May
27
The U.S. economy grew at a slower pace than previously estimated in the first quarter as businesses investment slackened, while hard-hit state and local governments curbed spending at the steepest rate since 1981, a government report showed on Thursday.
Gross domestic product expanded at a 3.0 percent annual rate, the Commerce Department said, instead of the 3.2 percent pace it reported last month.
Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 3.4 percent rate in the January-March period. The economy expanded at a 5.6 percent pace in the fourth quarter and has now grown for three straight quarters.
Economists are monitoring the U.S. recovery closely to see how well the economy can endure the debt troubles that threaten to slow Europe’s growth. The above-trend first-quarter U.S. growth suggests a solid base of support.
Output in the first three months of the year was revised down as business spending rose at only a 3.1 percent rate instead of the 4.1 percent initially reported last month. Spending grew at a 5.3 percent pace in the fourth quarter. Business spending on software and equipment increased at a 12.7 percent rather than the 13.4 percent rate reported last month.
State and local government spending contracted at a 3.9 percent rate, the largest decline since the second quarter of 1981.
However, consumer spending, which is key to the economy’s recovery, held up well. Consumer spending increased at a 3.5 percent rate, rather than the 3.6 percent rate reported last month. Although it was revised down slightly, it was still more than double the 1.6 percent pace in the fourth quarter and the largest advance since the first quarter of 2007.
Consumer spending, which normally accounts for 70 percent of U.S. economic activity, added 2.42 percentage points to GDP last quarter, the largest contribution since the first quarter of 2007.
Real final sales to domestic purchasers, considered a better measure of domestic demand, rose at 2.0 percent rate. Sales were previously estimated to have increased at a 2.2 percent following a 1.4 percent rise in the fourth quarter.
Recovery from the longest and deepest recession since the Great Depression had so far been largely driven by the manufacturing sector as businesses replenished their warehouses to meet strengthening demand. Consumers, however, are now participating as the labor market begins to firm.
The GDP report also showed after tax corporate profits rose 2.1 percent in the first quarter after increasing 6.5 percent in the final three months of 2009. In the first quarter, business inventories rose $33.9 billion rather than $31.1 billion reported last month. It was first increase since the first quarter of 2008.
May
26
WASHINGTON, DC–(Marketwire – May 26, 2010) – Vacancy rates continue to rise in most commercial sectors and are not expected to level out in most markets until the end of this year or early 2011, according to the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said there is one bright spot in commercial real estate. “The multifamily sector can expect increased demand as the economy creates jobs and new households are formed, likely in the second half of this year,” he said. “However, the office, warehouse and retail sectors continue to experience the delayed effects of the recession. These sectors should see gradual improvement after jobs pick up and create additional demand for space, meaning a broader improvement in commercial real estate is likely in 2011.”
The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of nearly 700 local market experts,(1) confirms that significant fallout from the recession remains, but to a lesser extent.
The SIOR index, measuring 10 variables, increased 2.7 percentage points to 38.2 in the first quarter, compared with a level of 100 that represents a balanced marketplace. This is the second gain following nearly three years of declines; the last time the market was in equilibrium was in the third quarter of 2007.
Development activity remains at a standstill with nine out of 10 respondents saying that it is virtually nonexistent in their markets.
Looking at the overall market, commercial vacancy rates appear to be approaching a plateau, according to NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK.(2) The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.Office Market
With an elevated level of sublease space available, vacancy rates in the office sector are projected to increase from 16.9 percent in the first quarter of this year to 17.6 percent in the first quarter of 2011, but should ease later next year.
Annual office rent is likely to fall 2.3 percent this year and decline another 2.1 percent in 2011. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is forecast to be a negative 24.6 million square feet this year and then a positive 25.5 million in 2011.
Industrial Market
Leasing activity in the industrial sector is below historical levels with higher vacancies, more tenant concessions from landlords and a steeper decline in rental rates. In addition, obsolete structures remain on the market. Industrial vacancy rates are expected to rise from 14.3 percent in the first quarter of 2010 to 14.8 percent in the first quarter of 2011, then decline modestly as the year progresses.
Annual industrial rent will probably drop 6.3 percent this year, and decline another 1.5 percent in 2011. Net absorption of industrial space in 58 markets tracked is seen at a negative 90.0 million square feet this year and a positive 135.6 million in 2011.
Retail Market
Retail vacancy rates should rise modestly from 12.6 percent in the first quarter of this year to 12.8 percent in the first quarter of 2011, and should hold at that level for most of next year.
Average retail rent is projected to decline 1.5 percent in 2010, then edge up by 0.4 percent next year. Net absorption of retail space in 53 tracked markets is likely to be a negative 3.7 million square feet this year and then a positive 8.9 million in 2011.
Multifamily Market
The apartment rental market — multifamily housing — is expected to benefit from an improving economy and job market. Multifamily vacancy rates are forecast to decline from 7.3 percent in the first quarter of this year to 6.3 percent in the first quarter of 2011.
With recent additions to supply, average rent is likely to slip 1.5 percent this year, and then rise 1.2 percent in 2011. Multifamily net absorption should be 145,700 units in 59 tracked metro areas this year, and another 214,500 in 2011.
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 79,000 NAR and institute affiliate members offer commercial brokerage services.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
(1) The SIOR Commercial Real Estate Index, conducted by SIOR and analyzed by NAR Research, is a diffusion index based on market conditions as viewed by local SIOR experts. For more information contact Richard Hollander, SIOR, at 202/449-8200.
(2) Publication of additional analyses, including metropolitan data, will be posted under Economists’ Commentary in the Research area of Realtor.org in coming weeks.The next commercial real estate forecast and quarterly market report will be released on August 26.
May
20
Mortgage delinquencies hit 10%
Filed Under Housing News | Leave a Comment
NEW YORK (CNNMoney.com) — A dubious distinction was reached during the first three months of 2010: More than 10% of all mortgage borrowers are now behind on their payments.
The delinquency rate hit a record of 10.06% in the first quarter, according to the Mortgage Bankers Association. The seasonally adjusted rate accounts for all mortgages on properties that have up to four units and that are at least one payment late.
The rate has been inching steadily toward this record, having ticked up almost a full point since a year go.
The report contained a sliver of good news, however. The non-seasonally adjusted delinquency rate dropped almost one point to 9.38% between the fourth quarter 2009 and first quarter 2010.
So while the seasonally adjusted number saw growth during that period, the non-seasonally adjusted number followed the traditional pattern. Rates usually peak in the fourth quarter, as holiday spending and heating bills kick in causing people to put off paying their loan. But then, when they get caught up in the first quarter, delinquencies fall again.
“The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement,” said Jay Brinkmann, MBA’s chief economist. “The normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which.”
Housing market diagnosis: Bipolar
The foreclosure inventory rate, which represents the percentage of mortgaged homes repossessed by lenders, was fairly flat quarter-over-quarter, inching up to 4.63% from 4.58%. But it jumped a lot from 12 months earlier, when the rate stood at 3.85%.
Nearly all varieties of loans suffered increased delinquencies compared with 12 months earlier. Prime fixed-rate loans hit 6.17%; prime adjustable-rate mortgages (ARMs) tipped 13.52%. Subprime fixed-rates jumped to 25.69%; and subprime ARMs are a whopping 29.09%.
The one bright spot was that delinquencies for FHA loans, the mortgages guaranteed by the Federal Housing Authority, dropped slightly to 13.15%.
The improvement is likely due to tighter FHA underwriting standards, which it adjusted after loans issued in 2007 and 2008 started souring. That should be a relief for taxpayers, who will be on the hook for any losses the FHA suffers.
Most of the overall rate increases are attributable to the seriously delinquent loans, Brinkmann said. Those loans, which are 90 days or more late, are going all the way through to foreclosure, but are not being foreclosed, keeping people in the system longer.
In the pre-housing-bust world, many borrowers would have already lost their homes and their delinquencies would no longer be counted in the survey.
Shift in problem-loan types
Lenders have slowed repossessions for various reasons: They may not have enough staff yet to handle the volume; the foreclosure prevention initiatives, such as the Home Affordable Modification Program, is postponing many foreclosures; and the banks themselves are trying to prevent defaults by approving more short sales.
There has been a fundamental change in the nature of the loans causing the most default problems, according to Brinkmann. And, he added, unemployment is the culprit. “Delinquencies are much more driven by the recession than by any one loan type now,” he said.
Subprime ARMs accounted for nearly 30% of all delinquencies a year ago, but just under 15% now. Meanwhile, prime fixed-rate loans delinquencies have grown so much that they represent the single biggest bucket of delinquent mortgages: 37% up from 29% a year ago.
Some of the prime loan defaults stem from an increase in people deliberately “walking away” from mortgages. These are homeowners who can pay their loans but choose not to because their homes have dropped so much in value.
According to a recent report, as much as 31% of all defaults in March were strategic.
Brinkmann opined that many of these “strategic defaulters” may be underestimating the impact of walking away. It may take them much longer to repair their credit histories than they realize as lenders assess more than their credit ratings to determine whether to finance future home purchases.
Underwriting involves more than just checking credit scores, and if a lender sees a strategic default on their records, homebuyers may not qualify for loans.
“They may be able to repair their credit scores,” he said, “but their ability to buy a home in the future may be negatively impacted for years to come.”
May
6
Memphis Foreclosure and Delinquency Rates Higher in March
Filed Under Housing News | Leave a Comment
Foreclosure rates among outstanding mortgage loans in Memphis increased in March to 2.19 percent, up from 1.57 percent in March 2009, according to CoreLogic, a company that provides real estate data.
Still, Memphis was below the national foreclosure rate of 3.23 percent for March.
The rate of Memphis homeowners late in paying their mortgages is also up. In March, 10.76 percent of mortgage loans were at least 90 days delinquent compared to 8.02 percent in March 2009, according to CoreLogic.
May
4
Signed contracts to buy homes surge 5.3 percent in March as buyers seized on gov’t incentives.
WASHINGTON (AP) — The number of buyers who signed contracts to purchase homes surged more than expected in March, another sign that government incentives are propelling the housing market this spring.
The National Association of Realtors said Tuesday its seasonally adjusted index of sales agreements for previously occupied homes rose 5.3 percent from a month earlier to a reading of 102.9.
The federal government has provided a big boost to home sales this spring by offering first-time buyers a tax credit of 10 percent of the purchase price, up to $8,000. There is also a credit of 10 percent, up to a maximum of $6,500, for homeowners who buy and move.
These incentives have stimulated home sales, but the deadline to get a signed sales contract was April 30. Many analysts project sales will drop sharply in the second half of the year.
“Strength in the spring was all but certain,” wrote Dan Greenhaus, chief economic strategist at Miller Tabak. “A slump following the credit’s expiration is likely although the exact timing is difficult to predict.”
Some analysts expect prices to slump as well, especially if mortgage rates rise and more foreclosed homes hit the market.
Nevertheless, economists and real estate agents alike hope the economy will be strong enough to bring down the unemployment rate from the current 9.7 percent. If that happens, it “could be enough to stabilize the housing market,” wrote Jennifer Lee, an economist with BMO Capital Markets.
March’s reading for pending home sales was the highest level since October and a 21 percent increase from the same month a year earlier. February’s reading was revised upward slightly to 97.7. Economists surveyed by Thomson Reuters had expected the index would rise 4 percent to 101.5.
The index provides an early measurement of sales activity because there is usually a one- to two- month lag between a sales contract and a completed deal.
Pending sales surged by 13 percent in the South, 2 percent in the West and 1 percent in the Midwest. They fell 3.3 percent in the Northeast.
R.J. Wroten, 34, who works at a concrete company east of San Francisco, made offers on around 30 homes over the past year. He finally signed a contract last Friday, the last possible day for buyers to qualify for the tax credit.
For Wroten, diligence paid off. He was up until midnight last Tuesday with his agent, Dalisa Porche of Coldwell Banker in Berkeley, Calif., getting together offers on five homes.
One of those — an offer to pay $160,000 for a foreclosed property in Oakland — was accepted. He’s taking out an extra $20,000 in loans to pay for fix-up work.
“It was very gratifying,” Wroten said. With the deal now in the works, he said, “I don’t have to take up my weekends to go look at places.”