Latest Real Estate News
Global Commercial Property Sales Double In Q2
Global commercial real estate investment sales hit $66 billion in Q2 of '10, double the amount a year ago and similar to Q1 as the market continues to recover, data showed on Thursday.
Global real estate adviser Jones Lang LaSalle said in a report that sales in the first half of the year hit $130 billion.
It forecasts total volumes to reach about $300 billion for '10, for a 50% improvement on '09.
"This is still less than half the pre-credit crisis levels of 2006 and 2007, but we must take into account the fact that those were heady years for commercial real estate investment, with unprecedented record trading volumes," said Arthur de Haast, head of JLL's International Capital Group.
Significant regional differences in sales emerged in Q2, with Asia Pacific posting a 34% drop to $15 billion, from Q1. Notable falls were seen in Japan, China and Australia, although Hong Kong and Taiwan continued to rise.
The fall coincided with tightening measures by some governments to cool down their overheated property markets earlier this year, although Asia Pacific's Q2 sales were still up 21% from the same period in '09.
In the Europe, Middle East and Africa region, second-quarter sales rose 15% from Q1 to $29 billion, with the U.K. accounting for more than 40% of the region's total volumes, JLL said.
London maintained its position as the world's most active city, with investment sales hitting nearly $5 billion, it added.
In the Americas, volumes saw a sharp uplift in Q2 to $21 billion, up 54% from Q1, although this was from a low base, JLL said.
The company noted that quarter-on-quarter growth in Canada and Brazil outstripped that in the U.S.
Lack of Appraisals Cited in Latest Material Loss Reviews
A
failure to obtain appraisals was chief among a list of reasons cited in the
latest material loss review of failed banks. The reasoning was listed by
the Office of the Inspector General of the Federal Deposit Insurance Corp. in
its report on why six bank subsidiaries of Security Bank Corporation failed and
were seized in July 2009.
According to the
FDIC, each of the Security Banks was found to be in contravention of
Part 323 of the FDIC Rules and Regulationsregarding
appraisals. This finding involved the failure of the banks to obtain updated
appraisals on properties that reflected current market conditions, according to
the report. Furthermore, prior appraisals were found to be weak and contained
stale comparable information, particularly when considering current market
conditions.
Prior
evaluations also contained unrealistic absorption rates, holding periods, sales
prices, and discount rates. Other weaknesses noted included the failure to (1)
obtain new appraisals or evaluations prior to the renewal of construction or
development projects that were either stalled, or were completed but had not met
their original sales projections and (2) obtain new appraisals or evaluations
despite significant changes in market conditions, according to the report.
The
failures of the Security Banks cost the FDIC’s Deposit Insurance Fund
approximately $807 million, according to its Inspector General’s report.
Interestingly, the Security Banks were examined in 2007 and 2008, with starkly
different results. While most of the banks were reported to have few significant
loan underwriting and credit administration weaknesses in 2007, by 2008
(following the subprime meltdown) these types of weaknesses were found to exist
at each of the banks. The Inspector General drew the following conclusion:
“…banks may
compromise sound credit principles in a highly competitive market. In that
regard, going forward, it would be prudent for examiners to place earlier and
greater emphasis on the significance of sustaining proper underwriting in
examination reports when high concentrations elevate a bank’s risk profile.”
To read the full FDIC Inspector General’s report, visit www.fdicoig.gov/reports10/10-020.pdf .
Regulatory Action Doubles to Historic High in 2009
Formal and
informal regulatory enforcement actions against banks in 2009 more than doubled
the previous year’s enforcement action total – setting a new record high,
according to a March 10 story in American Banker.
Last year,
regulators issued 1,143 formal enforcement actions against banks and their
holding companies. In addition, informal actions by the agencies – which are not
made public and often go untracked – also doubled. There were 1,099 such actions
last year, according to American Banker.
The dramatic
spike in regulatory enforcement against banks can be attributed to a number of
factors, including the struggling economy, pressure on regulators from Congress
and the public to get tough on financial institutions, and agency efforts to
keep banks from conducting risky business.
The spike in
agency enforcement coincides with the Obama administration’s efforts to see
Congress pass meaningful regulatory reform. Under proposed reform legislation,
the agencies that oversee the banking sector stand to lose or gain authority
based on lawmakers’ perceptions of how each agency has performed regarding their
regulatory mandate.
The four
agencies currently tasked with oversight of the nation’s banking and thrift
industries are the Federal Deposit Insurance Corp., the Federal Reserve, the
Office of the Comptroller of the Currency, and the Office of Thrift Supervision.
As noted in
American Banker, each of the four banking and thrift agencies more than doubled
their level of formal enforcement actions in 2009, with the Fed nearly
quadrupling its number of formal enforcement actions, which reached 191 last
year. The FDIC led the pack at 551, up from 273 in 2008.
The Fed also saw
a dramatic jump in the number of informal enforcement actions it filed last year
– up from 216 in 2008 to 467 actions in 2009.
Not
surprisingly, the high number of enforcement actions comes at a time when the
regulator’s bank-problem list is at its highest level since June 1993. At the
end of 2009 there were 702 institutions on the problem list, 150 more than in
the third quarter, according to American Banker.
Heavily criticized in the past for not taking enough action to prevent the housing and lending collapse, regulators now are being criticized by some in the banking industry for being too cautious, thus hampering lending and actually slowing recovery. But regulators disagree. As OCC spokesman Kevin Mukri told American Banker: "Historically, enforcement actions increase as one would expect during periods of economic stress. They are a plan that both the bank and regulator have agreed to bring the bank into full compliance with bank regulations."
Housing Prices Increase Slightly in Third Quarter - First increase since second quarter of 2007
According to the Federal Housing Finance Agency (FHFA), house prices rose in the third quarter of 2009. The housing price index roseAccording to the Federal Housing Finance Agency (FHFA), house prices rose in the third quarter of 2009. The housing price index rose 0.2% on a seasonally adjusted basis in the third quarter vs. the second quarter in 2009.
Hanley Wood: October New and Existing Home Sales Increase
New home sales increased in October to a seasonally adjusted 6.2 percent from September. The increase brings new home sales to an annual rate of 430,000 units, its highest level since Sept. 2008, according to a Dec. 11 Hanley Wood Market Intelligence report.
Median new home prices in
October increased 0.7 percent from September’s upwardly revised figure of
$210,700 to $212,200, but remain 0.5 percent lower than the same period a year
ago. Median new home prices have now posted 10 constitutive months of
year-over-year declines.
On a non-seasonally adjusted
basis, new home inventory dropped in October from September’s figure of 252,000
units to 240,000 units. On a seasonally adjusted basis, however, new home
inventory dropped 6.7 percent in October to 239,000 units, its lowest level
since Dec. 2006.
Hanley Wood reported that
existing home sales in October are at their highest annual rate since March
2007. Existing single-family home sales jumped 9.7 percent in October from the
previous month to 5.33 million units. Sales of existing condos and co-ops
climbed 13.2 percent in October from the previous month to 770,000 units.
For the third consecutive
month, existing home inventory declined in October by 3.67 percent to a
preliminary 3.574 million units from September’s upwardly revised figure of
3.710 million units. Existing home inventory is now at its lowest level since
January 2007. According to Hanley Wood, existing home inventory is approaching
the five- to six-month supply considered healthy. Based on the current sales
pace, there is now a 7-month supply of existing homes on the market compared to
September's figure of 8 months.
Mortgage rates increased for the first time since the beginning of November to 4.81 percent in Freddie Mac’s Dec. 10 Primary Mortgage Market Survey, marking the sixth consecutive week that fixed rates averaged less than 5.0 percent. In its weekly index ending Dec. 4, the Mortgage Bankers Association reported the seasonally adjusted purchase index increased 4.0 percent from the previous week. However, it remains 16.3 percent lower compared to a year ago. According to the MBA, this is the third consecutive weekly increase in purchase applications, which have been high because of record-low mortgage rates and the government’s homebuyer tax credit incentive.
Appraisal Modernization Legislation Included in Regulatory Reform Legislation
In a clear message that lawmakers want to avoid any future collapses of America’s financial markets, the House of Representatives passed sweeping financial reform legislation Dec. 11 that would give the government new powers, including the ability to break up companies that threaten the economy.
The wide-reaching legislation
– known as the Wall Street
Reform and Consumer Protection Act, H.R. 4173 – is aimed at
overhauling the U.S. system of financial services regulation with new controls
on large and systemically significant institutions. It also would create a new
agency to oversee consumer banking transactions and would shine a light into
shadow financial markets that thus far have been exempt from the oversight of
regulators.
Of importance to real estate
appraisers, the legislation includes provisions that have served as the
cornerstone of advocacy efforts by the Appraisal Institute to modernize the
appraisal regulatory structure, providing more resources and accountability in
the area of enforcement. These provisions were previously passed by the House as
part of a mortgage fraud bill (H.R. 1728). Also included in H.R. 4173 was an
amendment approved by the House Financial Services Committee last month that
would establish a Negotiated Rulemaking Committee on appraisal independence
issues.
“We are pleased to see
Congress recognize the importance of modernizing the appraisal regulatory
structure and promoting the use of highly qualified real estate appraisers,”
said Bill Garber, Appraisal Institute director of government and external
relations. “We look forward to a spirited debate in the Senate regarding the
future of financial regulation, which we believe should promote sound collateral
valuation policies and practices and meaningful oversight and enforcement.”
The bill passed the House by a
vote of 223-202, though no Republicans voted for the bill and 27 Democrats
opposed it. It now goes to the Senate, which is not expected to act on its
version of a regulatory overhaul until early next year, according to the
Associated Press.