International transactions are of increasing importance. With the expansion of international trade, the flow of people across borders has also increased rapidly, and, therefore, the demand for real estate in both residential and commercial sectors in conjunction with international transactions has been on the rise. NAR provides the state-by-state reports on international transactions, below is a link to the report which provides an overview of the real estate market as well as information on economic activity in New Jersey.
NAR released the 2016 Profile of International Activity in U.S. Residential Real Estate, which presents REALTOR® transactions with international clients in the U.S. for a 12-month period between April 2015 and March 2016. This year's report focuses on both international buyers purchasing in the U.S. and U.S. buyers purchasing abroad. Highlights include:
• Foreign buyers purchased $102.6 billion of residential property from April 2015–March 2016, a decrease from $103.9 billion in the previous 12-month period.
• Foreign buyers purchased 214,885 residential properties, an approximately three percent increase from 208,947 in the previous 12-month period.
• Foreign buyers typically purchase more expensive properties.
• Although foreigners purchased property nationwide, five states accounted for 51 percent of total residential property purchases: Florida (22 percent), California (15 percent), Texas (10 percent), Arizona (four percent), and New York (four percent).
For more information or to read the full report click here.
The Spanish real estate market, hit hard by the financial crisis, is now what one analyst calls “a two-speed market.” In many locations, prices have bottomed out and are rising, while other areas may still have room to fall further. When you match attractive prices with the growing interest among many Americans in retiring outside of the U.S., you have a promising opportunity for real estate agents.
When I recently met with real estate delegates from Spain, many did not know that Americans can use their tax-advantaged retirement funds to invest in offshore real estate. They had a lot of questions about how to use Real Estate IRAs as a strategy to grow their business. They definitely saw the potential to sell more to their existing client base of American investors.
One of the strategies of particular interest to this group was purchasing the property in the IRA, then taking it as a distribution in the future. Because the IRA account holder cannot live in the IRA-owned property, it is typically rented out, creating an income stream for the IRA. When the account holder reaches retirement age, he or she can take the property as a distribution.
If the property was purchased with a Roth IRA, it can be taken as a distribution all at once without any tax penalties. If it were owned in a Traditional IRA, the account holder would pay taxes on the distributed amount. For example, Entrust clients will often purchase beachfront property, rent it out and take incremental distributions until the property is fully in their name.
There is no reason U.S.-based real estate agents shouldn’t take advantage of this same technique to grow their business and stand out from the competition. The Spanish delegates clearly understood the importance of asking every American investor client, “Do you have an IRA?” Sometimes, you need to look no further than your database to find more business opportunity—inside or outside the U.S.
Source: By Jason Craig, President of The Entrust Group
For more information, visit www.theentrustgroup.com.
Global and domestic economic hiccups won’t likely slow commercial real estate activity this year, according to a new report published by Situs Real Estate Research Corp. (RERC) and the National Association of REALTORS®. Boosting activity this year, the report cites steady job gains and stable leasing demand.
Commercial real estate activity is forecasted to gradually grow this year, across all commercial sectors, according to the report “Expectations & Market Realities in Real Estate 2016—Navigating through the Crosscurrents.” Commercial property values and price gains, however, are expected to flatten, after having recently surpassed 2007 peaks in some major markets.
Read more: 2015 Marked Best Year for Office Sales in Years
"Historically low interest rates, especially in treasuries, combined with commercial real estate's stable prices and value make this asset an attractive investment," says Ken Riggs, president of Situs RERC. "Looking into 2016, the commercial real estate market should moderate, which could stabilize prices."
Vacancies in the commercial sector are forecasted to decline slightly this year across property types – except in the apartment sector, which will likely see a modest increase by the end of the year as new project completions enter onto the market.
Rising rents and steady investor returns will likely continue as job growth persists and demand exceeds supply with limited new construction – except with the multifamily sector, the report notes.
"Supported by solid hiring in most parts of the country, the demand for ownership and rental housing will continue to increase in 2016 despite another year of meager economic expansion," says Lawrence Yun, NAR’s chief economist. "While supply shortages will weigh on housing affordability and push home prices and rents higher, the housing sector will keep the U.S. economy afloat and lead the residential investment component of GDP growth by up to 10 percent this year."
Source: National Association of REALTORS®
Is the commercial real estate industry ripe for technological disruption? TheSquareFoot, a brokerage that’s digitizing the process of finding commercial real estate for its clients, believes so.
Tenants looking for commercial real estate space can start browsing properties through TheSquareFoot’s interactive map or identify potential matches by entering their needs to its Space Calculator application, all before ever contacting an agent. TheSquareFoot’s user interface then allows interested tenants to get in touch with one of the agents at any time.
Once a potential tenant is matched with an agent, the company’s newly launched TourBook feature enables agents and clients to communicate in real time on the web. Clients can manage listings and schedule viewings online and agents can upload leasing documents, eliminating the need for e-mailing lengthy PDF documents and links to individual listings.
Cofounder and Chief Operating Officer Justin Lee acknowledges that what his company is doing isn’t new in the world of real estate; companies like realtor.com® have been using technology to aid the search of home buyers for years. But Lee and cofounder Aron Susman thought if those tools were so well received in the residential sphere, why couldn’t it be the same for commercial real estate?
Matt Cohen, chief technologist at Clareity Consulting, a Minnesota-based technology advisory firm for the real estate industry, says commercial real estate has been slower to develop client-facing technologies than residential. That said, he doesn’t believe commercial real estate is behind the technological curve.
“People [search for] residential real estate and all they need to see is a couple of fields, and that’s enough to narrow their search,” says Cohen. “In commercial real estate, it’s a lot more complicated. So I think there’s a reason why there’s a little less that’s consumer-facing.”
Cohen also said that many of the commercial real estate search tools and client relationship management tools have been built for professionals in the field, rather than your average consumer looking for office space. Companies like LoopNet and Catylist have demonstrated success with tenant-facing search functions that can match them with landlords, Cohen added.
TheSquareFoot hopes to differentiate itself by providing not only these tools to commercial tenants at the start of their search but also its own agents that can help them complete the leasing process.
Tech Meets Real World in New YorkBefore arriving at its current home in New York, TheSquareFoot began as an online listing service for large commercial landlords in Houston. Lee came from a commercial real estate background and Susman was a CFO at a health care technology company when they hatched the idea of a tech-focused solution for connecting commercial tenants and landlords.
The service was popular with landlords, and the company expanded into the Dallas and Austin, Texas, markets. Eventually, Lee and Susman found that just listing properties on a website didn’t offer the solution that both landlords and tenants were asking for.
“Both sides were saying, ‘Hey, we need you to get more involved,’” says Lee. “Landlords were used to brokers bringing them clients” and businesses needed someone who could help guide them more actively in the leasing process.
Lee, Susman, and Jonathan Wasserman, who would become TheSquareFoot’s third cofounder, decided if they were going to become a full-scale brokerage, they might as well do it in the largest commercial real estate market in the world. TheSquareFoot launched its New York office at the beginning of 2013.
“The most difficult part for us was coming from Texas and adjusting to the New York City commercial real estate market,” says Lee. “We just weren’t aware of how competitive it was. Landlords are doing so well. When we were introducing them to potential clients, they were like, ‘Who the heck are you?’”
Christopher Okada, who has operated the real estate advisory and brokerage firm Okada & Co. in New York since 2006, says that in today’s market, it takes more than finding tenants to be successful in the city. “This market is a landlord market,” says Okada. “It’s really difficult to do business if you’re one of eight brokers who wants to do a deal on a space if you don’t have a connection.”
Even though TheSquareFoot was no longer collecting fees for listing properties on its site — just the standard fees that come along with brokering a deal — it still had a hard time getting landlords to work with the company. Now, Lee says, the company has amassed enough clients, from small businesses to large publicly traded companies, that it’s not as hard to get an audience with landlords who have been doing business in the city for years.
TheSquareFoot plans to scale up to 20 employees by year’s end. The compay’s recent hiring of Vivek Garg, who previously was the product owner of video licensing at stock image giant Shutterstock, speaks to its emphasis on providing its customers with a comprehensive technological solution for leasing a property.
“I’m a big believer that you don’t have to come from the industry in which you are trying to make a difference or disruption,” says Garg, now head of product for TheSquareFoot. “The two exceptions are health care and commercial real estate.”
Garg says the combination of TheSquareFoot’s founders’ background in commercial real estate and focus on innovation is what drew him to the company. “Where a traditional [agent] serves five clients, ours can serve 50,” says Garg, adding that this technology-fueled process greatly improves efficiency for both the client and agent.
“If you had told me [when I started] that I would be dealing with this many clients, I would have shaken my head,” says Arash Sidighi, a broker at TheSquareFoot. But Sidighi says the digitization of communication with his clients allows him to provide better customer service even while handling more clients.
A Different Incentive StructureTechnology is not the only place where TheSquareFoot is looking to innovate. Lee says the company is built on a model of generating inbound leads for agents, meaning each agent can focus on client interaction rather than generating new business.
The company wants to ensure that once clients find TheSquareFoot, the customer service they receive is flawless. By offering a salary compensation structure, Lee says the company aims to incentivize agents’ attentiveness to clients’ needs.
“It’s led to clients being a lot more comfortable,” says Sidighi. “There’s no incentive for me to try to steer them in any one direction and it allows me to be a better adviser.”
The company’s employees still receive performance bonuses when goals are met, but those are focused more on successful transactions and clients’ experiences, says Lee. For him, it’s about keeping customers engaged and excited throughout their search for a new workplace.
“It’s a complex process and it can take months,” says Lee. “We want to bring back the excitement of when they first started looking.”
In a huge win for real estate developers, Congress extended the popular, controversial and widely-debated EB-5 visa program for another year with no changes. Not a one. The program, which gives foreign investors a green card in exchange for a $500,000 investment in the U.S. economy, was part of the omnibus spending bill passed by Congress on December 15.
Here’s a rundown of the issues that tied up EB-5 for another year.
1. Targeted employment area
The definition of TEAs – low-income neighborhoods where investors only have to spend $500,000 (instead of $1 million) – is one of the most contentious parts of the EB-5 program. New York developers historically benefited from TEAs by drawing special districts to link their glitzy condo projects with poor areas, a practice critics say is gerrymandering. A proposal would have restricted the definition of TEAs.
Developers – and their supporters – say their projects qualify as TEAs since they hire workers from low-income areas. The proposed restriction would have eliminated most projects in New York, said Klasko.
2. “Reserved” visas
Introduced last week, the proposal would reserve 6,000 visas – out of a total of 10,000 awarded each year – for investment in three categories. The categories included rural areas, urban impoverished areas and areas outside of TEAs.
But critics said the system would leave just 4,000 visas for projects outside those categories, leading to a 10- or 15-year waiting list for EB-5 investors. “It would have killed the program, a lot of us felt,” Klasko said.
3. Limits on indirect jobs created
In an effort to ensure the EB-5 program creates jobs, the measure would require 10 percent of the new jobs created to be directly tied to a specific project.
But critics said there was not a clear way to calculate direct versus indirect jobs. And it was possible that condo projects, where construction could last two years, would not meet the proposed standard.
4. Foreign agents
With the goal of having better oversight of the foreign agents who bring investors to developers, a proposal would have established qualifications for those agents and set standards for the fees they charge.
But critics questioned whether it was the place of the U.S. government to tell foreign agents how much they can charge.
- See more at: http://therealdeal.com/blog/2015/12/16/developers-1-congress-0-as-eb-5-is-extended-again-with-no-changes/#sthash.8LHZ09Nu.dpuf
The saying goes that all real estate is local, but that does not mean that all homebuyers are local. According to the National Association of Realtors® 2015 international homebuyers report, global buyers spent an estimated $104 billion on housing in 2014, an increase of more than $10 billion from the previous year.
“We live in an international marketplace, and U.S real estate is extremely attractive to foreign buyers,” said 2015 President of the Eastern Bergen County Board of REALTORS Bowen Pak “International buyers recognize the Bergen County’s attractive prices compared to New York City, economic stability and well-defined property rights as an amazing opportunity for investment in their future.”
As more international buyers become a part of the fabric of American communities, they bring with them their many traditions and customs – including those that go along with moving into a new home. President Pak said, “223,000 Bergen County residents are Foreign Born, that is 33% of the total population. 51% of all homeowners are multi-national foreigners.” He explained this is why it is important to understand cultural relativity.
The EBCBOR Global Business Council has compiled a list of a few common housewarming traditions from around the globe, which you may want to use to welcome friends, family or neighbors into their new home.
Russia. According to Russian custom, a cat should cross over the threshold of the new home before anyone else enters. This is said to ensure that the homeowners will have a happy and prosperous life.
China. Before moving into a new home, Chinese custom is to shine a light in every corner, closet and wardrobe of the house. This is said to let any lingering spirits know that it is time to leave and how to find the way outside.
India. In India, it is considered lucky to move into a new house on Thursday, while Friday and Saturday are the unluckiest days to move. There is also the ceremonial housewarming known as ‘Grinha Pravesh,’ during which, in some parts of the country, a cow is allowed to walk through the house first, bringing good fortune to the homeowners.
France. When construction of a new home is finished, the French throw a traditional party called the ‘pendre la cremaillere,’ literally meaning ‘to hang the chimney hook.’ The phrase comes from medieval times when it was customary to invite over everyone who took part in the building of the house and eat dinner as a gesture of thanks. The food would be cooked in a large pot over a fire, where the chimney hook could be used to raise or lower the pot to heat or cool the food.
Buying a home in a foreign country can by a complicated and trying process, and Realtors® have the expertise to serve clients in a variety of international real estate transactions. So whether you are from Korea, Russia, India or Columbia, when you are ready to buy a home make sure to contact a Realtor®.
International buyers are consisting drawn to purchasing real estate in the U.S. for a variety of reasons, many cite the soundness of the government and financial systems which would better guarantee their home investment. These buyers also chose to purchase in the U.S. for its desirable location and climate, to be closer to family and friends, changes in work and employment, educational opportunities and affordable prices. Fourteen percent of international buyers purchased a property in the U.S. primarily for investment purposes. The quality of the Bergen County school system is an attractive feature for Russians living abroad.
The EBCBOR Global Business Council, recently named a Gold Council by the National Association of REALTORS®, hosts quarterly luncheons focusing on various topics in international real estate in addition to promoting important new and updates through its website and social media pages.
Wealthy, very nervous foreigners yanking their money out of their countries while they still can and pouring it into US residential real estate, paying cash, and driving up home prices – that’s the meme. But it’s more than a meme as political and economic risks in key countries surge.
And home prices are being driven up. The median price of all types of homes in July, as the National Association of REALTORS (NAR) sees it, jumped 5.6 percent from a year ago to $234,000, now 1.7 percent above the totally crazy June 2006 peak of the prior bubble that blew up in such splendid manner. But you can’t even buy a toolshed for that in trophy cities like San Francisco, where the median house price has reached $1.3 million.
And the role of foreign buyers?
[N]ever have so many Chinese quietly moved so much money out of the country at such a fast pace. Nowhere is that Sino capital flight more prevalent than into the US residential real estate market, where billions are rapidly pouring into the American Dream. From New York to Los Angeles, China’s nouveau riche are going on a housing shopping spree.
So begins RealtyTrac’s current Housing News Report.
“For economic and political reasons, Chinese investors want to protect their wealth by diversifying their assets by buying US real estate,” William Yu, an economist at UCLA Anderson Forecast, told RealtyTrac. “The best place for China’s smart money to invest is the United States.”
In the 12-month period ending March 2015, buyers from China have for the first time ever surpassed Canadians as the top foreign buyers, plowing $28.6 billion into US homes, at an average price of $831,800, according to the NAR. In dollar terms, Chinese buyers accounted for 27.5 percent of the $104 billion that foreign buyers spent on US homes. It spawned a whole industry of specialized Chinese-American brokers.
Political and economic instability in China along with the anti-corruption drive have been growing concerns for wealthy Chinese, Yu says. “China’s real estate market has peaked already. Their housing bubble has popped.”
So they’re hedging their bets to protect their wealth. And more than their wealth…
“China’s economic elites have one foot out the door, and they are ready to flee en masse if the system really begins to crumble,” explained David Shambaugh Professor at George Washington University in Washington, D.C.
China has capital controls in place to prevent this sort of thing for the average guy. But Yu says there are ways for well-connected Chinese to transfer money to the US, particularly those with business relationships in Hong Kong or Taiwan.
But in the overall and immense US housing market, foreign buying isn’t exactly huge. According to the NAR, foreign buyers acquired 209,000 homes over the 12-month period, or 4 percent of existing home sales. But foreign buyers go for the expensive stuff, and in dollar terms, their purchases amounted to 8 percent of existing home sales.
In most states, offshore money accounts for only 3 percent or less of total homes sales. But in four states it’s significant: Florida (21 percent), California (16 percent), Texas (8 percent), and Arizona (5 percent). And in some trophy cities in these states, the percentages are huge.
Among California cities that are hot with Chinese investors: Alhambra, Arcadia, Irvine, Monterey Park, San Francisco, San Marino, and in recent years Orange County, “a once heavily white middle-class suburb that is now 40 percent Asian and becoming increasingly expensive,” according to RealtyTrac:
Buyers from China, including investors from Hong Kong and Taiwan, are driving up prices and fueling new construction in Southern California areas such as Arcadia, a city of 57,000 people with top-notch schools, a large Chinese immigrant community, and a constellation of Chinese businesses.
For example, at a new Irvine, California development Stonegate, where homes are priced at over $1 million, upwards of 80 percent of the buyers in the new Arcadia development are overseas Chinese, according to Bloomberg…
Similar dynamics are playing out in New York.
“In Manhattan, we estimate that 15 percent of all transactions are to foreign buyers,” Jonathan Miller, president of a New York real estate appraisal firm, told RealtyTrac. “Luxury real estate is the new global currency,” he says. “Foreigners are putting their cash into a hard asset.” And they see US real estate as “global safe haven.”
This article was originally published on WOLF STREET.
Between now and 2020, roughly four out of every 10 new households that form in the U.S. will be headed by someone of Hispanic descent—more than any other single racial or ethnic group. The Hispanic demographic will be a key driver of home rental and purchasing activity in the next several years, and this will have important implications for the housing sector. Hispanics aspire to homeownership, and the majority of Hispanic movers want to purchase when they move. But a new report from The Demand Institute finds that there is significant business opportunity in meeting the housing and community demand of Hispanic households in the next five years.
Hispanics & Home Ownership: Closing the Gap is the latest publication from The Demand Institute, a non-advocacy, non-profit think tank jointly operated by The Conference Board and Nielsen. The report finds that nearly four million Hispanics would like to purchase a home when they move, but only 1.5 million are financially prepared to do so—a gap of 2.5 million households that will struggle to attain the goal of homeownership because they lack the down payment, income or credit to follow through on their plans.
“Hispanics were hit especially hard by the financial crisis and housing crash, and the outlook for homeownership is uncertain,” says Louise Keely, president of The Demand Institute. “The homeownership rate among Hispanic households now stands at 44 percent and continues to decline. Still, Hispanics are a large and fast growing segment of the housing market, and their distinct demand for communities and housing could stimulate innovation for a wide range of businesses, including financial services.”
In 2007, the Hispanic homeownership rate peaked at nearly 50 percent but has been in decline ever since. “Hispanics are one of the fastest-growing demographics, and their prospects for homeownership and what they will seek from communities in a lot of ways reflect the outlook for the entire country,” continued Keely.
The report also finds that more Hispanics are moving to the suburbs, even though Hispanics are still more likely than non-Hispanics to live in urban areas. “Hispanic households are still most likely to be family households,” says Jeremy Burbank, who is a vice president at The Demand Institute and leads the American Communities Demand Shifts Program. “Hispanics are moving to the suburbs for more space, better schools and more affordable housing – they’re looking for places to raise their families,” says Burbank.
Hispanics & Home Ownership: Closing the Gap is the first report from The Demand Institute’s American Communities Demand Shifts Program, which provides insight on the future of American communities, including the ever-evolving housing sector. The program is an extension of more than four years of in-depth research conducted by The Demand Institute, and will help business leaders and policymakers better anticipate and address the needs of consumers and citizens.
For more information, visit DemandInstitute.org/Projects/American-Communities/.
The ancient design philosophy, feng shui, still proves to be a powerful influence to Chinese-American home buyers, finds a new survey of 500 Chinese-Americans by Better Homes and Gardens Real Estate and the Asian Real Estate Association of America.
Seventy-six percent of Chinese-Americans surveyed said they were familiar with the principles of feng shui, which guides spatial arrangement and building design to increase the flow of energy in a home. Over half of those who said they were familiar with feng shui follow the practice in their daily lives, according to the survey.
Feng shui can prompt a big majority of Chinese-Americans to buy too. Overall, 86 percent of respondents said feng shui will play a role in a future home-buying decision, and 79 percent said they are willing to pay more for a home that has feng shui principles. Respondents reported a willingness to pay 16 percent more for a home that uses feng shui.
Indeed, 81 percent of Chinese-Americans surveyed who are also home owners said that feng shui factored into their most recent home purchase. What's more, 36 percent said they would avoid a real estate agent who was not familiar with the feng shui principles.
"It's critical for real estate professionals to understand all consumer drivers within the home search," says Sherry Chris, president and CEO, Better Homes and Gardens Real Estate LLC. "For this population, feng shui applications are as essential as other traditional characteristics of a home. Understanding these considerations is part of being a sophisticated service provider as well as an invaluable resource for our clients during the home buying and selling processes."
Chinese-Americans surveyed said the biggest design deal-breakers that went against feng shui principles are: the home being located at the end of a dead end street (31 percent); the home's back stairs directly facing the front door (29 percent); the home having a sloped backyard (29 percent); and the home's front and back doors being aligned with each other (24 percent).
"As the Asian American community's influence in the real estate market continues to grow, feng shui principles are gaining much needed attention and have already influenced real estate developers and interior designers alike," says Carmen Chong, 2015 AREAA national chairwoman.
Daily Real Estate News, National Association of REALTORS