Archives for June 2013

The REALTORS^® Commercial Real Estate Market Survey measures quarterly activity in the commercial real estate markets. The survey collects data from commercial REALTORS^®. The survey is designed to provide an overview of market performance, sales and rental transactions, along with current economic challenges and future expectations.
2013.Q1 survey highlights:

• REALTOR® commercial markets recorded improved conditions for both sales and leasing.
• 64% of commercial REALTORS® closed a sales transaction during the quarter.
• Sales volume rose 3% from a year ago.
• Sales prices inched up 0.3% on a year-over-year basis.
• Leasing activity advanced 5% from the previous quarter.
• Rental rates increased 1% compared with the previous quarter.
• Concession levels declined 5% on a quarterly basis.
• Financing remains at the top of the current challenges list, followed by pricing gap between buyers and sellers.
• The estimated average transaction slid from $1.2 million to $1.1 million from the prior quarter. (NAR)

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Looking ahead at the second half of 2013, the economic news is pretty solid. The US economy is on the mend, the labor market is slowly healing and house prices are up about 10% from year-ago levels. In addition, Europe (while in recession) appears to be holding together, DC budget brinksmanship is fading, car and light-truck sales along with consumer sentiment are rising, and new home construction continues its steady ascent. The only serious domestic fly in the ointment is the significant fiscal drag from Washington as the result of sequestration and year-end tax increases. The biggest foreign drag is Europe’s recession is hurting US exports.
With all this in mind, I expect Q3 GDP to be about 1.75% and Q4 GDP to come in slightly higher at 2.1%. As for housing starts, in Q3 they should, for the first time in years, exceed a million units (seasonally adjusted and annualized) with single family starts coming in at 675,000 and multifamily starts reaching a pace of about 340,000. In Q4 single family starts should hit to 700,000 with multifamily starts unchanged.
Inflation will remain benign. The combination of weak global growth, flat to declining energy and commodity prices, and flat to mildly rising food prices will keep CPI growth well below 2%. Moreover, the combination of tiny rises in import prices, producer prices, consumer prices and anemic wage growth means that personal consumption expenditure inflation, the Feds preferred inflation measure, will barely exceed 1%, giving the Federal Reserve ample room to continue its program of quantitative easing.
As for jobs, despite an improving labor market, the unemployment rate at the end of the year will remain above 7%. And combined with an annual inflation rate of well below 2%, it makes me think Bernanke and the rest of the voting members of the interest rate-setting Federal Open Market Committee will continue purchasing $85 billion/month in Treasuries and mortgage-backed securities at least through October 2013. Any tapering of QE3 will commence in late 2013 and more likely in early 2014.
Another reason why QE3 will be maintained in that due to weak wage growth, consumer spending is rising quite slowly and is being fueled, at least in part, by a decline in the personal savings rate which now stands at a scant 2.5%. Of course rising stock prices, improving home values and easing credit market conditions are also aiding the rise in consumer spending. But a sudden rise in interest rates could derail these positive developments and weaken manufacturing, which is currently neither expanding nor contracting. As such, the risk is simply not worth the return, at least for now.
What would change my thinking about QE3 would be consistent monthly non-farm payroll job growth of greater than 187,000. If we manage to achieve that, the Fed would likely reduce the amount of its monthly bonds purchases and interest rates would rise. However, given a growing economy, the rate rises would not be growth-sapping and I put the chances of a new recession at no more than 10%. In the meantime, I look forward to continued, slow and steady improvement the rest of the year.
Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net. His daily 70 word economics and policy blog can be seen at www.econ70.com.

The Commercial Real Estate Lending Survey is conducted annually and provides an overview of lending conditions that impact commercial transactions nationally, based on responses from commercial real estate members.
The economy is off to a reasonably good start in 2013, in the wake of a moderately positive performance during 2012. The first quarter gross domestic product expanded by 2.5%.
The year-end brought closure to several sources of uncertainty. The presidential election provided a degree of clarity over the next four year’s administration. The “fiscal cliff” uncertainty was solved by allowing some provisions to revert to normal (the payroll tax returning to 6.2%), and allowing the “sequestration” cuts to move forward. Housing continued to rebound, with housing starts recording a 27% gain for the year while new home sales rose 20% from 2011. Existing home sales grew by 9% during the year, with shrinking inventories driving up prices of existing homes.
Commercial real estate recorded a year of growth and expansion. Fundamentals strengthened throughout the year, with declining vacancies and rising rents. The apartment sector was the bright star, as office and industrial spaces found favorable conditions. With a strengthening foundation, investment sales found a higher ledge on their climb from the depths of the 2008-09 Great Recession. (NAR)
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By Richard Metcalf / Journal Staff Writer on Thu, Jun 6, 2013
Copyright © 2013 Albuquerque Journal
The state Court of Appeals has denied a motion to hold the state Construction Industries Division in contempt for continuing to enforce an energy code despite a ruling in April to “set aside” the code until pending resolution of legal issues.
“We conclude that there has been no flouting of the court’s ruling or authority in this relatively short time frame which requires the exercise by the court of its contempt power,” says the order filed late last week by the court.
In a related move, the Construction Industries Commission, the division’s rule-making body composed of gubernatorial appointees, took steps to preserve the legality of the existing code that included approval of a formal “Statement of Reasons” justifying its adoption.
“This code has been widely accepted and implemented by the construction industry, placing New Mexico well ahead of many other states in the areas of energy conservation and environmental stewardship,” the Regulation and Licensing Department, which includes CID, said in a statement to the Journal Thursday.
“The 2011 code provides a uniform and integrated set of building construction codes,” the statement says, adding that the standardized code avoids “substantial conflicts with building codes in other states and with other New Mexico building codes.”
The unsuccessful contempt motion was filed on behalf of the Southwest Energy Efficiency Project and nine other plaintiffs in a two-year-old lawsuit challenging the state’s adoption of a standardized energy code. The code includes specific energy conservation, plumbing, electrical and mechanical codes.
The court order says the contempt motion was “not inappropriate” but likely premature pending action by the CID to get a postponement of the effective date of the April “set-aside” ruling.
“Although we do not agree with the court’s decision to deny our motion for contempt, we do not propose to pursue the motion for contempt any further,” said Douglas Meiklejohn of the New Mexico Environmental Law Center, lawyer for the plaintiffs, in an email to the Journal .
The Southwest Energy lawsuit seeks to force CID to drop the standardized codes in favor of enforcement of custom codes developed by a committee during Gov. Bill Richardson’s administration.
The so-called “Richardson codes” were replaced early in Gov. Susana Martinez’s administration before they went into effect. The standardized codes currently being enforced were developed by the Washington, D.C.-based International Code Council.
The CIC’s Statement of Reasons, finalized and signed earlier this week, was done in conjunction with the re-adoption of the standardized codes. Both steps were taken per appeals court instructions.
A study by the Southwest Energy Efficiency Project that estimated the energy cost savings for homes built with the Richardson codes is “seriously flawed and unscientific in its methodology,” the statement says. The Richardson codes themselves have “serious procedural flaws,” it says.
“Further, the commission finds the claim that the Richardson codes will create jobs and pump money into New Mexico’s economy to be false,” it says.
Prior to the original adoption, the commission received 930 letters in opposition to the standardized codes, of which 462 were form letters generated from the Sierra Club website, the statement says. Many of the form letters came from out-of-state residents, it says.
On the other side, the commission received 413 letters in support of the standardized codes, it says. Letters in support generally came from the construction industry and tended to be more specific or detailed in their support of standardized codes versus customized codes, it says.
“The commission found the correspondence and testimony urging adoption of the 2009 IECC (standardized codes) to be more persuasive than that urging retention of the Richardson codes,” the statement says.
http://www.abqjournal.com/main/207747/biz/ruling-oks-code-enforcement.html