CHICAGO, IL, Jan. 4, 2012 – The Real Estate Capital Institute reports the New Year looks brighter for the real estate capital markets, given the continued momentum of the past two years. Numerous favorable signs are emerging, including:
- Inflation concerns resurfacing, giving the Fed space to boost the economy. However, Treasury rates remain low, moving up only 10 basis points during the past month. Inflation levels of 2 to 3% for this year should prove to be acceptable.
- Industrial markets improving nationally, particularly on the West Coast and major Midwest markets, led by electrical, automotive and metal fabrication.
- Retailing sector maintaining discipline by keeping stingy inventory levels even after an improved holiday season, as consumer spending still in flux.
- Suburban office market vacancies dropping, although few landlords report any improved profitability levels; clearly a tenant's market.
- Housing construction starts will boast positive results as energy states in the Midwest and the South/Southwest grow, while more overpriced areas pause, bringing more buyers in to the ownership pool. Housing affordability benchmarks have substantially improved with home prices now often below a 3-to-1 ratio of price to income, a dramatic reversal from the pre-great recession housing pricing. At such levels, more housing will be sold as lenders continue to unload foreclosed homes.
- New construction starts are still limited to multifamily buildings in the major markets and some energy belt communities. Substantial concern among investors of overheated pricing pressures in relationship to homeownership impacts investor 2012 acquisition plans; expect more cautious price appreciation.
- Banks seek more loan volume as the financial crisis cools down. Despite a slow start, expect more bank mergers this year. While rebuilding capital reserves, banks are cramped by limited growth as they prolong extremely conservative, restrictive lending. Ultimately, fewer banks mean less competition.
"After a lot of recent talk, homeownership is now starting to impact the rental market segment in some major cities. This environment provides extremely attractive pricing options for renters to become homeowners (again)," suggests Jeanne Peck (top right photo), the Real Estate Capital Institute's Director.
Contact:
The Real Estate Capital Institute(r)
3517 West Arthington Street
Chicago, Illinois USA 60624
Jeanne Peck, Research Director
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