Posts Tagged ‘Rebound’
Commercial real estate yields spur investors
Yields on U.S. commercial real estate are nearing a record high compared to Treasury bonds. Many investors take that as a signal to buy property. Capitalization rates, a measure of real estate yields, averaged 7.22 percent in the second quarter, as calculated by the National Council of Real Estate Investment Fiduciaries. That was 4.29 percentage points higher than the yield on 10-year government bonds as of June 30 and 4.75 percentage points higher than Treasury yields as of Aug. 31. Current returns are near the record 5.39 percentage points in the first quarter of 2009, when the U.S. was dealing with the worst economic downturn since the Great Depression. The spread shrank to less than 80 basis points when commercial real estate prices peaked in 2007. “The data indicate that real estate is poised for a rebound,” says Gerardo Lietz, who advises pension funds on property investments. Source: Bloomberg, Hui-yong Yu
Americans’ economic confidence ticks up slightly
Americans’ confidence in the economy improved slightly in August, but the mood is still gloomy amid job worries, according to a monthly survey. The Conference Board said Tuesday that its Consumer Confidence Index now stands at 53.5, up from a revised 51.0 in July. Economists surveyed by Thomson Reuters had expected 50.5. The increase comes after two straight months of declines. It takes a reading of 90 or more to indicate a healthy economy – a level not reached since the recession began in December 2007. The index – which measures how Americans feel about business conditions, the job market and the next six months – had been recovering fitfully since hitting an all-time low of 25.3 in February 2009. But August’s reading suggests that American confidence hasn’t improved from a year ago, a bad sign for the economy and for retailers, which have been grappling with a weak start to the back-to-school season. Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound. But worries are rising the economy is growing too slowly to support sustained job growth, and some are concerned it could fall back into a recession. “The comfort in (August’s confidence figures) is that confidence did not fall further,” Paul Dales, U.S. economist at Capital Economics, said in a statement. “But there are few signs that households will ramp up their spending. High unemployment, widespread negative housing equity and low share prices are keeping households on the sidelines.” Still, investors, bombarded by piles of bad news about the economy, seized on the bigger than-expected increase in August’s confidence figure. The Dow Jones industrial average is up 22, or 0.2 percent, at 10,032 Tuesday morning. The S&P 500 is up 1, or 0.1 percent, at 1,050. Stocks have been pummeled throughout the month because of uncertainty over signs of slowing growth. Meanwhile, a widely watched home price index reported that home prices rose in June for a third straight month as now-expired tax credits inspired a burst of homebuying. But prices are expected to fall through the rest of the year now that demand has faded. The slight improvement in August’s Consumer Confidence Index was boosted by shoppers’ improved outlook over the next six months. That gauge rose to 72.5 from 67.5. The other, which measures how consumers feel now about the economy, decreased to 24.9 from 26.4. “Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future,” said Lynn Franco, director of The Conference Board Consumer Research Center in a statement. New figures issued Friday show the economy is weaker than expected, and the outlook for the rest of the year is looking bleaker. The Commerce Department reported that gross domestic product grew at a 1.6 percent rate for April through June. The initial estimate was 2.4 percent. Home sales are plunging, and consumers are saving more and spending less as the unemployment rate remains stuck at almost 10 percent. The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday posted a 1 percent increase in June from May and was up 4.2 percent from a year ago. Home prices nationally were up 4.4 percent in the second quarter compared with the first quarter. That was largely because buyers could take advantage of government tax credits of up to $8,000. Home sales have dropped sharply since those incentives expired. Lending standards remain tight, and unemployment is stuck near 10 percent. Last week, the National Association of Realtors said sales of previously occupied homes in the U.S. fell 27 percent in July, the weakest showing in 15 years. It marked the largest monthly drop in the four decades that records have been kept. Meanwhile, the Commerce Department reported that sales of new homes fell 12.4 percent in July from a month earlier. July’s pace was the slowest in at least 47 years. Economists will closely watch Friday’s reading on job figures for August, but they’re bracing for more bad news. Economists surveyed by Thomson Reuters expect overall nonfarm payrolls to drop 100,000 jobs in August, dragged down by government cutbacks on the state and local level. Private employers were expected to add 54,000 jobs, which would mark the fourth straight month of tepid gains. Given the scenario, the unemployment rate is slated to tick up to 9.6 percent from 9.5 percent. Against this background, consumers are waiting for the best deals and buying fashions that they can wear right away for the fall season. And stores don’t expect shoppers to start spending anytime soon. The Conference Board survey, based on a random survey mailed to 5,000 households from Aug. 1 to Aug. 24, showed shoppers remain worried about jobs. Those saying jobs are “hard to get” increased to 45.7 percent from 45.1 percent, while those claiming jobs are “plentiful” declined to 3.8 percent from 4.4 percent. Those expecting more jobs in the months ahead increased to 14.6 percent from 14.2 percent, while those anticipating fewer jobs decreased to 19.4 percent from 20.9 percent. Copyright © 2010 The Associated Press, Anne D’Innocenzio, AP retail writer. AP Real Estate Writer Alan Zibel in Washington contributed to this report
Office leasing rebound could be deceiving
The office property sector is witnessing a rebound in leasing activity. But that has not stopped some tenants from looking for ways to use less space per employee. Companies that sat on the sidelines during the worst days of the recession are increasingly making leasing commitments. In the year ended June 30, Studley reports, office tenants signed 161.3 million square feet in leases nationwide – a 5.7 percent increase over the 12-month period ended March 31. In many cases, though, tenants are taking less space than they had before. This is due to the reality that they have fewer employees, but it’s also because they have discovered how to use space more efficiently. In New York, for instance, three of the second quarter’s five largest deals involved tenants either taking the same amount of space or less. The Studley report reads: “Until tenants shift into expansion mode … the market will be engaged in a process of musical chairs.” This trend does not bode well for an office market struggling with a U.S. vacancy rate of 17.4 percent – the highest since 1993, notes Reis Inc. Analysts and brokers are especially concerned about the hundreds of office buildings that are in precarious financial condition due to the fact that they are worth less than the mortgages that were made during the boom times. Such properties have an intense need to fill space in order to boost rental revenue and, subsequently, values. “People should temper their expectations about how quickly office space will be leased up,” says Victor Calanog, research director for Reis. “Where there are leases being signed, companies are trying to be efficient with the space they’re using.” Source: The Wall Street Journal (08/19/2010)
Housing construction rises 1.7 percent in July
New home construction edged up slightly in July but applications for building permits tumbled to the lowest point in 14 months, a sign of continued stress in housing. Construction of new homes and apartments rose 1.7 percent in July, the Commerce Department reported Tuesday. Still, applications for building permits, considered a good sign of future activity, fell 3.1 percent. A rebound in housing is considered critical for a sustained economic recovery. But builders continue to struggle with weak demand for new homes caused by high unemployment and a glut of foreclosed homes on the market. The July increase in housing construction pushed total activity to a seasonally adjusted annual rate of 546,000 units. Building activity in June was weaker than first reported. It fell 8.7 percent to an annual rate of 537,000 units, the slowest pace since October of last year. Housing construction got a boost earlier in the year when the government offered buyers up to $8,000 in federal tax credits. But after the incentives expired at the end of April, sales and constructions activity slumped. Driving the July increase was a 32.6 percent surge in construction of apartments and condominiums, which jumped to an annual rate of 114,000 units. The bigger single-family sector declined 4.2 percent, falling to an annual rate of 432,000 units. The drop in building permits left applications for new construction at a seasonally adjusted annual rate of 565,000, the slowest pace since May 2009. Construction activity surged 30.5 percent in the Northeast and was up 10.7 percent in the Midwest. However, construction fell 6.3 percent in the South and was flat in the West. In advance of the report on housing starts, the National Association of Home Builders reported Monday that its monthly index of builder sentiment dropped to 13 in August. That was the lowest reading in 17 months. Readings below 50 indicate negative sentiment about the housing market. The last time builders’ index was above 50 was in April 2006. Builders say consumers remain worried about the weak economic recovery and the sluggish jobs market. Among those who are buying, many are opting for deeply discounted foreclosed properties. Copyright © 2010 The Associated Press, Martin Crutsinger, AP economics writer.
Homes lost to foreclosure up 6% from last year
The number of U.S. homes lost to foreclosure surged in July, another sign lenders are moving quicker to take back properties from homeowners behind in payments. Lenders repossessed 92,858 properties last month, up 9 percent from June and an increase of 6 percent from July 2009, foreclosure listing firm RealtyTrac Inc. said Thursday. Banks have stepped up repossessions this year to clear out the backlog of bad loans. July makes the eighth month in a row that the pace of homes lost to foreclosure has increased on an annual basis. Meanwhile, homeowners who are falling behind on their payments are being allowed to stay in their homes longer because lenders are reluctant to add to the glut of foreclosed homes on the market. The number of properties receiving an initial default notice – the first step in the foreclosure process – rose 1 percent last month from June, but tumbled 28 percent versus July last year, RealtyTrac said. Initial defaults have fallen on an annual basis the past six months. The latest data reflect a foreclosure crisis that continues to drag on as many homeowners struggle to make their monthly payments amid high unemployment, slow job growth and an uneven rebound in home prices. Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures. Initially, lax lending standards were the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures. Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can’t qualify or fall back into default. The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. More than 40 percent, or about 530,000 homeowners, have fallen out of the administration’s main effort to assist those facing foreclosure. That program, known as Making Home Affordable, has provided permanent help to about 390,000 homeowners, or 30 percent of the 1.3 million who have enrolled since March 2009. Still, RealtyTrac estimates more than 1 million American households are likely to lose their homes to foreclosure this year. In all, 325,229 properties received a foreclosure-related warning in July, up 4 percent from June, but down 10 percent from the same month last year, RealtyTrac said. That translates to one in 397 U.S. homes. The firm tracks notices for defaults, scheduled home auctions and home repossessions - warnings that can lead up to a home eventually being lost to foreclosure. Among states, Nevada posted the highest foreclosure rate in July, with one in every 82 households receiving a foreclosure notice. The number of properties in Nevada receiving a foreclosure warning last month rose nearly 7 percent from June, but fell nearly 30 percent from the same month last year. Rounding out the top 10 states with the highest foreclosure rate last month were: Arizona, Florida, California, Idaho, Michigan, Utah, Illinois, Georgia and Maryland. Las Vegas continued to be the city with the highest foreclosure rate in the U.S., with one in every 71 homes receiving a foreclosure notice in July – more than five times the national average. Copyright © 2010 The Associated Press, Alex Veiga, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Related Topics: Foreclosures
