Investors Make a Comeback: 1031 Exchanges Return
Audio file
Topic(s): Broker/Owner/Manager, Commercial, Market Segment/Residential, Professional/Personal Development
Presenter(s): John Mangham, Rochelle Stone
Audiences: Broker/Owner/Manager
Session#: 213-108
Session Length: 60 min
Program: 2013 REALTORS Conference
Date: Nov 8, 2013
(National Association of REALTORS)
Click here to listen to source audio file.
Archives for 2013
Is the Rio Rancho Impact-Fee Moratorium Working? Opinions Vary
Supporters billed it as a sure way to boost construction activity and tax revenue for Rio Rancho. Top city staffers had their doubts, predicting that the city would lose hundreds of thousands of dollars — money used for roads, water lines and other infrastructure and services to support new development.
The two-year moratorium on impact fees took effect in September 2012, eliminating entirely the fees the city charges to developers for commercial building and slashing them in half for residential projects. A year later, opinions vary on whether the measure or simply more favorable economic conditions overall — or both — are behind increased development activity that has surfaced since.
Councilor Tim Crum has asked city staff to do a study to gauge the effects of the moratorium, but here’s what city-provided figures show so far: City staff calculated that $2.7 million more in impact fees in the form of cash or credit toward future city-wide infrastructure could have been due, based on actual activity in fiscal year 2013, if the moratorium had not been in effect. Fiscal year 2013 ran from July 1, 2012, through June 30, 2013.
“However, we can’t say how much would have been in cash. Impact fees are typically in the form of cash and credits,” city spokesman Peter Wells said. He said the city awards credits when a developer agrees to build infrastructure and dedicate it to the city in lieu of paying impact fees. What is clear from the city figures is that in the fiscal year that ended June 30, Rio Rancho received slightly more impact fees in cash than the level projected without the moratorium, $732,955 versus $730,515, city-provided figures show. That’s more than twice what city staffers forecast it would be if councilors passed the measure. Staff predicted impact fee revenue would plunge to $291,536 if councilors passed the moratorium; staffers revised that to $340,135 in the mid-year budget review.
Housing starts and gross receipts taxes from residential and commercial construction-related activity, and fees the city receives from things like plan checks and inspections have also increased. Single-family home starts were up 38 percent in the first six months of 2013 at 293, compared with 212 in the same period in 2012. Construction-related gross receipts tax for the July to September period was 6 percent higher in 2013 at $1,247,697, compared with $1,179,718 in the same period last year.
Clear message.
Councilors Chuck Wilkins, Mark Scott, Lonnie Clayton and Crum voted for the moratorium a year ago. Patty Thomas and Tamara Gutierrez were opposed. Scott said the numbers show how successful the moratorium has been. “It’s sent a clear message to the business community that Rio Rancho is very serious about attracting new business,” Scott said in a recent interview.
He pointed to Del Taco and Menchie’s Frozen Yogurt, which opened this year in a new 6,723-square-foot strip development near the Premiere movie theater at Unser and Southern. “All of them are producing gross receipts tax (for Rio Rancho) so it’s a win-win,” he said.
Commercial builder Steve Nakamura of Rachel Matthew Homes praised the moratorium, saying it was a critical factor in swaying clients to move ahead with projects. Nakamura spoke at council meetings last year urging adoption of the measure. He’s now building a new 5,329-square-foot corporate headquarters at 4500 Sundt Road and two projects for clients. “I sold the idea of the impact fee (moratorium) to clients,” Nakamura said in an interview recently. “It was too good of a deal to pass up. ”One client, Bill Stanage, owner of financial advisory firm Wealth Management, agrees. “It (the moratorium) was a key deciding factor. The money we saved helped us come within budget on construction,” said Stanage, who estimated he saved between $40,000 and $50,000 on the 6,077-square-foot office Nakamura is building for him at NM 528 and Quantum. Nakamura’s other client, Roxanne Baltz, co-owner of air-monitoring equipment manufacturer Bladewerx, said low-interest rates were the key factor in the decision to build a 10,394-square-foot facility at 4529 Arrowhead Ridge.
Too many factors
Rio Rancho Financial Services Director Olivia Padilla-Jackson cautioned against drawing a direct cause-and-effect relationship between the moratorium and the better-than-forecast figures. “Yes, we can say it’s (impact fee revenue) above the original projection — but we can’t say why,” she said. Wells added, “There are too many other factors out there like demand, pricing, lending practices. We can’t definitively conclude whether the impact fee moratorium did or did not lead to the construction over the last year.”
Commercial and residential real estate experts concur.
“Any incentive you can provide developers is going to help,” said Ken Schaefer, director of brokerage services at commercial real estate broker firm Colliers International. He said low interest rates, financing decisions and availability of land also influence where developers build. New product lines, pricing, low interest rates and robust marketing programs also affect when and where homes are built, said Jim Folkman, executive director of HBA, formerly the Home Builders Association of Central New Mexico. “It’s almost impossible to determine direct correlation — but it (the moratorium) certainly didn’t hurt Rio Rancho,” Folkman said.
PulteGroup’s New Mexico Division vice president of land Garret Price said the moratorium didn’t influence its robust building program at Loma Colorado in Rio Rancho because there was a long-term development agreement in place. Nevertheless, the company believes the decision to reduce impact fees was a good move to make the city competitive with Albuquerque and Los Lunas, which have also lowered impact fees, Price said in an emailed statement. (Rio Rancho Observer)
By Rosalie Rayburn (Rio Rancho Observer)
Click here for source article.
The two-year moratorium on impact fees took effect in September 2012, eliminating entirely the fees the city charges to developers for commercial building and slashing them in half for residential projects. A year later, opinions vary on whether the measure or simply more favorable economic conditions overall — or both — are behind increased development activity that has surfaced since.
Councilor Tim Crum has asked city staff to do a study to gauge the effects of the moratorium, but here’s what city-provided figures show so far: City staff calculated that $2.7 million more in impact fees in the form of cash or credit toward future city-wide infrastructure could have been due, based on actual activity in fiscal year 2013, if the moratorium had not been in effect. Fiscal year 2013 ran from July 1, 2012, through June 30, 2013.
“However, we can’t say how much would have been in cash. Impact fees are typically in the form of cash and credits,” city spokesman Peter Wells said. He said the city awards credits when a developer agrees to build infrastructure and dedicate it to the city in lieu of paying impact fees. What is clear from the city figures is that in the fiscal year that ended June 30, Rio Rancho received slightly more impact fees in cash than the level projected without the moratorium, $732,955 versus $730,515, city-provided figures show. That’s more than twice what city staffers forecast it would be if councilors passed the measure. Staff predicted impact fee revenue would plunge to $291,536 if councilors passed the moratorium; staffers revised that to $340,135 in the mid-year budget review.
Housing starts and gross receipts taxes from residential and commercial construction-related activity, and fees the city receives from things like plan checks and inspections have also increased. Single-family home starts were up 38 percent in the first six months of 2013 at 293, compared with 212 in the same period in 2012. Construction-related gross receipts tax for the July to September period was 6 percent higher in 2013 at $1,247,697, compared with $1,179,718 in the same period last year.
Clear message.
Councilors Chuck Wilkins, Mark Scott, Lonnie Clayton and Crum voted for the moratorium a year ago. Patty Thomas and Tamara Gutierrez were opposed. Scott said the numbers show how successful the moratorium has been. “It’s sent a clear message to the business community that Rio Rancho is very serious about attracting new business,” Scott said in a recent interview.
He pointed to Del Taco and Menchie’s Frozen Yogurt, which opened this year in a new 6,723-square-foot strip development near the Premiere movie theater at Unser and Southern. “All of them are producing gross receipts tax (for Rio Rancho) so it’s a win-win,” he said.
Commercial builder Steve Nakamura of Rachel Matthew Homes praised the moratorium, saying it was a critical factor in swaying clients to move ahead with projects. Nakamura spoke at council meetings last year urging adoption of the measure. He’s now building a new 5,329-square-foot corporate headquarters at 4500 Sundt Road and two projects for clients. “I sold the idea of the impact fee (moratorium) to clients,” Nakamura said in an interview recently. “It was too good of a deal to pass up. ”One client, Bill Stanage, owner of financial advisory firm Wealth Management, agrees. “It (the moratorium) was a key deciding factor. The money we saved helped us come within budget on construction,” said Stanage, who estimated he saved between $40,000 and $50,000 on the 6,077-square-foot office Nakamura is building for him at NM 528 and Quantum. Nakamura’s other client, Roxanne Baltz, co-owner of air-monitoring equipment manufacturer Bladewerx, said low-interest rates were the key factor in the decision to build a 10,394-square-foot facility at 4529 Arrowhead Ridge.
Too many factors
Rio Rancho Financial Services Director Olivia Padilla-Jackson cautioned against drawing a direct cause-and-effect relationship between the moratorium and the better-than-forecast figures. “Yes, we can say it’s (impact fee revenue) above the original projection — but we can’t say why,” she said. Wells added, “There are too many other factors out there like demand, pricing, lending practices. We can’t definitively conclude whether the impact fee moratorium did or did not lead to the construction over the last year.”
Commercial and residential real estate experts concur.
“Any incentive you can provide developers is going to help,” said Ken Schaefer, director of brokerage services at commercial real estate broker firm Colliers International. He said low interest rates, financing decisions and availability of land also influence where developers build. New product lines, pricing, low interest rates and robust marketing programs also affect when and where homes are built, said Jim Folkman, executive director of HBA, formerly the Home Builders Association of Central New Mexico. “It’s almost impossible to determine direct correlation — but it (the moratorium) certainly didn’t hurt Rio Rancho,” Folkman said.
PulteGroup’s New Mexico Division vice president of land Garret Price said the moratorium didn’t influence its robust building program at Loma Colorado in Rio Rancho because there was a long-term development agreement in place. Nevertheless, the company believes the decision to reduce impact fees was a good move to make the city competitive with Albuquerque and Los Lunas, which have also lowered impact fees, Price said in an emailed statement. (Rio Rancho Observer)
By Rosalie Rayburn (Rio Rancho Observer)
Click here for source article.
Economic Update: Tampering with Tapering
While Q4 GDP growth will probably be about 2.4%, slightly above the average rate of growth since the end of the Great Recession, it would be very surprising if the Federal Reserve Board (the Fed) were to begin reducing its monthly purchases of $45 billion in Treasuries and $40 billion in mortgage backed securities anytime soon.
While there are many reasons why, the most potent is that the mere suggestion last June that tapering might commence as early as mid-September rattled markets enough to raise interest rates on 30-year home mortgages by close to one-and-a-half percent in a matter of weeks, and in the process stop forward progress in the housing market dead in its tracks. The housing market is crucial to the recovery because with auto sales and manufacturing activity having all but returned to pre-recession levels, construction activity in general and its biggest component, new single family residential activity, is the last large cyclical sector not fully participating in the economic recovery. To have a self-sustaining recovery it is essential for all cyclical sectors to be at or near full capacity or rapidly moving in that direction.
In addition to a flat housing market, the labor market is showing signs of slowing down. During the first quarter of 2013 job creation averaged 207,000/month, while it was 182,000/month in the second quarter but just 143,000/month in the third quarter. Worse, while the unemployment rate has been steadily falling since the end of the Great Recession, it has been primarily thanks to the steady decline in the labor force participation (LFPR) rate from 65.5% at the end of the recession to just 63.2% today, the first time ever that the LFPR has declined after the end of a recession.
The above notwithstanding, the economy is really recovering. Household deleveraging is almost over, manufacturing and transportation activity have recovered to pre-recession levels, banks are once again healthy, corporate and household balance sheets have recovered and employment is almost back to where it was before the recession began. Given how far the economy has come, I think the Fed would prefer to essentially “buy” some downside economic insurance by continuing their current level of Treasury and MBS purchases.
Something that would change my prediction will be the success or failure of the congressional budget negotiations that were part of the deal to end the two week government closure. Lawmakers have a deadline of December 13th to produce a budget blueprint that will drive government spending for FY2014. The deadline is just days before the Fed’s last meeting of the year. A congressional deal would give the Fed some clarity on the fiscal front, and undoubtedly hasten the date of the first taper. On the other hand, negotiations that end in stalemate would increase fiscal uncertainty and reduce government spending by leaving sequestration in place, thereby reducing GDP growth.
In short, the economy is currently growing, but slowly. As a result, the labor force participation rate continues to decline, employment growth is weak, and due to poor Fed communication about interest rates, the all-important housing market has stopped growing. For all these reasons, the Fed may give lip service to the idea of commencing tapering following its mid-December meeting, but any tapering is more likely to start after its end of January meeting, and most likely following the Fed’s mid-March meeting, the first in 2014 to be followed by a press conference. And remember, short term rates will remain at their current rock bottom levels for another 18 months.
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.
REALTOR® Commercial Fundamentals Impacted by Slow Employment in Third Quarter
With lackluster employment growth, third quarter fundamentals in REALTOR® commercial markets maintained a positive trajectory. However, the specter of government shutdown and the budget debate added headwinds to the market performance. The results of the October Commercial Real Estate Market Survey indicated modestly rising absorption and new construction, accompanied by changing vacancies.
Leasing activity increased 2.0 percent higher over the previous quarter. On the supply side, new construction maintained momentum, increasing 5.0 percent over the second quarter. Vacancies declined for industrial and hotel properties. Office vacancies inched up 9 basis points, to 17.8 percent, while retail availability rose 110 basis points, to 15.7 percent. Multifamily vacancy reached 7.3 percent, as new supply entered the market and the residential rental market added competition.
With sliding vacancies, landlords found fewer reasons to offer rent concessions. In addition, rental rates rose 2.0 percent during the second quarter. In terms of space requirements, tenant demand remained strongest in the 5,000 square feet and below, accounting for 70.0 percent of leased properties. Lease terms remained steady, with 36-month and 60-month leases capturing the bulk of the market.
For the full report along with respondent comments, please visit http://www.realtor.org/reports/commercial-real-estate-market-survey.
George Ratiu, Research Economist
Link to source article here.
George Ratiu, Research Economist, writes regular economic columns and conducts research in the areas of commercial real estate, international investments, mortgage performance and foreclosures. He produces NAR’s Commercial Real Estate Outlook and manages quantitative surveys, including the Commercial Real Estate Quarterly Market Survey.
