October 1, 2012 • An Advertising Supplement to the San Fernando Valley Business Journal

REAL ESTATE:YOUR OFFICE,YOUR HOME

By Linda Heidtke

When I bought my first homeback in 1978 for a mere$26,000, it was saddled with a

traditional, 30-year fixed mortgage; thekind of mortgage my parents had, andtheir parents before them. Unlike my par-ents, I stayed in my home just seven years,typical of the amount of time that most ofus stay in a home after purchase. Anotherdifference, I refinanced my first mortgagewith another 30-year-fixed loan to cashout equity for a remodeling project at just3.5 years into my first mortgage.

This behavior trend is prevalent today.According to Freddy Mac, last quarter95% of home loan refinances were forfixed-rate loans, and 67% of them keptthe same term that they had paid off. So,realizing that most of us move or refi-nance long before the first mortgage ispaid in full, why do we continue tochoose fixed-rate mortgages with longerterms and higher rates?

Fixed-rate mortgages

The beauty of a fixed-rate mortgage isin its simplicity. It’s a great option for

those who want the security of a fixedrate and set monthly payment. Plus it’seasy to budget for. These loans also offera choice of terms that run the gamut offive to 50 years; you can almost pick theterm with the payment you can afford.However, they often have higher ratesthan adjustable-rate mortgages, increas-ing the size of your monthly payment.

Adjustable-rate mortgages

The adjustable-rate mortgage, or ARM,is more complex. Rates change on aschedule depending on what type of ARMand index you have. One loan, sometimesreferred to as a “hybrid-ARM,” offers aninitial fixed-rate term—typically anywherefrom three to 10 years. With a 7/1 ARM,for example, you’ll have a fixed rate forthe first seven years, but after that, yourrate will reset annually depending on pre-vailing interest rates. If the index towhich your rate is tied drops, your rateand payment will also drop. Some ARMsmay have an extra-low “teaser rate” forthe first year, as well as an upper limit, orcap. The amount that an ARM can riseeach year is also limited. If you plan tostay in your home only the length of the

fixed first term, such as seven years, anARM could be a great option for you evenif rates rise during that time.

It pays to compare payments

You plan to purchase or refinance yourhome for $400,000. When financing$400,000 at 3.60% APR, your paymentwill be approximately $1,819 per month.With a 7/1 ARM loan at 2.668% APRyour approximate payment will be$1,580, a monthly savings of $239 permonth, $2,868 per year, and a whoppingestimated savings of $20,000 over theseven-year-fixed term of the loan.

But what about your payment after the ini-

tial fixed term?

The answer to this question is in theARM’s loan rate caps. These caps limithow much the interest rate—and yourmonthly payment—can rise. The mostcommon ARM caps are the “initial cap,”“periodic cap” and “lifetime cap.” Theinitial cap limits how much the interestrate can increase the first time it adjusts.The periodic cap limits how much theinterest rate can increase each subsequenttime that it adjusts after the initial adjust-

ment. The lifetime cap sets a maximumamount by which the interest rate canincrease as long as you keep the loan.

Virtually all adjustable-rate mortgages,including the traditional, hybrid and inter-est-only varieties, feature caps that limithow much the interest rate—and conse-quently your monthly mortgage pay-ment—will change when your interest rateadjusts. These rate caps are importantbecause they protect you from unlimitedhigher payments, no matter how quickly,or how high, market interest rates rise.

When comparing mortgages, be sureto consult with a mortgage loan profes-sional. They can help you find the rightloan to fit your plans and budget.Moreover, when the time comes, you canoffer your children support and guidancefor the full range of mortgage options.

Linda Heidtke is the Marketing Director forWater and Power Community Credit Union(WPCCU), serving members who live, workworship or attend school in the valley, Westsideand downtown Los Angeles. For more informa-tion about WPCCU, or to talk with a mort-gage loan expert at the credit union, pleasewrite her at linda.heidtke@wpcu.org.

What Your Parents Didn’t Tell YouAbout Fixed-Rate Mortgages

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24 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL OCTOBER 1, 2012

By Paul C. Bauducco

Whether you’re physically work-ing on a property, or supplyingmaterials to a construction

project you’ve never seen, as a businessowner you can be left holding an emptybag instead of payment for services ren-dered or materials provided.

Private and public construction proj-ects today are generally working withmore restrictive budgets, leading propertyowners and financial institutions to delayprogress payments and release of reten-tion payments to general contractors.These delays in payment can cause gener-al contractors to suffer cash flow short-ages. When general contractors don’thave enough cash to make payroll orcover their own expenses, they may mis-use funds intended for subcontractors.

This can leave suppliers or subcontrac-tors in a hostage situation financially – withthe general contractors who fail to pass onprogress payments on a timely basis, orwho improperly withhold retention pay-ments received for work performed ormaterial provided by their subcontractors –holding the gun. Here are three ways youcan help ensure timely payment:

Joint Check Agreements

One method you as a subcontractor orvendor can use to avoid delayed paymentsfrom general contractors is to request ajoint check agreement from the owner/con-struction lender and general contractor.

In this type of agreement, the owner/construction lender, general contractorand subcontractor agree that work relat-ing to specific construction or materialsprovided on a project will be paid by acheck made payable jointly to the gen-eral contractor and the subcontractorwho performed the work or providedthe materials. The general contractormust notify the subcontractor that apayment has been made and get thesubcontractor’s signature in order tocash the check, preventing the generalcontractor from hiding and keepingsubcontractor payments.

However, not every owner, construc-tion lender or general contractor will agreeto a joint check agreement because itincreases the amount of time and paper-

work necessary to make payments on theproject. General contractors may refusesuch an agreement because it restricts their“flexibility” to use such payments.

Conditional Mechanic’s Lien Releases

Owners and construction lendersalmost always require general contractorsto obtain mechanic’s lien releases fromtheir subcontractors in connection withprogress and final payments. Regardlessof whether there is a joint check agree-ment in place, subcontractors should pro-vide lien releases which are conditional onreceipt of payment for the work covered inthe release.

In the event the subcontractor does notreceive payment for the work or materialsreflected in the “conditional” release, it

will not be barred from recording amechanic’s lien to secure its payment.

Prompt Payment Statute

California Business and ProfessionsCode §7108.5 can be used to imposepenalties which may cause the generalcontractor to make prompt payment tosubcontractors. A general contractorwithholding payments received from anowner/construction lender due to a sub-contractor can be subject to a penalty oftwo percent per month for the unpaidamounts due. If the subcontractor isforced to bring a lawsuit to collect fundswrongfully withheld, the “prevailingparty” will also be entitled to an award ofattorney’s fees and costs.

The code also allows general contrac-tors to withhold up to 150 percent of anypayment to subcontractors when there isa “good faith dispute.” Currently there isa split of opinion in the appellate courtsas to whether the determination of a“good faith dispute” should be based onthe “subjective belief” of the general con-tractor or on what a “reasonable person”would “objectively determine”.

Even with the “good faith dispute” ex-ception, §7108.5’s penalties are substantialand provide a valuable tool for obtainingprompt payment from general contractors.

Paul C. Bauducco is a real estate litigationattorney at Lewitt Hackman in Encino. Hecan be reached for more information at(818) 990-2120.

Supply & Demand: How a Construction Project’sCash Flow Can Leave You Strapped

REAL ESTATE: YOUR OFFICE, YOUR HOME

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23 31_sfvbj_real_estate_supplement.qxp 9/27/2012 12:08 AM Page 24

OCTOBER 1, 2012 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL 25

REAL ESTATE: YOUR OFFICE, YOUR HOME

By Clark Everitt

If one were to ask active buyers andsellers of multi-family properties in Bplus and above areas of the Valley and

Westside how the market is doing, myguess is they would all fire off a similararsenal of words such as “aggressive,”“competitive,” and “strong.” Multi-fami-ly housing, especially within the past sixmonths, has seen a tremendous boom invalue, with properties selling for lowerCAP rates and higher gross rent multi-plies than the market has seen in sometime, if ever. Amazingly, amidst the con-stant reminders of a recession, a laggingeconomy, stalled GDP, and high un-em-ployment, when it comes to multi-familyreal estate in sold Los Angeles areas, themarket seems to be on an ever-improvingtrajectory. This trend within the bittergalls of a weakened economy seems todefy all odds; that is, until one looksbehind the Wizard of Oz curtain andbegins to see things as they really are.

Pulling back that curtain, in my never-to-be-humble opinion, there are threesimple reasons why prices have jumpedso quickly this year.

First, it now seems like such a cliché,but interest rates really are at an all-timelow. One client of ours purchased a 15.5million dollar apartment building sixweeks ago and was able to borrow around10.5 million dollars at a fixed rate hover-ing around 3.5% with a 30 year amortiza-tion. His LTV and rate alone justified thesub five CAP he paid.

Second, cash heavy buyers, some whoare new to the market, would muchrather receive a 4% return from a realestate deal than continue to collect lessthan one half of one percent in their sav-

ings accounts. In marketing an 18 unitapartment building on Barrington Ave.over the summer, several of the regularplayers we typically see in the marketsubmitted competitive bids. Then, onefamily new to the market came in withan all-cash offer and terms that left theregulars scratching their heads. Recogniz-ing the long term value of the asset andgrateful to be trading in their savingsaccount returns, they were happy to closeat a CAP below 4%.

Third, developers are back in the mar-ket. Six months ago we were marketing a2.37 acre development site on MagnoliaBlvd. in Sherman Oaks and were veryimpressed by the interest and responsefrom many investors who had been outof the market for three or four years. Thesomewhat complex development poten-tial was no-match for the number of buy-ers expressing solid interest; and, unlikeland development deals of 2009, 2010, oreven 2011, this plot of land closed quick-ly with a buyer who was the envy of tenplus groups wishing they had been theones to close.

Amid the lure of incredible loans,cash heavy buyers tired of paltry savingsaccount returns, and developers taking aserious look at projects again, the mar-ket in solid areas of the Los Angeles real-ly are aggressive, competitive and

strong. If you are a seller it’s a greattime to sell. If you are a buyer, get readyfor a wild ride and don’t be scared off bythe initial sticker shock. By taking astep back and looking at things as theyreally are, you will find far more wisdomthan wizardry in the deals that are trad-ing right before your eyes.

Clark Everitt is a Senior Vice President atInvestment Real Estate Associates and a part-ner and co-founder of The Everitt Group. Formore information, please call (818) 386-6888,email clark@irea.com, or visit www.irea.com / facebook.com/theeverittgroup.

Southern California Multi-Family Market Continues to Thrive

Offices located in: SUN VALLEY: 818-394-2300VALENCIA: 661-775-4112CENTRE POINTE: 661-253-9500

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23 31_sfvbj_real_estate_supplement.qxp 9/27/2012 12:08 AM Page 25

26 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL OCTOBER 1, 2012

REAL ESTATE: YOUR OFFICE, YOUR HOME

By Wayne Wirth

Hardly a day goes by when we don’thear “interest rates are at their low-est point in decades” reported in

the news. No one knows when the currenttide of low interest rates and favorableterms could make a sudden turn due toeconomic, social and political factors be-yond anyone’s control. So it might makegood sense to act quickly by evaluatingyour business position and speaking witha lender if you’re considering a major pur-chase, such as commercial real estate.

The first question you may want to askyour lender, who is hopefully also a trustedadvisor to you, is what does the SBA offer

to small business owners? The programs aremany and varied, and the qualifications foreach are specific. Understanding a littleabout how SBA programs work is the firststep towards receiving assistance.

The SBA provides a number of finan-cial assistance programs for small busi-nesses. Each has been specifically de-signed to meet key financing needs. Themost common and broad reaching arethe Guaranteed Loan Programs, whichfacilitate debt financing.

It is important to understand that theSBA does not make loans directly to smallbusinesses. Rather, the SBA sets the guide-lines for these loans, which are thenmade by the SBA’s lending partners.

When a business applies for an SBA loan,it is actually applying for a commercialloan that is structured according to SBArequirements (with an SBA guaranty tothe actual lender).

SBA loan guaranty requirements andpractices can change as the Governmentalters its fiscal policy and priorities to meetcurrent economic conditions. Therefore, youcan’t rely on past policy when seeking assis-tance in today’s market, which makes it allthe more important that you work with alender that will help guide you through theprocess and identify what type of programmay best fit the needs of your company.

When it comes to the purchase, refi-nance or renovation of commercial realestate, borrowers should take a close lookat the SBA 7(a) Loan Program.

While not widely known or understoodoutside the lending industry, the SBA 7(a)Loan Program offers borrowers up to 90percent financing for the purchase ofowner/user commercial real estate that isfully amortized with no balloon pay-ments. For the purpose of the loan pro-gram, owner/user is defined as a mini-mum of 51 percent of total occupancy.

With a maximum loan amount of$5,000,000 and terms as long as 25 years forcommercial real estate acquisition, construc-tion or refinance, the 7(a) Program couldserve as a real solution to many borrowers.

Qualifying for an SBA loan may be easierthan qualifying for other, more traditionalforms of financing, as the SBA programs gen-erally allow for a higher loan to value ratio,longer amortization periods and may evenconsider the projected income of the business(not just historical cash flows) when makinga credit decision. These factors can be ex-tremely helpful, particularly to a rapidlygrowing company.

As previously stated, SBA 7(a) loanscan be used by qualifying borrowers topurchase or renovate or refinance realestate. In addition, these loans can alsobe used for acquiring fixed assets, such asheavy machinery or other equipment,restructuring current debt, working capi-tal and in some cases can even be used tofund the acquisition of a new business.

SBA 7(a) loans and other types of spe-cialized lending make it possible for qual-ified businesses to get the financing theyneed, often times with much more flexi-ble terms than more conventional loanoptions. Two resources to help you learnabout SBA and other forms of specializedlending are available at www.sba.gov orwww.MissionValleyBank.com.

Wayne Wirth is senior vice president and manag-er of Mission Valley Bank’s SBA Loan Division.Mission Valley Bank is a locally-owned, full-serv-ice, independent, commercial bank with PreferredSBA Lender status serving the San Fernando andSanta Clarita Valleys. Wayne can be reached at(818) 394-2329. MissionValleyBank.com

SBA Loans to Grow Your Business

23 31_sfvbj_real_estate_supplement.qxp 9/27/2012 12:08 AM Page 26

OCTOBER 1, 2012 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL 27

23 31_sfvbj_real_estate_supplement.qxp 9/27/2012 12:09 AM Page 27

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28 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL OCTOBER 1, 2012

Positive underlying fundamentals con-tinue to support all of the majorcommercial real estate sectors, but a

slowdown in job creation and ongoingtight loan availability has tempered growthin some areas, according to the mostrecent National Association of Realtorsquarterly commercial real estate forecast.

Lawrence Yun, NAR chief economist,said there are mixed results among thecommercial sectors. “Job creation in thesecond quarter was about half of whatwe saw in the first quarter, which ismoderating demand in the office sec-tor,” he said. “Industrial and warehousespace is holding on better becauseimports and exports have advanced.While exports to Europe generally aredown, trade has been robust with India,China and other Asian nations, alongwith Brazil, Mexico and our strongesttrading partner – Canada.”

Although still positive, dampeneddemand is slightly moderating rentgrowth with the exception of the multi-family market. “Sharply higher demandfor apartments is causing rents to rise atfaster rates,” Yun said. “A return to nor-mal household formation will mean evenlower vacancy rates and higher rents inthe future.”

The current commercial real estatecycle has been driven by shifts indemand without an oversupply of newconstruction. “The difficulty smallbusinesses have in getting commercialreal estate loans for leasing or purchaseis keeping a lid on demand,” Yun

explained. “Multifamily is the onlycommercial sector with a notablegrowth in new space, with some lendingprovided through government loans.”

With the exception of multifamily,vacancy rates remain above historic aver-ages seen since 1999. Over that time-frame the typical vacancy rate has been14.4 percent for the office market, 10.1percent in industrial, 8.1 percent for retailand 5.8 percent in multifamily.

Vacancy rates are marginally decliningand rents are modestly rising in all of thesectors, but significant changes in the out-look are unlikely before the end of the year.Many corporate decisions on spending andjob hiring are on hold given uncertaintyover the upcoming elections, whether Con-gress will effectively avoid a “fiscal cliff,”and unsettled issues such as health care andbanking/financial regulations.

“Overall companies hold plentifulcash reserves, but they are hesitant tohire without clarity over how these out-standing issues will impact the bottomline,” Yun said.

“Commercial real estate gains could bethwarted if lending from small and com-munity banks dry up from excessive regu-latory compliance costs, and if interna-tional big-bank capital rules are applied tosmaller lending institutions,” Yun added.

NAR’s latest Commercial Real EstateOutlook offers projections for four majorcommercial sectors and analyzes quarter-ly data in the office, industrial, retail andmultifamily markets. Historic data formetro areas were provided by REIS, Inc., a

source of commercial real estate perform-ance information.

Office Markets

Vacancy rates in the office sector areexpected to fall from an estimated 16.1percent in the third quarter to 15.6 per-cent in the third quarter of 2013.

Office rent is projected to increase 2.0percent this year and 2.6 percent in 2013.Net absorption of office space in the U.S.,which includes the leasing of new spacecoming on the market as well as space inexisting properties, should be 24.1 mil-lion square feet in 2012 and 47.8 millionnext year.

Industrial Markets

Industrial vacancy rates are forecast todecline from 10.7 percent in the thirdquarter of this year to 10.5 percent in thethird quarter of 2013.

The areas with the lowest industrialvacancy rates in the nation currently areOrange County, with a vacancy rate of4.6 percent; Los Angeles, 4.8 percent; andMiami at 6.8 percent.

Annual industrial rent is likely to rise 1.7percent in 2012 and 2.4 percent next year.Net absorption of industrial space nationallyis seen at 59.8 million square feet this yearand 67.2 million in 2013.

Retail Markets

Retail vacancy rates are projected todecline from 10.9 percent in the thirdquarter to 10.7 percent in the third quar-ter of 2013.

Average retail rent is forecast to rise0.8 percent this year and 1.3 percent in2013. Net absorption of retail spaceshould be 10.3 million square feet thisyear and 20.1 million in 2013.

Multifamily Markets

The apartment rental market – multi-family housing – is expected to seevacancy rates drop from 4.3 percent inthe third quarter to 4.2 percent in thethird quarter of 2013; vacancy ratesbelow 5 percent generally are considereda landlord’s market with demand justify-ing higher rents.

Average apartment rent is likely toincrease 4.1 percent in 2012 and another4.4 percent next year. Multifamily netabsorption should be 219,300 units thisyear and 236,600 in 2013.

The Commercial Real Estate Outlook ispublished by the NAR ResearchDivision for the commercial communi-ty. NAR’s Commercial Division,formed in 1990, provides targeted prod-ucts and services to meet the needs ofthe commercial market and constituen-cy within NAR.

The NAR commercial componentsinclude commercial members; commer-cial committees, subcommittees andforums; commercial real estate boardsand structures; and the NAR commercialaffiliate organizations – CCIM Institute,Institute of Real Estate Management,Realtors Land Institute, Society ofIndustrial and Office Realtors, andCounselors of Real Estate.

Commercial Real Estate Recovering Despite ObstaclesREAL ESTATE: YOUR OFFICE, YOUR HOME

23 31_sfvbj_real_estate_supplement.qxp 9/27/2012 12:09 AM Page 28

Choosing a business location is per-haps the most important decisiona small business owner or startup

will make, so it requires precise planningand research. It involves looking atdemographics, assessing your supplychain, scoping the competition, stayingon budget, understanding state laws andtaxes, and much more.

Here are some tips to help you choosethe right business location.

Determine Your Needs

Most businesses choose a location thatprovides exposure to customers. Addi-tionally, there are less obvious factors andneeds to consider, for example:

Brand Image – Is the location consis-tent with the image you want to maintain?

Competition – Are the businessesaround you complementary or competing?

Local Labor Market – Does the areahave potential employees? What willtheir commute be like?

Plan for Future Growth – If youanticipate further growth, look for abuilding that has extra space should youneed it.

Proximity to Suppliers – They needto be able to find you easily as well.

Safety – Consider the crime rate. Willemployees feel safe alone in the buildingor walking to their vehicles?

Zoning Regulations – These deter-mine whether you can conduct yourtype of business in certain properties orlocations. You can find out how propertyis zoned by contacting your local plan-ning agency.

EEvvaalluuaattee YYoouurr FFiinnaanncceess

Besides determining what you can afford,you will need to be aware of other finan-cial considerations:

Hidden Costs – Very few spaces arebusiness ready. Include costs like reno-

vation, decorating, IT system upgrades,and so on.

Taxes – What are the income andsales tax rates for your state? What aboutproperty taxes? Could you pay less intaxes by locating your business across anearby state line?

Minimum Wage – While the federalminimum wage is $7.25 per hour, manystates have a higher minimum. Visit theDepartment of Labor’s website for a list ofminimum wage rates by state.

Government Economic Incentives –Your business location can determinewhether you qualify for government eco-nomic business programs, such as state-specific small business loans and otherfinancial incentives.

IIss tthhee AArreeaa BBuussiinneessss FFrriieennddllyy??

Understanding laws and regulationsimposed on businesses in a particularlocation is essential. As you look to growyour business, it can be advantageous towork with a small business specialist orcounselor. Check what programs andsupport your state government and localcommunity offer to small businesses.Many states offer online tools to helpsmall business owners start up and suc-ceed. Local community resources such asSBA Offices, Small Business DevelopmentCenters, Women’s Business Centers, andother government-funded programsspecifically support small businesses.

The Bottom Line

Do your research. Talk to other busi-ness owners and potential co-tenants.Consult the small business communityand utilize available resources, such asfree government-provided demographicdata, to help in your efforts.

Information for this article was provided bythe SBA. Learn more at SBA.gov.

Tips for Choosing YourBusiness Location

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OCTOBER 1, 2012 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL 29

REAL ESTATE: YOUR OFFICE, YOUR HOME

23 31_sfvbj_real_estate_supplement.qxp 9/27/2012 12:09 AM Page 29

30 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL OCTOBER 1, 2012

American businesses rely upon theavailability and affordability of ter-rorism risk insurance and it’s

become a vital component of most com-mercial real estate transactions, theNational Association of Realtors said intestimony recently.

NAR’s 2012 Commercial CommitteeVice Chair Linda St. Peter spoke beforethe House Financial ServicesSubcommittee on Insurance, Housingand Community Opportunity on the11th anniversary of the Sept. 11 terroristattacks about the future of the TerrorismRisk Insurance Act. TRIA is a federal ter-rorism insurance program enacted in2002 that establishes a risk-sharing part-nership between the government, privateinsurers and commercial policyholders.

“Terrorism continues to be an unpre-dictable threat to our nation, and as theleading advocate for property owners,realtors know that American businessesmust have adequate terrorism risk cover-age,” said St. Peter. “The federal govern-ment’s terrorism risk insurance programhelps protect the nation’s business sectorby ensuring that adequate insurance cov-erage is available. That coverage is criticalto helping maintain a strong and vitalcommercial real estate market.”

In her testimony, St. Peter said thatafter the Sept. 11 attacks private insurersbacked out of the terrorism insurancemarketplace, prompting Congress toenact TRIA, a federal insurance backstopthat allows the federal government and

private insurance companies to sharelosses in the event of a major terroristattack. TRIA helped stabilize commercialreal estate markets by making terrorismcoverage available and more affordableover time. Congress has reauthorized theprogram twice; it currently expires onDecember 31, 2014.

While the commercial real estatefinance market is starting to show signsof life, any disruption in the availability

of terrorism insurance would have seriousconsequences on commercial real estate’sfragile road to recovery. According toindustry sources, 84 percent of outstand-ing commercial mortgage balancesrequire terrorism insurance.

Given that primary insurers remainlargely averse to exposing themselves topotentially catastrophic terrorism losses,there are concerns about TRIA’s uncertainfuture and the potential unavailability of

terrorism risk insurance at the end of2014. “Any uncertainty could causeinsurance prices to fluctuate or promptinsurers to drop terrorism coverage, caus-ing commercial loans to go into technicaldefault,” said St. Peter.

To that end, NAR supports the contin-ued availability and affordability of ter-rorism insurance coverage because of itsimportance to commercial policyholdersand the U.S. economy, and believes TRIAshould be maintained beyond its current2014 expiration date.

“Realtors are concerned that TRIA’spotential sunset will create a spike in ter-rorism coverage premiums or make cov-erage unavailable in many markets;therefore, we believe the time has comefor Congress to enact a long-term solu-tion for insuring against terrorism – onethat provides the needed market certain-ty to allow for continued economicgrowth and development,” said St. Peter.“Since the reinsurance industry has notyet been able to develop a long-termsolution that would eliminate the needfor the federal government’s terrorismrisk insurance program, extending TRIAbeyond its current 2014 authorizationwill help maintain a strong commercialreal estate market and the health of thenation’s economy.”

Information for this article was providedby the National Association of Realtors, rep-resenting 1 million members involved in allaspects of the residential and commercial realestate industries.

REAL ESTATE: YOUR OFFICE, YOUR HOME

Existing-home sales continued to im-prove in August and the nationalmedian price rose on a year-over-year

basis for the sixth straight month, accordingto the National Association of Realtors.

Total existing-home sales, which arecompleted transactions that include sin-gle-family homes, townhomes, condo-miniums and co-ops, rose 7.8 percent toa seasonally adjusted annual rate of 4.82million in August from 4.47 million inJuly, and are 9.3 percent higher than the4.41 million-unit level in August 2011.

Lawrence Yun, NAR chief economist,said favorable buying conditions get thecredit. “The housing market is steadilyrecovering with consistent increases inboth home sales and median prices. Morebuyers are taking advantage of excellenthousing affordability conditions,” hesaid. “Inventories in many parts of thecountry are broadly balanced, favoringneither sellers nor buyers. However, theWest and Florida markets are experienc-ing inventory shortages, which are plac-ing pressure on prices.”

According to Freddie Mac, the nation-al average commitment rate for a 30-year,conventional, fixed-rate mortgage rose to3.60 percent in August from a record low3.55 percent in July; the rate was 4.27percent in August 2011.

“The strengthening housing market isoccurring even with difficult mortgagequalifying conditions, which is testamentto the sizable stored-up housing demandthat accumulated in the past five years,”Yun added.

The national median existing-homeprice2 for all housing types was $187,400

in August, up 9.5 percent from a year ago.The last time there were six back-to-backmonthly price increases from a year earli-er was from December 2005 to May 2006.The August increase was the strongestsince January 2006 when the medianprice rose 10.2 percent from a year earlier.

Distressed homes - foreclosures andshort sales sold at deep discounts -accounted for 22 percent of August sales(12 percent were foreclosures and 10 per-cent were short sales), down from 24 per-cent in July and 31 percent in August2011. Foreclosures sold for an average dis-count of 19 percent below market valuein August, while short sales were dis-counted 13 percent.

Total housing inventory at the endAugust rose 2.9 percent to 2.47 millionexisting homes available for sale, whichrepresents a 6.1-month supply 4 at thecurrent sales pace, down from a 6.4-month supply in July. Listed inventory is18.2 percent below a year ago when therewas an 8.2-month supply.

The median time on market was 70 daysin August, consistent with 69 days in Julybut down 23.9 percent from 92 days inAugust 2011. Thirty-two percent of homessold in August were on the market for lessthan a month, while 19 percent were onthe market for six months or longer.

First-time buyers accounted for 31 per-cent of purchasers in August, down from34 percent in July; they were 32 percentin August 2011.

All-cash sales were unchanged at 27percent of transactions in August; theywere 29 percent in August 2011. Invest-ors, who account for most cash sales, pur-

chased 18 percent of homes in August,up from 16 percent in July; they were 22percent in August 2011.

Single-family home sales rose 8.0percent to a seasonally adjusted annu-al rate of 4.30 million in August from3.98 million in July, and are 10.0 per-cent above the 3.91 million-unit pacein August 2011. The median existingsingle-family home price was$188,700 in August, up 10.2 percentfrom a year ago.

Existing condominium and co-opsales increased 6.1 percent to a season-

ally adjusted annual rate of 520,000 inAugust from 490,000 in July, and are4.0 percent above the 500,000-unitlevel a year ago. The median existingcondo price was $176,700 in August,which is 3.3 percent higher thanAugust 2011.

Existing-home sales in the West in-creased 8.3 percent to an annual level of1.17 million in August but are un-changed from a year ago. With ongoinginventory shortages, the median price inthe West was $242,000, which is 16.3percent higher than August 2011.

Home Sales Continue to Show Improvement

Terrorism Risk Insurance is Vital to Commercial Real EstateMarket, Say Realtors

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