Iowa City Real Estate Blog

Types of Commercial leases

Wednesday, August 30, 2017

3 Different Types of Commercial Real Estate Leases

There are three basic types of commercial real estate leases. These leases are organized around two rent calculation methods: “net” and “gross.” The gross lease typically means a tenant pays one lump sum for rent, from which the landlord pays his expenses. The net lease has a smaller base rent, with other expenses paid for by the tenant. The modified gross lease is a happy marriage between the two. While terms vary widely building by building, this basic overview will help businesses shop for the best deal possible.

Gross Lease or Full Service Lease

In a gross lease, the rent is all-inclusive. The landlord pays all or most expenses associated with the property, including taxes, insurance, and maintenance out of the rents received from tenants. Utilities and janitorial services are included within one easy, tenant-friendly rent payment.

When negotiating a gross lease, the tenant should ask which janitorial services are provided, and how often they are offered. Excess utility consumption beyond building standards is sometimes charged back to tenant; so if the tenant is a big consumer of electricity, this point should be clarified in the lease as well. The tenant pays his own property insurance and taxes.

A benefit of this type of lease is that it is supremely easy for the tenant, which can forecast expenses without worrying about an unexpected lobby maintenance charge, for example. The landlord assumes all responsibility for the building, while tenants concentrate on growing their businesses.

Net Lease

In a net lease, the landlord charges a lower base rent for the commercial space, plus some or all of “usual costs,” which are expenses associated with operations, maintenance, and use that the landlord pays. These can include real estate taxes; property insurance; and common area maintenance items (CAMS), which include janitorial services, property management fees, sewer, water, trash collection, landscaping, parking lots, fire sprinklers, and any commonly shared area or service.

There are several types of net leases:

Single Net Lease (N Lease)

In this lease, the tenant pays base rent plus a pro-rata share of the building’s property tax (meaning a portion of the total bill based on the proportion of total building space leased by the tenant); the landlord covers all other building expenses. The tenant also pays utilities and janitorial services.

Double Net Lease (NN Lease)

The tenant is responsible for base rent plus a pro-rata share of property taxes and property insurance. The landlord covers expenses for structural repairs and common area maintenance. The tenant once again is responsible for their own janitorial and utility expenses.

Triple Net Lease (NNN Lease)

This is the most popular type of net lease for commercial freestanding buildings and retail space. It is known as the net net net lease, or NNN lease, where the tenant pays all or part of the three “nets”–property taxes, insurance, and CAMS–on top of a base monthly rent. Common area utilities and operating expenses are usually lumped in as well; for example, the cost for staffing a lobby attendant would be part of the NNN fees. Of course, tenants also pay the costs of their own occupancy, including janitorial services, utilities, and their own insurance and taxes.

Landlords typically estimate expenses and charge tenants a portion of these expenses based on their proportionate, or pro-rata share. A tenant who leases 1,000 square feet of a 10,000 square foot building would be expected to pay 10% of the building’s taxes, insurance, and CAMS, for example.

Triple net leases tend to be more landlord-friendly, and tenants should carefully review NNN fees and negotiate caps on the amounts they can be raised annually. An NNN lease can also fluctuate from month to month and year to year as operating expenses increase or decrease, making the company’s expense forecasting tricky and sometimes frustrating.

There are tenant benefits in the NNN leases, however. Transparency is an excellent perk, since tenants can see business operating expenses in relation to what they are charged. Cost savings in operating expenses are passed on to the tenant rather to the landlord. In addition, the monthly rent in a NNN lease is potentially lower than in a gross lease, as tenants have a higher level of responsibility for the building.

Absolute Triple Net Lease

This is a less common option that is more rigid and binding than the NNN lease, where tenants carry every imaginable real estate risk, for example, being responsible for construction expenses to rebuild after a catastrophe, or for continuing to pay rent even after the building has been condemned. Aptly called the “hell-or-high-water lease,” tenants have ultimate responsibility for the building no matter what.

Modified Gross Lease

As the gross lease is more tenant-friendly, and the net lease tends to be more landlord-friendly, there exists a compromise lease for the convenience of both parties. The modified gross lease (sometimes called the modified net lease) is similar to a gross lease in that the rent is requested in one lump sum, which can include any or all of the “nets”–property taxes, insurance, and CAMS. Utilities and janitorial services are typically excluded from the rent, and covered by the tenant. Tenants and landlords negotiate which “nets” are included in the base rental rate.

The modified gross lease is more popular with tenants, because its flexibility translates into an easier agreement between tenant and landlord. Unlike the NNN lease, if insurance, taxes or CAM charges increase, the lease rate would not change. Of course, if those expenses decrease, the cost savings is passed on to the landlord. As janitorial service and electricity are not covered, tenants can better control how much they spend compared to a gross lease.

Summary of NNN Lease, Modified gross, or Full Service Commercial Leases 

When evaluating options for office space lease, it is important to compare the different lease options with an eye toward all expenses, and not just the base rental rates. NNN base rental rates tend to be much lower, with additional expenses added for the real monthly rate.

Market forces will tend to even out rental rates for comparable properties, regardless of type of lease. Tenants should expect to pay roughly the same amount with an NNN, modified gross, or full service lease for similar quality office spaces in the same area.

The most important rule of commercial leases is for tenants to read their leases carefully, and clarify exactly what expenses they have responsibility for. Circumstances under which additional charges will occur should be identified and caps negotiated.

 Reposted from: Mike Cobb, Senior Vice President at Colliers International



Corridor Business Journal Names LKR as One of the Best Places to Work!

Thursday, August 24, 2017

The Corridor Business Journal has announced the ‘2017 Coolest Places to Work’. According to the site, this list “honors local companies that have created the most engaging and rewarding work environments.” Companies in Kirkwood’s region can nominate themselves, but are selected for the list based on a Worker Satisfaction Survey.

The winner of the 2017 Coolest Place to Work will be announced at the ‘One Cool Evening’ event on September 14. But, in the meantime here are the companies in the running (listed alphabetically):

Branded Apparel
Clickstop Inc.
de Novo Marketing
F & M Savings Bank
Higher Learning Technologies
Iowa City Ambulatory Surgical Center
Lepic-Kroeger Realtors
New Bohemian Innovation Collaborative (NewBoCo)
New York Life – Cedar Rapids Office
NewBo City Market
Oaknoll Retirement Residence
Ready Wireless
Sanctuary Spa
SouthGate Companies
Spotix Inc.
Strategic Financial Solutions
Travel Leaders / Destinations Unlimited
TrueNorth Companies
Van Meter Inc.
Veridian Credit Union

It’s unclear which will take the title, but these are all great companies to work for. And even though Townsquare Media didn’t make the list, we’re great too! See what we’re all about here at Townsquare Cedar Rapids in the video below. Happy job hunting!

Read More: The 2017 Coolest Places to Work in the Corridor |

Big changes predicted for commercial real estate

Saturday, March 25, 2017

This prediction for 2018 commercial real estate may effect the Iowa City / coralville / North Liberty and other Johnson County Areas reports Jeff Edberg, CCIM, SIOR at Lepic Kroeger, Realtors in Iowa City.
A consultant who predicts a 2018 end to the current commercial real estate cycle says the industry will see fewer office and retail property sales, but more multifamily sales as millennials eschew homeownership.
Christopher Lee, president and CEO of Los Angeles-based commercial real estate consultancy CEL & Associates, said the industry shift is a based in part on “generational” factors. Those factors include younger workers spending less time in the office, a homeownership rate 10 points below a mid-2000s peak, and manufacturing productivity increases fueled by automation and robots.
Change is coming even as the commercial real estate market flourishes in the current post-recession boom, Lee told about 200 people gathered Tuesday for a NAIOP Minnesota event in Golden Valley.
“This is a great time to be in real estate, but you’ve got to be on your game,” Lee said. “We’re in the seventh inning. Our cycle is about to end.”
The most immediate trend the industry needs to address is the end of the current cycle, Lee said. He predicts an industry downturn will start in 2018 and won’t reverse until the next up cycle starts in 2023. By that point, he said, industry giants including CBRE will have grown through consolidation.
The current generation of brokers will see their work dictated more by data and analytics than by “intuition” and “gut feel.” That is a change from the current cycle, which Lee said has focused on “capital, asset and entity rebalancing” after the Great Recession.
NAIOP brought Lee in for the program to give its members a wider market perspective, said Mark Reiling, a member of NAIOP Minnesota’s board of directors and president of SR Realty Trust.
“It’s a wake-up call to hear there’s danger in the comfort zone,” he said in an interview.
Lee’s presentation, “Megashifts & Real Estate Cycles,” gave outlooks for each sector of the commercial real estate market.
Retail: The viability of property in this sector will be heavily impacted by internet retail sales expected to grow to $532 billion by 2020. Still, the sales volume of Minneapolis-area retail properties increased 25 percent between 2015 and 2016, bucking a national trend of decreasing sales, Lee said.
Office: Lee said office sales are slowing as users require less space. Space requirements for workers that sat at 350 square feet for baby boomers may drop to less than 100 square feet for the generation of workers following millennials, Generation Z. Office sales in the Minneapolis market dropped 12 percent between 2015 and 2016, Lee said.
Industrial: Sales in the Minneapolis market were down 23 percent between 2015 and 2016, Lee said. The number of manufacturing workers will drop in the future, he said, because automation and robots will reduce the need for human workers.
Multifamily: This sector has done the best recently and is “the darling of investment capital,” Lee said. Sales of multifamily properties increased 65 percent between 2015 and 2016 in the Minneapolis market, he said. Multifamily will remain strong as national homeownership drops to about 59 percent in the coming years from a peak of 69.2 percent in the mid-2000s, Lee said.
Event attendees had a range of reactions to Lee’s presentation. Mark Kolsrud, a senior vice president with the Minnetonka office of Colliers International, said he doesn’t need convincing that the end of the current cycle is coming. Commercial properties are currently leasing and selling at a premium, but those prices will “soften” over the next two years, he said.
Property owners, Kolsrud said, should take advantage of the market while it’s strong.
“I think it’s clear that today is a good time to be selling your real estate,” he said after the event.
Wayne Kuykendall, a vice president with Bloomington-based Frauenshuh, said he can already see building owners competing for tenants that need less space.
“If the market doesn’t expand, i.e. if the body count doesn’t expand, then everyone is trying to get a piece of the pie that is smaller and smaller,” he said.
Offering amenities such as transit access, child care, and on-site food service can help some older buildings compete with newer properties, Kuykendall said.
Coming real estate cycles will see the industry operate in new ways, Lee said. The next cycle, which he predicts lasting until 2028, will be marked by consolidations that put most transactions in the hands of just a few brokerage firms. A cycle between 2033 and 2038 will see transactions heavily influenced by artificial intelligence, and leasing in the oceans and in outer space, he said.

Online -vs- Brick and Mortar Retail Shopping: The Statistics

Wednesday, March 15, 2017

The web is chock full of awesome research, survey results, and insights about retail. You could spend hours digging around looking for quotable bits of information.

To make it easy for you, I compiled 100 different statistics about retail, eCommerce, customer experience, and a whole bunch of related topics. Use this post as a singular place to find lots of data points to use for whatever purpose you need.


eCommerce Statistics

Current sales value of eCommerce retailers is $294 billion. [1]

Sales value of eCommerce retailers expected to reach $414 by 2018. [1]

In 2015, 200 million digital shoppers will spend an average of $1,700/person. [1]

Two thirds of eCommerce customers are “webrooming”. [1]

93% of retailers that seek a POS want inventory management capabilities built in. [8]

In 2014, online shoppers in the U.S. spent $1,611 versus $1,151 in Canada and $1,162 in Europe (translated from British Pounds on June 25). [11]

60% of adult Americans are happy to know they won’t have to shop in a crowded mall or store. [11]

71% of shoppers believe they will get a better deal online than in stores. [13]

Generation X spends $561 on average online, 15% more online than Generation Y who spends $489. [13]

Only 28% of U.S. small businesses are selling their products online. [13]

U.S. average conversion rate is 3.06% in Q4 2013. [13]

China is expected to generate $562.7 billion in eCommerce revenue. [14]

Despite having ultra-low incomes, Generation Z spends the highest percentage (9%) of their income online. [16]

40% of men and 33% of women aged 18-34 say they would ideally “buy everything online.” [16]

Cart Abandonment Statistics

$4 trillion in merchandise was abandoned in online shopping carts in 2014. [1]

65% of retailers have a shopping cart abandonment rate that is higher than 50% [3]

66% of online consumers abandon their cart because of problems with the payment process. [8]

23% of shoppers will abandon their shopping cart if they are forced to register an account. [12]

54% of shoppers will purchase products left in shopping carts, if those products are offered at a lower price. [12]

28% of shoppers will abandon their shopping cart if presented with unexpected shipping costs. [12]

Statistics About Online Marketplaces
Four times as many sellers reach 1 million sales on Amazon versus eBay. [20]

63% of sellers only sell on marketplaces. [20]

29% of sellers aren’t satisfied with their channel management software. [20]

72% of sellers don’t use a marketplace management tool. [20]

Customer Experience Statistics

By 2016, 89% of companies plan to compete on the basis of customer experience. [1]

63% of consumers feel a coupon is the most valuable form of mobile marketing. [7]

89% of consumers began doing business with a competitor following a poor customer experience. [15]

U.S. brands are losing approximately $41 billion each year due to poor customer service. [17]

65% of consumers have cut ties with a brand over a single poor customer service experience. [17]

63% of online consumers said they were more likely to return to a website that offers live chat. [17]

40% of global consumers said they prefer self-service over human contact for their future interactions with companies. [17]

64% of people think that customer experience is more important than price in their choice of a brand. [18]

Customer Loyalty Statistics

The probability of selling to a new customer is between 5 and 20%. The probability of selling to an existing customer is between 60 and 70%. [18]

It costs 6 times more to attract a new customer than to retain an existing one. [18]

Loyal customers are worth up to 10 times as much as their first purchase. [19]

62% of consumers feel that the brands that they’re most loyal to have not done enough to reward them. [19]

If you resolve a complaint in your customer’s favor, he or she will do business with you again 70% of the time. [19]

75% of shoppers belong to up to 10 loyalty programs. [19]

62% of Millennials feel that online content drives brand loyalty. [19]

Brick & Mortar Retail Data

Current sales value of U.S. brick & mortar retailers is $3.9 trillion. [1]

94% of total retail sales are still generated in brick & mortar stores. [1]

Half of brick & mortar retailers are “showrooming”. [1]

72% of young shoppers research online before purchasing in a store. [1]

Two thirds of in-store shoppers will check prices on their phone before making a purchase. [1]

In the U.S., 3.8 million retail establishments support 42 million jobs. [2]

98.6% of retail businesses employ fewer than 50 people. [2]

Less than 25% of major retailers track store traffic. [8]

Statistics About Omnichannel

Three out of four customers are more likely to visit your store if your online info is useful. [1]

Digital interactions influence 36 cents of every dollar spent in a brick & mortar store. [1]

22% spend more at the store if digitally influenced. [1]

55% of online shoppers would prefer to buy from a merchant with a physical store presence over an online-only retailer. [1]

Two thirds of customers have made a purchase in the last 6 months that involved multiple channels. [1]

84% believe that retailers should be doing more to integrate their online and offline channels. [1]

Only 8% of companies said they currently provide a ‘very integrated’ customer experience. [17]

Mobile Commerce Statistics

57% will not recommend a retailer with a poorly designed mobile site. [3]

66% of time spent with online retailers is on mobile. [6]

174 million U.S. consumers (72%) now own smartphones and 93 million (38%) now own tablets. [6]

53% of consumers are willing to share their current location to receive more relevant advertising. [7]

57% of consumers are more likely to engage with location-based advertising. [7]

70% of online transactions occur on a mobile device. [8]

43% of consumers will visit a competitor’s site next after a negative mobile shopping experience. [13]

More than 80% of U.S. shoppers want the ability to check for nearby product availability. [14]

94% of smartphone users look for local information on their device. 90% take action after the search. [18]

Social Commerce Statistics

25% of U.S. consumers will consult social media before buying gift. [4]

40% of 18- to 34-year-olds are likely to use social networks for gift ideas. [4]

62% of consumers share local deals with friends. [7]

78% of small businesses attract new customers and engage current ones using social media. [8]

41% of independent retailers rate social media as a “very effective” marketing tactic. [8]

71% of consumers who experience positive social media care are likely to recommend that brand to others. [17]

85% of orders from social media sites come from Facebook. [22]

Orders for referrals from Instagram average $10 more than Facebook ($65 versus $55, respectively). [22]

Social commerce is predicted to be 5% of online retail revenue in 2015. [22]

33% of consumers have reacted to a promotion on a brand’s social media page. [22]

Statistics About Reviews & Recommendations

Above “the fold” product recommendations are 1.7 times more effective than those below. [11]

Shoppers spend 50% more after talking with a brand ambassador. [8]

55% of shoppers say that online reviews influence their buying decision. [12]

36% of consumers spend 30+ minutes comparison shopping before making a decision on purchasing a commodity product; 65% spend 16+ minutes doing so. [13]

73% of consumers prefer to do business with brands that personalize shopping experiences. [15]

Statistics About Digital Marketing & SEO

54% would consider ending their relationship with a retailer if they are not given tailor-made, relevant content and offers. [3]

42% of independent retailers rate email marketing as a “very effective” marketing tactic. [8]

Small retailers’ average marketing budget is 4-5% of gross revenue. [8]

Conversion rate is 5.5 times higher for customers who clicked on a personalized product recommendation. [11]

44% of online shoppers begin by using a search engine. [13]

13% of consumers said that a blog post had inspired a purchase. [13]

91% of eCommerce retailers saw a lift in their SEO rank thanks to social referrals. [15]

Statistics About Shipping, Fulfillment & Returns

64% of retail shoppers think delivery speed is important when purchasing online. [9]

44% of shoppers are more likely to purchase online if they can pick up in the store. [11]

62% of shoppers are more likely to purchase online if they can return the item in the store. [11]

83% of shoppers would shop online more, knowing they could have free shipping. [11]

27% would purchase an item that costs more than $1,000 if offered free returns. Only 10% would, otherwise. [11]

47% of all online orders include free shipping. [13]

Same-day delivery revenue is expected to increase to more than $620 million in 2015. [14]

Holiday Shopping Statistics

Almost 20% of U.S. retail sales come during the Christmas shopping season. [5]

The average U.S. shopper expects to spend $718 on holiday gifts. [10]

Miscellaneous Retail Statistics

Approx. 2/3 of the U.S. GDP comes from retail consumption. [5]

27% of customers make an impulse purchase at the register. [8]

Next to the register merchandise is only 1% of total retail space, but can account for 7% of revenue [8]

Consumers spend 12-18% more when using a credit card versus cash. [8]

One in four mobile shoppers in the U.S. is over the age of 55. [16]

87% of global consumers factor in Corporate Social Responsibility into their purchase decisions. [21]

Sources & Citation Info

To be completely clear, none of the statistics in this blog post are based on nChannel research. This post is simply a curated collection of statistics from around the web. We compiled this list to show a) how much research attention gets put on this topic and b) to give you a convenient place to find data, when you need it.

(Maybe you can use this when you need ammo for convincing your boss you need a multichannel management platform.)

We welcome and encourage you to link to this post, but for any formal or academic purposes, we ask that you cite the original source of the data.

The links below are where we found the statistics. We encourage you to follow through to these sites for more many more statistics and valuable context for many of the ones we’ve shared.

Retail’s Main Event: Brick & Mortar vs. Online, RetailNext
Retail’s Impact, National Retail Federation
13 Alarming Stats About Retail in Digital, Digiday
15 Holiday Retail Stats That Every Marketer Needs to See, AdWeek
2014 US Retail Industry Overview,
Hold the Phone: 66% of Time Spent With e-Retail is on Mobile, Internet Retailer
How Proximity Marketing Is Driving Retail Sales, Forbes
15 Retailer Resources, Stats and Tactics, SnapRetail
Speed of Delivery Is Important for Retail Shoppers, Accenture
Trends in Retail Show US Consumers Plan To Spend More on Holiday Shopping, Accenture
12 Illuminating eCommerce Stats from January-March 2015, eConsultancy
5 Ecommerce Stats That Will Make You Change Your Entire Marketing Approach, Kiss Metrics
40 Amazing Online Shopping And Ecommerce Statistics, Selz
Five 2015 Ecommerce Stats & Trends You Should Know About, PixelMEDIA
5 Stats Every Ecommerce Business Should Know, Gigya
7 Statistics About E-Commerce Shoppers That Reveal Why Many Consumer Stereotypes Don’t Apply Online, Business Insider
13 Startling Customer Service Statistics, Parature
10 Useful Customer Experience Statistics For Your 2015 Strategy, Neosperience
38 Powerful Customer Experience Stats for 2015, Christine James of HissingKitty
10 Statistics from the Online Marketplace Seller Survey, Web Retailer
12 Retail Trends and Predictions for 2015, Vend HQ
U.S. Social Commerce – Statistics & Trend, AdWeek

Iowa City Area Statistics and Resources

Sunday, March 5, 2017

New Johnson County, Iowa area real estate sales reports and statistical reports are new available on the RESOURCES tab of this website.  Navigate to RESOURCES for a look at all Johnson County, Iowa area sales and lease comparable transactions from 2005 through 2016.  Also, new statistical reports are available for this Iowa City, Iowa metro area including the Executive Summary for 2016, the Housing Report for 2016 and the Business Summary report for 2016.  You will also find useful links for the Johnson County Graphic Information Service report and local real estate oriented resources of all descriptions.  If you would like additional, in depth statistical reports for the Iowa City, Coralville, North Liberty and Solon areas, please contact Jeff Edberg at and I get them to you!

Professionalism in Real Estate Brokerage

Saturday, February 25, 2017

Professionalism is the normal in the Iowa City area. Let professionalism start with me!

Key Takeaways
Instead of looking to real estate agents for solutions, we could put the burden on brokers.
Real estate licensees are required to work under a licensed broker, and that gives brokers control.
Some brokers won’t be able to raise the bar of professionalism, but many can and should.
For years, I have read and listened to complaints about how low the bar is for becoming a real estate agent and about how many “bad agents” we have as a result.
Often agents are asked how we can raise standards. How is that working?
We have that “DANGER” Report to warn us about those bad, unethical and incompetent agents who are bringing us all down and who could possibly cause the job of real estate agent to vanish.
There is a solution to the problem that isn’t being fully explored. Instead of looking to real estate agents for solutions, we could put the burden on brokers.
What about the brokers?
If real estate brokers supervised their agents — as is their job and is required by law — we would be able to easily help the bad players improve their skills and competency, or they could be let go.
Real estate licensees are required to work under a licensed broker, and that give brokers control.
It isn’t hard at all for a brokerage to sever ties with a real estate agent who is an independent contractor, and it is easy to say “no” to a new licensee who brings nothing but a license and the ability to fog a mirror. Even top-producing independent contractors can be cut loose, and there are plenty of agents who can take their place.
The fixes
One great example of an easy fix is the agent who only sells one or two houses a year.
Maybe she got her license so she could feel empowered, or maybe he was bored at his day job. If every broker set a minimum production level that is higher than two units a year, how would this agent get work?
If brokers looked over every purchase agreement written and insisted that they be written correctly — with page numbers and dates — and insisted that each field be filled in correctly, I’ll just bet agents would learn to do a better job with the contracts.
The agents who could not learn how to write a contract could be dismissed. Other industries do that; people get fired every day.
Brokers could give their agents periodic quizzes about new rules and old rules for handling multiple offers and on the best practices of representing buyers and sellers.
Agents can be taught how to write offers and how to explain contracts to consumers. There are agents who have been doing things the same way for 20 years because that is how they were taught to do it 20 years ago, and they haven’t received any instruction since.
Sure, the state can require more pre-license training and even a college degree, and that will keep some people from getting licensed, but anyone who believes that people with more training and higher education always do a better job or are somehow more honest must not read newspapers or watch the news.
Anyone who believes all “top producers” are ethical and competent are living in a make-believe world.
The broker’s place
I often wonder why we leave the broker and the real estate company out of the conversation when we talk about raising the bar.
We include the broker when we talk about branding. I see company logos on most of the contracts I look at, but I don’t always see page numbers or a final acceptance dates.
It is easy to start a real estate company in most states — and brokers are not always ethical, either. In fact, some are downright dishonest — and there are a few bullies out there, too, who demand money that isn’t owed, and others who threaten lawsuits because they have a legal department and I don’t.
Some brokers won’t be able to raise the bar of professionalism, but many can and should.
Last year, I had a former agent get into one of our listings using an electronic key borrowed from the broker’s office. The unlicensed agent wrote an offer for buyers. The former agent’s broker was not aware that licensee’s license had expired — or so he claimed.
When there is a problem with an agent, it isn’t always easy to figure out who the broker is when there are several agents in an office with broker’s licenses. I totally understand why some brokers won’t answer the phone or why they hide in their offices when I stop by.
I read questions that agents ask in Facebook groups. Agents should be asking their broker the questions — not asking other agents from other states.
Some will say that their broker isn’t working at 11:30 at night and that they want answers right away. We all want answers right away — but we don’t always get what we want.
If a question comes up in the middle of the night while working with a client, most clients will understand if we tell them we need to wait until morning to get accurate answers or help.
Right now, I cannot think of a single reason why real estate brokers cannot raise the bar. We can all start right now and hold each other accountable.
If we see something we could say something. If we need to take a pledge, I’ll whip something up people can sign.
We don’t need new laws or standards. We could get a long way if we just follow the current rules and insist that all of our agents meet the highest standards of professionalism.
Teresa Boardman is a Realtor and broker/owner of Boardman Realty in St. Paul. She is also the founder of
Email Teresa Boardman.

8 experts predict what the 2017 housing market has in store

Sunday, December 11, 2016

What will happen to mortgage rates, affordability, inventory and more


Key Takeaways

  • Mortgage rates are likely to continue to increase throughout 2017.
  • There will not be any easing in inventory, and affordability will still be a challenge in big markets.
  • The potential is there for a large number of first-time buyers to enter the buying market, but they will face new challenges.
  • It’s been one unprecedented 2016, between the Brexit vote, the continued persistence of low mortgage interest rates and an election that seemed to temporarily throw markets for a loop. What will the 12 months encompassing 2017 hold in store for housing?

Inman asked eight different experts to give their take:

  • Steve Cook, editor of Real Estate Economy Watch
  • Doug Duncan, senior vice president and chief economist at Fannie Mae
  • Mark Fleming, chief economist at First American
  • Matthew Gardner, chief economist at Windermere
  • Svenja Gudell, chief economist at Zillow
  • Ralph McLaughlin, chief economist at Trulia
  • Rodney Ramcharan, director of research at University of Southern California’s Lusk for Real Estate
  • Jonathan Smoke, chief economist at

Here’s what they told us.

Mortgage rates

Steve Cook
We’ve been spoiled with historically low interest rates, which haven’t risen despite threats to do just that over the past few years. No more. “The kind of rates we were getting earlier this year, down to 3.5 percent — those days are over,” said Cook. Where will they go? “We will likely still see volatility in mortgage rates over the next two, three, four months as [President-elect Donald] Trump unveils cabinet members and specific policies he wants,” said McLaughlin.

Svenja Gudell
And the Federal Reserve is due to hike rates, too, which often puts pressure on mortgage rates one way or another. “I think in December we’ll see the Fed raising rates and we’ll see more Fed hikes in 2017, and with that, I wouldn’t be surprised if the 30-year fixed mortgage rate hits 4.75 percent,” said Gudell. “I don’t believe we’ll see any pullback until after the inauguration, but even the best-case scenario suggests that the historically low rates that have been in place for the last few years are firmly in the rear-view mirror,” said Gardner. “My forecast is for the 30-year fixed rate to rise above 4.5 percent by year’s end, and worst case scenario, knock on the door of 5 percent. ”What does it mean?

Doug Duncan
Whether or not the rate increase will affect homebuyers (and especially first-time homebuyers) remains to be seen, but Duncan believes it’s at least partially contingent on income growth. “If income growth picks up, then the rise in interest rates will affect refinancing, but not the home purchase activity. If incomes start to grow more strongly, it probably won’t affect buying as much as refinancing,” he said.

Rodney Ramcharan
“Just looking at the pricing data in terms of interest rates, the spike in interest rates should definitely slow things down,” said Ramcharan. Fleming said that if mortgage rates get closer to 5 percent by the end of 2017, he would expect home sales to decline by about 4 percent from First American’s original projection — or by about 200,000 sales. At what point would rising mortgage rates start to significantly dampen buyer demand? “When I’ve looked at this topic historically in the past, what you tended to see was an absolute level that the market reacted to, and in years past that absolute level was closer to 6.5 and 7 percent,” said Smoke. “But there are plenty of people who believe that because we’ve had a decade of historically low rates that the new threshold for that might be in the mid 5’s or even as low as 5 percent. So if we see them jump more than we’re anticipating, getting into the 5s, then we start to run into that issue.”

Jonathan Smoke
However, Smoke thinks that in the meantime, there’s a lot that buyers can do to mitigate the effects of rising rates, including looking for lower-priced homes, putting more money down or changing term lengths on a mortgage’s fixed-rate component. “If Trump goes ahead with his infrastructure plan, which is probably a smart thing to do and a no-brainer as far as Congress is concerned, it will stimulate the economy and probably increase pressure on rates,” added Cook. Housing inventory — or the lack thereof — was a big deal in 2016, and it will continue to be a problem next year, experts believe. “Historically, you’d want to be much closer to a million homes built or sold, and we’re roughly at half of that, so I don’t think builders are going to have an easy time magically ramping up,” said Gudell. Inventory will likely fluctuate by market and price point, too. “For people at high ends and expensive properties you may very well see a surge, and the expectation is that tax cuts will come,” said Ramcharan. “Prior to Trump being President-elect, there was a slowdown at the top end.”

How mortgage rates will influence inventory

Because most housing inventory comes from the existing market (as opposed to new construction), what potential sellers decide do in 2017 will have an impact on the market as a whole — and rising mortgage rates might not be great for sales.

Mark Fleming
“We’ve had effectively a 30-year tailwind run of declining mortgage rates,” said Fleming. “At this point in time, maybe they go up or down a little bit, but the long-term trend over the past 30 years has been lower and lower and lower mortgage rates.” Consequently, existing homeowners with low mortgage interest rates might not be able to afford to move into a bigger house if it also comes with a higher rate. “How do we address the fact that the existing homeowner, the largest single source of housing supply, has a built-in financial disincentive to make that supply move?” asked Fleming. “You’re making that decision to supply as a function of what you can afford to buy, but all else held equal, because you lose that low rate and have to get a new mortgage at a higher rate, you might not be able to buy your own home back from yourself without an increased monthly payment.”

Where’s the entry-level housing?

“The thing that’s missing is entry-level housing available for sale, but also, all of the apartment-building that is going on is all class A properties, which is the most expensive — no one is building class C properties,” said Duncan.

Sellers unwilling to budge

“Household psychology has affected people; they’re willing to take less risk than they were in the past,” said Duncan. “You can see that in the remodeling data. People are staying in place and remodeling their existing homes with a higher probability than in the past.” “The median tenure in homes is at an all-time high,” noted Jonathan Smoke. “Part of [that] is … the reasons people are purchasing tie into life events. “Where this can be particularly important is with retiring baby boomers,” he added. “There’s a cohort of baby boomers who might think it’s in their best interest to stay put and make improvements so they can age in place.”


A basic economics lesson: When inventory (supply) is thin on the ground, and demand is unchanged, you can expect prices to go up. “Home construction is at full tilt and it’s still not filling the bill, particularly affordable housing,” noted Cook. “The average price of a new home is increasing still; we’re not serving the mid to lower-tier market with new home construction. So you’re not going to see much relief in affordability.” Mortgage rates and ability to buy.  “If you’re located in San Francisco, Los Angeles, Seattle, New York or Miami, rising mortgage rates might very well have an impact on you because you’re already stretching your budget as it is to get into a home that you can barely afford at historically low mortgage rates,” Gudell added. “In these places where affordability is already an issue, seeing these small bumps will already have a slight dampening effect, and we’ll see that effect not on all buyers but specifically first-time homebuyers or lower income folks. “People who are repeat buyers or buying higher-end homes won’t feel it so much.”

The big picture

Ralph McLaughlin
“We still think affordability is going to be a challenge in some of the largest markets in the U.S. — L.A., the San Francisco Bay Area, the Pacific Northwest — but that said, the U.S. is still a very affordable place to buy a home,” said McLaughlin. “Outside the big metros, things look pretty rosy for homebuyers. In many places, buyers wouldn’t have to spend more than 20 percent of their income to buy a home. “In some of the unaffordable markets, we may see pressures alleviate somewhat, but at the same time, nationally we are starting to see wages pick up, and we think that benefits those on the lower income distribution more than middle or upper income.” Still, “we are going to have to see many months or even years of solid wage gains to make up for price gains,” he added. “In general, home values will slow their climb next year,” said Gudell. “Currently we’re looking at 6-percent-ish annual appreciation; next year it’ll probably be half that, so a little bit of relaxation there, which will also feed into being more of a buyer’s market by the time we reached 2018.”

Millennial and first-time buyer trends

The biggest pool of potential homebuyers didn’t make huge strides toward homeownership in 2016 — so what will millennials be doing in 2017? “Our surveys of the prime first-time homebuying age people suggests a very high, 90 percent-plus, want to eventually own a home,” said Duncan. “What has tended to be the case is that they’re saying ‘just not right now,’ and that’s driven by the fact that their incomes haven’t risen as far as they need to and they’ve delayed getting married and having a baby relative to prior groups at this age point.” Duncan added that he thinks we might be at the bottom of the decline in the homeownership rate. “Builders are seeing millennials, whose first home they are purchasing used to be the first move-up home, sort of leapfrogging that entry-level, and part of that may be there simply isn’t sufficient supply of the starter homes; they’ve just delayed buying until they could get the house that they wanted, the more midsized or first move-up house.”

Matthew Gardner
And Gardner thinks there is big potential for first-time buyers in 2017. “Although we have seen modest improvement in this buyer sector, I believe that the possibility of continued interest rate increases, in concert with a tightening labor market, will get many would-be buyers off the fence and into homeownership.”

Wild cards

What else should agents and brokers be on the lookout for in 2017? “You’re not going to see any new government incentives to first-time buyers,” said Cook. “You’re not going to see an additional reduction in the mortgage insurance premium for FHA loans. That’s not the kind of thing the new administration wants to do. “On the other hand, a reduction in regulation is going to make it easier for lenders to be more creative; you’ll probably see more innovation in mortgage lending. I think nonbanks will thrive in this environment,” he added. Interest from first-time buyers and changes in mortgage rates mean that agents and brokers might have to deal with some new challenges, too. “The potential is there for the market to have the most first-time buyers, certainly on an absolute volume basis but also on a shared transactions perspective,” said Smoke. “For the industry, this is the biggest shift we need to be able to contend with because it likely means elongated length of time that people are spending in that journey, especially the first-time buyer, but it potentially also means higher cancellation rates and lower conversion rates. “You’re going to have more challenges with people contending with needing to qualify for and buy a home in the environment we’re in now instead of in the environment we were in the last two years,” he concluded. “I see prices at the median perhaps not growing as fast but prices at the top end are likely to boom,” said Ramcharan. “If a Trump Presidency entails greater inflation or risk, high-end homes are a great hedge against inflation and risk, so for people at the top end, I see that there’s a natural tendency now to shift the wealth away from equity markets into high-end homes.” Who’s able to buy a home is also going to change (slightly), as is where they are looking. “The homeownership rate will grow, and they’ll be less white and a little younger,” said Gudell. “Unfortunately, I think all of us will be spending more time in the car as more people have to look for more housing outside the city center as homes become much more expensive in the urban area,” she added. And how big is the threat of reliving another 2008-like slump?

“It’s been close to seven years since we had a recession,” noted McLaughlin, “and they tend to move in 7-to-10 year cycles; if it’s not next year then the chances go up. There aren’t any signs yet that that is imminent; there are a lot of signs that suggest otherwise, but there are a lot of wild cards at this point that both buyers, sellers and agents need to be aware of.”

From Innman News Service, Amber Taufen, Editor


Fed to hike interest rates next week while ignoring the elephant in the room

Saturday, December 10, 2016

mw-eu354_yellen_20160819152738_mgThe Federal Reserve is going to raise interest rates next week, but shy away from the bigger question looming for financial markets: How does the shock outcome of the presidential election change the economic landscape?

The Fed is widely expected to announce an increase in the target range for its federal funds rate to 0.5%-0.75% when its two-day meeting wraps next Wednesday, analysts agree. It will be the first increase of 2016, a year once expected to produce at least a couple of rate adjustments. The stock SPX, +0.59% and bond markets TMUBMUSD10Y, +0.00% have a quarter-point move baked in the cake. At the same time, Fed officials are expected to duck questions about how the upcoming Trump administration’s plans for fiscal, trade and regulatory policies will impact the economy and the central bank’s policy outlook. “I would expect them to keep as low a profile as humanly possible,” said Vincent Reinhart, chief economist for Standish Mellon in Boston. “They don’t want to be seen as influencing policy, either as cheerleader or expressing doubts,” he added.

The Fed has already shown a desire for staying out of presidential politics. It included no mention of the election in the minutes of its September or November meetings, Reinhart noted. Fed Chairwoman Janet Yellen wants to avoid the recent experience of Bank of England Governor Mark Carney, who came under fire from Brexit supporters for comments he made during, and after, the referendum campaign that ultimately ended with a vote for the U.K. to split with the European Union. And the Fed doesn’t want to whip up Republicans in the House and Senate who are eager to clip the central bank’s wings, analysts said.

Fed officials are not likely to change their economic forecasts or their projections for interest rates over the next three years, economists said. At the moment, the central bank is penciling in two rate hikes in 2017, and three rate hikes each in 2018 and 2019. Markets scan the Fed’s “dot plot” to extract a snapshot of Fed thinking on economic and policy projections. Any forecasts beyond mid-2017 will be basically ignored by the market, analysts say. By then, the Trump administration could have put its initial stamp on the central bank, filling the existing two vacancies on the seven-member Fed board of governors. At the moment, the market does not expect another rate hike until June.

But there are growing expectations that higher interest rates may be needed, and perhaps sooner. Bond yields and the dollar DXY, +0.47% have risen in the wake of the election in part due to expectations of a more active Fed. Congress is expected to press ahead with tax cuts next year and rate hikes could be needed to keep this stimulus from becoming inflationary. “The market reflects optimism about the future for economic growth, but the Fed is going to be overly cautious of latching on to that reality,” said Tom Simons, an economist at Jefferies in New York.

For Yellen, the end of her tenure at the Fed is only 14 months away. Republican insiders think it is highly unlikely Trump will offer Yellen another term at the helm of the central bank. Analysts think Yellen won’t leave early and will follow her policy instincts until the end. “She’s got a pretty stiff spine. She’ll stand up to any tweets or commentary,” said Kevin Logan, chief economist at HSBC Global Research. With two hikes seen next year, the Fed is likely to space them out from June to December, Logan said. “The general plan is to gradually move the rate up as appropriate, given the data they are faced with,” he added.

Reprinted from

Iowa City Council unanimously approves support for workforce housing project

Wednesday, December 7, 2016


7-story building with 36 micro-apartments is planned

IOWA CITY — The Iowa City Council gave a boost to a workforce housing development Tuesday, following a process that cut the size of the proposed building in half.

The council voted 7-0 to provide Workforce Housing Tax Credit support for seven-story micro-apartment residential and commercial structure planned for 7 S. Linn St. To apply for the tax credit, the Iowa Economic Development Authority requires developer Monark LLC to secure a minimum of $1,000 per unit support from the city for the project’s proposed 36 units.

The development plans include commercial space on the first floor and apartments targeted for graduate students, professionals or retirees, according to a memo sent to the council from Tracy Hightshoe, neighborhood services coordinator. The building would include 24 studio apartments at 300 square feet each and 12 one-bed apartments at 500 square feet.

“I do see the need here, just with talking with folks in my particular age demographic,” said council member Kingsley Botchway II. “I think that this is a great kind of affordable housing for a workforce standpoint.”

Tuesday wasn’t the first time a resolution for the project came in front of the council. The first proposal was for a 14-story building that needed workforce tax credit support for 72 units and failed 4-3 with some citing concerns about a lack of parking, among other issues.

“My preference would’ve been for the taller building with more units downtown,” said council member Susan Mims.

Member Terry Dickens also spoke out in the support Tuesday of the older proposal that was already shot down last summer. Botchway was the third vote in support of the 14-story structure in June.

Monark LLC and Managing Partner Kevin Monson submitted his original proposal for the 14-story structure and an alternative seven-story plan for consideration by the Board of Adjustment. Last month, the board approved parking exemptions and required the exterior designs to be subject to Design Review Committee approval, according to the memo.

“It generated comparisons or alternatives. Rather than the council and community being presented with one option, we had two,” said council member John Thomas. “It will be a significant improvement to the downtown.”

John Yapp, development services coordinator, said 18 parking spaces would’ve been required for the building but the Board of Adjustment waived the requirement, which is half as many parking spaces per residential unit, because of the small size of the lot. Monark will, however, have to pay a fee in lieu of the waived parking spaces.

The money for the project either could come from the city’s general fund or a form of tax abatement, Hightshoe said.

The IEDA does not put rental or income restriction on its workforce housing projects, according to the memo. However, it does require the cost per unit is $200,000 or less with the hopes of targeting middle-income households.

Reprinted from the Gazette.  Comments: (319) 339-3172;

What does President Trump mean for the housing market?

Thursday, November 10, 2016

lev-radin_453281794Political pundits around the country were stunned last night when Donald Trump secured enough votes to beat Hillary Clinton to become the next President of the United States. While supporters from both sides are still reeling from emotions, we woke up wondering what that would mean for real estate.

It’s common for the president to use housing as a vehicle to lead economic recovery, and with Trump being a licensed broker, real estate professionals have been keen to see how his policies would affect them.

“The last time we had real estate dealmakers as U.S. Presidents were founding fathers Thomas Jefferson and George Washington, who loved their property holdings and made sure the U.S. Constitution protected them,” Inman publisher Brad Inman wrote earlier this year. “That was a big deal.”

How will an impending Trump presidency change the real estate market? Here are eight possible outcomes.

Will he use real estate to kickstart the economy?

Trump has used real estate himself as an investment, and although he hasn’t said much about his housing platform, what he has said indicates that he’s interested in boosting homeownership.

Much of Trump’s platform has centered around deregulating the financial market in order to more fully revive it, and that alone could also give a boost to real estate.

What will happen to mortgage rates?

Many different factors affect mortgage rates — they change each day based on what the market is doing — and last night, we saw a little bit of market panic, which can be expected due to an unforeseen event (most polls showed a Clinton win).

However, as of this morning, they have already bounced back a bit.

A similar effect was seen post-Brexit, with markets dropping after the unexpected vote to leave the European Union, but a few months later, it’s business as usual again.

The international economy also has an effect on the exchange rate, and there could be some disturbance as the result of an unforeseen event.

“Mortgage rates are falling because investors are seeing safe yields in U.S. mortgage backed securities, reflecting their confidence in the relative safety of the U.S. housing market,” wrote Trulia chief economist Ralph McLaughlin this morning in a statement. “Furthermore, the Fed is likely to delay a December rate hike because of global economic turmoil. Both effects mean short term win for borrowers, and we’ll likely see an increase in mortgage refinancing if rates continue to plummet.”

Could it become easier to borrow money?

One way that a Trump presidency could make it easier for consumers to own homes would be to lower premiums for FHA loans or cutting guarantee fees for Fannie Mae or Freddie Mac.

Neither of those have been specifically mentioned as priorities for his campaign — and Fannie and Freddie present their own problem, as seen below.

Will there be cutbacks in federal programs?

In the 1980s, Ronald Reagan cut back on many federal programs (such as mental health care) in order to trim the national budget.

Some programs, such as those involving affordable housing, might have more of an effect on real estate than others, but Trump has not indicated which programs he would be most likely to target for cutbacks.

“While local and state policies are likely to be unaffected, major programs — such as the Low Income Housing Tax Credit and Section 8 housing vouchers — could be on the table for reform,” said McLaughlin.

What about regulations?

This is something that Trump — and the Republican party as a whole — has been vocal about.

Banking regulations

In July, the party approved its 2016 platform. That platform includes significant changes to the Consumer Financial Protection Bureau (CFPB), and there has been talk of repealing the Dodd-Frank Act, which imposed regulations on lenders, and replacing it and the CFPB with something else.

Loosening regulation on lending could potentially boost homeownership by making it easier for consumers to obtain loans.

Building regulations

In August, Trump also told a meeting of the National Association of Home Builders, “There’s no industry, other than probably the energy industry, that is more overregulated than the housing industry … Twenty-five percent of costs to build a house are regulations. I think we should get that down to 2 percent.”

If construction is deregulated to some extent, this could mean more affordable homes for consumers.

Employer/independent contractor regulations

What happens to the Patient Protection and Affordable Care Act (PPACA, also known as Obamacare) and Occupational Safety and Health Administration regulations is up in the air now.

And if Republicans are successful in getting rid of some or all of PPACA or OSHA, then that could mean lower operating costs for small business, including real estate brokerages. It could also mean that agents are no longer required to purchase their own health insurance as independent contractors if PPACA is repealed or amended.

Will the mortgage interest deduction go away?

Last year, a tax plan that Trump shared specifically and explicitly mentioned that he would preserve the mortgage interest deduction.

Trump’s current plan (more abbreviated than the previous version) does not go into detail about the mortgage interest deduction.

Will there be reforms at Fannie Mae or Freddie Mac?

Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs), are currently under government conservatorship — and although figuring out what to do with the behemoths is bound to be difficult, it’s also likely to fall into Trump’s lap.

The GSEs are projected to run out of funds in 2018, so if we don’t have a plan by the time that happens, we’ll need one.

What about immigration?

This is a big unknown — if Trump does, indeed, tighten immigration policies as outlined in his platform, then the United States could see some softening in markets that rely heavily on overseas investors, who might face additional difficulties or hurdles in purchasing property.

However, Trump’s immigration policy has undergone many changes since he first announced his candidacy, and immigration reform won’t be an easy bill to push through, so it’s difficult to determine whether this will influence the real estate market to any large degree.

Inman readers were prescient in September when we revealed the results of a reader poll — most readers were voting for Trump. What do you think is next now that he’s our new president?

From Inman News Service

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