Commercial REALTOR® markets posted accelerating growth in sales and leasing activity during the fourth quarter of 2012. Based on the results of the January Commercial Real Estate Market Survey, commercial practitioners closed the year on a more upbeat note. Commercial REALTORS® rated business opportunities in the fourth quarter 6.0 percent higher than the previous quarter.
Higher residential rents compared to a year ago were reported by 57 percent of REALTORS® in September (55 percent in August), based on information from the REALTORS® Confidence Index survey. The data are additional confirmation of the recovery of the U.S. residential real estate markets.
Home prices swung too high and then crashed badly. But there was no notable fluctuation in rents. The chart below compares the two data points and clearly shows how home prices overcorrected in relation to rent from 2009 to 2011. Beginning this year, home prices steadily made positive gains, and are now catching up to the rise in rents. Given that rents are expected to further rise because of falling apartment vacancy rates, home values would need to continue upward movement in order to catch up fully to rent trends.
This simple home price-to-rent comparison does not even take into account the impact of home buying from lower interest rates. So even not factoring in generational low mortgage rates, homes remain a good buy. But please, stay well within your budget.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses inflation and the consumer price index.
Economy Advances 2.2 Percent in 2012
Based on early estimates, economic activity closed 2012 on a mixed note. Though gross domestic product grew at 2.2 percent for the whole year, the fourth quarter results were disappointing, showing a 0.1 percent decline. A large 22.2 percent cut in defense spending at the federal level (coming after a surprisingly high defense spending growth in the prior quarter) and a large negative change in private business inventories were key reasons for the mild contraction in the economy.
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