Metro Area New Home Prices
The U.S. Census Bureau regularly tracks new home prices for the United States, Census Regions and Divisions. However, there is no systematic measurement of new home prices by states or metropolitan areas. To fill the void, NAHB Economics periodically estimates median new home prices for metropolitan areas. The most recent estimates show that median new home prices range from less than $110,000 in Beaumont-Port Arthur, TX to more than $845,000 in Bridgeport-Stamford-Norwalk, CT (Table 1). The map below helps visualize the wide cross-country differences and reveals a familiar geographic pattern with most expensive new homes clustered in the coastal areas of California, Hawaii and the Northeast region. The least expensive new homes are concentrated in Texas and the center of the United States.
To estimate median new home prices by metro NAHB Economics relies on data reported by the 2010 Census Bureau’s Building Permits Survey and Survey of Construction (SOC). The Permits Survey provides both the number and aggregate value of new housing units authorized by building permits and, thus, allows calculating average permit values for all metro areas. However, permit values do not include brokerage commissions, marketing/finance costs and may not include the cost of raw land. These additional costs are likely to differ across geographic areas but not available for metro areas. To account for these additional costs, NAHB Economics estimates ratios of median new home prices to average permit value for nine Census divisions available in the SOC and then uses the division-wide ratios to convert metro average permit values into median new home prices.
Growing Strength for Housing in 2012
Final data for 2011 confirms that single-family home sales marked their worst year on record, totaling 302,000 for the year. Total private residential construction spending, including home improvement expenditures, was down more than 1% compared to 2010.
Despite these year-end statistics, other key economic indicators suggest growth for housing and home building in 2012.
For the economy as a whole, fourth-quarter GDP growth was estimated at 2.8%, up from the weak rate of 1.8% in the third quarter of 2011. In January, total payroll employment increased by 243,000, causing the unemployment rate to decline to 8.3%.
Construction firms saw increased business activity in their futures, with 2011 the first year since 2006 when total hires exceeded total job separations for the industry. And NAHB’s Remodeling Market Index achieved a level of 46.6 in the fourth quarter of 2011, the highest mark since 2006.
As the new year began, NAHB published research and analysis on several topics of interest to home builders and remodelers.
NAHB economists updated the “priced out” model, which estimates the number of households that are unable to purchase a new home when prices increase due to regulatory costs and other burdens.
Economists also examined the distribution of new home prices across metropolitan areas.
A quarterly survey of remodelers found windows to be the most popular energy-efficient property installed with respect to home improvement projects.
And finally, NAHB analysis noted the aging of the owner-occupied housing stock, with the average age of owned homes standing at 34 years old in 2009, a full 11 years older than the measure taken in 1985.
New interstate proposed for Middle Georgia
Atlanta Business Chronicle by Carla Caldwell, Morning Call Editor Tuesday, February 14, 2012, 5:34am EST
A new federal study includes a possible $7.7 billion interstate route from Augusta, Ga., to Natchez, Miss., reports the Macon Telegraph.
The report, obtained by The Telegraph under the Freedom of Information Act, includes the prospect of an interstate highway cutting through the center of Byron. The roadway would connect with Interstate 75.
Funding for the federal route has not been identified. The study was done by the Federal Highway Administration to meet a congressional mandate.
The federal route includes an area being studied by state officials in the Connect Central Georgia study, which seeks to better connect Columbus, Macon and Augusta, the newspaper reported.
Ga. Power says solar plan infringes on territory
Atlanta Business Chronicle by Carla Caldwell, Morning Call Editor Monday, February 20, 2012, 6:23am EST
Georgia Power says a Georgia Senate proposal that would allow private property owners and businesses in the state to buy solar panels and power from a third party would illegally infringe on the company’s territory and drive up rates for customers, reports the Associated Press.
Supporters of Senate Bill 401 say it promotes renewable energy options, supports private property rights and is good for power consumers, AP reported.
The bill has been assigned to a committee, but has not yet gotten a hearing.
***
What do you think of this? Is it right to allow Georgia Power to keep a monopoly on all forms of electrical generation, all the while extorting the free market while charging power users IN ADVANCE for the costs of building a nuclear generator?
Land broker friends of mine out west are raving over the increase in ranch land values because of the capability of harvesting wind power from it. Here in Georgia, the sun offers us a opportunity to harvest income from solar energy drawn from otherwise low productive areas of our land.
True, the technology isn’t at the break even point yet, but with the ever increasing uncertainty of our oil supply, it may soon be. Do you want to give up your ability to make money off of your land to Georgia Power?
Southside Industrial Outlook
Want to Learn How to Lower Your Property Taxes?
Need more office buildings? Not likely, U.S. told
chris atchison Special to Globe and Mail Update Published Monday, Feb. 06, 2012 3:37PM EST
It’s doubtful that most in the commercial property sector have ever envisioned a world without new office construction. The need for more offices is sure to remain strong, right?
Think again, concluded a panel of experts and academics convened by the Building Owners and Managers Association at Georgetown University in Washington, D.C., last month. They debated a simple, yet contentious, question: Does the United States really need any more office space?
The experts agreed that, with the exception of a handful of core markets such as New York and San Francisco, the country’s existing property supply likely already offers more than enough room for its white-collar workers.
In other words, the United States has effectively reached peak office demand – an assessment that should spark interest for commercial property market insiders in Canada.
“We don’t need another office building,” says Martha O’Mara, a symposium panelist, lecturer at the Harvard University Graduate School of Design and managing director of Cambridge, Mass.-based commercial property consulting firm Corporate Portfolio Analytics Inc.
“Our traditional idea of an office space and the idea that as the number of office jobs increase, it will lead to an increase in demand for office space, just doesn’t hold any more.”
The reason, according to Dr. O’Mara, is that most companies already occupy about 50 per cent more office space than they actually need, while technology has drastically changed the post-war work model. Fifty years ago, working from home was simply not an option.
But the shift to a largely information- and services-driven economy and the ubiquity of Internet-based communications has drastically changed that model.
“The idea of people working in a closed office or cubicle in an office doesn’t really work any more,” Dr. O’Mara explains. “I think the understanding about how to efficiently use real estate is only beginning to become obvious in information work.”
Panelists stressed, however, that the U.S. commercial property market will not die if their predictions play out – quite the opposite.
In their view, future activity in most American property markets will shift from new construction to the refurbishment of existing office properties as companies reconfigure their spaces to suit the drastically different needs of Generation Y and millennial workers who are said to prefer working in smaller workstations in light-filled, open-concept, collaboration-driven environments.
But the question remains: if the panel’s pessimistic predictions about demand for new product in the U.S. office market are correct, could the same scenario play out in Canada?
Not likely, says Ian Thompson, a Toronto-based senior research analyst with commercial property services provider CB Richard Ellis Canada. As he explains, a relatively buoyant economy and strong national immigration rates have resulted in a near constant influx of new Canadians into both large- and medium-sized markets across the country. That net positive immigration, he says, will maintain demand for new office construction for the foreseeable future.
In spite of extreme uncertainty in the current economic climate and general economic malaise in the United States and abroad, for example, Canada’s office market fundamentals have remained relatively robust.
Consider national downtown office vacancy rates, which dropped significantly in the fourth quarter of 2011 to 6.1 per cent from 8 per cent a year earlier, as well as average Class A net office rents, which have held steady year-over-year hovering at $23.65 per square foot in the fourth quarter, according to CBRE data.
Another reason new office property construction will likely continue in Canada, says Colin Ross, senior vice-president and manager for office leasing at DTZ Barnicke in Toronto, is the relative lack of speculative building – and thus less oversupply – compared with south of the border.
“In Canada, we have a very conservative, largely pension fund-owned model and wait until a new downtown-core office building is 70 per cent leased [before starting construction],” Mr. Ross explains. “There’s a lot of speculative building in suburban markets, but not in the downtown core areas.”
He says the one clear similarity between the United States and Canadian office markets is in the drive by companies to improve space utilization and reduce their overall real estate portfolio. Mr. Ross says that most companies are reducing their footprint per employee from about 200 square feet to 140 square feet on average. They’re achieving that goal by reconfiguring their spaces and using fewer offices for executives or managers, while introducing smaller but more effective employee workstations.
As Susan Steeves, a partner at Vancouver-based SSDG Interiors Inc., explains, office furniture designers are now producing workstations that serve multiple functions – including swing-out tables that allow for impromptu meetings, for example – as well as low walls between workstations to give workers the chance to discuss ideas with ease and maximize light penetration throughout an office.
Facilitating this sort of change will require a major overhaul of existing office buildings, or an increase in new, purpose-built spaces, she says.
“To a large degree [the traditional towers] are going to be gutted,” Ms. Steeves says.
Mr. Ross points out that while some companies will opt to retrofit existing spaces to suit their needs, others, such as Corus Entertainment – which recently constructed a new open-concept office complex on Toronto’s waterfront replete with meeting rooms, an abundance of naturally lit spaces, employee-friendly amenities and close proximity to public transit – will still focus on constructing new, flagship offices from scratch that reflect the characteristics of their brand.
But for the most accurate snapshot of the office of the future, Ms. O’Mara recommends walking around a university campus today and watching how students interact. “People will be working in settings that drive behaviour rather than individual workplaces,” she predicts. “There will always be certain jobs that will require people to have a fixed workstation and that should always be provided, but the majority of people will be mobile.”
Bye, bye cubicle
– Teleworking: From home, or even different countries. People don’t want to sit in their cars, companies [and the planet] can’t afford for people to sit in their cars.
– Collaborative spaces: Favoured by companies such as Google. It believes one never can tell when the next spark of genius will occur, that’s why it wants its workers to be together with colleagues.
– Generational change: By 2025, about half of the baby boomers will be out of the workplace. Younger workers are more comfortable using technology to blend work and home life.
Source: BOMA foundation
Economist’s View: A Better Economy in 2012?
By George Ratiu Finance, In Print, Investment, LendingFeb 10, 2012
Two-and-a-half years after the official end of the economic recession, we are still looking for an “all clear” sign. While 2011 offered some positive news, it barely made for holiday sparkle. Weighed down by a bagful of European financial issues, weak domestic employment and a consumer mood that was more attuned to the Grinch than Santa Claus, the economy seemed relieved that another year was over.
As we approached the end of the year, the Bureau of Economic Analysis’ second estimate, in the third quarter, downgraded the gross domestic product from a 2.5 percent annual rate of growth to 2.0 percent. Most major GDP components were revised downward, indicating a softer level of economic growth.
This was not a surprise, as consumer spending grew at a weak 2.3 percent rate during the third quarter. Consumers did increase their spending on both goods and services. However, as the much-anticipated post-Thanksgiving retail shopping illustrated, consumers are looking for discounts and proving to be much more targeted with their dollars.
Continued large debt levels, high unemployment, stagnant wages and lack of growth kept the outlook in check. The consumer confidence index compiled by the Conference Board declined to 40.9 in October, a low not seen since the second quarter of 2009, during the recession. More troubling, consumers were pessimistic about both the current economic conditions and prospects for the future.
It didn’t help that employment slowed down in the third quarter compared with the first half of the year. Businesses cited general uncertainty, lack of demand and regulatory concerns as the main reasons for modest hiring. The good news is that the number of nonfarm payroll jobs rose by 297,000 during the quarter, with professional and business services posting a net 102,000 new jobs. The other contributors to employment growth were the education and health sectors.
However, employment conditions remain far from a pace that could support sustainable economic growth. The first-time unemployment insurance claims were pegged stubbornly high at 412,000 per week during the third quarter. The figure should fall below 400,000 per week to ensure meaningful, consistent job creation. In addition, the number of people drawing unemployment benefits rose to 3.73 million in the third quarter, from 3.72 million in the second quarter. The encouraging highlight was the decline in the unemployment rate from 9.1 percent at the end of September to 8.6 percent in November.
While not fully ramping up employment levels, business investments provided a double-digit boost to the economic advance in the latter half of the year, with business spending rising 14.8 percent during the third quarter. In fact, in a hopeful sign for 2012, businesses accelerated their spending with each successive quarter during 2011. Notable gains included transportation rising by 31.7 percent and industrial equipment by 31.6 percent in the third quarter. And spending on commercial real estate gained for two consecutive quarters, advancing 12.6 percent by the end of October.
Much of the investment was aimed at international trade, which proved resilient last year. But while trade grew, so did prices of exchanged goods. Import prices, in particular, grew at double-digit rates for the better part of 2011, with September’s prices 13.4 percent higher year-over-year. Export prices rose at a much slower pace, with September figures up 9.5 percent over the prior year.
The other major contributor to economic growth—government spending—was flat. Federal spending increased 1.9 percent, driven by defense expenditures, up 4.7 percent. State and local governments slashed their spending by 1.4 percent as they continued to face mounting deficits.
Thus, while the holiday season brought a small jolt of energy to the economy, it did not provide enough fizz to make everyone’s celebration cups full. The GDP is expected to gain 2.5 percent this year, an improvement over 2011. With the political cycle closing another loop in November, hopes are high that 2012 will offer a better economy.
George Ratiu is manager of quantitative & commercial research at the National Association of Realtors.
Apartment, Office Properties Record Strongest CRE Pricing Recovery In 2011
As Distress Eases Most Property Types Swing Upward In 2011, Despite Seasonal End-Of-The-Year Price Softening
By Randyl Drummer February 15, 2012
Powered by continuing gains in apartments and growing momentum in the office sector, the CoStar Commercial Repeat Sale Indices (CCRSI) National Composite Index ended 2011 significantly above its cyclical low last March, despite a relatively flat fourth quarter for pricing.
CRE sale prices stalled a bit in December as heavy year-end trading kept pricing stable in the fourth quarter, a trend CoStar has observed in each of the past two years, according to this month’s release of the CCRSI, which tracks sale pair transaction data through Dec. 31. The National Composite Index ended 2011 up a flat 0.2% from year-ago levels, but 5.5% above its low point in March 2011, thanks to a mid-year surge.
The Investment Grade and the General Commercial indices of the CCRSI both followed a similar trajectory in 2011, with prices declining in the first quarter, rallying at midyear and coasting during the flat final quarter. Highlighting the investor flight to safety to major markets and core assets, the Investment Grade Index finished December up a cumulative 14.6% from its March 2011 trough, while the recovering General Commercial Index ended the year up 3.5% from March.
CoStar’s Multifamily Index continued to lead all property sectors, with prices rising by 6.8% in the fourth quarter and increasing a total of 15.3% in 2011. After several quarters of relative weakness, the West regional index recorded the largest overall gain in the country, helped by outsized growth in office and multifamily pricing. In total, the Northeast regional index has continued to see the largest cumulative pricing gains since the trough of the real estate cycle.
Lone among commercial property types, the Retail Index lost ground in the fourth quarter of 2011, falling to its lowest value since 2003.
The impact of distressed property transaction on pricing levels was blunted by a surge in non-distressed property trading in the fourth quarter, although the volume of distressed trades remains high.
CoStar this month also introduced new quarterly pricing indices for hospitality properties and commercial land in addition to office, industrial, multifamily and retail, the four major CRE properties types. Both hotels and land ended 2011 near cyclical lows.
Reflecting a disproportionate level of distress, the Hospitality Index remained 47.6% below its third-quarter 2007 peak — the widest gap among the six property types — despite improving occupancies and revenue per available room (RevPAR). As a percentage of the total sales pairs, the level of distressed hotel property transactions ranks at the top among all commercial property types and has not yet begun to decrease significantly, tamping down average hotel sale prices.
Likewise, the Land Index finished 2011 down a cumulative 41% from the peak of the last cycle, and has not shown any tangible recovery to date following three years of quarterly declines, although losses appear to be easing.
The multifamily index has now grown by a cumulative 21.6% since the bottom of the cycle, outperforming the second-ranked office sector by more than 400 basis points. Renter demand has eclipsed supply, causing vacancies to contract by 170 basis points over the past two years, prompting rental rate gains. Strong property level income growth expectations by investors appear to be baked into the heightened pricing of current transactions.
Investor interest in office property also rebounded in 2011, with the office property index increasing by 17.3% since the end of March 2011. Like the recovery of the broader economy, the office rally has proved to be volatile and uneven despite the significant firming up of prices.
“Pricing gains have proven to be more explosive in tech-centric markets than in the overall market,” according to the CoStar CCRSI report. “The office index will likely continue to vacillate between gains and losses until office demand growth becomes more evenly dispersed across markets.”
Industrial property pricing increased by just 4.4% since March 2011, and was down slightly in the fourth quarter compared to year-ago levels.
Retail is the notable exception to the recovery story to date. Shopping center fundamentals remain soft despite an improving economy and a burst of pent-up consumer spending that has pushed retail sales above the peak of the last cycle. Bucking the trend, power centers and super regional malls have seen gains in tenancy gains over the past year, which could signal a coming turnaround in retail pricing, according to the CoStar report.
Larger and higher-quality properties generally outperformed the market in timing and magnitude of prices improvement, mirroring the growth in CRE fundamentals over the past year. Prices for investment grade properties stabilized at the end of 2009, more than a year ahead of price stability in the general commercial properties. The Investment Grade Index gained 3.4% in 2011, compared with 0.2% for the General Commercial segment.
While the volume of distressed transactions in December remained well above the monthly average for the year, the percentage of distressed trades fell from 35.4% in March 2011 to 24.8% in December, helping push up the National Composite Index.
Hampering the market recovery is the continued softness in levels of real estate lending. Mortgage originations fell by 7% in the fourth quarter from the previous quarter, according to the quarterly survey by the Mortgage Bankers Association (MBA).
The Northeast Composite Index, powered by the exceptional rebound in multifamily and office pricing, gained 12.3% from the market bottom, ending 2011 only 14.3% below the peak of the last boom cycle, reflecting an investor preference for the best assets and densely populated coastal markets. Pricing in the South, Midwest, and West regions is recovering at a more moderate pace, with the indices for each region finishing December 2011 down between 34% and 39% from the market peak.
However, the West won as the most improved region of the country, with the composite index advancing by 5.8% in 2011, compared with a 4% gain in the Northeast, a 2.2% gain in the Midwest, and a 6.9% loss in the South.
“Barriers to supply in the West have improved the marketability of CRE assets in this region as investors branch out to seek opportunities beyond the core coastal Northeastern markets,” CoStar said in the report.
In other CCRSI regional results among specific property types:
Apartments were the only index to record positive gains in 2011 across all regions, while office recorded the second-best growth rate in 2011, with regional gains ranging from 8% in the West to 11% in the Midwest and Northeast.
The South, the only region to record a loss on the overall composite index in 2011, recorded a 4% pricing loss in office.
Retail, universally the worst performer, experienced losses ranging from 1.2% in the West to 10.3% in the South in 2011 prices.
Fourth-quarter results in the Top 10 Largest Metro indices reflected the investor preferences for the best properties in the top markets. The Office Top 10 Largest Metro Index gained 23.8% since the trough of the last cycle as of the fourth quarter, significantly outperforming the 17.3% of the National Office index.
The Multifamily Top 10 Index recovered 25.6% from its trough, compared with 21.6% in the overall multifamily index.
The industrial and retail Top 10 Largest Metro Indices, however, underperformed their national counterparts. The Industrial Top 10 index declined by 11% compared with a 2.9% decline in the national index, while the retail top 10 metros also proved to be drag on the National Retail Index, with quarterly and annual losses nearly double the national average.