Wednesday, June 22, 2011

Distress Is Everywhere; Impacting Pricing, Property Management

The economy continues to be hit at all levels. But there are rays of hope....

Case in point -- A lot of residential housing stock is now firmly entrenched in the investment RE category. And more is coming. A new report shows that many agents (primarily on the residential side) are switching gears due to the poor shape of the economy and becoming property managers. How and why? As more and more owners are upside down on their houses, and haven't been able to find buyers, they are renting their homes and using (hopefully) experienced agents as their managers/marketing representatives.

In short, the weak housing market has given light to what we in the real estate industry are calling "accidental landlords." And the renters? In many markets, they are new to the city and don't trust the economy enough to buy. But they have income, stable jobs and are finding bargains as they peruse the inventory of available rental homes.

Secondly, according to Moody's Investors SErvice, U.S. commercial property prices (on average) fell in April as sales of distressed assets made up a large share of transactions. The Moody's/REAL Commercial Property Price Index dropped 3.7 pecent from march and 13 percent from a year ago. It is now 49 percent below the peak of October 2007 and at its lowest point in data going back to December 2000.

In fact, Moody's reports that nearly 30 percent of transactions in April 2011 involved distressed properties. THAT, my friends is an amazing number. We're talking commercial/investment buildings here -- NOT single family housing. And Co-Star Group stated earlier this month that prices for investment-grade properties declinced 5.3 percent in the same month, April.

Now for the good news -- BTW, I concur in this. Moody's and Cash On Cash believe the transaction volume -- which was up -- helps lay the groundwork for a "meaningful broad recovery" in the U.S. commercial real estate market. Prices are on the increase in certain areas of the nation. We are seeing stabilization here in Central Ohio, even a little uptick as well.

It will take time. We may have another round of rough sledding in 2012. But the fundamentals seem to be getting better. At least for now. For me? I have hungry, qualified investors. Not bottom feeders, but active, quality buyers looking for smart opportunities.

Transactions are happening...

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