Approximately three to four percent of REALTORS® report a commercial rental every month. On an annual basis, this would be in the neighborhood of 175,000 rental transactions per year. In addition, approximately three percent of REALTORS® report a commercial sale.
According to the Commercial Real Estate Quarterly Market Survey, rental volumes are up by three percent on a quarter-over-quarter basis. Rental rates are down by two percent, although the level of downward pressure has been decreasing. For sales, volume is up by 11 percent, with prices down 3%.
Farm prices are going through the roof, at least in Colorado, Kansas, Missouri, Nebraska, Oklahoma, and Wyoming – the area monitored by the Kansas City Federal Reserve. Both irrigated and non-irrigated land prices have essentially tripled in the past 10 years, with the most recent appreciation of a strong 27 percent in the past year to the second quarter. Many foreign investors are said to be buying farm land even without an on-site visit on the assumption that crop yields will easily cover any borrowing interest cost. High food prices and livestock prices are helping, though only if farmland has not been impacted by a drought.
The U.S. home ownership rate stands at a 15-year low with the latest figures showing 65.6 percent of Americans living in owner-occupied homes. At peak in 2004 the ownership rate was a hair shy of 70 percent. Over the next two years it may fall further, possibly to 64 percent before stabilizing. But the falling homeownership rate will not mean fewer home sales. The dynamics is such that both the rental and ownership households will rise, though the proportion will be such that the home ownership rate will fall.
As part of the health care legislation, a new 3.8 percent tax will be imposed on some people starting in 2013. Contrary to rumors among some real estate practitioners, this is not a tax on the sale of a home. Neither a home-buyer nor home-seller will have to fork over $3,800 to the federal government on the sale of a $100,000 home.
This tax, however, will impact some landlords and some homeowners who have significant housing equity. Rental incomes will be subjected to this 3.8 percent tax on landlords who earn more than $200,000 a year. For example, a corporate lawyer who has a high salary but who also owns a rental property will likely be subject to this tax. But as with most taxes, those who have to fork over the money to the federal government and those who actually suffer the burden of the tax will not be the same. The right question to ask is: how much of this tax on rental income will get shifted to tenants as a rent hike?