Recent changes to the property tax assessment structure in South Carolina have had some negative consequences on the real estate market, particularly along the coast and in the commercial market. Point-of-sale assessment is an issue that must be addressed, as there are some very serious inequities created in the market by point-of-sale. SCR is working with Representative Bill Cotty, House Ways and Means Property Tax Subcommittee Chairman, on a bill that addresses point-of-sale assessment for property tax purposes. This bill will not affect the property tax relief provided to owner-occupied homes or make any changes to the way owner-occupied homes are classified under SC property tax laws.
The Ways and Means Committee, the committee that will consider the bill, has been occupied with writing the state budget since early January. The House gave approval to the budget the week before last. With that behind them, the committee can focus on other legislative issues. We will be meeting with Representative Cotty this week to finalize the language. As soon as that is done, we can begin the legislative process and have the bill considered by the subcommittee. This is a priority legislative issue for SCR, so please stay tuned to the weekly newsletters for progress reports.
Saturday, March 29, 2008
Friday, March 28, 2008
Builders have been pulling out all the stops
Sales of new single-family homes fell by 1.8% in February to a seasonally adjusted annual rate of 590,000 units, according to newly released numbers from the U.S. Commerce Department. This sales pace was nearly 30% below a year earlier and down by 58% from the peak in July 2005.
“Builders have been pulling out all the stops to sell homes and narrow the supply of units on the market,” noted Sandy Dunn, a home builder from Point Pleasant, W.Va. and president of the National Association of Home Builders (NAHB). “Unfortunately, buyer demand remains very weak heading into the spring home buying season. Clearly, Congress needs to act decisively upon its return from recess next week to enact measures that will keep housing from dragging the economy into a recession.”
“Our latest member surveys confirm that builders have seen an improvement in the number of prospective buyers who are visiting model homes, and consumer attitudes toward home buying have perked up in recent months,” noted NAHB Chief Economist David Seiders. “But this hasn’t yet translated into greater sales activity, and it stands to reason that additional stimulative measures — such as a temporary home buyer tax credit, FHA modernization and GSE reform — could have substantial positive impacts on both the housing market and the overall economy.”
Regionally, sales activity was mixed in the month of February. The Northeast registered a 40.3% decline while the Midwest posted a 6.4% decline, the South posted a 5.7% increase and the West eked out a 0.7% gain.
On a positive note, builders’ efforts to reduce the inventory of new homes on the market drove that number down 2.1% to a seasonally adjusted 471,000 units in February. However, the supply of units at the current sales pace remained unchanged at 9.8 months and the median length of time that completed homes were on the market rose to 7.2 months from 6.7 months in January.
“This is a truly critical time for housing and the economy, and Congress needs to get right down to business when it returns from recess next week,” Dunn said. “Every day that lawmakers fail to act is a missed opportunity for improvement.”
“Builders have been pulling out all the stops to sell homes and narrow the supply of units on the market,” noted Sandy Dunn, a home builder from Point Pleasant, W.Va. and president of the National Association of Home Builders (NAHB). “Unfortunately, buyer demand remains very weak heading into the spring home buying season. Clearly, Congress needs to act decisively upon its return from recess next week to enact measures that will keep housing from dragging the economy into a recession.”
“Our latest member surveys confirm that builders have seen an improvement in the number of prospective buyers who are visiting model homes, and consumer attitudes toward home buying have perked up in recent months,” noted NAHB Chief Economist David Seiders. “But this hasn’t yet translated into greater sales activity, and it stands to reason that additional stimulative measures — such as a temporary home buyer tax credit, FHA modernization and GSE reform — could have substantial positive impacts on both the housing market and the overall economy.”
Regionally, sales activity was mixed in the month of February. The Northeast registered a 40.3% decline while the Midwest posted a 6.4% decline, the South posted a 5.7% increase and the West eked out a 0.7% gain.
On a positive note, builders’ efforts to reduce the inventory of new homes on the market drove that number down 2.1% to a seasonally adjusted 471,000 units in February. However, the supply of units at the current sales pace remained unchanged at 9.8 months and the median length of time that completed homes were on the market rose to 7.2 months from 6.7 months in January.
“This is a truly critical time for housing and the economy, and Congress needs to get right down to business when it returns from recess next week,” Dunn said. “Every day that lawmakers fail to act is a missed opportunity for improvement.”
Thursday, March 27, 2008
Same privileges to gamblers as it awards to banks
What if our government afforded the same privileges to gamblers as it awards to banks? You place a bet. If you win, you get to keep the money. If you lose, the bank covers your bet. In the United States, the pillar of capitalism, this is exactly how banks are allowed to operate.
Even socialism would be better than the way we practice capitalism. With socialism, the profits and the losses are distributed among the citizens. One for all and all for one! In the United States, however, we privatize profits and socialize losses. When they win, banks keep their profits. When they lose, the taxpayers foot the bill.
How can banks have the gall to charge fees? How do they have the power to hold a check for five days to make sure it clears before you have access to your money? How do they get away with charging interest on loans, when they are protected by the government from any losses?
Over two million families stand to lose their homes in foreclosure due to the current crisis. If you are one of the unfortunate families facing foreclosure right now, how does this make you feel? Your bank has the right to seize your home and sell it to collect the debt you owe, but when the bank can’t pay its debt, the government swoops in to bail it out.
Recently, the U.S. Department of Treasury brokered a deal in which JPMorgan offered the financially troubled Bear Stearns $2 per share (which was later increased to $10 per share) or a total somewhere between $232.6 million and $2.326 billion. What a deal!
Except for U.S. tax payers… and, of course, holders of Bear Stearns stock. We got nothing but the privilege of guaranteeing up to $30 billion of the bad loans and other assets that led to Bear Stearns’ demise.
Maybe when homeowners default on their mortgages, banks should offer the same courtesy as the government offers them. The government should purchase the home and let you live in it until you’re back on your feet again. This would certainly be a better way the government could spend its money… I mean our money.
Another solution would be to socialize banks. When banks earn profits, we all receive our dividend checks or we get a tax break or the profits go to fund our retirement. This way, when the banks suffer a loss, we might not feel so bad about bailing them out.
The current arrangement, however, is shear madness. Privatizing profits while socializing losses is just plain unfair! Bailing out the banks is not the capitalism that has made this country great. It is un-American and worse than the worst of the socialist and communist states that we often criticize.
Even socialism would be better than the way we practice capitalism. With socialism, the profits and the losses are distributed among the citizens. One for all and all for one! In the United States, however, we privatize profits and socialize losses. When they win, banks keep their profits. When they lose, the taxpayers foot the bill.
How can banks have the gall to charge fees? How do they have the power to hold a check for five days to make sure it clears before you have access to your money? How do they get away with charging interest on loans, when they are protected by the government from any losses?
Over two million families stand to lose their homes in foreclosure due to the current crisis. If you are one of the unfortunate families facing foreclosure right now, how does this make you feel? Your bank has the right to seize your home and sell it to collect the debt you owe, but when the bank can’t pay its debt, the government swoops in to bail it out.
Recently, the U.S. Department of Treasury brokered a deal in which JPMorgan offered the financially troubled Bear Stearns $2 per share (which was later increased to $10 per share) or a total somewhere between $232.6 million and $2.326 billion. What a deal!
Except for U.S. tax payers… and, of course, holders of Bear Stearns stock. We got nothing but the privilege of guaranteeing up to $30 billion of the bad loans and other assets that led to Bear Stearns’ demise.
Maybe when homeowners default on their mortgages, banks should offer the same courtesy as the government offers them. The government should purchase the home and let you live in it until you’re back on your feet again. This would certainly be a better way the government could spend its money… I mean our money.
Another solution would be to socialize banks. When banks earn profits, we all receive our dividend checks or we get a tax break or the profits go to fund our retirement. This way, when the banks suffer a loss, we might not feel so bad about bailing them out.
The current arrangement, however, is shear madness. Privatizing profits while socializing losses is just plain unfair! Bailing out the banks is not the capitalism that has made this country great. It is un-American and worse than the worst of the socialist and communist states that we often criticize.
Wednesday, March 26, 2008
getting a mortgage right now
“There is an excess of housing inventory right now and that makes it a good time for buyers to get into the market. Lower prices mean lower monthly payments, but before prospective buyers jump in, there are some key things they need to know about getting a mortgage right now,” he says.
6 Essentials to Look For Include:
1. Use a down payment — Consumers will see better loan terms if they can put at least 5% down. “Each 5% increment will help,” according to Brown, “so put as much down as you can and speak to a loan professional for specifics on various scenarios. Zero down payment programs have all but disappeared, although FHA and conforming 3% down programs still exist. Even with a small amount down, buying compares favorably to renting.”
2. Shop the right way for interest rates — “Fees are critical, as they affect your overall cost, so don’t go by interest rates alone,” adds Brown. “An interest rate that sounds higher may include no fees, while another is lower but includes fees that may make the actual financing cost higher, so be sure to have it spelled out for you.” Lenders are required to provide a Good Faith Estimate of all costs, and consumers are advised to check it carefully against the HUD-1 Settlement Statement to make sure there are no “surprise” charges or other fees. MortgageAnswersFast.com provides consumers detailed explanations of how to analyze Good Faith Estimates to ensure borrowers find the lowest total loan cost.
3. Be wary of advertising — The airwaves are full of advertisements trying to entice consumers into a mortgage because the Federal Reserve has cut interest rates claiming “rates will never be lower.” In actuality, long-term fixed interest rates for mortgages are tied to bonds called mortgage backed securities (MBS) and the prices investors are willing to pay for them, Brown explains. “The Fed does not control long-term fixed interest rates for mortgages. There may be some impact on adjustable rates, but seldom to the extent that advertisers would have you believe. So borrowers should research mortgage rates rather than simply believe false advertising claims.”
4. Think about paying more for your house — “It might sound crazy,” Brown says, “but by paying more for your home you might actually wind up paying less for the transaction. Here’s how: instead of negotiating the sale price down by a certain dollar amount, ask the seller to pay for the costs to “buy down” the interest rate on the loan. The monthly payment can be reduced substantially, saving cash flow in the short run while increasing your principal balance in the long term. Seller funds can also be used to buy out PMI,” Brown explains. “Your mortgage professional can help you calculate the actual savings.”
5. Know your PMI options — PMI, or Private Mortgage Insurance, protects the lender from losses incurred after default when foreclosing on a property. If a borrower has less than 20% down on a conventional conforming mortgage, they must pay PMI, with rates that can vary based on credit score. “Borrowers typically pay PMI monthly,” according to Brown, “but there are other options, including lender-paid mortgage insurance, in which premium is added into the interest rate of the loan. There are other options that allow a smaller fee at closing without raising the rate, and sellers can also pay the fee at closing, which sometimes can be a condition of the sale.” For more detail on these sometimes confusing alternatives, he recommends that borrowers check with their mortgage professional.
6. Improve credit scores — Credit scores have always been important, but never more than today, especially for borrowers with less than 20% as a down payment. Small differences in score can mean big differences in interest rates or fees, so consumers should do everything they can to show their credit in its best light. “Do not close out credit card accounts, but instead distribute the balances as evenly as possible and use old cards every few months to keep them active,” Brown says. “Check your credit report for errors and get them corrected, and get rid of liens and charge offs, if you have any, and resolve any late payments. All these will have a quick and positive effect on your credit score.” Even people with great credit scores as high as 720 may pay a penalty based upon recently changed guidelines. “Credit repair is not just for people who have credit problems,” he adds. “Most people don’t realize they can optimize their score using a few simple techniques.”
6 Essentials to Look For Include:
1. Use a down payment — Consumers will see better loan terms if they can put at least 5% down. “Each 5% increment will help,” according to Brown, “so put as much down as you can and speak to a loan professional for specifics on various scenarios. Zero down payment programs have all but disappeared, although FHA and conforming 3% down programs still exist. Even with a small amount down, buying compares favorably to renting.”
2. Shop the right way for interest rates — “Fees are critical, as they affect your overall cost, so don’t go by interest rates alone,” adds Brown. “An interest rate that sounds higher may include no fees, while another is lower but includes fees that may make the actual financing cost higher, so be sure to have it spelled out for you.” Lenders are required to provide a Good Faith Estimate of all costs, and consumers are advised to check it carefully against the HUD-1 Settlement Statement to make sure there are no “surprise” charges or other fees. MortgageAnswersFast.com provides consumers detailed explanations of how to analyze Good Faith Estimates to ensure borrowers find the lowest total loan cost.
3. Be wary of advertising — The airwaves are full of advertisements trying to entice consumers into a mortgage because the Federal Reserve has cut interest rates claiming “rates will never be lower.” In actuality, long-term fixed interest rates for mortgages are tied to bonds called mortgage backed securities (MBS) and the prices investors are willing to pay for them, Brown explains. “The Fed does not control long-term fixed interest rates for mortgages. There may be some impact on adjustable rates, but seldom to the extent that advertisers would have you believe. So borrowers should research mortgage rates rather than simply believe false advertising claims.”
4. Think about paying more for your house — “It might sound crazy,” Brown says, “but by paying more for your home you might actually wind up paying less for the transaction. Here’s how: instead of negotiating the sale price down by a certain dollar amount, ask the seller to pay for the costs to “buy down” the interest rate on the loan. The monthly payment can be reduced substantially, saving cash flow in the short run while increasing your principal balance in the long term. Seller funds can also be used to buy out PMI,” Brown explains. “Your mortgage professional can help you calculate the actual savings.”
5. Know your PMI options — PMI, or Private Mortgage Insurance, protects the lender from losses incurred after default when foreclosing on a property. If a borrower has less than 20% down on a conventional conforming mortgage, they must pay PMI, with rates that can vary based on credit score. “Borrowers typically pay PMI monthly,” according to Brown, “but there are other options, including lender-paid mortgage insurance, in which premium is added into the interest rate of the loan. There are other options that allow a smaller fee at closing without raising the rate, and sellers can also pay the fee at closing, which sometimes can be a condition of the sale.” For more detail on these sometimes confusing alternatives, he recommends that borrowers check with their mortgage professional.
6. Improve credit scores — Credit scores have always been important, but never more than today, especially for borrowers with less than 20% as a down payment. Small differences in score can mean big differences in interest rates or fees, so consumers should do everything they can to show their credit in its best light. “Do not close out credit card accounts, but instead distribute the balances as evenly as possible and use old cards every few months to keep them active,” Brown says. “Check your credit report for errors and get them corrected, and get rid of liens and charge offs, if you have any, and resolve any late payments. All these will have a quick and positive effect on your credit score.” Even people with great credit scores as high as 720 may pay a penalty based upon recently changed guidelines. “Credit repair is not just for people who have credit problems,” he adds. “Most people don’t realize they can optimize their score using a few simple techniques.”
Tuesday, March 25, 2008
down payment of less than 20% need credit score of at least 680
Would-be homeowners with middling credit scores are finding mortgages difficult to come by as wary lenders clamp down on credit. Credit score guidelines for conforming loans-loans eligible for purchase by mortgage giants Fannie Mae and Freddie Mac-tightened in late February, said Brian Goode, president of Badgerland Mortgage Group Inc. in Racine, Wis.
Customers making a down payment of less than 20% of the loan now need a FICO credit score of at least 680, he said, while those borrowing most or all of the value of their homes need scores north of 730.
Two borrowers with very different credit scores might have landed the same interest rate a year ago; now, risk-based pricing, tiered by credit score, has been on the rise since Fannie Mae and Freddie Mac introduced it in December.
Borrowers with credit scores below 680 might have anywhere from a few tenths of a percentage point to a whole point tacked onto their interest rates.
“It used to be that if you had a 620, you could get the same rate as somebody with an 800,” Goode said.
“Now, if they have doubts about your credit, you’re going to pay for them.”
Borrowers with income that is difficult or impossible to verify might need credit scores as high as 730, he said.
The median FICO credit score nationally is about 720, said Craig Watts, a spokesman for Fair Isaac Corp., which develops the model that produces FICO scores.
About 42% of consumers have credit scores below 700, according to Fair Isaac.
About 27% have scores between 600 and 700, a range in which getting a mortgage is no longer a sure thing, said Jean Badciong, vice president of operations for First Choice Mortgage in Waukesha, Wis.
“Anybody from 600 to 680, we used to be able to do those all the time,” said Badciong, who is also the treasurer of the Wisconsin Association of Mortgage Brokers.
Today, she said, about half the people who come to the company for a mortgage can’t get one.
“Underwriters are going over those files with a fine-tooth comb,” she said. “We really have to cross all our t’s and dot all our i’s.”
She said customers with credit scores in the mid-600s might not see better access to loan products until late this year or 2009.
Those looking ahead to buying a home should check their credit scores to see if they need to improve them to qualify for a loan, she said.
Sue Stankus, president of Suburban Mortgage Group, of Milwaukee, said mortgage insurers have also tightened credit requirements, making it harder for those who need to borrow more than 80% of the value of their homes to get loans.
A year ago, borrowers with credit scores as low as 500 could get mortgage insurance, she said.
The bar for the minimum score to get insurance has crept up gradually since then, and jumped at the beginning of March from about 575 to 620.
The minimum credit score for people who need insurance to borrow more than 95% of the value of their home is now 680, Stankus aid.
“A lot of people who previously could qualify for that insurance no longer qualify at all,” meaning they can’t get a loan, she said.
John Scherer, a financial planner with Trinity Investment, said those who expect loans to be handed out as freely as they were a few years ago might need to get used to waiting.
Prospective home buyers need to pay more attention to long-term strategies like building their credit and saving for down payments than they did in years past, he said.
Customers making a down payment of less than 20% of the loan now need a FICO credit score of at least 680, he said, while those borrowing most or all of the value of their homes need scores north of 730.
Two borrowers with very different credit scores might have landed the same interest rate a year ago; now, risk-based pricing, tiered by credit score, has been on the rise since Fannie Mae and Freddie Mac introduced it in December.
Borrowers with credit scores below 680 might have anywhere from a few tenths of a percentage point to a whole point tacked onto their interest rates.
“It used to be that if you had a 620, you could get the same rate as somebody with an 800,” Goode said.
“Now, if they have doubts about your credit, you’re going to pay for them.”
Borrowers with income that is difficult or impossible to verify might need credit scores as high as 730, he said.
The median FICO credit score nationally is about 720, said Craig Watts, a spokesman for Fair Isaac Corp., which develops the model that produces FICO scores.
About 42% of consumers have credit scores below 700, according to Fair Isaac.
About 27% have scores between 600 and 700, a range in which getting a mortgage is no longer a sure thing, said Jean Badciong, vice president of operations for First Choice Mortgage in Waukesha, Wis.
“Anybody from 600 to 680, we used to be able to do those all the time,” said Badciong, who is also the treasurer of the Wisconsin Association of Mortgage Brokers.
Today, she said, about half the people who come to the company for a mortgage can’t get one.
“Underwriters are going over those files with a fine-tooth comb,” she said. “We really have to cross all our t’s and dot all our i’s.”
She said customers with credit scores in the mid-600s might not see better access to loan products until late this year or 2009.
Those looking ahead to buying a home should check their credit scores to see if they need to improve them to qualify for a loan, she said.
Sue Stankus, president of Suburban Mortgage Group, of Milwaukee, said mortgage insurers have also tightened credit requirements, making it harder for those who need to borrow more than 80% of the value of their homes to get loans.
A year ago, borrowers with credit scores as low as 500 could get mortgage insurance, she said.
The bar for the minimum score to get insurance has crept up gradually since then, and jumped at the beginning of March from about 575 to 620.
The minimum credit score for people who need insurance to borrow more than 95% of the value of their home is now 680, Stankus aid.
“A lot of people who previously could qualify for that insurance no longer qualify at all,” meaning they can’t get a loan, she said.
John Scherer, a financial planner with Trinity Investment, said those who expect loans to be handed out as freely as they were a few years ago might need to get used to waiting.
Prospective home buyers need to pay more attention to long-term strategies like building their credit and saving for down payments than they did in years past, he said.
Monday, March 24, 2008
Buried in the Economic Stimulus Act lies a lucrative perk
Buried deep in the new Economic Stimulus Act lies a lucrative perk for landlords and commercial tenants.
In an effort to revive the flagging real estate industry, Congress increased the amount of construction costs that can be written off in the first year for improvements to commercial or residential rental property.
Since 2006, only 2.5 percent of the costs of those improvements could be written off in the first year. The remainder had to be spread out over 39 years.
The new "bonus depreciation" schedule provides much quicker relief, bringing back the most generous depreciation rules that were in place after the Sept. 11 terrorist attacks.
With the change, landlords and commercial tenants can now write off 50 percent of the cost for "qualified leasehold improvements" in the first year alone, as long as the improvements are completed by the end of this year, said Dwayne Holt, a partner at Vienna-based accounting firm Beers & Cutler PLLC. The rest is written off in declining increments over just 15 years.
"That's the big home run for the real estate industry with this stimulus act," Holt said. "If you put $3 million of leasehold improvements into service in 2008, you get to deduct over $1.5 million in the first year."
If you wait until 2009 to make the improvements, you will be able to deduct just $50,000, he said.
Since the new provisions are similar to the bonus depreciation incentives Congress provided in the wake of the Sept. 11 attacks, this type of economic prod does seem to have a track record of success.
However, the real estate boom that followed the 2001 package can't be tied to the tax package alone, in part because those incentives were increased and extended through 2005, experts say.
"Unfortunately, real estate cycles move very slowly, and there is usually a significant lag between the adoption of new incentives and their manifestation in the marketplace," said David Orr, the president of Falls Church-based development company Orr Partners.
Tax policy, of course, is not the only factor affecting the marketplace.
"The local construction industry has seen a significant increase in growth since 9/11," said Steven Shapiro, an adjunct real estate development professor at the University of Maryland. But "the increase is probably not attributable to tax policy but [to] the incredible expansion in the defense industry and the trickle down to all sectors of our regional economy."
Even so, in a market that demands Class A space or better, the tax benefit provides an opportunity to meet that demand, according to construction industry insiders.
"It provides another reason to reinvest in properties that may be B or C space," said Dennis Cotter, senior executive vice president at James G. Davis Construction Corp.
The package also provides a boost for owners that want to implement environmentally friendly improvements, he said.
Architects, on the other hand, say they did not see any significant jump in business after the Sept. 11 stimulus package, and they don't expect to see one now.
"Maybe if there are enough small gains and lots of companies spending more money, those will create more work for architects and designers," said Thomas Campbell of Burt Hill's D.C. office. "I don't see it happening to any great extent though."
Because of the tight time frame for companies to claim the benefits, the provisions might not influence a tenant's decision to build or move, said Rusty Meadows, D.C. principal at Chicago-based Perkins and Will Architects Inc. "What these provisions will likely influence, however, is how much money they may spend on their new project or relocation."
For the retail and restaurant industry, however, the tax package may offer the perfect recipe.
"It's great for restaurants because their interior build-out is so expensive," said Geoff Mackler, a principal broker at Bethesda-based H&R Retail. "To be able to offset some of their costs in the first year is a tremendous advantage. If they can get beyond the first year, they have a much better chance of succeeding."
For office building owners -- particularly those in the emerging markets and more far-flung suburbs -- the package could woo tenants into empty buildings, said James Martinko, managing principal at Bethesda-based Reznick Group, an accounting and tax consulting business.
"Inside the Beltway the market is very strong and really needs few incentives to continue to flourish," Martinko said. "Outside the Beltway, the stimulus could create the needed incentives to fill empty commercial space and to speed up decisions for tenants looking for space."
While the potential benefits will have to be calculated on an individual basis, "the bigger question, and one for the policymakers, is whether it is worth the cost," Shapiro said.
"I'm usually skeptical of using the tax code for short-term economic stimulus," he said. "At the margin, it might help a tenant that is otherwise considering such an expenditure, but I doubt that it influences major decisions."
In an effort to revive the flagging real estate industry, Congress increased the amount of construction costs that can be written off in the first year for improvements to commercial or residential rental property.
Since 2006, only 2.5 percent of the costs of those improvements could be written off in the first year. The remainder had to be spread out over 39 years.
The new "bonus depreciation" schedule provides much quicker relief, bringing back the most generous depreciation rules that were in place after the Sept. 11 terrorist attacks.
With the change, landlords and commercial tenants can now write off 50 percent of the cost for "qualified leasehold improvements" in the first year alone, as long as the improvements are completed by the end of this year, said Dwayne Holt, a partner at Vienna-based accounting firm Beers & Cutler PLLC. The rest is written off in declining increments over just 15 years.
"That's the big home run for the real estate industry with this stimulus act," Holt said. "If you put $3 million of leasehold improvements into service in 2008, you get to deduct over $1.5 million in the first year."
If you wait until 2009 to make the improvements, you will be able to deduct just $50,000, he said.
Since the new provisions are similar to the bonus depreciation incentives Congress provided in the wake of the Sept. 11 attacks, this type of economic prod does seem to have a track record of success.
However, the real estate boom that followed the 2001 package can't be tied to the tax package alone, in part because those incentives were increased and extended through 2005, experts say.
"Unfortunately, real estate cycles move very slowly, and there is usually a significant lag between the adoption of new incentives and their manifestation in the marketplace," said David Orr, the president of Falls Church-based development company Orr Partners.
Tax policy, of course, is not the only factor affecting the marketplace.
"The local construction industry has seen a significant increase in growth since 9/11," said Steven Shapiro, an adjunct real estate development professor at the University of Maryland. But "the increase is probably not attributable to tax policy but [to] the incredible expansion in the defense industry and the trickle down to all sectors of our regional economy."
Even so, in a market that demands Class A space or better, the tax benefit provides an opportunity to meet that demand, according to construction industry insiders.
"It provides another reason to reinvest in properties that may be B or C space," said Dennis Cotter, senior executive vice president at James G. Davis Construction Corp.
The package also provides a boost for owners that want to implement environmentally friendly improvements, he said.
Architects, on the other hand, say they did not see any significant jump in business after the Sept. 11 stimulus package, and they don't expect to see one now.
"Maybe if there are enough small gains and lots of companies spending more money, those will create more work for architects and designers," said Thomas Campbell of Burt Hill's D.C. office. "I don't see it happening to any great extent though."
Because of the tight time frame for companies to claim the benefits, the provisions might not influence a tenant's decision to build or move, said Rusty Meadows, D.C. principal at Chicago-based Perkins and Will Architects Inc. "What these provisions will likely influence, however, is how much money they may spend on their new project or relocation."
For the retail and restaurant industry, however, the tax package may offer the perfect recipe.
"It's great for restaurants because their interior build-out is so expensive," said Geoff Mackler, a principal broker at Bethesda-based H&R Retail. "To be able to offset some of their costs in the first year is a tremendous advantage. If they can get beyond the first year, they have a much better chance of succeeding."
For office building owners -- particularly those in the emerging markets and more far-flung suburbs -- the package could woo tenants into empty buildings, said James Martinko, managing principal at Bethesda-based Reznick Group, an accounting and tax consulting business.
"Inside the Beltway the market is very strong and really needs few incentives to continue to flourish," Martinko said. "Outside the Beltway, the stimulus could create the needed incentives to fill empty commercial space and to speed up decisions for tenants looking for space."
While the potential benefits will have to be calculated on an individual basis, "the bigger question, and one for the policymakers, is whether it is worth the cost," Shapiro said.
"I'm usually skeptical of using the tax code for short-term economic stimulus," he said. "At the margin, it might help a tenant that is otherwise considering such an expenditure, but I doubt that it influences major decisions."
Sunday, March 23, 2008
Myrtle Beach boardwalk
The proposed boardwalk for Myrtle Beach would cost $12 million and now there's a plan to pay for it.
The Downtown Redevelopment Corporation wants to create a special tax district in Myrtle Beach. Property taxes from new development in that district would be set aside to pay off the bonds.
Other parts of the plan include corporate naming rights, sponsorships and hospitality fees.
City Council will consider the plan at its budget retreat in two weeks.
The Downtown Redevelopment Corporation wants to create a special tax district in Myrtle Beach. Property taxes from new development in that district would be set aside to pay off the bonds.
Other parts of the plan include corporate naming rights, sponsorships and hospitality fees.
City Council will consider the plan at its budget retreat in two weeks.
Subscribe to:
Posts (Atom)