Stevens: “Incredible” Market Ahead
With the housing recovery still fragile, it’s hard to look ahead with anything but caution. However, the long-term prospects for the market are “incredible,” FHA Commissioner David Stevens told REALTORS® yesterday in the opening forum of the 2010 NAR Midyear Legislative Meetings & Trade Expo.
Young households today represent a demographic block larger than even the baby boomers, and their entry into the housing market promises to help build “an incredible real estate market in the future,” said Stevens. But first the housing market must move from recovery to stability and then to long-term growth, and that will only happen if investors regain confidence in the mortgage market. And for that to happen, the mortgage market must be reformed to reward transparent financing structures.
Stevens credited NAR’s role in helping Congress and the administration stabilize the market through its support of a “mosaic” of pragmatic policies, such as:
• The Federal Reserve’s $1.25 trillion dollar investment in Fannie Mae and Freddie Mac mortgage backed securities, which helped keep interest rates historically low.
• The home buyer tax credit, which has so far been taken by 2.2 million households for $16 billion in total returns
• The federal government’s foreclosure prevention efforts, which have helped 1.1 million households.
That mix of programs has led to today’s housing recovery but the job won’t be finished, he says, until the federal government steps out of the picture and the market stands on its own. “We constantly talk about exit strategy,” Stevens said, referring to the administration’s goal of unwinding its mortgage-market interventions.
To help protect the recovery, Stevens urged REALTORS® while they’re in Washington this week to convince lawmakers to pass FHA reform legislation under consideration in the House as soon as possible. That legislation, H.R. 5072, would enable FHA to lower the upfront mortgage insurance premium and instead fold a higher annual premium into the loan, a change that would align FHA with the approach used in the private sector. The legislation would also give FHA more tools for clamping down on bad lenders.
The changes in the mortgage insurance premium are needed to help FHA improve its financial picture and restore its reserves to its congressionally mandated level. Not having the authority it needs to change its premium structure “is costing FHA $300 million a month in money it’s not getting,” he said.
“You are the recovery,” he told the packed room of REALTORS®. “Now we’ve got to finish the job.”
Survey: Practitioners Plan to Stick with Real Estate
With the real estate market improving, three-quarters of REALTORS® are very certain they will remain active in the market for two more years, according to the 2010 National Association of REALTORS® Member Profile. Only 8 percent were uncertain about their future.
The study’s results are representative of the nation’s 1.1 million REALTORS®, who account for 60 percent of the 1.85 million active real estate licensees in the U.S. The typical NAR member has 10 years of experience, and many have increased their training, Web presence and use of social media over the past year. More than half use social networking sites, up from 35 percent in 2009.
Analysis of data from the Association of Real Estate License Law Officials shows the number of active real estate licensees in the U.S. fell 7.5 percent last year from 2.0 million in 2008. The number of licensees who are not REALTORS® was 750,000 in 2009, down 14.8 percent from 880,000 in 2008. At the same time, NAR membership fell only 0.7 percent.
NAR President Vicki Cox Golder said these comparisons mark a sharp contrast. “REALTORS® are much more likely to remain active in the business than real estate agents or brokers who are not NAR members. REALTORS® are helped by the support and benefits they receive from NAR, as well as their local and state REALTOR® associations. Many members take advantage of down time to improve their skills and training to better serve future clients, but there also are intangible benefits that come from networking and membership in the nation’s largest trade association,” she said.
“In addition, many are diversified in their business practices – they don’t put all their eggs in the residential sales basket,” Golder said. “While eight in 10 members specialize in residential sales, almost all REALTORS® also have secondary areas of focus – only 3 percent don’t.”
Twenty-two percent of respondents also offer commercial brokerage, 21 percent are in relocation, 18 percent residential property management, 15 percent counseling and 13 percent land development. Smaller percentages were also in commercial property management, residential appraisal, international, auction, and commercial appraisal.
Residential brokerage was cited as a secondary business for 11 percent of respondents who had other primary specialties.
Report: Revitalize Commercial Real Estate
High unemployment rates and tight credit conditions were just some of the challenges that REALTORS® who practice commercial real estate faced last year, as data from the 2010 National Association of REALTORS® Commercial Member Profileshow. Despite current obstacles, NAR remains committed to restoring a strong and robust commercial real estate market.
“Commercial real estate is the basis for much of the growth in the American industry and economy,” said NAR President Vicki Cox Golder. “Because of its vital role, commercial real estate must have access to adequate capital resources. NAR is continuing to work with legislators and regulators to increase market liquidity and promote national interest in a healthy commercial sector.”
According to NAR’s 2010 Commercial Member Profile, commercial members completed a median of five sales transactions in 2009, down from eight in 2008. The median sale volume was $1,767,900 among those engaged in sales transactions – 14 percent of NAR’s commercial members did not complete a sales transaction in 2009. The median leasing volume was $330,200 in 2009 among those engaged in leasing business; 42 percent of commercial members had no leasing transactions in 2009.
Median gross annual income for REALTORS® practicing commercial real estate has been declining since 2006, when it was $115,600. In 2009 the median income was $68,600. Commercial practitioners with less than two years experience earned a lower median income than those with more than 26 years experience – $35,300 versus $112,500.
Land sales were cited as the primary specialty for commercial practitioners, which is consistent with past years. Investment sales and multifamily building sales were cited as the next two most popular specialties.
More women are entering the commercial real estate field. Although still in the minority – women comprise 26 percent of REALTOR® commercial practitioners compared with 18 percent last year – 37 percent of commercial members with two years or less experience are women. Nineteen percent of REALTORS® in commercial real estate who have more than 26 years experience are women.
Commercial practitioners account for more than 80,000 of NAR’s 1.2 million members. Fifty-seven percent of commercial members have a broker’s license, and 28 percent have a sales agent’s license. More than half of NAR’s commercial members – 56 percent – work for a local commercial real estate firm. The typical commercial member has been in real estate for 20 years, has practiced commercial real estate for 12 years, and has been a member of NAR for 15 years.
“REALTORS® who practice commercial real estate help build communities by facilitating investment and promoting the sale and lease of commercial space, which supports millions of jobs nationwide,” said Golder. “REALTORS® are optimistic that the latter half of 2010 will bring improvements in credit availability to get the commercial real estate market moving again.”
More People Are Sharing Homes
About one in every six Americans lives in a multi-generational household, up 30 percent since 2000, according to U.S. Census figures and a study released Thursday by the Pew Research Center.
The study found that the economy is a primary driver of the trend, but there are other factors as well. Aging Americans are opting for home health care over nursing homes, and Hispanic and Asian immigrants come from cultures where multi-generational living is the norm.
The Pew study and an examination of census data by AARP concluded:
• The most likely multi-generational scenario is a parent who owns a home and shares it with an adult child and a grandchild.
• Older women are more likely than older men to live in a multi-generational household.
• The number of adults older than 65 who live alone is decreasing from 28.8 percent in 1990 to 27.4 percent in 2008.
Vacant Lots Become Hot Property
Vacant residential lots are looking better and better to real estate investors.
The cost of a finished, ready to build lot, can cost a developer about 25 percent of the finished home price. There are a number of these ready-to-go lots on the market at about half what they actually cost to prepare. Investor groups are snapping them up, figuring that the time will come soon when they will be in demand.
“The country needs 1.2 million new units for the next 10 years just because of population growth,” says Scott Clark, president of American Development Partners, which has bought thousands of vacant lots all over the West. “[U.S. builders] built about 500,000 units in 2009 and 600,000 units in 2008, so there eventually will be pent-up demand. We want to get as many of those finished lots as we can because as demand begins to rise, the need for housing will become painfully obvious. The delta (ratio of change to value of underlying asset) in this investment will be significant.”
