Tag Archives: National Association of Exclusive Buyer Agents

Realtors® Say Commercial Market on the Upswing, Construction Activity Sluggish

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Washington, D.C. – May 18, 2018 (nar.realtor) A strengthening economy and job growth nearing historic levels have given Realtors® confidence in future commercial real estate market conditions, according to speakers at a commercial real estate forum during the 2018 REALTORS® Legislative Meetings & Trade Expo.

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Lawrence Yun, chief economist of the National Association of Realtors®, led a panel discussion about the economic forces shaping commercial real estate markets and expressed that a favorable environment will lead to a rise in demand for commercial spaces in 2018 and 2019.

“Even after 90 straight months of job gains, the economy looks likely to expand over the next two years with job openings at the highest level in nearly 10 years. The gross domestic product should experience a 2.7 percent growth, therefore the demand for commercial spaces is expected to rise this year and next year,” Yun said.

One area of concern for Realtors® is the lack of construction, which is hindering inventory. Yun pointed out that with subdued construction activity in commercial real estate in recent years, vacancy rates will continue to fall and rents will rise. “Concerns are growing around commercial property prices, which have dramatically shot up by 85 percent in the past seven years. With interest rates recently rising, commercial prices could decline and commercial investment sales may see an additional dip, though at a modest pace,” he said.

Most commercial sectors are on the upswing, according to Yun. Office demand is strong because of rising employment and moderate office supply, which will lead to modest vacancy rates, mainly due to the expansion of telecommuting. Increased trade and rising e-commerce has the industrial sector on a hot streak, with a growth of 20 percent, while retail sales are growing at 5 percent and completions remain low, with rents experiencing solid growth.

Two panelists joined Yun to discuss trends in multi-family demand and the impact the global economy could have on commercial real estate over the next year. Richard Barkham, global chief economist at CBRE, gave his perspective on global economic trends and his outlook for commercial real estate.

“Commercial real estate is buoyant these days, and first quarter leasing is through the roof. Interest rates may turn up, but slowly over the next few years, and inflation remains weak, as wage growth has failed to gain traction. Relatively, supply is in line with demand and cap rates have hit a bottom and remain extremely firm,” Barkham said.

Danielle Hale, chief economist at realtor.com® also shared highlights from her outlook for multi-family households.

“Apartment demand remains robust and the sector is seeing growth, especially in mixed-use urban development, as many consumers prefer a neighborhood close to work and entertainment,” said Hale. “Millennials are shifting into the largest generation of homeowners and will be a huge boom to the multi-family market in recent years. Multi-family building has seen the largest four-year stretch in supply since the 1980s and vacancy rates are trending at the lowest in years.”

For more commercial real estate research, visit www.nar.realtor.

The National Association of Realtors® is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Media Contact:

Cole Henry
(202) 383-1290
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NAR, realtor.com® Report Housing Supply and Affordability Are at Odds in Markets Across U.S.

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Washington, D.C. – April 18, 2018 (nar.realtor) At the national level, housing affordability is down from a year ago and fewer households can afford the active inventory of homes currently for sale on the market based on their income. That is according to joint research from the National Association of Realtors® and realtor.com®, a leading online real estate destination.

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Using data on mortgages(1), state and metro area-level income(2) and listings on realtor.com®, the Realtors® Affordability Distribution Curve and Score(3) is designed to examine affordability conditions at different income levels for all active inventory on the market. A score of one or higher generally suggests a market where homes for sale are more affordable to households in proportion to their income distribution.

State affordability

According to March data, the states with the lowest Affordability Score(4) were Hawaii (0.52), California (0.57), Oregon (0.60), and the District of Columbia, Montana and Rhode Island (all at 0.64). In these areas, households at the median income level can afford only 19 to 23 percent of the active housing inventory. The states with the highest Affordability Score were Ohio (1.12), Indiana (1.09), Kansas (1.09), Iowa (1.07), and West Virginia (1.05). In these areas, a typical household can afford 54 to 62 percent of the active housing inventory currently on the market.

Metro affordability

By looking at the data by metropolitan statistical area (MSA), more metro areas experienced weakening (45) affordability conditions compared to improving conditions (35) from a year ago. The markets with the lowest affordability scores include Los Angeles-Long Beach, California (0.35), San Diego-Carlsbad, California (0.37), San Jose-Sunnyvale, California (0.43), Oxnard-Thousand Oaks-Ventura, California (0.45) and San Francisco-Oakland, California (0.48), where a typical household can only afford 3 to 11 percent of the active housing inventory.

The Youngstown-Warren, Ohio-Pennsylvania market had the highest Affordability Score at 1.25, followed by Dayton, Ohio (1.19), Toledo, Ohio (1.18), Akron, Ohio (1.16), and Scranton-Wilkes-Barre, Pennsylvania (1.11). In these areas, the typical household can afford nearly 75 percent of the homes that are currently on the market.

Lawrence Yun, NAR chief economist found a notable imbalance between what potential home buyers can afford and what is listed for sale. “The survey confirms that the lack of entry-level supply is putting affordability pressures on too many buyers – especially those at the lower end of the market, where demand is the strongest. This is why first-time buyers continue to struggle finding affordable properties to buy and are making up less than a third of home sales so far this year,” said Yun.
The Affordability Score decreased nationally from 0.86 to 0.84 between March 2017 and March 2018, because of rising prices across the country and a spike in mortgage rates. However, 14 states had better affordability compared to a year earlier, with the greatest increase in affordability in the District of Columbia (from 0.59 to 0.64), Vermont (from 0.81 to 0.84) Hawaii (from 0.50 to 0.52) and North Dakota (from 0.95 to 0.97). Thirty-five metro areas had better affordability compared to a year earlier, led by Austin-Round Rock, Texas (from 0.55 to 0.66), Syracuse, New York (1.04 to 1.1), North Port-Sarasota, Florida (0.60 to 0.66) and Palm Bay-Melbourne, Florida (0.71 to 0.77).

“We’ve seen affordability improve as inventory declines have begun to lessen these areas. More balanced supply and demand dynamics have kept listing price growth below the national average, providing some much needed relief for stretched home buyers in these areas,” according to Danielle Hale, chief economist for realtor.com®.

“Wages are growing, which is welcome news for prospective buyers, but prices are increasing at a faster rate, up almost 6 percent in the first two months of 2018. Solutions to improve these conditions include more homeowners selling, investors releasing their portfolio of single-family homes back onto the market and more single-family housing construction,” Yun said.

The Realtors® Affordability Distribution Curve and Score was created to be a valuable resource for Realtors® and consumers to assess the affordability of markets in different income groups.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Realtor.com® is the trusted resource for home buyers, sellers and dreamers, offering the most comprehensive source of for-sale properties, among competing national sites, and the information, tools and professional expertise to help people move confidently through every step of their home journey. It pioneered the world of digital real estate 20 years ago, and today helps make all things home simple, efficient and enjoyable. Realtor.com® is operated by News Corp [NASDAQ: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. under a perpetual license from the National Association of REALTORS®. For more information, visit realtor.com®.

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1. Down payment percentages are determined from recently locked mortgages from Optimal Blue to determine the maximum affordable home price. The maximum affordable home price assumes that 30 percent of a purchaser’s income can go to pay for the financing, property tax, homeowner’s insurance costs, and a mortgage insurance premium if the down payment is less than 20 percent. Assumptions are made that homes are financed with a 30-year fixed-rate fully-amortizing mortgage at the prevailing mortgage rate. Mortgage rates are those advertised on realtor.com® during the period analyzed.

2. Income distribution data is collected from Nielsen. Nielsen data is provided as numbers of households within income brackets, which are then calculated to find the percentile within, above, or below any bracket. See detailed methodology here: http://www.tetrad.com/pub/documents/popfactsmeth (link is external).

3. The Affordability Distribution Curve gathers income data for households in our desired market and constructs a maximum affordable house price for the income level using a down payment percentage determined from recently originated mortgages from Optimal Blue. Once a maximum affordable house price for a given income percentile is determined, active listings on realtor.com® are reviewed to see what percent of homes on the market are priced less than that maximum affordable house price.

4. The Affordability Score is two times the area under the Affordability Distribution Curve. The score varies between zero and two. A score of zero will result when no household can afford any of the homes that are currently on the market. A score of two will result when all households can afford all of the homes that are currently on the market. A score of one generally suggests a market close to equality, in other words, homes on the market are affordable to households in proportion to their income distribution.