The latest figures from the commercial real estate sector indicate that while residential markets improve, commercial markets are "hobbling to recovery."
NAR Chief Economist Lawrence Yun told attendees at the Commercial Real Estate Forum this month that multifamily is the only sector where rents are outpacing inflation. Demand for the sector is strong, with rental property growth reaching 6 million units over the past five years.
Apartment vacancy rates have been declining mostly due to the fact that many young people cannot obtain a mortgage, and many families have gone through foreclosure.
Commercial lending activity, Yun noted, has been severely hampered by the financial reforms in Dodd-Frank legislation since smaller banks that have handled much commercial activity in the past are far more burdened by the new regulations than larger institutions.
Also speaking at the forum, Calvin Schnure, vice president, research and industry information at NAREIT, echoed Yun's predictions for the apartment sector. "Pent-up demand continues to drive the multifamily sector while new supply falls short," he said. "Market conditions for multifamily have tightened since the housing crisis."
The market has also experienced a change in demographic when it comes to all-cash buyers. These purchasers surged in the aftermath of the housing downturn. It was these buyers who took advantage of historic pricing drops and of a market where tightened lending standards meant many potential buyers were sidelined.
"We've seen a tremendous increase in cash buyers since the housing downturn that we haven't seen before in history," said Lawrence Yun, chief economist of the National Association of Realtors. Yun said a decade ago all-cash home purchases were less than 10 percent of the market but have increased steadily since 2008, to as much as 30 percent of sales.
Yun said the increase in more buyers paying cash for real estate reflected tight lending conditions and an increase in investor sales, which account for the bulk of cash sales. Increases in the number of international buyers, who often have financing difficulties when purchasing a home in the U.S., are also adding to the rise in cash sales. NAR research shows that 62 percent of international purchases were all cash; the percentage has continually increased since 2007.
Yun said that tightened inventory conditions are also impacting time-on-market, which has steadily decreased nationally since the start of the year, as are home buyers' search processes.
"Tightened inventories in some places mean homes are selling more quickly and reducing time-on-market," Yun said. "Our research shows that last year, home buyers saw 10 homes before buying, down from 12 the year before, and more than half of buyers reported that finding the right home was the hardest part of the home search process."
As more buyers return to the market and lending standards loosen, all-cash purchases have declined slightly.