Financial Problems in China Lead to Strong Real Estate Activity in the States

There’s trouble brewing in China.

The nation’s stock market is floundering and the currency has been devalued, bringing about halts in trading and concerns among investors regarding the effect that this major world economy will have on the global economy.

However, amid this bad news, there is a silver lining for the domestic real estate world. Wealthy Chinese investors have viewed American real estate as a safe investment for a long time, and even more Chinese money is flooding into the States in the form of home and commercial real estate purchases. The National Association of Realtors tells us that, for the first time, buyers from China, Hong Kong, and Taiwan are representing the largest group of foreign purchasers of homes in the United States.

This activity has been particularly strong in the Seattle area. For the year that ended in March of 2015, fully eight percent of residences purchased by Chinese buyers were in Washington State, making the area second only to California, which made up thirty-five percent. Further, Chinese investors played a key role in about $2 billion in commercial projects throughout the Puget Sound area.

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Freddie Mac’s Expectations for 2016

2016 Commercial Real Estate Insights

Insight and Outlook

Freddie Mac recently released its December Insight and Outlook, focusing on the current state of marketplace lending and the projected impact that the Federal Reserve’s decision to raise short-term interest rates will have on the commercial real estate market in the new year. Here are some of the highlights of what the mortgage giant is expecting out of 2016:

The rate for a thirty-year, fixed-rate mortgage will average below 4.5 percent annually. The recent upward trend of mortgage rates will continue, gradually pushing them higher. However, a strengthening labor market and pent-up demand will likely keep the market healthy, despite lowered affordability. Continue reading

Seattle Rents Rose 8.6% in 2014

Last year was a big year of growth for Seattle commercial real estate. By the end of 2014, renters in Seattle paid an estimated total of $8.7 billion in rent. Compared to the $7.1 billion paid in 2013, we can see that this represents an increase of 8.6%. For individual renters, this amounts to an extra $71 more per month, and $852 per year over the previous year.

Throughout the country, it is estimated that renters paid a total of $441 billion in rent, which represents a 5% increase over the $420 billion from 2013. Though Seattle’s 8.6% is well above the national average, it still lags behind the leading cities for rent increases; top performers in this field include San Francisco with 13.5%, Denver with 10.8%, and Pittsburgh with 10.6%.

Looking forward to the rest of 2015, renters shouldn’t expect any relief. Rental rates continue to rise faster than the price of homeownership. According to the online real estate company, Zillow, another year-over-year increase in total rent paid is probable.


Low Rates Fuel REIT’s and Commercial Real Estate Stocks

Investors are looking to commercial real estate, as REIT’s and real estate stocks outperform the general US stock market. In the first half of 2014, stock exchange-listed equity real estate investment trusts in the US were up by 16.25 percent. This came with a dividend yield of 3.52 percent, as opposed to the S&P 500 index’s total return of 7.14 percent and dividend yield of 2 percent. All of this is coming from the National Association of Real Estate Investment Trusts.

These trends can be attributed to a number of factors. Commercial real estate Continue reading

Commercial Real Estate Forecasts for 2015

There have been many positive trends in the commercial real estate market as of late. Office vacancy, retail vacancy, hotel vacancy, and industrial vacancy are all slowly declining throughout the country. Meanwhile, non-residential construction is showing some strong growth. Meanwhile, the owners of commercial real estate are proving to have a stronger ability to pay debts and maintain profits as the economy continues to improve across the board. This is a very positive outlook for 2015.

Occupancy is expected to continue its growth as the economy continues to expand. As non-residential operating returns grow, landlords should have ample opportunities to raise rents. Construction should also continue to grow; however, the existing vacancy rates are still high enough to keep new development from being terribly strong for another few years.

In terms of property values, there are two factors to consider. First of all, an increase in operating revenues are working in the value of the property. On the other hand, high interest rates should continue to be a mitigating factor. One could therefore expect values to improve, but not at a very strong rate.