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Why Inflation Is Higher Than What the Government Wants you to Believe.

Posted by silvesterrealty 818-530-3225 on May 6, 2013 Comments Off

In a discussion about the economy by a financial planner in our Network Group, he reiterated the usual 2% CPI (Consumer Price Index). I could not help but speak up even though I know he has only reporting the “official” numbers. Even if he doesn’t believe it and nor I, I wanted to be sure the others were completely aware of the true numbers. So he forwarded this article on to everyone. 
Before reading this, you might be asking why would the government want to engineer the numbers to show only 2%?
The majority of votes come from government workers and union workers and other employees. These groups often get an anual pay increase equal to inflation. If inflation is equal or less than their increase in pay, they “feel” safe and confident in the governing bodies. You would think that they would know that they are actually spending more each year than the reported inflation. But we are often like frogs in a bowling pot of water. We keep believing what is reported.
I think this is enough from my opinion from socalhappy.com. Here is the article:  

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by Dan Caplinger Feb 22nd 2012 1:45PM
Updated Feb 22nd 2012 2:07PM
Social SecurityLast fall, Social Security recipients got their first raisein their monthly benefit checks since 2009. Yet, if you’re like most people, watching the prices of the things you buy go up all the time makes the government’s inflation gauge seem out of touch.But there’s a good reason why the government’s estimates don’t match up with your experience: They aren’t designed to.

Like any statistic, the Consumer Price Index, which measures inflation, is only as effective as the assumptions it makes — in this case, about what you spend money on. If you spend more on certain things than most people, then the CPI will do a terrible job of reflecting the prices you actually pay.

Understanding the Consumer Price Index

The CPI looks at a “basket” of different types of goods and services that the Bureau of Labor Statistics thinks reflects the typical household’s expenditures . The biggest category in the CPI is housing, which makes up 40% of the index. Food and transportation each contribute another 15%. The remaining amount is spread across recreational activities, education, health care, and other goods and services.

The BLS specifically says that the CPI won’t match up with the experience of any specific individual. But because of the way it’s constructed, many people will see some dramatic differences.

What It Means for Retirees

In particular, retirees often don’t fit the CPI profile well at all. Many retirees have already paid off their mortgages, and despite still having to cover utility costs, property taxes, and maintenance and upkeep, their spending on their housing needs falls well short of 40%. And declining home prices have only benefited those who didn’t own homes prior to the housing bust. Far from getting any benefit, retirees who own their homes have taken big hits to their finances.

At the same time, medical care places an ever-increasing drain on many retirees’ finances. Hospital costs have risen at nearly twice the rate of overall inflation in the past 12 months, and over the longer run, health care has seen huge price increases that are straining government programs like Medicare and Medicaid to the breaking point. Yet, medical costs make up only 7% of the CPI — a far cry from the estimated $230,000-$250,000 that retirees can expect to pay for health-care expenses over the course of their retirement years.

And Then There’s the New Threat

Even worse, some are looking to reduce cost-of-living increases in Social Security benefits that are linked to inflation. When the so-called “supercommittee” met last year to discuss ways to cut the federal budget, one proposal suggested using what’s known as the “chain-weighted” CPI to calculate cost-of-living increases. According to estimates, using the chain-weighted CPI would save $200 billion over 10 years — $200 billion that would come from lower annual raises for retirees’ Social Security benefit checks.

For now, that proposal doesn’t look like it’ll become reality anytime soon. But the move was just the latest in a series of arguments about whether the CPI overstates or understates inflation. As the federal budget becomes an increasingly important issue, you can expect to see more attempts to use the CPI as a way to rein in spending in an opaque but very detrimental way for retirees.

What to Do

As you plan for your own retirement, keep in mind that just because government numbers may reflect relatively low inflation in recent years, you can’t necessarily count on prices staying low in your own personal budget.

If you do everything you can to build some leeway into your personal expenses, you’ll be better able to handle whatever price shocks may come around in the future. With new calls for $5 gasoline, hanging onto every penny you can is only going to get more important in the coming months and years.

More on retirement:

HAFA changes designed to streamline short sale approval process

Posted by silvesterrealty 818-530-3225 on May 1, 2013 Comments Off

BofA Newsletter from J. Lin:


Changes have been made to Home Affordability Foreclosures Alternatives (HAFA) which impact short sales with existing loans owned by non-government-sponsored enterprises. FHA, VA, and USDA do not participate in HAFA and Fannie Mae and Freddie Mac ended their participation in 2012.

 

As the real estate market heats up, we are committed to providing you insight and tools that will position you as a trusted resource for homebuyers.

 

Managing change is a big part of success in this business. This month, we’ll share an update about what we have been doing to expand mortgage modification solutions and deliver customers the resources and necessary help to sustain homeownership. This month’s newsletter also outlines some important changes to the Home Affordability Foreclosures Alternatives (HAFA) program designed to make the short sale process more efficient. This issue also provides you some insight into the trends that interest potential homeowners on the exteriors of the homes they’re considering for purchase.

 

I hope you enjoy this month’s issue.

 

Results reported on programs that aid homeowners

ImageBank of America is committed to helping our customers stay in their homes or otherwise avoid foreclosure, and have made great progress doing so. For mortgage customers in need of assistance, we offer many home retention and foreclosure avoidance programs, including relief options under the terms of the National Mortgage Settlement.

 

Foreclosures Avoided: More than 1.7 million foreclosures have been avoided since 2008. This includes more than 1 million first lien modifications and about 428,000 short sales and deeds-in-lieu completed. An additional 280,000 second lien loans have been modified or extinguished for customers, improving their ability to retain homeownership.

 

Bank of America completed or approved nearly $30 billion in real and meaningful relief to more than 330,000 homeowners and offered life-of-loan interest rate reductions to more than 40,000 others in 2012 through National Mortgage Settlement (NMS) programs. Consumer relief programs through December 31, 2012 include:

 

  • First-Lien Principal Forgiveness: Nearly 42,500 customers had been approved for offers of first-lien modifications or received forgiveness of previous principal forbearance, totaling $6.75 billion in total principal reduction.
  • Home Equity Relief: More than 143,200 customers had received extinguishment or modification of a home equity loan or line of credit, totaling more than $9.8 billion in reduced principal.
  • Interest Rate Reduction: Through December, approximately 7,500 rate reductions were completed.
  • Short Sales Completed: Nearly 99,000 customers have completed qualifying short sales or deeds-in-lieu, with $11.8 billion in relief from the principal balances on the loans.

 

Through Bank of America’s participation in homeowner outreach events and assistance provided in our Customer Assistance Centers, we have been able to make significant progress in providing customers with mortgage solutions.

 

  • Outreach Events: Since 2009, Bank of America has participated in more than 1,200 homeowner outreach events, assisting more than 167,000 homeowners. In 2012, our representatives met with nearly 39,000 customers at these events.

 

Bank of America remains focused on helping homeowners stay in their homes whenever possible. We are also working closely with national and local organizations to help revitalize communities impacted by foreclosure and property abandonment.

 

  • REO Properties: Through 2012, we closed more than 3,300 properties under the Neighborhood Stabilization Program and our First Look program. First Look provides community or non-profit groups “first look” access to our REO inventory and pre-listed vacant properties, delivering them a competitive advantage over cash buyers/investors.
  • Property Donations: In 2012, Bank of America donated nearly 2,000 properties as part of our community revitalization and gifting program. Over the next three years, we will donate up to 1,000 homes nationwide to non-profit organizations and local government programs that provide homes for injured military veterans and first responders, and up to 2,000 vacant properties that will be used to provide affordable housing for low-income families across the country in partnership with Habitat for Humanity. Additionally, we have established innovative partnerships in Kansas City, Cleveland, Chicago, Milwaukee, and Detroit to assist with demolition of deteriorating structures and the donation of low-value properties for redevelopment, open space, urban farming, or other uses that benefit the community.

 

We continue to grow our mortgage business with a focus on serving customers directly through Bank of America’s direct-to-consumer channels.

 

  • Mortgage Originations: We funded more than $75.1 billion in residential mortgages, helping more than 305,000 homeowners either purchase or refinance an existing mortgage.
  • Home Affordable Refinance Program: We continue to offer HARP 2 and introduced improved pricing and the ability to refinance at any LTV above 80 percent.

 

 

 

HAFA changes designed to streamline short sale approval process

ImageChanges have been made to Home Affordability Foreclosures Alternatives (HAFA) which impact short sales with existing loans owned by non-government-sponsored enterprises. FHA, VA, and USDA do not participate in HAFA and Fannie Mae and Freddie Mac ended their participation in 2012.

 

The federal HAFA program helps homeowners who cannot afford their first mortgage, who want to avoid foreclosure, and who have exhausted all modification attempts and cannot keep their house. It allows homeowners to sell their house through a short sale and settle a mortgage debt. It also offers relocation assistance to occupants who must vacate after completing a HAFA short sale or a deed-in- lieu of foreclosure.

 

A HAFA short sale is a better option for a short sale decision when there is no purchase offer because a suggested list price is provided before the home is listed, resulting in a decision in as few as 10 days once an offer is submitted.

 

Enhancements to HAFA forms now streamline the approval process. In addition, documentation to certify that this is an arms-length transaction has been added and the resale requirements have improved. The program ends December 31, 2013 and any HAFA transactions must have a closing date on or before September 30, 2014.

 

The specific changes include:

 

  • The Short Sale Agreement (SSA) has been converted to a Short Sale Notice (SSN), which no longer requires the borrower to sign and return the agreement.
  • The Request for Approval of Short Sale (RASS) form is eliminated.
  • In place of the Alternative Request for Approval of Short Sale (ARASS) is the Acknowledgement of Request for Short Sale (ARSS), which does not require the borrower’s signature or form return.
  • The time frame for servicers to make a decision on a borrower’s request for HAFA has generally been shortened to 30 calendar days.
  • The U.S. Treasury Department will now require both the seller and purchaser in a HAFA short sale transaction to sign a new HAFA Affidavit document prior to closing. This certifies that the sale represents an arms-length transaction and that no money is being given or received that is not reflected on the HUD-1 Settlement Statement.
  • The prohibition against resale of a property for 90 calendar days following a HAFA closing is updated to prohibit any resale within 30 calendar days and prohibit a resale for more than 120 percent of the HAFA short sale price between 31 and 90 calendar days of the HAFA closing.

Details about HAFA and the new enhancements are available on the Bank of America Agent Resource Center; links are outlined below.

 

  • Help your financially distressed clients understand the benefits of a HAFA short sale, including relocation assistance. Review the agent HAFA education guide to learn more.
  • Provide the Bank of America non-GSE HAFA Eligibility FAQ to interested homeowners.
  • Direct homeowners to contact Customer/Agent Care at 1.866.880.1232 if they have questions.
  • Visit the short sale section of the Agent Resource Center for the most comprehensive and up-to-date information at http://www.bankofamerica.com/shortsaleagent.

 

HAFA eligibility does not represent a guarantee of equalization or approval which is determined by the investor.

 

During the short sale process, loan servicing may be transferred to a different loan servicer. Servicing refers to collecting principal, interest, and escrow payments, if any, as well as sending monthly or annual statements, tracking account balances, and handling other aspects of the loan. We may assign, sell, or transfer the servicing of a loan at any point while the loan is outstanding. Your client will be given advance notice before a transfer occurs. Depending on the status of the short sale when the servicing of a loan is transferred, the new servicer may not be required to accept the terms and conditions of a short sale.

 

Hot home trends take the inside out

ImageHome design style is expanding to the outdoors this year and, with spring open house season, it’s important to stage your listings with those design trends in mind.

 

According to 2013 surveys from both the Residential Landscape Architecture Association and the National Association of Home Builders, prospective homebuyers want a home’s living space to extend outdoors. Those who are shopping for a home expect to see outdoor spaces that offer the feeling and function of indoor rooms. They attribute positive feelings when seeing outdoor home spaces that include cushion-covered seating and elements of indoor style – rugs, candles, and decorative elements – included on patios, decks and in courtyards.

 

People like being out in the open, but they also crave privacy. Survey respondents indicate they want a potential home’s outside living and entertaining space to include privacy screens. They especially appreciate outdoor spaces screened from the neighbors by shades or curtains made with material that is designed to withstand the weather, free-standing screens, lattice, or large potted plants.

 

Because outdoor living spaces are top-of-mind for people in the market for purchasing a home, make sure those spaces are able to be viewed from inside the home. Pull back curtains or raise shades to give prospective buyers an intriguing view and invitation to step outside and spend more time envisioning themselves living there.

 

Remember, when you have questions about home financing, contact your local mortgage loan officer. To find a mortgage loan officer in your market, call 818-530-3225 for a suggestion for a lenders, los angeles homes, real estate investing.

10 Things to Consider Before Buying Your First Investment Property

Posted by silvesterrealty 818-530-3225 on April 30, 2013 Comments Off

This is a very informative article. The kind of discussion I have with new investors.

by on April 29, 2013

Everyone seems to know it. It’s on TV, it’s in the newspapers, and it’s on the radio: Real estate investing can do wonders for your financial future!  However, just because investing in real estate has a great reputation for delivering stellar returns and building great wealth doesn’t mean that all investments are created equal.

The secret to getting those great returns lies in understanding the fundamentals of what makes a great real estate investment and focusing on buying only the best real estate. This post will help you sort through the clutter by offering ten important considerations to think about before you buy your first investment property.

1. Are You Ready to Invest?

Investing in real estate can be lucrative, but it takes time and a lot of moneyInvesting in real estate is not for everyone. While you don’t need to be listed on the “Forbes Richest” list to buy a rental property, it’s still important that you have a firm grasp on your personal finances before investing in real estate. Additionally, real estate investing is not a “get rich quick” scheme, but an adventure that can span decades.

Only you can know if you are ready to start investing, so take a good inventory of your life, and if real estate can fit into your investment portfolio – great! Take time to get educated. Read real estate books, blogs, websites, and forums to get a firm grip on just what real estate investing is and how the most successful investors use real estate to build wealth.

2. Do You Have a Plan?

Perhaps the biggest reason many investors lose money – whether in stocks, mutual funds, real estate, or business – is due to lack of planning. You wouldn’t consider driving from Saskatchewan to Peru knowing only that the direction was “somewhere south.” A plan will help you get from where you are right now to the place you want to someday be.

3. What Kind of Property Should You Start With?

Real estate investing is an exciting field because of the many different niches and strategies you can use to customize your plan to fit your personality and position in life.

Perhaps you enjoy risk and would prefer a “fix and flip” business? Or maybe you are looking at long-term stability and would prefer investing in single-family rentals. Or, maybe you don’t want any involvement at all and would rather just “become the bank” by lending money to other investors and earning a passive return. There are literally hundreds of ways to invest in real estate, so find the strategy that best fits your lifestyle.

4. What is the Neighborhood Like?

You’ve surely heard the old cliché: “Location, location, location.” The importance of this phrase is no less vital when choosing a real estate investment. You don’t need to necessarily buy a house in the most expensive area of town, but it’s important that you understand what the location is like – both during the day and at night. Drive by your prospective property at different times of the day to ensure you are comfortable with the location and that it fits within your plan.

5. What are the Local Vacancy Rates?

One of the most costly expenses you are likely to face as a real estate investor is vacancy. However, vacancy is a normal part of an investor’s life and should be fully expected and prepared for.

Check with local property management companies to determine the average vacancy rate in the area where you are looking to buy. Set aside money each month for times when the unit is vacant so you won’t be surprised by the lack of income. Also seek to minimize vacancies by understanding what the local average market rent is and attempting to be just a little bit below average.

6. Do You Know All Your Investment Expenses?

A common mistake by many first-time real estate investors is underestimating the expenses that occur. Sure, most investors know there will be repairs from time to time, but there are numerous other expenses you may need to account for, such as:

  • Water/sewer
  • Garbage
  • Utilities
  • Legal fees
  • Accounting
  • Evictions
  • Vacancies
  • Office supplies
  • Fuel
  • Scheduled maintenance
  • Capital improvements

A good rule of thumb to use when determining how much you should plan on spending for expenses is known as the “50 percent rule.” The 50 percent rule states that, on average over time, expenses on a property will equal 50 percent of the income. So if a property rents for $2,000 per month, you can assume $1000 in expenses per month before paying the mortgage payment.

7. How Will You Finance Your Property?

Real estate investors must decide whether they want to finance their properties with cash or mortgage loansThere are many different ways you can pay for an investment property. If you have the money, you can pay all cash and not deal with banks or loans.

However, if you don’t have all the cash needed or you’d rather utilize greater leverage, you can supply just the down payment and take out a mortgage to cover the remaining cost. If you do use a loan, be aware of the term and interest rate on the loan you are taking, and stay away from adjustable rate mortgages as they may go up, causing your payment to rise dramatically.

8. Should You Self-Manage or Hire a Professional Manager?

Whether or not you should manage your property is a personal decision largely dependent upon your plan, personality, skills, and availability. A typical property manager may cost between 7 and 10 percent of the monthly rent, but a good property manager should also decrease vacancy and have systems in place to make repairs less expensive. If you are undecided, always budget in management; if you decide you don’t like it, you’ve already planned for it.

9. Can You Be Your Own Bookkeeper?

Of all the great benefits real estate investing has going for it, easy paperwork is not one of them. Are you confident in your abilities to do the bookkeeping, or do you need to budget for a professional to keep track of the numbers?

10. Do You Have an Exit Strategy?

Finally, always start with the end in mind. This circles back to our discussion on “having a plan.” Know what you are going to do with the property before you buy it. Many investors, during the last housing boom, bought properties with only one plan – to sell soon for a higher price. When the market dropped, however, many of those investors lost their properties.

Always have multiple plans for your investment, and know exactly how you plan on making money with the investment. Will you pay it off slowly over 30 years? Will you rent it out each month for cash flow and sell it when the market peaks? Know what exit strategies are available for you, and plan, from the start, how you will exit.

Conclusion

How about you: Do you have any additional considerations someone should think about before investing in real estate? I hope this post didn’t scare you away from one of the greatest investments out there today. I am a firm believer in the power that real estate investing can have for your future, but also believe that you must be smart about it. Let me know if you have any questions or comments!

This guest post was written by Brandon Turner. He is the senior editor for BiggerPockets.com, the real estate investing social network and home to the free Ultimate Beginner’s Guide to Real Estate Investing. Brandon enjoys writing epically long, comprehensive posts on topics like landlording, tenant screening, and everything to do with real estate.

Investing in real estate does not have to be complicated. Using the right guidance from your team of property management, agent, and lender, you can enjoy your start to financial freedom. Utilizing systems and people that handle bookkeeping, court appearances, evictions, screening and tax forms make it all simple.

4 Low Down Payment Loan Options Every Agent and Buyer Should Know

Posted by silvesterrealty 818-530-3225 on April 30, 2013 Comments Off

The U.S housing market is mending. With mortgage rates still south of 4 percent, the monthly carrying costs for owning a home rival the cost of rent in many U.S. cities.

A home’s monthly payment, however, is just one part of the mortgage financing puzzle. Many buyers are worried that having limited funds for their first payment, the down payment, could keep them out of the game.

The good news: According to the National Association of REALTORS® Profile of Home Buyers and Sellers 2012, 73% of U.S. home buyers made a downpayment of 20% or less. Thankfully, for buyers like these, there are a host of low-  and no-down payment mortgage options for qualified borrowers.

Here are a few every agent should know to help eliminate one of the top worries of today’s buyer prospects:

1. For home buyers with a down payment less than 20%

Putting less than 20 percent down on a home doesn’t relegate buyers to paying for potentially costly private mortgage insurance (PMI) — it hasn’t in more than a decade.  This is because banks offer loans known as “second mortgages”, or junior liens.

A second mortgage is what its name implies. It’s a second loan made at the time of closing — often for a relatively small amount — which extends a buyer’s indebtedness.

As an example, a buyer with a fifteen percent down payment may give a first mortgage to the lender for 80 percent of the home’s purchase price; and also a second mortgage to the bank for 5 percent. Together, these loans finance 85% of the purchase price, with the buyer bringing 15% to closing.

Second mortgages are typically available in two varieties — a fixed-rate option known as a Home Equity Loan (HELOAN) and an interest-only, adjustable-rate option known as a Home Equity Line of Credit (HELOC). Home Equity Line of Credits are more common and are typically tied to Prime Rate, which is currently 3.25%.

In today’s mortgage market, buyers can find second mortgage financing for up to 90% of their home’s purchase price. Contact efmfinancial.com/ Or Call 818-530-3225

2. For home buyers with a down payment of less than 10%

For buyers with a down payment of less than 10 percent, the choice for a home loan gets more tricky. Yes, conventional financing is available via Fannie Mae and Freddie Mac to 95% loan-to-value (LTV), however, loans insured by the Federal Housing Administration (FHA) are  a viable option as well.

The FHA itself does not make loans. Rather, it’s an insurer of mortgages offering mortgage lenders protection against default. So long as the loan meets the FHA minimum standards — a series of rules known as “guidelines” — the FHA will insure it against loss.

Among the FHA guidelines is the requirement that home buyers make a down payment of at least 3.5% against a home’s purchase price. For every $100,000, that amounts to $3,500 due at closing.

However, as compared to conventional financing, the cost to insure an FHA mortgage is relatively high, requiring an upfront cost of 1.75 percent, plus an annual cost which ranges up to 1.55%, depending on the loan size and term (i.e. number of years).

Furthermore, unlike conventional mortgage insurance, beginning June 3, 2013, some FHA loans will require that annual mortgage insurance be paid for as long as the loan is “active”. Conventional mortgage insurance typically ends once a home’s LTV reaches 80%.

For this reason, home buyers making a down payment of between 5-10 percent should consider both FHA and conventional financing, and choose the program which suits best.


3. For home buyers with a down payment Of 3%

For buyers wishing to put less than 3.5% down on a purchase, there is a Fannie Mae Conventional 97 product.

Among low down payment mortgage programs, the Conventional 97 program is unique in that it allows a buyer’s down payment to come from either their own cash or gift funds entirely, and  home buyer counseling is not required. It’s often less costly as compared to FHA financing, too, as a result of less-expensive mortgage insurance premiums.

Not all loans will meet the Conventional 97 program’s minimum standards, however. For example, the program is valid for 1-unit homes only, and loan sizes may not exceed $417,000, regardless of whether the property is in a designated  ”high-cost area” such as San Francisco, California; Potomac, Maryland; and any one of New York City’s five boroughs. Contact efmfinancial.com/ Or Call 818-530-3225

The Conventional 97 program is valid for primary residences only.

4. For home buyers with A down payment Of 0%

Lastly, for qualified buyers, 100% financing programs remain available. These products are typically government-backed, and require that buyers meet some secondary standards beyond the typical mortgage underwriting guidelines, like special classes or counseling.

The two most common zero-down programs are the Department of Veteran’s Affairs VA loan, and the U.S. Department of Agriculture’s Rural Housing Loan. Both are previewed below. Contact efmfinancial.com/ Or Call 818-530-3225

VA Home Loans

VA home loans are available to qualified military personnel exclusively. Loans are available for up to 100% of a home’s purchase price, and have no mortgage insurance requirements whatsoever. Furthermore, because mortgage rates for VA loans are often low as compared to comparable conventional financing, VA loans can be a viable choice for military buyers putting down any amount less than 20 percent. Contact efmfinancial.com/ Or Call 818-530-3225

Homeowners with VA loans also benefit from access to the VA Streamline Refinance program — among the simplest, most-effective refinance programs available today. Contact efmfinancial.com/

USDA Home Loans

USDA mortgages make available 100% financing, too. To qualify, the subject home must be within a pre-approved USDA census tract, which includes many U.S. suburbs and exurbs; and the buyer must earn an income which does not exceed local norms. The USDA charges a small, annual mortgage insurance-like fee of 0.40%. For eligible home buyers, however, the effects of this cost are countered by ultra-low mortgage rates and the ability to buy a home with nothing down. Contact efmfinancial.com/

Lending hurdles aren’t as high as your clients think

For today’s home buyers, there are a multitude of low and no-down payment mortgage options. Use the above as a guide, and connect with your local lending expert to help match buyers with the  programs that best suit their needs best.

As the housing market expands via both first-time and repeat buyers, demand for homes will increase. Knowing today’s financing options can go along way toward converting your on- and offline real estate leads.

 

Quick Guide – Finding the Right Mortgage

Contact efmfinancial.com/ Or Call 818-530-3225
How To Buy A Home : Infographic from The Mortgage Reports

Check local mortgage loan limits at The Mortgage Reports.

Written By Dan Green More about Dan Green
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4 Low Down Payment Loan Options Every Agent Should Know

The U.S housing market is mending. With mortgage rates still south of 4 percent, the monthly carrying costs for owning a home rival the cost of rent in many U.S. cities. A home’s monthly payment, however, is just one part of the mortgage financing puzzle. Many buyers are worried that having limited funds for their [...]

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Contact efmfinancial.com/ Or Call 818-530-3225

10 Best Retail Markets by Vacancy Rate

Posted by silvesterrealty 818-530-3225 on April 29, 2013 Comments Off

nob hill san fran 300x217 Top 10 U.S. Retail Markets by Vacancy Rate

We’ve already looked at the Top 10 Retail Markets for New Development, the Top 10 Discount Retailers, Top Retail Markets for New Supply, and Top 10 Largest Retail Markets–all of them based on data in the 2013 Colliers’ Retail Report (here’s the PDF). But we’re not done… I plan on milking this research for every Top 10 list it’s worth! With that said, here’s the latest ranking I’ve mined from this very thorough report (someone tell Colliers I said thanks).

Here are the Top 10 U.S. Retail Markets by Vacancy Rate:

10. Orange County, CA (7.2%)

9. Westchester County, NY (6.8%)

 7/8. (tie) Boston, MA (6.5%)

7/8. (tie) San Jose/South Bay, CA (6.5%)

6. Oakland/East Bay, CA (6.2%)

5. Pittsburgh, PA (5.7%)

4. Long Island, NY (5.2%)

3. Miami-Dade County, FL (4.8%)

2. Hawaii (4.0%)

1. San Francisco, CA (3.8%)

Despite all the bad news we’ve heard about the brick and mortar retail sector, a handful of U.S. retail markets remain quite healthy. With an average year-end vacancy rate of 5.7%, the markets listed above far outshine those closer to the national average–10.4%. The most likely driver of a strong retail market–aside from overall economic vitality–is density. The less room there is for retail space, the higher the demand, price per square foot, and occupancy rates. Hence the strong showing by markets in the Bay Area and New York City metro area.

783px Kakaako Waterfront Park SE 2 20100422 300x229 Top 10 U.S. Retail Markets by Vacancy Rate

Manhattan isn’t ranked because it isn’t listed as a market unto itself, and for some reason the Colliers report doesn’t show the numbers for New York City proper. According to IRR, NYC’s looking at a 5% retail vacancy rate in 2013, which means Manhattan itself is likely doing as well as San Francisco, if not better.

But what’s the deal with Hawaii? Far from being the most densely developed area in America, somehow the Pacific state (the bulk of whose development is on one island) somehow ranks fourth on this list. From 2011 to 2012, Colliers reports, the market’s vacancy rate shrank from 6% to 4%, while asking rents jumped by 16% to a whopping $40/SF (compare that to San Francisco’s $26/SF!).

I can only speculate as to why Hawaii’s retail real estate would be this active. It doesn’t seem consistent with the news of decreased tourism and economic activity since the world economic crisis.

Is tourism making a comeback in Hawaii? Certainly, and emerging economies in Asia are no doubt contributing to the state’s recovery. Still, it seems most likely to me (and maybe I’m completely missing something) that Hawaii is long overdue for some new retail inventory. With about 22 million SF of retail space, the entire Hawaiian market has less retail inventory than Omaha, Nebraska. No doubt prices will sink–and the vacancy rate will go up–as the supply pipeline returns.

Either that, or there really are as many ABC Stores in Hawaii as everybody says…

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