Morning Briefing: Real estate firms optimistic on profitability, hiring

by Steve Randall07 Aug 2015
Real estate firms optimistic on profitability, hiring
Future growth and profitability in the real estate industry are looking good according to a survey by the National Association of Realtors. Its annual report shows that 95 per cent of real estate firms expect profits to increase or remain the same in the next year; 75 per cent of commercial firms are expecting an increase and 69 per cent of residential firms. Only 6 per cent of residential firms and 3 per cent of commercial firms expect lower net income. Despite the optimism 51 per cent of firms named profitability as the biggest challenge facing their firms in the next two years. The second most common responses, at 46 per cent each, were keeping up with technology and maintaining sufficient property inventory.

Concerns about the ability of homebuyers to make a purchase include 54 per cent who fear that millennials will be unable to afford to buy in the next two years due to stagnant wage growth, slow jobs market and debt-to-income ratios.

Forty-five per cent of firms expect competition to increase over the next year from non-traditional market participants, while 41 per cent expect to see increased competition from virtual firms. However, these concerns are not preventing firms from growing. Forty-four per cent of firms are actively recruiting new agents, with 88 per cent citing business growth as their primary reason for hiring new agents. 
Mortgage credit availability increases
Mortgage credit was easier to obtain in July according to the Mortgage Bankers’ Association. Its index based on analysis of Ellie Mae data showed a 2.9 per cent rise in the month with conventional mortgages loosening restrictions the most followed by jumbo, government and conforming. "Credit availability increased in July, mainly driven by higher-balance loan programs," said Mike Fratantoni, MBA's Chief Economist. "Many investors are fine tuning their cash-out refinance requirements to meet increasing borrower demand for home equity financing. Some investors increased the availability of low down payment loans."
Gradual improvement for housing markets
Housing markets in 75 of 360 metro areas across the US are returning to or exceeding their last normal levels of economic and housing activity. That’s according to data from the National Association of Home Builder for the second quarter of 2015 and means an additional 13 metros joining the list since last year. “The markets are gradually improving and economic and job growth continue to strengthen, which bodes well for housing for the remainder of the year,” said NAHB Chairman Tom Woods, a home builder and developer from Blue Springs, Mo.

Baton Rouge, La. continues to top the list of major metros on the Leading Markets Index followed by Austin, Texas; Honolulu; Houston; and Oklahoma City. Rounding out the top 10 are San Jose, Calif.; Los Angeles; Charleston, S.C.; Salt Lake City; and Nashville, Tenn.



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