Month: March 2019

January 2019 Home Seller Gains by Market

ATTOM Data Solutions took an early look at home seller gains from January 2019 in the 20 markets anticipated to be covered by Case-Shiller next week.

Among those 20 markets, San Francisco saw the greatest seller gains in January 2019, selling for an average of $325,000 more than their original purchase price. That price gain represented an average 73 percent return on the original purchase price, up 7 percent from December 2018 and up slightly by 1 percent from January 2018.

Following San Francisco with having the highest dollar amount in seller gains was Los Angeles. There, home sellers saw a dollar gain of $218,000, which represented an average 56.6 percent return, up 3 percent from this past December as well as annually.

Another top 20 market where the dollar gain in January 2019 represented an average 56.6 percent return on the original purchase price was Boston, where home sellers realized a dollar gain of $150,000. Boston had one of the highest annual increases in seller gains, up 8 percent from January 2018.

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Lower Interest Rates Should Drive More Acquisitions in the Multifamily Sector

As the Fed softens its stance on interest rate hikes, multifamily investors are likely to take advantage.

Borrowers have an unexpected second chance to get low-interest financing to buy or re-finance apartment properties, thanks to growing worries about the slowing U.S. economy.

This month, officials at the Federal Reserve cancelled plans to raise benchmark interest rates in 2019, after a weak jobs report and lowered expectations for economic growth.

So far, the bad news for the broader U.S. economy has been good news for apartment building owners and investors. Interest rates for permanent loans on apartment properties went back to roughly the same level they were nine months ago, in the summer of 2018. Apartment sector experts now predict a flurry of deals, as buyers use low-interest rates to purchase properties and borrowers lock-in low rates on permanent loans.

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Home Prices in 20 U.S. Cities Post Smallest Gain in Six Years

The S&P CoreLogic Case-Shiller index of property values posted growth of 3.6 percent in January, down from 4.1 percent in December.

(Bloomberg)—Home prices in 20 U.S. cities registered their smallest gains since late 2012, decelerating for a 10th month in January as buyers held out for more affordable properties.

The S&P CoreLogic Case-Shiller index of property values increased 3.6 percent from a year earlier, down from 4.1 percent in the prior month and below the median estimate of economists, data showed Tuesday. Nationally, home-price gains slowed to 4.3 percent, the lowest since 2015.

Key Insights

The data indicate that the 2018 slump in housing extended to the start of this year amid the longest-ever government shutdown and still-elevated home prices. Potential buyers may have remained cautious after stocks had their worst December since the Great Depression, and a separate report this month showed sales of new U.S. homes fell to a three-month low in January. At the same time, other data suggest the market has since picked up: A report last week showed sales of previously owned U.S. homes rebounded in February to the fastest pace in almost a year. The seasonally adjusted 20-city index gained 0.1 percent from the prior month, less than projected. Economists watch the year-on-year gauge to better track trends, and home-price gains have slowed enough that they’re roughly in line with wage increases. A separate report Tuesday showed that U.S. new-home groundbreakings fell in February by the most in eight months on a drop in single-family homes, suggesting buyers and builders remain wary despite higher wages and a drop in mortgage rates.

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This housing market clue predicts pending economic slowdown

A key indicator of economic health is steadily declining, and it’s raising red flags.

When it comes to the health of the economy, the housing market is the canary in the coal mine, providing clear and early clues of pending trouble. And that’s why analysts track its performance intently, looking at a multitude of indicators that might signal the looming recession some are forecasting.

Now, one critical clue from the housing market has emerged to suggest economic growth is likely to backslide, and that is a steady decline in single-family authorizations.

In essence: Construction activity appears to be slowing.

Single-family housing authorizations – what some call a key predictor of economic recessions – represent building permits requesting permission to commence construction. In contrast, housing starts signal that construction has already begun.

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Where Are Cap Rates Going in the Four Core Property Sectors?

Experts predict little change in either direction in the first half of the year.

With late 2018 jitters gone and investor optimism returning, the commercial real estate market should experience mostly steady cap rates through the first half of 2019, although there are particular market segments and geographies that could experience some bumps.

“On the interest rate side, I think everybody has dismissed, at least for the time being, the inflation threat so that kind of stress on pushing cap rates higher isn’t there right now,” says Manus Clancy, senior managing director of applied data, research and pricing with Trepp. “We went through a tough period in December when people were jittery. Now everybody has taken a deep breath; they don’t feel like the wheels are falling off either the U.S. or the global economy.”

Still some changes, although potentially muted, could be in store. Recent trends suggest there is little room left for cap rate compression, according to Matthew Schreck, quantitative strategist with online real estate marketplace Ten-X. “We expect increases to both interest rates and spreads to drive some loosening in cap rates in 2019 across all property types,” he says.

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Top 10 States With The Worst Foreclosure Rate

This week ATTOM Data Solutions released its February 2019 foreclosure activity datasets, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 54,783 U.S. properties in February 2019, down 3 percent from the previous month and down 11 percent from a year ago – 8th consecutive annual decrease in foreclosure activity.

Foreclosure Rate Rankings

In keeping with ATTOM Data’s figures Friday posts and doing a bit of a deeper dive with the data, we wanted to uncover those top 10 states whose foreclosure activity is among the highest in the nation.

Topping the list is New Jersey with a foreclosure rate of 1 in every 1,006 housing units receiving a foreclosure filing in February 2019. Followed by Delaware (1 in every 1,008 housing units); Maryland (1 in every 1,193 housing units); Florida (1 in every 1,365 housing units); Illinois (1 in every 1,465 housing units); South Carolina (1 in every 1,615 housing units); Connecticut (1 in every 1,801 housing units); Ohio (1 in every 1,918 housing units); Nevada (1 in every 2,041 housing units); and rounding out the top 10 is Pennsylvania with 1 in every 2,205 housing units receiving a foreclosure filing in February 2019.

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Charting the Growth of Renters Over the Age of 60

Cities in the South have seen a marked uptick in the share of households with renters aged 60 or over in the past decade.

Recent research from RentCafe illustrates that with the average age of Americans creeping upward, the share of renters aged 60 or older has risen dramatically in the past decade in many cities.

According to RentCafe:

Our top 30 oldest cities all have a median age over 39.6 and are mostly retirement cities in Florida, California, or Arizona. In fact, Florida is home to 12 of the oldest cities, with Cape Coral, first in our top, boasting a median age of 47.9, followed by Hialeah, with 46.5. Sunny Scottsdale, AZ is third in our top, with a median age of 46, proving once more its high popularity among retirees in search of warm days and entertainment.

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HNW Investors Might Start Entering the Industrial Sector to Capitalize on Higher Returns

Historically considered too “unglamorous” by HNW investors, industrial assets now offer some of the best returns in the market.

By and large, it’s big institutional investors that scoop up industrial assets in the United States. However, there now appears to be more room for a different class of buyers in the industrial sector—high-net-worth (HNW) investors.

Why? Because industrial opportunities in secondary and tertiary markets—where there is likely to be less competition from institutional investors with big pockets—have grown more attractive.

A new report from commercial real estate services company Cushman & Wakefield says many of the dynamics that spawned the industrial boom, including the e-commerce explosion, will continue to play out in ways that bolster strong demand in secondary and tertiary markets, as well as across a broader array of asset sizes. And a recent report from asset manager DWS Group suggests smaller local distribution facilities—although not necessarily in smaller markets—“generally offer superior investment prospects.”

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3 Design Strategies for Multifamily Investors

After purchasing an older property, new owners usually look for ways to make the units and common spaces more livable and more attractive. Here are three ideas from Horizon Realty Group’s Jeff Michael.

Whether you invest in, develop or manage residential buildings, you’re always trying to make the most of your budget and invest wisely in your properties to help attract great residents. Giving a little extra attention to design can go a long way toward meeting those goals in cost-effective and eye-catching fashion.

We like to use the term “adaptive reuse” in describing much of the work undertaken by my Chicago-based company when we purchase and renovate nondescript, mid-century buildings in aging parts of the city that have fallen into disrepair over the decades.

There are things you can and can’t do. Concrete structures with units that have 8-foot ceilings can’t magically be transformed into 10-foot-high grand palaces. But we can, for example, move around interior walls to create rooms that work for today’s lifestyles, rip out carpeting that’s covering beautiful hardwood, patch and paint the walls for a major refresh and, if we happen to still encounter any in 2019, peel off aging psychedelic wallpaper.

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Southern and Midwestern Towns Are Already Seeing a Manufacturing Renaissance. A New Maritime Regulation May Create a Nationwide Manufacturing Boom

With an expected increase in the cost of fuels used by ocean carriers, many manufacturing plants might move from Asia to the United States.

Manufacturing is once again a growing U.S. industry, especially in Southern “right-to-work” states, which tend to have lower wages than unionized states, and Midwestern cities with an abundance of highly skilled factory labor, according to Jack Fraker, vice chairman and managing director of global Industrial and logistics group with real estate services firm CBRE. In addition, there is a build-up in the high-tech manufacturing sector in Silicon Valley, with 1,500 manufacturing facilities with 65,000 jobs alone in San Jose, reports a local ABC News affiliate.

Due to this ramp-up in demand for industrial space in secondary markets, some smaller markets, like the Spartanburg-Greenville area in South Carolina, are performing more like primary, core markets, Fraker says. Growth in manufacturing in these towns is adding pressure on industrial vacancy and rent, and spurring new industrial development around plants and ports.

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