Archives for April 2015

Last year, GDP growth was a mediocre 2.4%. While it was the best growth since 2010 when GDP growth was a “sparkling” 2.5%, it means yet another year, the ninth in a row, of sub 3% GDP growth. There has never been a run of such weak GDP growth since record keeping began in 1930. Yes, there were terrible periods but they were all blessedly brief, never lasting more than two or three years and they always occurred during recessions. In our case, the recession ended in June 2009. What is going on? The fact is that our weak GDP growth is not surprising at all, let me explain.
GDP growth is composed of two things, growth in the labor force and growth in labor productivity. GDP rises when more people work, and better yet, when they work more productively. Productivity growth is particularly important because it boosts living standards.
GDP growth was very good following WWII because annual labor force growth grew dramatically from 0.5% in 1950 to almost 2.5% in 1975. As a result, the prime-aged working population, those between the ages of 25 and 54, grew from 60 million to almost 80 million in 25 short years. While population growth then began to decline, it remained above 1% through 2003. As a result, the prime-aged population continued growing, hitting 122 million in 2003. As a matter of fact, the labor force grew much faster than the population during the 1970s and 1980s due to the huge influx of women into the labor force. As a result, the prime-aged working population grew by over 3% per year during the 1980s.
Since 2003, population growth has slowed further and is now barely 0.7%. Moreover, the Boomers have begun retiring in large numbers and the number of working men and women has, for a number of reasons, continued to slowly decline. As a result, the size of the prime-aged working population has essentially flat-lined since 2003. As a matter of fact, it peaked in 2007.  If the size of the prime-aged working population is flat, it’s hard to experience rapid GDP growth even if labor productivity growth is good.
Regrettably, labor productivity growth has not been particularly good of late. But first some history: from 1948 through 1973 labor productivity grew at an amazing average annual rate of 2.8%. Add to that rapid labor force growth, and it’s no wonder GDP growth averaged 4.1% per year. Between 1974 and 1990, labor productivity grew by an anemic 1.4% percent but given good population growth, GDP growth was a solid 3.0% per year. From 1991 through 2007, productivity perked up to a very respectable 2.4%, and despite weak population growth, GDP still averaged 3% per year.
Since the start of the Great Recession, however, we have experienced anemic labor productivity growth of, again, 1.4% per year and a trivial increase in the working population. As a result, GDP growth has averaged a dismal 1.2% per year. Luckily the prime-aged working population is again starting to rise, which is good. The million dollar question is “How will labor productivity growth perform?” Will it be a replay of the boom years of 1974 through 1990, the crummy years since 2007, or more likely something in between?   While nobody knows for sure, GDP growth should drift upwards as demographics become more favorable and labor productivity hopefully rises.
By: Elliot Eisenberg (GraphsandLaughs)
Click here to view source website.

National Association of REALTORS® Issue Brief Commercial Real Estate – Top Priorities and Commercial Issues and Actions: April 2015
Full briefs on each issue can be accessed by going to www.realtor.org/political-advocacy
1031 LIKE KIND EXCHANGES: During 2013 and 2014, tax reform proposals in both the House and Senate would have repealed Section 1031. The President’s budget proposal for Fiscal Year 2015 contained limits on the deferral provisions of Section 1031. Fortunately none of the proposed changes to Section 1031 progressed beyond the idea stage. So far no tax reform plans have been introduced in 2015, but since it is typical for tax reform proposals to borrow heavily from ideas floated in previous years, the risk to Section 1031 remains a clear and present danger.
NAR ACTION: NAR participates in multiple coalitions to protect Section 1031 from repeal or limitation. As part of the “1031 Like-Kind Exchange Coalition,” which includes non-real estate industry groups, NAR commissioned a study from Ernst & Young on the macroeconomic effects of repealing Section 1031, and participated in a press conference and a hill-visit day to meet with key Members of Congress to discuss the issue. As part of the “Real Estate 1031 Like-Kind Exchange Coalition,” made up solely of real estate sector groups, NAR has commissioned another economic study on Section 1031, focusing on its impact on real estate. In 2015 NAR surveyed its membership to gauge how REALTORS® use Section 1031, and how their businesses will be affected if it is repealed. NAR continues to monitor this, and will oppose any plans to repeal or limit its use.
BASEL III: The Basel Committee on Banking Supervision released a proposal addressing Revisions to the Standardized Approach for Credit Risk, which outlines the risk-weighting regime for credit exposures for those using the standard approach. The proposal would have a negative impact on credit availability for commercial real estate through its changes to risk weighting different factors within the loan, and increased lending standards that would be higher than what regulators already have in place.
NAR ACTION: NAR signed onto a comment letter in March 2015 with several industry partners calling for the Committee to rethink its approach to the risk weighting standards and to scale back some of the changes that would be most limiting to commercial real estate lending.
LEASE ACCOUNTING: The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) have been working since 2005 to develop a standardized approach to lease accounting. The initial proposal included new accounting rules that would force many companies to capitalize commercial leases onto their balance sheets using a “right-of-use” accounting model. Efforts to fully converge the two standards have stalled. The latest reports from FASB indicate it will replace the current dual model approach with a new one: though leases currently categorized as “operating leases” will be brought onto balance sheets under it, “Type A” leases are treated as capital leases and “Type B” leases continue to be recorded as straight-line rent expenses. Most real estate leases will fall into the “Type B” category. The updated standards are expected to be released in 2015, to be effective in 2017 or 2018.
NAR ACTION: Throughout the standards convergence project, NAR has been active on its own and in coalitions to express concern the new lease accounting proposal would be detrimental to the economy by reducing the overall borrowing capacity of many commercial real estate lessees and lessors. NAR will continue to monitor the FASB and IASB negotiations as they approach finalization of their standards, and will provide education to its members about the new standard and the impact it may have on commercial real estate.
MARKETPLACE FAIRNESS: In March 2015 Senators Enzi (R-WY) and Durbin (D-IL) introduced S. 698, the “Marketplace Fairness Act of 2015,” which would create authority for state governments to collect sales taxes on Internet sales for goods delivered to their states, which would level the playing field between brick-and-mortar and e-commerce retail businesses while assisting the states in collecting billions of uncollected state sales taxes. Earlier in 2015 Rep. Goodlatte (RVA), Chairman of the House Judiciary Committee, circulated a draft proposal which would implement an origin-based collection system for online sales, which has been strongly criticized by many industry groups.
NAR ACTION: NAR participates in the Marketplace Fairness Coalition, and will continue to support S.698 and urge Congress to pass this legislation.
By: National Association of REALTORS®
Click here to view source PDF.
Click here to learn more on NAR’s website.

Thanks to all of the brokers, sponsors and guests who attended the April 2015 CCIM Deal Making Session and to those who shared the April 2015 CCIM Properties. Over 23 million dollars of commercial real estate properties available for sale were presented from all over New Mexico.

Anne Apicella	2616-2632 Mesilla St NE	$2,066,000
Todd Strickland	232 Prosperity Ave	$305,000
Jim Wible, CCIM & Dave Hill, CCIM	1903 Edith Blvd	$1,300,000
Anne Apicella	1909 29th St SE	$757,350
Cole Flanagan, CPA, Rich Diller, CCIM, SIOR & Carlos Garcia	2860 Cerrillos Rd	$6,145,000
Todd Strickland	6409 Candelaria Rd	$410,227
Reese Good-Aumell	5901 Lomas Blvd NE	$450,000
Cole Flanagan, CPA, Rich Diller, CCIM, SIOR & Carlos Garcia	720-730 St Michael’s Dr	$7,950,000
Todd Clarke, CCIM	1920 Vassar NE	$4,375,000

April 16, 2015 | 8:15 – 11:30 a.m.

State Bar of NM | 5121 Masthead NE

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Learn the many options for financing investment commercial real estate projects in today’s regulatory environment! Instructor: Darin Davis, CCIM