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Annapolis Real Estate Law Blog

Slower commercial property market could impact Maryland residents

As the real estate market enters its mature cycle, it could spell an end to earnings growth for commercial real estate companies. CBRE Group's stock declined by 14 percent in August 2015 with 7 percent of that coming in one day. In addition, HFF Inc. saw the value of its share decline by 20 percent in August 2015.

While it is true that broader indexes have declined in recent weeks, commercial real estate stocks have fallen further. For instance, the S&P 500 has seen a drop of 10 percent while real estate investment trusts have lost just 5.7 percent of their value. The 49 percent increase in new commercial real estate deals in the first quarter of 2015 compared to the same quarter in 2014 was largely attributable to several large transactions occurring at that time, and the increase in the second quarter was less than half that.

Market activity may affect real estate

As Maryland residents watch the volatile activity of the stock market, they may find that the swings affect their immediate plans for spending money in areas such as real estate. Many have predicted a coming correction in the stock market, but the actual drops that started in August may lead to worry for those who could face losses. Real estate is an area that can be affected both positively and negatively as the corrections play out.

One of the ways market volatility, especially drops, can affect real estate activity is that investors may seek out safer investments. Purchasing certain types of properties may provide a tangible asset that can later be sold or rented. Positive market activity often leads those with significant levels of wealth to invest in more expensive homes. As the market becomes less stable, this activity may drop off as homeowners keep more modest properties instead. The upper-end housing market could be negatively affected as a result.

Property investors may be contributing to troublesome price surge

Maryland investors may know that commercial real estate prices have been rising significantly. The investment-driven increases are cause enough for concern that the Wall Street Journal and some other news sources have even compared growth rates to the mid-2000s boom. The Federal Reserve also took note of the market rise in a July report to Congress.

According to Realty Today, the trends observed in cities such as New York, Los Angeles and Chicago are being replicated in foreign cities like Osaka, London, Berlin and Sydney. In the second quarter of 2015, commercial building sale assessments set records in terms of per-square-foot pricing.

Technology is changing commercial real estate

Those who want to buy or sell commercial real estate in Maryland would do well to take a lesson from the experts on how to use "big data" to make important assessments such as property value and price point. Real estate experts are using technology to supply instant information about important data, and this is changing the way that property is bought and sold.

Real estate agents, appraisers and others now use technology to assess property damage, check title facts and even to project improvements to commercial property. The use of technology means that big data is creating a transparency in the real estate industry that has already changed health care and other industries significantly.

Investor urges Macy's to consider REIT

Maryland investors may have read media reports about leading retailers taking advantage of their commercial property portfolios by forming real estate investment trusts. The investment firm Starboard Value urged Darden Restaurants to pursue this strategy in June, and the activist firm's CEO said during an investor conference on July 15 that Macy's could almost double its share price if it followed a similar path.

The Starboard CEO said that Macy's property portfolio was worth about $21 billion. He said that the retailer's flagship store in New York City was worth $4 billion and locations in Chicago and San Francisco would fetch over $1 billion on the open market. The company generated $28 billion in sales during its last fiscal year from more than 800 Macy's and Bloomingdale's stores around the country. The Ohio-based retailer said in a statement that it was considering a number of options concerning its commercial real estate holdings.

Avoiding common real estate myths

For many people in Maryland, the residential real estate market is something they only deal with only once or a few times in their lives. When people are in the process of selling or purchasing a home, it is understandable why they may believe certain myths about how the process works.

Many people think they should ask a price higher than what they believe they will receive. If they do this, though, they run the risk of receiving an offer that is lower than what they should or none at all. The reason for this is that most people will not look at homes they believe are above their price range. Secondly, if a home does not sell within the first few weeks, people tend to believe something is wrong with it and be leery of making an offer at all.

Declining prices for real estate in the Hamptons

Maryland residents who are looking to purchase real estate in the Hamptons area of Long Island may be pleased to learn that the median sales price for homes in the area is declining. Since 2014, there has been a 6.5 percent drop in the median sales price of a home in the Hamptons. The median sales price for a Hamptons home is now at $849,000.

Fewer residential real estate sales are taking place in the Hamptons this year than they did last year. At the same time last year, there had already been 700 homes purchased in the Hamptons during 2014. So far in 2015, only 590 homes have been sold in the Hamptons. Although the median sales price is lower for 2015, the average selling price for a home in the area rose by 2.5 percent since 2014.

Experts predict 2015-16 real estate market trends

Real estate investors and developers in Maryland and around the country often make their decisions after analyzing market trends and carefully considering the forecasts made by experts in the field. A Chicago-based group of advisers called the Counselors of Real Estate assess trends in the commercial and residential property markets each year, and it released its forecasts for the year ahead on June 24. According to the CRE, the behavior of two demographic groups will have the biggest impact on the U.S. real estate market in the coming year.

Baby boomers are retiring in ever greater numbers, and the CRE believes that this will likely continue to drive property prices up in popular retirement destinations like Arizona and Florida. The number of commercial property developments involving retirement homes or assisted living facilities is also expected to increase.

Short sales as a solution to an unmanageable mortgage

Maryland residents may be familiar with the high level of foreclosure activity in recent years. The idea of being underwater on one's mortgage can be frustrating, especially if there might be a need to relocate. In other cases, mortgage payments have become unmanageable because of lost jobs, household emergencies or other issues related to the local and national economy. Although the government has worked to provide solutions to keep people in their homes in the midst of financial difficulties, there are times that the programs don't resolve the situations.

There may be programs available through one's financial institution for resolving a past-due mortgage. However, some of these require bringing a loan current, which can be difficult if more than just one or two months' payments have been missed. Long-term forbearance may be an option if a serious household emergency such as a severe injury has prevented participation in gainful employment activity. When all options appear to have been exhausted, a short sale may be the only alternative to allowing one's home to go into foreclosure.

Supreme Court makes decision on housing discrimination

Maryland residents who have been victimized by housing discrimination may gain some relief following a narrow decision by the U.S. Supreme Court. The June 2015 ruling upheld the applicability of the federal Fair Housing Act to a case in which the Texas Department of Housing and Community Affairs. In this case, Dallas officials had applied federal vouchers more predominantly in low-income neighborhoods, and the court ruled that such action could have a disparate impact on minorities and thus be subject to the FHA even if it wasn't intentional.

The Fair Housing Act, enacted in 1968, forbids housing, renting and lending discrimination based on certain factors such as race, religion, gender and disability. The concept of disparate impact, which involves a finding that certain zoning, lending and sales practices have more of an effect on certain groups of people, is not specifically addressed in the legislation.