Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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Existing Home Sales Prices Of course Wimberley has the good fortune to be located in the Dallas/Fort Worth market, where the strong local economy is turn- ing out jobs and attracting transplants. But the uptick in residential came over the summer, he says. "T e past three months have quickly transitioned from a buyer's market to a seller's market," he says. "My land developer clients are getting back in the market and searching for 20- to 50-acre tracts to start the process of putting lots on the ground again." Jones Walker in Las Vegas is also benefi ting from residential refer- rals. "We have completed over 16 transactions in the past 12 months with referring agents," she says. "T ey were all residential agents who were selling homes to clients moving to the area to open their businesses or, in the case of three referrals, local residents wanting to purchase buildings knowing that prices had declined from 40 percent to 60 percent from the top of the market." Two of the strongest housing markets are Florida and the West Coast, where shortages are actually occurring. "Sales have picked up dramatically to the point that there is two to four months' inventory," says Janet K. Robinson, CCIM, with Coldwell Banker Commercial NRT in Sarasota, Fla., who has been getting two to four referrals a week from residential agents. "Rental property is also seeing strong activity including limited inventory. New home development is picking up, but is still limited primarily to the under $200,000 market." On the West Coast, Juan Huizar, CCIM, a broker with Accrued Financial Services in Signal Hill, Calif., who does both residential and commercial, says the Long Beach, Calif., residential market "is hot, bottom line. Inventory is down by over 40 percent YOY. T ere are fewer foreclosed homes on the market and currently more buyers than sellers. People are having to overbid in order to win the deal." Huizar is also seeing cash investors gravitate to residential, pick- ing up bank-owned houses and condos. "A condo under $150,000 provides owners a great cash-on-cash yield, with minimal risk," he says. "Vacancy is extremely low and rents are forecasted to increase, so these condos rent fast. From a broker's standpoint, if you don't have a cash buyer for these condos, you simply don't stand a chance." Huizar says the residential uptick has not translated into com- mercial activity in his market, and many CCIMs report a similar situation. But, says NAR economist Ratiu, residential's return is still a good sign for the commercial market: "With rising sales, property values also tend to increase, … appreciating values should liſt con- sumer confi dence and, over time, consumer spending." In addition, the residential market provides an indication of where consumers are going, he says: "Demand for housing relates to con- sumers' appetite for spending and their medium- to long-term out- look. Upward trends in both would indicate a strong economy." And, when people buy houses, they buy lots of other stuff to fi ll them such as furniture and appliances. Today's home buyers have exceedingly low mortgage interest rates, which translates into more CCIM.com % change YOY Northeast Midwest South West U.S. 0 Source: NAR disposable income. "A lower cost of fi nancing leaves more money for spending in retail stores, which drives demand for consumer goods, increases trade, and directly impacts demand for industrial space," Ratiu adds. T e apartment market has also been infl uenced by the residential market, he says. "T e level of inventory and supply of residential space are other important indicators, directly tied to the apartment market," he says. "In an environment of high supply and high inven- tory of homes, along with low interest rates, such as the fi rst half of the 2000s, demand for apartments may be low. On the other hand, in the post-2009 period, low levels of new construction, low supply and tight lending standards, in addition to the fallout from the foreclosure crisis, have elevated demand for apartments." But will the demand for single-family housing eat away at mul- tifamily demand? Hardly a chance, says Cassidy Turley economist T orpe. T e pent-up demand for household formation stands at about 1.3 million units, enough for both multifamily and single- family residential to sustain healthy markets for several years. In fact, NAR economist Yun predicts single-housing shortages — and price appreciation — in the near future, as supplies dwindle and homes sell more quickly. "Ironically, if housing construction doesn't pick up to normal levels within two years, supply shortages could be sustained for an extended period and lead to above-average appreciation," he says. No one sees a return to the wildly infl ated home prices of the housing bubble, but a little appreciation would go a long way toward increasing consumer confi dence, which, in a low interest rate environ- ment, would lead to more demand, more sales, more new construc- tion, and more jobs, setting in motion the wheels of a true recovery. Sara Drummond is executive editor of Commercial Investment Real Estate. November | December | 2012 25 $50,000 $100,000 $150,000 $200,000 $250,000 August 2012 price