REALTORS CONFIDENCE INDEX

Report and Market Outlook March 2013 Edition

Based on Data Collected March 25 through March 29, 2013

NATIONAL ASSOCIATION OF REALTORS Research Department Lawrence Yun, Senior Vice President and Chief Economist

Table of Contents
SUMMARY .................................................................................................................................................. 3 REALTOR Confidence in Current Market Conditions Rose Strongly .................................................. 3 Demand for Properties Continued to Expand Faster than Supply ........................................................... 4 REALTORS Are Increasingly Optimistic Concerning the Market Outlook ......................................... 5 I. Market Conditions .................................................................................................................................... 7 Confidence Is Up Across All Property Types ........................................................................................... 7 Prices Continue to Firm Up ...................................................................................................................... 8 Median Days on the Market: 62 Days .................................................................................................... 10 Distressed Sales: 21 Percent of Sales ...................................................................................................... 11 II. Buyer and Seller Characteristics ............................................................................................................ 14 Cash Sales: 30 Percent of Residential Sales .......................................................................................... 14 First Time Buyers: 30 Percent of Residential Buyers ............................................................................ 15 Residential Sales to Investors: 19 Percent of Residential Market.......................................................... 15 Second Home Buyers : 11 Percent of Residential Market ...................................................................... 16 Relocation Buyers : 13 Percent of Residential Market ........................................................................... 16 International Transactions: About Two Percent of Residential Market .................................................. 17 Mortgages With Down Payments of 20 Percent or More ....................................................................... 17 Rising Rents for Residential Properties .................................................................................................. 18 REALTORS Also Reported Commercial Rentals and Sales .............................................................. 19 III. Current Issues........................................................................................................................................ 20 Tight Credit Conditions and Slow Lending Process ............................................................................... 20 AppraisalsA Continuing Problem ....................................................................................................... 20 IV. Articles and Comments......................................................................................................................... 21 Consumer Debt Down, But Student Debt Up ......................................................................................... 21 Even in Bad Times, Real Estates Impact is Big .................................................................................... 24 Demand for Office Projected to Grow in 2013 ....................................................................................... 26 Comments From REALTORS ............................................................................................................. 27

SUMMARY
Jed Smith and Gay Cororaton The REALTORS Confidence Index (RCI) Report provides monthly information about market conditions and expectations, buyer/seller traffic, price trends, buyer profiles, and issues affecting real estate. The current report is based on the responses of a random sample of 3,204 REALTORS to a survey conducted during March 25 through March 29, 20131. All real estate is local: conditions in specific markets may vary from the overall national trends presented in this report. Based on replies to the March RCI Survey, REALTORS generally were upbeat about current and future market conditions, reflecting both the market recovery and the seasonal upswing in spring. Buyer demand was generally reported to be strong, and most respondents had sanguine expectations about future prices. However, REALTORS remained concerned about the tight inventory, stringent credit conditions, the slow pace and uncertainty of the economic recovery, and the effect of regulations concerning qualified mortgage purchases. REALTOR Confidence in Current Market Conditions Rose Strongly The Confidence Index-Current Conditions rose strongly across all types of market from their previous levels in February as well as a year ago. An index level of 50 delineates moderate market conditions.

REALTORS Confidence Index - Current Conditions March 2013

80 70 60 50 40 30 20 10 0

SF: 67 TH: 47 Condo: 41

The survey is sent to about 50,000 REALTORS.

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200801 200804 200807 200810 200901 200904 200907 200910 201001 201004 201007 201010 201101 201104 201107 201110 201201 201204 201207 201210 201301 SF TH Condo

Demand for Properties Continued to Expand Faster than Supply The Buyer Traffic Index rose to 69. The Seller Traffic Index also increased, although minimally, to 41. In many areas, REALTORS reported low inventory levels of homes for sale with not enough REOs and listings coming into the market. Indexes of Buyer and Seller Traffic
70 60 50 40 30 20

Mar 2013: Buyer: 69 Seller : 41

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Buyer Traffic Index

Seller Traffic Index

Amid tight inventory conditions, most REALTORS reported rising prices and lower days on the market. About 86 percent of REALTORS reported constant or increasing prices compared to their average home transaction a year ago. Median days on the market fell to 62 days. Percentage of Respondents Reporting Constant or Higher Prices Today Compared to a Year Ago
73% 69% 71% 73% 86% 79% 83% 83%

54%

58%

62% 64% 64%

201301

Median Days on the Market for All Sales

120 100 80 60 40 20 0 201105 201106 201107 201108 201109 201110 201111 201112 201201 201202 201203 201204 201205 201206 201207 201208 201209 201210 201211 201212 201301 201302 201303 Source: NAR, RCI Survey 96 97 98 92 101 96 98 99 99 97 91 83

72 70 69 70 70 71 70 73 71 74

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REALTORS Are Increasingly Optimistic Concerning the Market Outlook The Confidence Index for single family homes surged to 73. For the first time, the Index for townhouses breached the level of 50. The Index for condominiums rose to 47, significantly above the 31 level a year ago. An index of 50 marks moderate expectations.

80 70 60 50 40 30 20 10 0

REALTORS Confidence Index--Six-Month Outlook March 2013

SF: 73 TH: 53 Condo: 47

200801 200804 200807 200810 200901 200904 200907 200910 201001 201004 201007 201010 201101 201104 201107 201110 201201 201204 201207 201210 201301 SF TH Condo

About 94 percent of REALTORS reported that they expect constant or higher prices in the next 12 months. REALTORS' Price Expectations for Next 12 Months
100% 80% 60% 40% 20% 0% Mar 2013: 94% expect constant/higher prices in next 12 months

Constant/Rising Prices

Falling Prices

NAR forecasts continued sales and price increases as are indicated by REALTOR responses .
Sales
8000000 6000000 4000000 2000000 0 Jan/00 Oct/00 Jul/01 Apr/02 Jan/03 Oct/03 Jul/04 Apr/05 Jan/06 Oct/06 Jul/07 Apr/08 Jan/09 Oct/09 Jul/10 Apr/11 Jan/12 Oct/12 Jul/13
12-Month Rolling EHS Sales-Actual 2013-2014 EHS Forecast 12-Month Rolling EHS Median Prices 2013-2014 EHS Median Prices- Forecast

Home Sales and Prices: Actual thru 2014 Forecast

Prices
250000 200000 150000 100000 50000 0

What Does This Mean For REALTORS? The real estate markets continue to recover from the Great Recession in terms of sales and price. Continued restrictive mortgage availability with tight underwriting standards is a problem, but REALTORS report that loans are frequently available at smaller banks and credit unions. Tight inventories are reported as making markets increasingly competitive.
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I. Market Conditions
Confidence Is Up Across All Property Types The Current Conditions Confidence Index for single family homes rose to 67 while the Six-Month Outlook Confidence index surged to 73. An index of 50 delineates moderate expectations. For the first time, the Six-Month Outlook Index for townhouses broke the benchmark level of 50. The Outlook Index for condo properties continued to rise, with some comments indicating continued problems with FHA certification. REALTORS Confidence Index--March 2013 Current and Six Month Outlook: Single Family Properties
80 70 60 50 40 30 20 10 0

Current: 67 Outlook: 73

60 50 40 30 20 10 0

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REALTORS Confidence Index--March 2013 Current and Six Month Outlook: Townhouse Properties
Current: 47 Outlook: 53

Current Conditions

6-Month Outlook

201301

REALTORS Confidence Index--March 2013 Current and Six Month Outlook: Condo Properties
50

Current: 41 Outlook: 47
40 30 20 10 0

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6-Month Outlook

Prices Continue to Firm Up With strong buyer demand and tight inventory, most REALTORS reported rising prices. Prices are expected prices to increase in the next 12 months. o About 85 percent of respondents reported constant to rising prices compared to their average transactions a year ago. o About 16 percent reported a sales premium compared to the asking price. o Among respondents, the median expected price increase in the next 12 months is 4.4 percent. Price expectations are most upbeat in the West region where inventory is very low, in Texas, Florida, and Georgia where prices are recovering, and in strong growth states such as Virginia. Percent Distribution of Respondents Reporting Average Price Change Compared to A Year Ago -March 2013 RCI Survey
27% 29% 18% 11% 5% 5% 5%

10%+ down

5 to 9% down

1 to 4% Unchanged 1 to 4% up 5 to 9% up down

10% up

201301

Percent of REALTORS Reporting Net discount or Net Premium From the Listing Price - - March 2013 RCI Survey
net premium of greater than 23% net premium of 20-23% net premium of 16-19% net premium 12-15% net premium 8-11% net premium of 4-7% net premium of greater than 0 to 3% 0% net discount or net premium net discount of greater than 0 to 3 % net discount of 4-7% net discount of 8-11% net discount of 12-15% net discount of 16-19% net discount of 20-23% net discount of greater than 23% 0.3% 0.5% 0.6% 0.7% 2.5% 3.9% 7.8% 15.7% 20.2% 19.6% 11.3% 5.8% 3.4% 3.7% 4.0% 5.0% 10.0% 15.0% 20.0% 25.0%

0.0%

REALTORS' Median Expected Price Change for Home Prices in the Next 12 Months (in %)
Median Price Change in %

5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

Mar 2013: 4.4%

Source: NAR RCI Surveys

Median Expected Price Change in Next 12 Months of Respondent REALTORS in the March 2013 RCI Survey

Median Days on the Market: 62 Days Tight inventory has led to shorter time on the market. The median days on the market fell to 62 days in March (74 in February). Short-sales had the longest days on market at 81 days (101 days in February), while foreclosures were on the market for 46 days (52 days in February). The median days on the market for non-distressed properties was 66 days (77 days in February). About 37 percent of REALTORS noted that recently sold properties were on the market for less than a month when sold compared to 27 percent in the same month last year. The percentage of REALTORS reporting that the house sold had been on the market for 6 months or more is down to 20 percent from 28 percent a year ago.

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Median Days on Market

180 160 140 120 100 80 60 40 20 0

Mar 2013: Shortsale: 81; Foreclosed: 46; Not distressed: 66; All: 62

All Source: NAR, RCI Survey

40% 35% 30% 25% 20% 15% 10% 5% 0%

Distressed Sales: 21 Percent of Sales About 21 percent of reported sales were distressed properties, substantially down from levels a few years ago. REALTORS continued to report strong demand for REOs from investors, who typically pay cash. Distressed sales accounted for slightly more than a third of investor purchases and 35 percent of cash sales.

201105 201106 201107 201108 201109 201110 201111 201112 201201 201202 201203 201204 201205 201206 201207 201208 201209 201210 201211 201212 201301 201302 201303 Short Sales Foreclosed Not distressed

Time On Market When Sold Percentage Distribution by Months

37%

13%

10%

10% 6% 5%

7%

5%

8%

<1 mo 1-2 mo 2-3 mo 3-4 mo 4-5 mo 5-6 mo 6-9 mo 9-12 mo >=12 mo 201203 201302 201303

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Percent of Respondents Reporting Distressed Sales

50% 40% 30% 20% 10% 0% 200905 200907 200909 200911 201001 201003 201005 201007 201009 201011 201101 201103 201105 201107 201109 201111 201201 201203 201205 201207 201209 201211 201301 201303 Foreclosed As % of Sales Short Sale As % of Sales

Mar 2013: Foreclosed: 13% Shortsale: 8%

Percent of Distressed Sales to Total Sales, By Buyer

Type of Buyer First-time Investor Second home Relocation International March 2013 RCI Survey % distressed 23.7% 37.1% 15.4% 10.4% 22.5%

Distressed Sales by Type of Financing Oct 2012 thru March 2013 RCI Surveys
35.4% 20.7%

Distressed, As % of Cash Sales

Distressed, As % of Mortgage Sales

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Foreclosed property sold on the average at a 15 percent discount, while short sales sold at a 13 percent average discount. For homes with above average condition, the discount is at 910 percent.
Percent Price Discount by Property Condition (%) Unweighted Average for Apr 2012 to Mar 2013 %
40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 33.6 28.3 21.2 13.9 12.3 15.8 12.7 16.5 21.0 21.8

Above average

Average

Below average

Well below average

Bottom 1%

Foreclosed

Shortsale

Mean Percent Below Market Value Mar 2013 RCI Survey House Condition Above average Average Below average Well below ave Bottom 1% Foreclosure 11 12 18 22 16 Short Sale 9 10 19 24 4

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II. Buyer and Seller Characteristics

Cash Sales: 30 Percent of Residential Sales Approximately 30 percent of REALTORS who made a sale reported a cash sale (32 percent in February). International homebuyers and investors typically pay cash. Cash Sales as Percent of Market
40% 35% 30% 25% 20% 15% 10% 5% 0%

Mar 2013: 30%

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Percent of Cash Sales by Type of Buyer- Mar 2013

80% 70% 60% 50% 40% 30% 20% 10% 0% FTHBuyer Investor Second home Relocation International Distressed 9% 17% 51% 45% 71%

201301

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First Time Buyers: 30 Percent of Residential Buyers Approximately 30 percent of responding REALTORS reported making a sale to first time home buyers (same as in February). Normally, first time buyers are in the neighborhood of 40 percent.2 Approximately 9 percent of first-time buyer sales paid cash. About 24 percent of sales to first time buyers were distressed properties.

Residential Sales to Investors: 19 Percent of Residential Market Approximately 19 percent of responding REALTORS reported making a sale to investors who were active in buying distressed properties and paying cash. About 37 percent of investor purchases were distressed properties. Approximately 71 percent of investor sales were cash sales.

Based on data from NARs Profile of Homebuyers and Sellers. 15

Relocation Buyers : 13 Percent of Residential Market

Second Home Buyers : 11 Percent of Residential Market

10%

12%

14%

16%

18%

10%

12%

14%

16%

0% 0% 2% 4% 6% 8%

2%

4%

6%

8%

Second-Home Buyers as Percent of Market

Relocation Buyers as Percent of Market

Mar 2013: 14%

Mar 2013: 11%

201104 201105 201106 201107 201108 201109 201110 201111 201112 201201 201202 201203 201204 201205 201206 201207 201208 201209 201210 201211 201212 201301 201302 201303

201009 201010 201011 201012 201101 201102 201103 201104 201105 201106 201107 201108 201109 201110 201111 201112 201201 201202 201203 201204 201205 201206 201207 201208 201209 201210 201211 201212 201301 201302 201303

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International Transactions: About Two Percent of Residential Market Approximately 2.3 percent of REALTORS reported sales of U.S. residential real estate to foreigners not residing in the U.S. Cash sales were reported at 73 percent. Percent of Sales to International Clients
4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 201003 201004 201005 201006 201007 201008 201009 201010 201011 201012 201101 201102 201103 201104 201105 201106 201107 201108 201109 201110 201111 201112 201201 201202 201203 201204 201205 201206 201207 201208 201209 201210 201211 201212 201301 201302 201303

Mar 2013: 2.3%

Mortgages With Down Payments of 20 Percent or More Approximately 37 percent of sales with mortgages involved a down payment of 20 percent or more. Percentage Distribution of Downpayment Terms for Buyers Who Obtained a Mortgage

17% 2% 37%

No downpayment 1-2% 3-6% 7-10%

29% 5% 10%

11-20% more than 20%

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Rising Rents for Residential Properties Approximately 53 percent of responding REALTORS reported higher residential rents compared to 12 months ago. About 24 percent of REALTORS reported conducting an apartment rental.

Percent of REALTORS Reporting Changing Rent Levels as Compared to 12 Months Ago

60% 50% 40% 30% 20% 10% 0% 201012 201102 201104 201106 201108 201110 201112 201202 201204 201206 201208 201210 201212 201302

Mar 2013: Rising rent: 53%

Rising Rents

Lower Rents

Constant

Percent of Respondents Conducting An Apartment Rental

35% 30% 25% 20% 15% 10% 5% 0%

Mar 2013: 24%

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REALTORS Also Reported Commercial Rentals and Sales

Percent of Respondents Conducting A Commercial Rental

4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 201207 201208 201209 201210 201211 201212 201301 201302 201303 3% 4% 3% 4% 4% 3% 4% 4% 4%

Percent of Respondents With Commercial Sales

4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 201207 201208 201209 201210 201211 201212 201301 201302 201303 2.0% 2.2% 1.7% 2.6% 2.3% 3.0% 3.9% 3.1% 2.9%

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III. Current Issues

Tight Credit Conditions and Slow Lending Process REALTORS continued to express concern over unreasonably tight credit conditions. Mortgage lenders appear to continue to display an unnecessarily high level of risk aversion. In the 2001-04 time frame approximately 40 percent of residential loans went to applicants with credit scores above 740. Currently the percentage is in the 50 percent range. Estimates by NAR economists have indicated that an additional 500,000 to 700,000 additional sales could be made if credit conditions returned to normal.

FICO Scores: Recent Scores in 2012 vs. 2005

80% 70% 60% 50% 40% 30% 20% 10% 0%

lt 620

740+

Fannie/Freddie 740+

The meaning for REALTORS is clear: In many cases lenders are not making loans to potential buyers with less than perfect credit scores but who are well qualified to buy a home. A potential home buyer who is rejected by one bank or financial institution should try, try, try again at a different financial institution.

AppraisalsA Continuing Problem Appraisals continued to be a problem in moving sales transactions to closure. Many REALTORS continue to report that appraisal values are not keeping pace with the appreciation in market values.

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Percent of REALTORS Reporting Appraisal Problems in Past 3 Months

50% 40% 30% 20% 10% 0% 201003 201004 201005 201006 201007 201008 201009 201010 201011 201012 201101 201102 201103 201104 201105 201106 201107 201108 201109 201110 201111 201112 201201 201202 201203 201204 201205 201206 201207 201208 201209 201210 201211 201212 201301 201302 201303 Contract Cancelled Contract Delayed Negotiated to Lower Price

Mar 2013: 29%

IV. Articles and Comments

Consumer Debt Down, But Student Debt Up
Lawrence Yun, Chief Economist Americas economy is looking better and better with each passing day. Not only is the housing market contributing to growth, but corporations are flushed with cash and consumers are steadily paying down their debts. Moreover, the net exports are meaningfully improving because of the energy renaissance in North Dakota and Pennsylvania. GDP (gross domestic product, the measurement of everyones income all combined) could rise at a 3 percent rate in the first quarter as a result. If such a growth rate can be sustained for the remainder of the year, then it would mark the first field goal success for President Obama. Historically, GDP in America grows at 3 percent a year the reason for using the 3-point field goal analogy. President Bush kicked two field goals in his eight years, while President Obama has yet to make one to date. Crawling out of a deep recession is not going to be easy because of the financial market collapse. Generally the deleveraging process of consumers needing to save more and banks needing to rebuild capital (by lending less) take years to complete. This transitional phase means less money circulating through the economy. But the deleveraging process could soon be ending. Re-leveraging of borrowing more to spending more could be in store to provide that extra kick to the economy. The consumer credit card debt has fallen meaningfully in recent years. Part of the reason was due to banks lowering the credit card debt limit amount, which automatically forced consumers to borrow less. Interestingly, credit card delinquency rates have been tumbling down, far faster than mortgage delinquency rates. Consumers evidently never want to lose the plastic card, though are willing to lose the house. Or maybe only the homeowners in Illinois, New Jersey, New York, and other judicial foreclosure states, where not paying a mortgage does not
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mean getting kicked-out of a home for at least a couple of years, are keenly focused on keeping credit card payments current, though at the expense of a much slower housing market recovery in these states.

Mortgage debt levels have also significantly fallen. More cash purchases in recent years and refinancing into lower interest rates have helped. A discharge of a certain portion of the mortgage debt via foreclosures and short-sales also has lowered the overall debt load. As a result, a typical homeowner debt servicing obligation has fallen to the lowest level in at least a decade.

Meanwhile, financial institutions are flushed with cash. Their quarterly financial books show solid profit increases due in part to the pristine nature of mortgages that were originated in the past 4 years. Rising home prices have drastically cut mortgage delinquencies of recent vintages. The combination of piles of cash and exceptionally low delinquency rates on recently originated mortgages should begin to open up more lending opportunities.

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But not every debt segment is improving. The U.S. government debt is on the verge of getting out of control. Furthermore, the student debt situation is worsening. Therefore, the firsttime homebuyer market is likely to be hampered in upcoming years. Perhaps colleges are not teaching the right skills that students need for the modern economy. Or perhaps todays students are interested in going to college (to party) but not as interested in learning as evidenced by a growing number of 5th and 6th year undergraduate students. Maybe it is the slow economy that is not growing fast enough to absorb many of the bright college students. Small businesses, for example, have noted in the latest Federal Reserve Beige Book, that fewer planned staffing from the confusing and burdensome compliance cost associated with the Affordable Care Act that will go into effect from next year. Unfortunately, young adults look to be strapped for hard times ahead. The rising student debt load should have policy implications. Before automatically falling in love with the idea that more college students are good for society, we should look hard at what works and what doesnt. A look back at two past great revolutionary educational achievements may provide clues about the right public policy. Kindergarten was introduced in Germany speaking regions in the 19th century with the belief that earlier the start the better the outcome. Germany at the time was not even a country, but a glob of hundreds of different principalities speaking a common language but with no single national cohesion. But after a national unity orchestrated by Bismarck and better educated workforce, Germany experienced an economic miracle (and unfortunately, a military rise). To this day a phrase like precision German engineering carries a very strong image. Another educational revolution occurred in the distant reaches of the Soviet Union. In places like Uzbekistan and Kirgizia, the literacy rate had been less than 5 percent not too long ago. It was normal for women to have 10 or so children during that era. But the introduction of the Russian language and forced schooling raised literacy rates to over 99 percent in few short years. After acquiring education, women were having only 3 or 4 children as they wanted to spend more time reading about the happy and unhappy families in novels like Anna Karenina. All good for the mind. The eventual collapse of the state-run economy eviscerated peoples lifetime savings, both for men and women. The lesson appears to be that promoting education just for education sake is insufficient. The education must provide skill sets necessary for an ever-changing dynamic economy. Only from having a secure job and rising income will it permit people the leisure time to read great books.
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Even in Bad Times, Real Estates Impact is Big

Ken Fears, Manager, Regional Economics and Housing Finance

Historically real estate has played an important role in the U.S. economy. One reason for the economys sluggish recovery has been problems in the mortgage finance sector that have constrained a traditional housing-led expansion. While real estates share of the national GDP figure has been muted for several years, a number of state economies are still heavily dependent.

Hawaiis economy is by far the most dependent on housing related industries for its state product. Rental and leasing along with other real estate services and construction contributed 22.8% of Hawaiis gross state product in 2011 (2012 data has not been released yet). This figure does not include expenditures on furniture and related manufactured goods that often accompany a home purchase. Many of the sand states, including Florida, Arizona, California and Nevada, were also among the top ten most housing-dependent economies. However, Florida and Nevada experienced sharp declines from 2006 to 2011. The decline in home sales and prices over this time period combined to reduce incomes derived from real estate and construction came to a halt, but increased rental activity provided some countervailing support. Nascent sales and construction growth in 2012 will help to expand real estates share in these economies. This is notable given these states recent housing troubles and subsequent high unemployment rates. Housing recovery in these areas should have a strong impact on local employment as well as state and local finances.

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Each home sale results in additional expenditures for remodeling [1] , appliances, services, and furnishings and builders respond by adding new inventory as supplies wane. The income generated by these expenditures results in additional expenditures from employees of these industries. The latter process is known as the economic multiplier. Furthermore, rising home values have a strong wealth effect where consumers will spend more of their income if they feel confident that rising home prices are expanding their personal wealth. Not surprisingly, states with the highest home prices experienced the largest impact from existing home sales in 2011. Hawaii and the District of Columbia received the most significant benefit with a host of cities in the Northeast following suit as well as California. Housings contribution to the economy, while muted in recent years, remains strong. Whats more, housings role in the economy will only expand as modest price growth and stronger sales volume boost agent incomes, new construction puts more workers back to work with expanding incomes, and stronger sales and rising prices result in robust follow-on spending. A tight lending environment and sluggish employment growth have stymied the economic expansion, but both will likely ease as the regulatory environment becomes clearer and business confidence expands.
[1] Expenditures on remodeling were added to this calculation based on the national estimate produced by the Harvard Joint Center using the American Housing Survey, the share of first-time and repeat buyers from NARs Survey of Home Buyers and Sellers, and NARs median home price by state.

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Demand for Office Projected to Grow in 2013

George Ratiu, Manager, Commercial Real Estate Research The economy closed 2012 with positive growth, the slow fourth quarter GDP data notwithstanding. Mirroring that growth, commercial real estate also notched a year of growth and expansion. Fundamentals continued improving through the fourth quarter of the year, with declining vacancies and rising rents. The apartment sector shone brightly, and office and industrial spaces also 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. With employment in office-centered industries rising, demand for office buildings advanced. For office properties, net absorption totaled 17.4 million square feet in 2012, according to Reis, Inc. The supply of new office space ramped up, but did not match demandthere were about 12.0 million square feet of new completions. Vacancy rates for office properties are expected to hit 16.0 percent by the end of the first quarter of 2013 and to continue declining to an average 15.9 percent for the year. The decline in vacancies is expected to be accompanied by a 2.6 percent rise in rents. For more information about the 2013 commercial real estate outlook, see the Expectations & Market Realities in Real Estate 2013 report.

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Comments From REALTORS

Jed Smith, Managing Director, Quantitative Research REALTORS continued to report that lack of inventory, tight financing, appraisal issues, and regulatory/economic issues are constraining the current housing recovery. 1. Low Inventory/multiple bidding Inventory remains tight, with increased multi-bidding. REOs do not appear to be coming to the market sufficiently to meet demand. Sellers are reported as waiting for prices to pick up further. There are reports of homes selling above asking prices. Investors who pay cash generally win over first time home buyers.
I have 11 pending sales currently. Buyers are out in full force. Houses in my area are selling for asking to above asking price. Multi offer situation on good homes. Inventory in our area is extremely low. We are evolving into a Seller's market. Inventory is very low. First time home buyers are competing with cash investors. Multiple offers are the norm. Listings are selling faster at higher prices and I'm getting multiple offers. Banks should release more properties of their possession to ease supply!

2. Tight Financing/Credit Access to financing continues to be perceived as tight. The process of obtaining a mortgage remains protracted, especially for short sales, causing delayed closings and risking cancellations. There are reports that banks are disapproving loan applications of those with reasonably good credit scores and are requiring larger down payments.
Interest rate is very attractive right now. However the lending rules of the bank are a little too tight. It makes no sense wasting days on tiny little details of underwriting conditions. It is good practice to go to the basics; however banks are taking it to the extreme. Banks are slow or not making loans they are very slow and demand a lot of information that has already been sent many times over. Just experienced the loss of a sale due to the amount of time it takes a bank to approve a short sale. Banks are tougher - perhaps too tough. Good buyers are being rejected.

3. Appraisal issues The most common reports are about out-of- area appraisers who are reported in some cases to have poor knowledge of local conditions. Another issue is the demand for unusual repairs by some appraisers.

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 Appraisers are causing problems other than low appraisal. They are acting as inspectors. I know they have criteria to follow depending on the type of loan but they are pushing their level of expertise. They have no need to recieve a copy of the contract. The value of the property is the value of the property regardless of the agreed price. Appraisal delays are lengthening contracts and causing extensions. Appraisals are definitely an issue as home prices are all over the place and in many cases appraisers are from out of area. Appraisers are starting to pick up the speed in doing an appraisal (experienced long delays last year), but there are still major problems financing condominums and especially manufactured homes.

4. Regulatory and Economic Issues REALTORS expressed concern about the adverse effects of fiscal/financial regulation and the state of the economy. REALTORS expressed deep concern over adverse effect on first-time buyers of new regulations concerning mortgage insurance.
Jobs,Jobs,Jobs- Jobs Foster sales! Confidence spurs decision-making! I am hoping the new FHA loan requirements - leaving the mortgage insurance on the entire life of the loan - don't hurt sales . The HUD rules for owner occupants for condos and townhouses in this area need to be relaxed. The rule of 50% owner- occupied needs to be changed. Flood insurance/ Insurance issues due to super storm Sandy

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