summer

Mon, 08/17/2015 - 15:52

Every quarter, NAR surveys a panel of lenders who specialize in mortgages for home purchase. In the second quarter of 2015, lenders continued to expand access for borrowers. Despite a decline in the share of production that was non-QM, an increasing share of lenders offered non-QM and rebuttable presumption loans. This trend points to easing of standards in the jumbo space as well as a thaw in the lower credit score portion of the conventional and FHA markets. A sharp uptick in interest from mortgage investors appears to be creating an outlet for this demand. In addition, respondents shared their opinions on the new TRID rules and FHA taxonomy.

Highlights of the Survey:


  • The non-QM share of originations shrank again to just 0.8% of production in the 2nd quarter, while the rebuttable presumption share expanded to 5.5%.
  • While willingness to originate non-QM and rebuttable presumption loans eased, the share of lenders offering these products increased dramatically.
  • For the second consecutive quarter, the share of respondents indicating an increase in investor demand for non-QM loans surged reaching 46.2%.
  • Over the next six months, respondents expect access to credit for non-QM loans to moderate slightly, while access for rebuttable presumption products remains steady and prime products continue to expand. Respondents indicated that investor demand is likely to mimic these patterns.
  • More than half of lenders are concerned about the potential impact of TRID timelines, but only expect 9.5% of closings to be delayed and 1.0% to be cancelled.
  • However, 38.5% of lenders report that TRID will moderately impact their willingness to issue pre-approval letters.
  • Only 15.4% of respondents felt the FHA’s new defect taxonomy helped to clarify the risk around the FHA’s enforcement policies and an equal share would be more willing to lend to borrowers with credit scores below 640 as a result.
  • Finally, a significant share of originators reported having issues attaining tax transcripts from the IRS, but the issue was more evident with smaller producers.


June Housing Affordability Index

Mon, 08/17/2015 - 11:09

At the national level, housing affordability is down from a year ago and for the month of June as rates inch up and modest income growth still struggles to keep pace with the growth of home prices.

  • Housing affordability is down from a year ago in June as the median price for a single family home in the US is up from a year ago. Regionally, the West had the biggest increase in price at 10.0% while the Northeast experienced the slowest price growth at 4.4%. The Midwest and the South both contributed solid price gains of 7.2%.
  • The median single-family home price is $237,700 up 6.6% from June 2014. June’s mortgage rate is 3.99, down 24 basis points (one percentage point equals 100 basis points) from last year. Nationally, affordability is down from 155.2 in June 2014 to 153.1 in June 2015.
  • Affordability is down from one month ago in all regions, and the Midwest had the largest drop of 4.8% while the West fell only 3.5%. From one year ago, affordability is down in all regions except the Northeast which had an increase of 1.1%. The West saw the biggest decline in affordability at 3.6% and the Midwest had the smallest decline of 0.7%.
  • Despite month to month changes, the most affordable region is the Midwest where the index is 191.1. The index is 161.4 in the South, 150.7 in the Northeast, and 113.9 in the West.
  • With rates on the rise potential home buyers may try to hasten their search and purchase process. Lending options with low down payments are now more widely available. Mortgage applications are currently up but demand may level off if prices and rates continue to increase. New home construction has favored the multifamily inventory stock while single family homes have been lagging in production. An increase in single family construction will help ease the inventory shortage issue and slow down price growth.
  • What does housing affordability look like in your market?  View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principle and interest payment to income).  See further details on the methodology and assumptions behind the calculation here.

Weekly Unemployment Insurance Claims Continue to Trend Below 300,000

Fri, 08/14/2015 - 14:32

This blog post was written by Erin Fitzpatrick. Erin is a Summer Research Intern and is currently studying at George Washington University pursuing a B.S. in Economics and a B.A. in Political Science.

  • Initial claims for unemployment insurance filed during the week ending August 8 increased from the previous week’s level to 274,000. This increase of 5,000 claims can be attributed as weekly volatility in the data. Initial claims for unemployment insurance continue to trend below 300,000 which analysts consider to be normal. The 4-week moving average, which strips out the weekly volatility, showed a decreased to 266,250 claims, the lowest level since April 15, 2000.
  • The decline in unemployment claims is in line with other positive labor market indicators:
    • 2.4 million more workers employed in  July 2015 compared to a year ago
    • 5.3 percent unemployment rate as of July 2015, compared to 6.2 percent a year ago
  • At the current pace of job growth, NAR expects 5.3 million in existing home sales, up from 4.9 million in 2014.

Demand in REALTORS® Commercial Markets Outpaces Construction in Q2.2015

Fri, 08/14/2015 - 12:36

Commercial space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings. Based on Energy Information Administration data approximately 72 percent of commercial buildings are less than 10,000 square feet in size.[1] An additional 8 percent of commercial buildings are less than 17,000 square feet in size. In short, the commercial real estate market is bifurcated, with the majority of buildings (81 percent) relatively small (SCRE), but with the bulk of commercial space (71 percent) in the larger buildings (LCRE).

While large buildings in top-tier markets generally receive most of the press coverage, smaller commercial properties tend to be obscured given their relatively smaller size. However, these smaller properties provide the types of commercial space that the average American encounters on a daily basis—e.g., strip shopping centers, warehouses, small offices, supermarkets, etc. These are the types of buildings that are important in local communities, and REALTORS® are active in serving these markets.

NAR’s Commercial Real Estate Market Trends gathers market information for SCRE properties and transactions, and summarizes sales and rental activity based on a quarterly survey of commercial REALTOR® practitioners. Based on the latest report, fundamentals improved during the second quarter of 2015. Leasing volume during the second quarter rose 4.7 percent compared with the first quarter 2015. Leasing rates advanced at a steady pace, rising 2.7 percent in the second quarter, compared with the 2.8 percent advance in the previous quarter.

NAR members’ average gross lease volume for the quarter was $629,000. New construction accelerated, posting a 5.7 percent gain from the first quarter of this year, a pace which more than doubled the 2.7 percent rise recorded in the first quarter 2015.

Tenant demand remained strongest in the 5,000 square feet and below, accounting for 84.0 percent of leased properties. Lease terms remained steady, with 36-month and 60-month leases capturing 60.0 percent of the market.

To access the latest Commercial Real Estate Market Trends report, visit: http://www.realtor.org/research-and-statistics/commercial-real-estate-market-survey.

[1] Smith and Ratiu (2015), “Small Commercial Real Estate Market,” National Association of REALTORS®

Mortgage Application Data (August 12th, 2015)

Fri, 08/14/2015 - 12:13

This blog post was written by La Shawn Skeete. La Shawn is a Summer Research Intern, and is currently studying at The University of Maryland, College Park pursuing a degree in Economics.

  • Seasonally adjusted mortgage application volumes increased only 0.1% from the week ending July 31st and are 17.7% higher than this time last year.

  • Seasonally adjusted applications for purchase decreased over the week by 3.5% but purchase application volumes are 19.8% higher than last year.
  • 30-year FRM rates remained constant at 4.13% and are less than they were in 2014 by 22 basis points. 
  • This week the National Association of Realtors® released data on metro median home prices as well as affordability trends and found that qualifying incomes for mortgages in the nation’s metropolitan areas are dramatically higher than the national average. For example, to purchase a median-priced home in the Washington market with 20% down requires an annual income of $72,992, which is 80% higher than the national average. The qualifying income in Northern California is twice that amount.
  • In order to maintain affordability in the years to come, income growth will need to accelerate to match rising mortgage rates, while supply must expand to soften price growth to historically stable levels.

Mortgage application data serve as an indicator to homes sales and other home related expenditures such as appliances and furniture.

Yield Premium Favors REALTORS® Commercial Markets in Q2.2015

Tue, 08/11/2015 - 15:16

Commercial real estate transactions span the price spectrum, but tend to be measured and reported based on size. While the majority of buildings (81 percent) are relatively small (SCRE), with the bulk of commercial space (71 percent) concentrated in larger buildings (LCRE)[1], larger buildings account for the majority of sales. CRE deals at the higher end—$2.5 million and above—comprise a large share of investment sales, with transaction data readily available from several sources, including Real Capital Analytics (RCA).

Data for smaller transactions—$2.5 million and below—many of which are handled by REALTORS®, are less widely available. NAR’s Commercial Real Estate Market Trends gathers market information for SCRE properties and transactions.

Based on the latest NAR report on REALTORS® CRE markets, capitalization rates declined to an average of 7.5 percent across all property types, an 85 basis point decline on a yearly basis. Apartments posted the lowest cap rate, at 6.8 percent, followed by hotel properties with average cap rates at 7.4 percent. Office and industrial spaces posted cap rates of 7.7 percent and 7.5 percent respectively. Retail transactions reported the highest comparative cap rates—8.0 percent.

The interest rate on 10-year Treasury Notes—a standard measure of risk-free investments—averaged 2.08 percent during the second quarter of 2015, unchanged from the first quarter. Based on the prevailing rates, the spread between cap rates and 10-year Treasury Notes ranged from 462 basis points in LCRE market to 542 basis points in SCRE markets. The spread denotes that CRE investors are continue to enjoy healthy returns in the rebounding markets.

As the Federal Reserve’s “forward guidance” has been hinting at a hike in the target rate in the latter half of this year, the impact on the CRE sector is likely to be minimal. On one hand, the Fed’s funds rate is essentially a short-term rate, whereas the more relevant Treasury notes carry longer-terms. On the other hand, with communications from the Federal Reserve Board being somewhat more transparent, the initial rate increase has likely been already capitalized in market prices. And on the proverbial economist’s third hand, with spreads exceeding 400 basis points, CRE investors retain a healthy cushion, as cap rates are not likely to change dramatically in the short term.

To access the latest Commercial Real Estate Market Trends report, visit: http://www.realtor.org/research-and-statistics/commercial-real-estate-market-survey.

[1] Smith and Ratiu (2015), “Small Commercial Real Estate Market,” National Association of REALTORS®

Aging in Place: Likely to Drive Growth in Home Improvement

Tue, 08/11/2015 - 10:28

In a presentation at a REALTOR® University Speaker Series, Dr. Kermit Baker, Senior Fellow of the Joint Center for Housing Studies of Harvard University, shared his research findings on the emerging trends in home remodeling.[1] Dr. Baker presented estimates that home improvement projects are expected to hit an all-time high of $324 billion by the end of 2015, a recovery to the 2007 level. Home remodeling spending on both owned homes and rentals peaked in 2007 at $324 billion as homeowners spent to improve home values that were falling during the housing collapse (Chart 1). Spending dipped to $281 billion in 2011 as homeowners reined in on major homeowner improvement projects amid weak income and job growth. With the economy continuing to improve and with rising home equity that can be used for home improvement financing,  home owners have started to spend more on improvement and maintenance projects. Owner improvement projects are the “big” discretionary spending such as kitchen and bath remodeling and system upgrades which account for about two-thirds of the total home improvement market.

Dr. Baker noted that baby boomers (born 1945-1964) are still the primary drivers of home improvement spending, accounting for about half of total home improvement spending. However, Gen-Xers (born 1965-1984) are gaining share, with their share up from 5 percent in 1995 to 30 percent in 2013 (Chart 2). Recent buyers, who moved into the home within the past three years, spend 25 percent more on the average than non-recent buyers.

With declining mobility among baby boomers, spending for accessibility features that enable senior household members to age in place is expected to be a major driver of home improvement spending. Currently, many households with aging members lack accessibility features (Chart 3). Accessibility features refer to features such as room and full-bath on entry, no steps on entry, extra-wide hallways and doors, and in-home elevators . The 55+ households are heavily concentrated in the Midwest and Northeast.

Why This is of Interest to REALTORS®: People undertake home improvements before or after selling a home. Homes that are in good condition and that cater to a buyer’s needs tend to sell faster and at a better price. Buyers of home with multigenerational family members will likely be looking for home accessibility features for senior members.

[1]               Dr. Baker is Director of the Remodeling Futures Program of the Joint Center for Housing Studies of Harvard University.  He is also Chief Economist, American Institute of Architects.

The Commercial Real Estate Sector: Some Interesting Facts

Mon, 08/10/2015 - 15:30

Size of the Commercial Building Sector

The Energy Information Administration’s Commercial Building Energy Consumption Survey (http://www.eia.gov/consumption/commercial/) has recently provided updated estimates of total U.S. commercial real estate space. The types of commercial building transactions frequently handled by REALTORS®–office buildings, retail space, warehouses, and lodging—accounted for approximately 48 Billion square feet of space in 2015.


Online retailing appears to be driving the growth of warehouse space, accompanied by increased use of flex space for offices. Increased affluence appears to be associated with increased lodging space; vacations and trips are increasing space demands. For the office sector, square feet of space use per person is declining, but the economy is increasingly office and services oriented, accounting for office space growth.

Building Characteristics

The commercial sector is essentially bifurcated between large buildings—generally over $2.5 million in value; and smaller buildings under $2.5 million in value—small strip malls, stand-alone convenience stores, etc. Although the bulk of commercial space is in large buildings, by number the majority of commercial buildings are small.

  • Approximately 70 percent of commercial buildings are smaller buildings–less than 10,000 square feet in size and generally valued well under $2.5 million. These are the buildings typically frequented on a daily basis by people on “Main Street,” –retail, small offices, strip shopping centers–in contrast to larger buildings selling over $2.5 million—multi story office buildings, office parks, large warehouses, etc.
  • Financing for “Main Street buildings” may typically be obtained through local sources, in contrast to national sources (such as major banks, pension funds, insurance companied, etc.) for large buildings.
  • For “Main Street” buildings, local investors may be the owners, rather than larger financial intermediaries.


During the Great Recession the commercial real estate sales declined in price and volume very significantly. Larger buildings were first to start the recovery in terms of price and sales volume. In the past year, the “Main Street” small buildings have started to catch up as noted in NAR’s 2015 second quarter commercial survey for smaller buildings:

  • Sales volume rose 9 percent from a year ago, with the average transaction increasing from $1.7 million in Q1.2015 to $2.0 million in Q2.2015.
  • With inventory shortage topping the list of current challenges, commercial prices accelerated, rising 7 percent year-over-year.
  • Capitalization rates averaged 7.5 percent nationally, across most property types, an 85 basis-point decline from the same period in 2014.
  • Perceived pricing differences between buyers and sellers remained the second most significant concern for NAR members.

In comparison, based on data from Real Capital Analytics (RCA)—for larger buildings (deals of $2.5 million and above):

  • Sales volume in the second quarter of this year rose 23 percent, totaling $118 billion.
  •  Prices for properties rose 3.1 percent on a yearly basis.
  • Cap rates declined 30 basis points from the second quarter 2014, averaging 6.7 percent across RCA’s property types.

As the Small Balance Advocate indicates, strong price gains and rising sales are now being experienced by investors in smaller buildings. While a large performance spread characterized the relationship between small and large markets’ sales and price growth in the first five post-recession years, market indicators have been converging over the past couple of years. Cap rates remain one indicator where smaller buildings and markets continue to carry a premium, given the underlying comparative risk. In short, small buildings are now performing approximately as well as larger buildings.

What Does this Mean for REALTORS®?

The national news continues to have articles questioning whether both residential and commercial real estate markets will continue to expand. Sales, prices, and trends for residential real estate continue to deliver good news. For commercial buildings the data seem to indicate that the market for both small and large commercial buildings is in an upswing, which should continue if job growth and GDP continue their trends as predicted by most economists.

Sales of large buildings totaled $430 billion in 2014, and small building sales appear to have been in the neighborhood of $50 billion in recent years. Although all real estate is local—which means that general conclusions will not necessarily hold for each city, it appears that the small-cap market is now in substantial recovery.

State and Local Down Payment Assitance is Important

Mon, 08/10/2015 - 11:09

One of the Federal Housing Administration’s (FHA) important functions is to provide insurance on low down payment mortgages. The majority of FHA-financed mortgages have a down payment of 3.5%. A homebuyer can get assistance for the down payement from a relative, an employer-sponsored program, or a state or local government sponsored program. Recently, the FHA’s inspector general has called into question the legality of down payment assistance programs threatening an important source of down payment funding for some borrowers.

In 2014, 27.2% of borrowers who financed their mortgage with support from the FHA received help from a relative for their down payment. Another 2.4% received help from a government source, 0.2% got help from an employer program, and the remainder, 70.2%, provided their own down payments. Most state housing finance angencys (HFAs) provide assistance for down payment and closing costs. This assistance can be in the form of a forgivable loan or a loan for the full amount that has a slightly higher rate than market. The FHA inspector general argued in a recent case that the later form of asistance is illegal as the consumer is paying for the assitance through a higher rate. The HFAs argue that the higher rate allows them to recoup the cost of the program and to provide services to other borrowers. Furthermore, the head of the FHA, Principle Deputy Assitant Secretary for Housing Ed Golding, reafirmed the FHA’s support for certain down payment assistance programs like those run by  HFAs.


What impact do these programs have on the market? The share of FHA purchase mortgages with government down payment assistance rose steadily from 1.5% in 2012 to 2.4% in 2014. Government down payment assistance programs accounted for 3.4% of mortgages financed by the FHA in the first four months of 2015.

Certain areas are more dependent on government sponsored down payment assistance programs. In 2014, many of the counties with the highest utilization rates, 15% or more, of government assisted down payments on FHA financed mortgages were concentrated in Nevada and Arizona, but Illinois, Texas, South Dakota, Kansas, and Colorado. More than a quarter of the nearly 1,800 FHA purchase mortgages originated in El Paso county Colorado received government funded down payment assistance, while Shawnee and Osage counties in Kansas had similar shares. New Orleans was also a hot spot. While the utilization rate per county was below 5% across most of California, Florida, Washington, Oregon, and Maryland, all of these states had a high share of counties per state where government down payment assistance was utilized.

Oversight is an important part of the efficiency and effectiveness of government programs. However, it is important to differentiate between programs that benefit consumers while using sustainable financing from others. A reduction or elimination of government assisted down payment programs may have a small effect nationally, but the local impact would be large.

Mortgage Application Data (August 5th, 2015)

Fri, 08/07/2015 - 11:54

This blog post was written by La Shawn Skeete. La Shawn is a Summer Research Intern, and is currently studying at The University of Maryland, College Park pursuing a degree in Economics.

  • Seasonally adjusted mortgage application volumes increased 4.7% from the week ending July 24th and are 14.5% higher than this time last year.
  • Seasonally adjusted applications for purchase increased over the week by 3.3% and application volumes are 22.9% higher than last year.
  • 30-year FRM rates decreased yet again this week, this time by 4 basis points over the week to 4.13% and remain less than they were in 2014 by 22 basis points.

  • The TILA-RESPA Integrated Disclosures (TRID) go into effect on October 3rd, 2015. TRID is designed to make loan transactions more transparent but may dramatically affect the timeline of a home-loan closing. As a result, the lag between closed sales and applications could widen.
  • Sales of single-family homes priced between $750,000 and $1 million are 21% higher than last year outpacing homes costing between $100,000 and $250,000 having only a 12.5% improvement over this period. Lenders are broadening access to meet the rising demand for jumbo loans from credit-worthy borrowers. This week JP Morgan announced a reduction in its minimum down payment from 20% to 15% and credit score from 740 to 680 for jumbo. These modifications follow similar changes by Wells Fargo and Bank of American earlier this year.

Mortgage application data serve as an indicator to homes sales and other home related expenditures such as appliances and furniture.

Latest Employment Report (July 2015)

Fri, 08/07/2015 - 11:08
  • Job gains continued in July, thereby providing a solid foundation for home buying and commercial real estate leasing activity. Not all is alright, however. Part-time employment still remains above normal and wages are barely rising. Job gains in the construction industry remain tepid despite the need to build more homes.
  • Specifically, 215,000 net new jobs were added in July, which brings the total over the 12-months to 2.9 million. From a longer term perspective, 12 million net new jobs have been added from the low point five years ago after having shed 8 million jobs during the downturn.
  • Some sectors are experiencing a faster takeoff than others. Jobs in education and health care sectors have been on a steady increase while jobs in manufacturing are barely coming around.  Also jobs in the professional business sector (which require office spaces) have been robustly rebounding while jobs in the construction industry have tepidly risen. Perhaps, due to rising inequality, the upper-tier people are outsourcing more of domestic works, as evidenced by a fast growing number of jobs in the “personal and laundry service”.
  • The unemployment rate has fallen to a multiyear low to 5.3 percent. But that partly reflects many people who have left the workforce and not looking for jobs. The opposite side of the coin is measuring the employment rate, which shows being stuck 59 percent and well below the pre-recession level of 63 percent. Moreover, part-time employment still remains elevated. Wages are rising by only 1.8 percent while rents are rising double that rate and home prices are rising by more than triple the rate.
  • As an aside, the discrepancy between the good figure on the unemployment rate and the bad figure the employment rate can partly be explained by a surge in disability benefits of recent years. Those who are on it are not counted as unemployed even though they do not have a job.

Real Estate: The New Face for Women’s Economic Empowerment

Fri, 08/07/2015 - 10:36

The typical REALTOR is a 57 year old female who is educated and a homeowner, survey says

Move over Sheryl Sandberg, the Lean In circles may be great for corporate America but female entrepreneurs are making their own way. While women’s advancement in the workforce is important, empowered women beat to their own drum in the real estate industry where they are the breadwinners. It’s the American Dream.

The National Association of REALTORS® (NAR) surveys its one million members annually to uncover a wide range of demographic information. That data reveals several interesting facts. According to the 2015 Member Profile, the typical REALTOR is a 57 year old female that is educated and a homeowner.

When the survey came out this summer, I was excited about the results. But I wanted to know more about NAR’s female membership. Our team further analyzed the data by segmenting male and female responses to the questions regarding income, family structure, marital status, and homeownership. What we discovered was the following:

  • 43 percent of all women (married or single) said real estate is their primary source of income
  • 33 percent of female REALTORS® are single, widowed, or divorced
  • Of the women that are single, 47 percent of female respondents said they support two to five people within their homes

By looking at the responses from women, we see a new picture of the female real estate agent: four in 10 female REALTORS® are the breadwinners in their homes. A half of all female REALTORS® that are single, work to support a large family.

The inherent nature of the real estate industry makes this possible. REALTORS® are their own bosses, set their own schedules and have flexibility during the day to tend to families members, and can make more sales when they put in extra hours. The real estate industry is thus one that enables a single mom to provide for her family.

Next, we wanted to see how women fared against men. We compared both gender segments of the data and found that 67 percent of female REALTORS® are married and of those homes that only have two people, 33 percent of women say real estate is their primary source of income.

According to a 2013 report released by the Pew Research Center, four in 10 moms are the primary breadwinners for their homes. The Pew Center defines breadwinner moms as “made up of two very different groups: 5.1 million (37%) are married mothers who have a higher income than their husbands, and 8.6 million (63%) are single mothers.” Fortune article cites that in 2014 that number jumped to one in two U.S. mothers. It was not surprising that female REALTORS® that support their families are on the rise.

Last, we looked at the data by age group and marketing techniques. If the typical female REALTOR® is 57, we found that 24 percent of female REALTORS® have been in the industry for less than five years. We can speculate that women are entering the industry as a second profession to likely help pay for retirement. Seventy percent of female REALTORS® use social media to market their business, 12 percent more than men in fact. More women than men also reported utilizing their website for their business. Eighty percent of female real estate agents also reported having a home office, six percent higher than men. The flexibility of the industry nonetheless affords women unique economic opportunities.

NAR’s 2015 Commercial Profile reports demographic data for commercial REALTORS®. Eighty percent of NAR members are residential brokers. However, the commercial real estate industry is a small but lucrative subset. The median income for a commercial real estate agent is $126,900 compared to all real estate agents at $45,800. According to the report, 75 percent of commercial real estate professionals are men. Nonetheless, 51 percent of new entrants into the industry (those with less than two years’ experience) were female in 2014.

Finally, we compared income for men and women in real estate. Under $35,000, women are making slightly more than men. From $35,000 to $74,999, men and women are making roughly the same amount. Over $75,000, men take the lead but only by a few percentage points in each category. While women have not surpassed men overall in terms of real income, suffice it to say that where women are the breadwinners in their families, they are doing so with less.

It will be interesting to glance at the industry’s demographic makeup after another decade. Will we expect to see women leading the industry? Will women seek higher paying positions in commercial real estate? Will we see more married women earning more than their husbands?


Like-Kind Exchanges: Highlights from California

Thu, 08/06/2015 - 11:42

This blog post was written by Erin Fitzpatrick. Erin is a Summer Research Intern and is currently studying at George Washington University pursuing a B.S. in Economics and a B.A. in Political Science.

The latest data from Bureau of Economic Analysis[1] shows that the Real Estate Industry accounted for $366.6 billion in California. This constitutes around 16 percent of the Gross Domestic Product of real estate in the United States. With the eighth largest economy in the world[2] and a significant portion of the real estate market, one must look at how policy changes will disrupt California’s market.

Internal Revenue Code (IRC) Section 1031—governing like-kind exchanges—is an important feature of the tax code, which enhances real estate transactions, thus positively impacting California’s economy. Like-kind exchanges (LKE) can be utilized by individuals, partnerships, corporations, limited liability companies, and trusts. IRC Section 1031 allows investors to defer taxes when disposing of property, as long as the proceeds are reinvested in another property of like kind within 180 days. This tax deferral feature allows increased investment in properties and encourages a more active real estate market.

The Like-Kind Exchanges: Real Estate Market Perspectives 2015 report provides information about LKEs and their impact on real estate markets. The report is based on a national survey of both commercial and residential REALTORS®. In California, about 75 percent of respondents who indicated that they participated in an LKE transaction from 2011-14 engaged in 1 – 6.  In addition, LKE transactions in California involve properties held for a longer duration, with 39 percent being held for 5 – 9 years and 27 percent held for 10-14 years.

Like-kind exchange transactions lead to additional investment in real estate properties, as over 90 percent of respondents from California indicated. The majority of California’s respondents, 59 percent, stated that the average capital investment in property improvements is between 10% – 24% of the property’s fair market value. The additional capital spending helps create jobs and increases the Gross State Product of California.

Respondents to the survey were asked how the repeal of IRC Section 1031 would change the real estate market. 89 percent of respondents stated that, without the tax deferral provision, real estate values would decrease. 97 percent of respondents also stated that there would be a decrease in demand for core assets/business/service if repeal were to occur.

To access the Like-Kind Exchanges: Real Estate Market Perspectives 2015 report, visit http://www.realtor.org/reports/like-kind-exchange-survey.

[1] U.S. Bureau of Economic Analysis, “Gross domestic product (GDP) by state (millions of current dollars)” http://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=1#reqid=70&step=10&isuri=1&7003=200&7035=-1&7004=naics&7005=1&7006=04000&7036=-1&7001=1200&7002=1&7090=70&7007=2014&7093=levels (accessed July 30, 2015)

[2] Masunaga, Samantha. “We’re No. 8: California near Top of World’s Largest Economies.” Los Angeles Times. Los Angeles Times, 2 July 2015. Web.

61 Percent of REALTORS® Reported Higher Prices from a Year Ago in June 2015

Wed, 08/05/2015 - 11:29

In the June 2015 REALTORS® Confidence Index Survey Report 61 percent of REALTORS® reported rising home prices compared to only 43 percent in December 2014 (60 in May 2015; 68 in June 2014). About 16 percent of sales reported by the respondents sold at a net premium over the listing price, compared to 11 percent of sales sold at a net premium earlier this year.

Strong demand for homes amid tight supply has pushed up prices. While rising prices are lifting homeowners out of negative equity positions, the strong price recovery amid modest growth in incomes is also making homes less affordable. Still, homes are generally affordable in May 2015, the median family income of $66,608 was higher than the necessary qualifying income to purchase a house of $41,712.

REALTORS® Price Growth Expectation in Next 12 Months, By State

Tue, 08/04/2015 - 13:15

REALTORS® who responded to the June 2015 survey expect prices to increase over a range of two to seven percent, with the median at 3.4 percent over the next 12 months, according to the June 2015 REALTORS® Confidence Index Survey Report.

Since all real estate is local, price expectations varied across local markets and states. The map shows the median expected price change in the next 12 months for each state based on the April 2015–June 2015 RCI surveys.[1] REALTORS® from Colorado and Florida had the most upbeat price expectations, with a median expected price growth in the range of five to seven percent. In California, Nevada, Washington, Oregon, Texas, Minnesota, Georgia, New Hampshire, and the District of Columbia, the median expected price growth was four to five percent. Prices are expected to increase at a modest pace of less than three percent in many Northeast states as well as in the West North Central states.

[1]  In generating the median price expectation at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C. may have less than 30 observations. The median expected price change is the value such that half of respondents expected a price growth below the median, and half of the respondents expected a price growth above the median.

Raw Count of Home Sales (June 2015)

Tue, 08/04/2015 - 10:40
  • Existing-home sales increased 3.2 percent in June from one month prior while new home sales decreased 6.8 percent. These headline figures are seasonally adjusted figures and are reported in the news. However, for everyday practitioners, simple raw counts of home sales are often more meaningful compared to the seasonally adjusted figures. The raw count determines income and helps better assess how busy the market has been.
  • Specifically, 573,000 existing-homes were sold in June while new home sales totaled 45,000. These raw counts represent a 16 percent gain for existing-home sales from one month prior while new home sales dropped 6 percent. What was the trend in the recent years? Sales from May to June rose by 3 percent on average in the prior three years for existing-homes and decreased by 2 percent on average for new homes. So this year, existing-home sales outperformed compared to their recent norm while new home sales underperformed.
  • Why are seasonally adjusted figures reported in the news? To assess the overall trending direction of the economy, nearly all economic data—from GDP and employment to consumer price inflation and industrial production—are seasonally adjusted to account for regular events we can anticipate having an effect on data around the same time each year. For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that in December retail sales rise by 35 percent because of holiday gift buying activity. Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends. That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month. When seasonally adjusted data shows an increase, then this is implying a truly strengthening condition.
  • What to expect about home sales in the upcoming months in terms of raw counts?  Independent of headline seasonally adjusted figures, expect less activity in July for existing-home sales. For example, in the past 3 years, July sales typically decline by 2 to 7 percent from June.  However, in 2013 existing-home sales increased 4 percent. For the new home sales market, the raw sales activity in July tends to drop by 3 to 23 percent compared to those occurring in June. All in all it’s no time to be thinking of vacation at these months of the year for REALTORS®.

Latest Construction Spending (June 2015)

Mon, 08/03/2015 - 11:22
  • Construction spending for apartments has been solidly increasing. But there is still a housing shortage and rents are rising at roughly twice the pace of wages. With homeownership rate at near 50-year low, there needs to be an even faster pace of new home construction of all types of homes.
  • Specifically, in June the overall construction spending rose by 12 percent from one year prior.  Good news for construction companies and construction workers.  Such a gain adds to job creation and GDP growth. The increase is currently being driven by the multifamily sector, which was up 24 percent. Single-family construction spending is only running half as fast and remains overall subdued from historical perspective.
  • Spending for office buildings and other commercial developments are on the rise as well, rising 24 percent and 8 percent respectively. Declines in commercial vacancy rates across all property types have boosted rents, which in turn are leading to more new construction.
  • Spending for highways and streets rose 15 percent from one year ago. All this could stop quickly, however, if federal transportation funding does not come through in the future.
  • As an aside, political pressures could mount for rent controls. Even though multifamily construction activity appears to have returned to normal, we are living in abnormal times. The homeownership rate having fallen to a near 50-year low. The new household formations over the past decade have been predominantly for renting and not for owning. The big gains in apartment construction are therefore still inadequate to satisfy the rising rental demand. Either some renters need to convert into ownership or we need to build even more apartments. If there is rent control then bad things will occur. Too few new apartments will be built and thereby leading to even a greater shortage.  It will be like alcohol prohibition where corruption becomes rampant and more people live in shabby housing.

Fewer Workers on Unemployment Insurance

Fri, 07/31/2015 - 15:58

This blog post was written by Erin Fitzpatrick. Erin is a Summer Research Intern and is currently studying at George Washington University pursuing a B.S. in Economics and a B.A. in Political Science.

  • The 4-week moving average for continuous claims for unemployment insurance filed during the week ending July 18 decreased to 2,255,250. Continuous claims for the week ending July 18 increased by 46,000. The decrease of the moving average is consistent with the improving job market. Data for continuous claims lags a week.

  • Initial claims data by state lag a week compared to the national level data. For the week ending July 18, the largest increase occurred in California (1,948). This was followed by Rhode Island (382) and Idaho (57). The largest decreases occurred in New York (-21,082), Pennsylvania (-7,456), Illinois (-4,043), New Jersey (-3,941), and Texas (-3,174).


  • Nar expects 2.5 million net new jobs in 2015 and 5.3 million in existing home sales.


REALTORS® Commercial Markets Record Accelerating Prices In Q2.2015

Fri, 07/31/2015 - 14:57

Commercial space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings. In terms of inventory, commercial real estate markets are bifurcated, with the majority of buildings (81 percent) being relatively small (SCRE), while the bulk of commercial space (71 percent) is concentrated in larger buildings (LCRE)[1]. The bifurcation continues along transaction volumes as well, with deals at the higher end—$2.5 million and above—comprising a large share of investment sales, while transactions at the lower end make up a smaller piece of the pie.

Data are readily available for transactions in excess of $2.5 million from several sources, including Real Capital Analytics (RCA). However, in general, data for smaller transactions—many of which are handled by REALTORS®—are less widely available. NAR’s Commercial Real Estate Market Trends gathers market information for SCRE properties and transactions, mostly valued below $2.5 million.

Commercial real estate sales volume in LCRE markets posted a 23 percent year-over-year increase, totaling $118 billion during the second quarter of 2015, based on RCA data. While the pace remained elevated, it represented a slowdown from the first quarter’s 49 percent yearly increase. Over the first half of this year, sales volume totaled $255.1 billion, a 36 percent increase over the first half of 2014.

In SCRE markets sales also advanced, with REALTORS® reporting rising investment volume.  Sales of commercial properties during the second quarter rose 9.1 percent on a year-over-year basis.  For the first half of the year, sales in REALTORS® markets advanced 11 percent year-over-year.

Prices in LCRE markets rose by 3.1 percent during the second quarter of this year, based on RCA’s Commercial Property Price Index. The advance was driven by strong appreciation in prices of apartment and CBD office properties, both of which have exceeded their prior 2007 peaks.

With the shortage of available inventory reported as the number one concern for NAR members, price growth accelerated in SCRE markets during the second quarter of 2015, with properties trading at 6.6 percent higher average prices compared with the same period in 2014. The average transaction price increased from $1.7 million in the first quarter 2015 to $2.0 million in the second quarter 2015.

To access the latest Commercial Real Estate Market Trends report, visit: http://www.realtor.org/research-and-statistics/commercial-real-estate-market-survey.

[1] Smith and Ratiu (2015), “Small Commercial Real Estate Market,” National Association of REALTORS®