By Michael Tucker
Real Capital Analytics, New York, reported commercial real estate price growth increased at a 1.4 percent annualized pace in September as gains in apartment and industrial sector prices offset declines in retail and office price.
The Trepp CMBS delinquency rate continued to trend notably lower in October. After two huge jumps in May and June, the rate has now declined for four consecutive months.
The CMBS Delinquency Rate in October is 8.28%, a decline of 64 basis points from the September number. About 1.00% of that number represents loans in the 30 days delinquent bucket – down 40 basis points for the month.
By Michael Tucker
The Urban Land Institute, Washington, D.C., said a consensus of real estate economists surveyed expect a short-lived recession and above-average GDP growth in 2021 and 2022.
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By Bendix Anderson
Though the majority of properties were still close to fully occupied, over-eager developers had squeezed too many new projects into growing cities like Phoenix and Orlando, Fla., which put some downward pressure on rents. Then the initial chaos caused by the pandemic rents down further.
The Fannie Mae (FNMA/OTCQB) Home Purchase Sentiment Index® (HPSI) increased 3.5 points in September to 81.0, rising for the second consecutive month and continuing the rebound from late spring. Three of the six HPSI components increased month over month, with consumers reporting a substantially more optimistic view of home-selling conditions, expected home price growth, and the labor market, but a more pessimistic view of homebuying conditions and mortgage rate expectations. Year over year, the HPSI is down 10.5 points.
“The HPSI has recovered more than half of the early pandemic-period decline, mirroring the strong home purchase activity of the past few months,” said Doug Duncan, Senior Vice President and Chief Economist. “Consumers’ home price expectations were up strongly this month, with high home prices playing an increasingly – though unsurprisingly – important role in driving both the increase in ‘good time to sell’ sentiment and the decline in ‘good time to buy’ sentiment. Going forward, we believe the wild card to be whether enough sellers enter the market to continue to meet the strong homebuying demand. The home purchase market requires the proper mix of home price growth and continued economic recovery to achieve sustainable levels of housing activity.”
By Jon Banister
Tenant demand in the office market has been increasingly favoring shorter-term lease deals, a trend that complicates how much buildings are worth.
Lenders tightened their standards on commercial and industrial business loans to firms of all sizes amid weaker demand during the second quarter, the Federal Reserve reported Aug. 3 in its newest Senior Loan Officer Opinion Survey. The tightened standards and reduced demand also applied to construction and land development loans, nonfarm residential loans and multifamily loans.
The COVID-19 pandemic rages on, with the U.S. remaining one of the worst-hit parts of the globe. Other nations have contained the virus or are dealing with more isolated outbreaks. There's no clear end in site for the crisis. The global economy remains gripped by uncertainty and hobbled by measures necessary to contain the spread of the virus.
It's in this context that CBRE is releasing its Global Real Estate Market Outlook 2020 Mid-Year Review report. As it did with its 2020 Real Estate Market Outlook, CBRE has provided NREI an advance look at the report. The slideshow walks through the firm's observations with interactive versions of the charts published in the report.
The U.S. economy expanded in May and June, but by some measures it already is slowing down, according to data released July 20 by real estate firm JLL. Advance retail sales rose 7.5% between May and June, and industrial production jumped 5.4% during the same period, but consumer sentiment declined in July over fears of increasing COVID-19 cases.
The Mortgage Industry Standards Maintenance Organization, known as MISMO, on July 24 released for comment its proposed commercial appraisal data standards. The standards are intended to facilitate the exchange of commercial appraisal information, which is critical for underwriting and loss mitigation, between multiple industry participants. Comments are due Sept. 21.
Home sales increased moderately across most Fed districts, but commercial activity remained at a low level, with reports of mixed or deteriorating conditions — although most tenants reportedly paid rent in June, according to the Federal Reserve's latest Beige Book released July 15. Investment activity was slow to nonexistent across the board.
Commercial and multifamily mortgage bankers are expected to close $248 billion in loans backed by income-producing properties this year, a 59 percent decline from 2019’s record volume of $601 billion, a new Mortgage Bankers Association forecast said.
Total multifamily lending alone, which includes some loans made by small and midsize banks not captured in the overall total, is forecast to fall by 42 percent to $213 billion in 2020 from last year’s record total of $364 billion. MBA anticipates a partial rebound in lending volumes in 2021, with activity rising to $390 billion in commercial/multifamily mortgage bankers originations and $308 billion in total multifamily lending.
By Pedro Nicolaci da Costa
Policymakers at the Federal Reserve, after some initial optimism that the Covid-19 slump would be deep but confined to the second quarter of this year, now seem braced for a more prolonged recession marked by high unemployment and a rising risk of corporate bankruptcies.
Demand for office space is intrinsically linked to the economy; generally in a downturn, office demand drops off as employment levels fall and corporates move into cash preservation mode. The global pandemic has undoubtedly pushed us into a global recession and in the short term this will have a direct impact on office demand. However, in light of the success of wholescale working from home, the question is now being asked – over the longer term, will this be the catalyst for the end of the office?
This is not the straightforward equation it is often portrayed as; increased working from home does not directly equal less demand for office space. There are a myriad of other factors which need to be looked at, including density, financial returns, productivity and technology. Before examining these factors, it is worth taking a step back to look at the function and purpose of the office from both the employer and employee perspective.
According to Freddie Mac’s Quarterly Forecast, housing markets have been affected by the pandemic with both home sales and house price growth declining.
“While the housing market undoubtedly has felt the effects of COVID-19, we are encouraged by recent homebuyer demand as well as mortgage rates that should remain at record lows for the foreseeable future.” said Sam Khater, Freddie Mac’s Chief Economist. “However, beyond the initial rebound in the housing market, the economic and housing outlook will be heavily impacted by the prospects for a vaccine, fiscal policy and the underlying organic recovery of the economy which, in combination, make the outlook highly uncertain.”
The Fannie Mae (FNMA/OTCQB) Home Purchase Sentiment Index® (HPSI) increased 4.5 points in May to 67.5, building slightly after nearing its all-time survey low in April. Four of the six HPSI components increased month over month, with consumers reporting a somewhat more optimistic view of homebuying conditions and, to a lesser extent, home-selling conditions. Moreover, fewer consumers reported expectations that mortgage rates will go up over the next 12 months. Year over year, the HPSI is down 24.5 points.
“Although the HPSI’s precipitous declines of March and April did not continue in May, Americans’ financial, economic, and housing market concerns remain substantially elevated compared to survey history,” said Doug Duncan, Senior Vice President and Chief Economist. “Low mortgage rates have helped cushion some of the impact of the pandemic on consumer sentiment regarding whether it’s a good time to buy a home, which picked back up this month to late-2018 levels. Although weakened income perceptions and continuing job loss concerns, particularly among renters, are likely weighing on many would-be buyers, purchase mortgage applications have returned to mid-March levels when pandemic response measures began ramping up. Home-selling sentiment remains severely dampened due primarily to economic concerns, though increased purchase activity may improve the confidence of some potential sellers. As lockdown restrictions begin to ease across the country, we expect economic recovery to be largely shaped by consumers’ decisions regarding when and how to reengage in the economy. We believe this month's HPSI results and Friday's unexpectedly favorable labor market report to be encouraging signs for the months ahead.”
The Federal Housing Finance Agency (FHFA) is extending several loan origination flexibilities currently offered by Fannie Mae and Freddie Mac (the Enterprises) designed to help borrowers during the COVID-19 national emergency. Flexibilities extended until at least July 31st include:
By Scott Baltic
National economic upheaval and surging unemployment will push U.S. office market absorption into negative territory through the second quarter of next year. That’s according to the NAIOP Research Foundation’s Office Space Demand Forecast for the second quarter.
