Month: January 2020

Multifamily Developers Find Less Space for Parking. What it Might Mean for Pricing.

The lost income will cut into the eventual sale price.

Apartment developers on new projects are often building less parking at their projects than the old standard of two spaces per apartment.

Developers can often save millions of dollars if they build fewer parking spaces. But they also risk losing potential residents if they fail to build enough parking spaces to satisfy their residents. The stakes are high. Any lost income from losing tenants could into the eventual sale price. Meanwhile, a development with too much parking will have a lower yield than it could have, because the developers built empty parking spaces that don’t earn any money.

“We see the parking demand only further decreasing in the future,” says Michael Smith, design director for Humphreys & Partners Architects. “With things like Uber’s air taxis on the near horizon, the demand for cars will be even further reduced.”

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Millennials are looking forward to buying a home, but feel overwhelmed by the process

First-timers admit they seek help from mom and dad

Millennials are buying homes. This much is known. But, despite the much-discussed generation making their entrance into the housing market, many still are still very uneasy about the process.

To try to get into the minds of millennials, TD Bank surveyed more than 850 millennials (which it categorizes as age 23-38) who are planning to buy their first home in 2020.

According to TD Bank’s First-Time Homebuyer Pulse, 68% said they think now is the right time to buy a home and 52% are actively searching home listings online.

But, 75% of first-time Millennial homebuyers admit they’re overwhelmed by the process of buying a home.

As for what’s weighing on millennials’ minds, the answers vary.

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How Is the New Focus on Impact Investing Playing Out in the Office Sector?

Impact investing is increasingly popular among institutional investors and private equity funds. What does it mean for office owners?

While impact investing has become trendy among institutional and large private equity investors, it also “makes good business sense,” according to Eric Enloe, managing director in charge of capital markets valuation nationally with real estate services firm JLL.

Technology and Fortune 500 companies, which are generating growth in office occupancies nationwide, require environmentally-friendly office spaces, and so are driving this investor trend, Enloe notes. And from an office owner’s perspective, sustainability can be a major financial incentive, as it lowers operating costs and increases the probability of tenant renewal at lease expiration.

“All big investors are environmentally-conscious,” Enloe says. As a result, he notes that the line between impact investing and standard investment practices is blurring. “There’s no such thing as ‘non-impact’ investing. It’s critical to attracting and retaining tenants.”

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Will Private Equity RE Players Continue Raising Funds at a Breakneck Pace?

There are a record high number of funds in the market at the start of 2020.

There’s never been more private equity cash chasing real estate assets. And yet more funds than ever continue to come to the market. That could make 2020 the frothiest year yet for private equity investors in the CRE space.

In 2019, fund managers raised $151 billion, a volume that edged past the previous record of $148 billion achieved in 2018, according to Preqin. Average fund sizes are larger than ever as well with 295 funds accounting for that capital vs. 486 funds that had raised the $148 billion figure in the prior year.

That activity speaks to the still strong demand to invest in real estate with many investors that are maintaining, if not increasing allocations. These days, institutions are pushing 15 percent to 20 percent allocations to alternative investments, the largest beneficiaries of which are real estate and private equity, notes Byron Carlock, national partner, real estate practice leader at PwC.

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Fannie Mae’s Duncan: Low mortgage rates will boost prices

30-year fixed mortgage rate likely will average 3.7%, down from 3.9% in 2019

Fannie Mae raised its forecast for 2020 home-price gains, saying low mortgage rates and a strong labor market will pump up demand for properties.

Single-family home prices probably will increase at a 4.6% pace this year, Fannie Mae said in a forecast on Tuesday. That compares with the 4.1% advance for 2020 the mortgage giant predicted a month ago.

The forecast is based on the Federal Housing Finance Agency‘s home-price index that measures single-family homes purchased using conventional mortgages.

“Think about someone focused on the size of payment they can afford,” Doug Duncan, Fannie Mae’s chief economist, said in an interview. “If you hold the size of the payment constant and interest rate component shrinks, that give you some latitude to bid up prices. That’s what’s happening.”

Price gains will push the volume of mortgage originations used for home purchases to a record $1.37 trillion, Fannie Mae said.

The average U.S. rate for a 30-year fixed mortgage probably will be 3.7% in 2020 and 2021, according to the forecast. That compares with 3.9% in 2019 and 4.5% in 2018, Fannie Mae said.

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Airbnb’s $30 Billion Listing Must Do More for Cities: Alex Webb

The rise of the sharing economy means the prices of vacation rentals and apartment rents are linked more than ever.

(Bloomberg Opinion)—Which would you prefer: cheaper rent or a cheaper holiday rental?

I’d wager heavily that most people would answer “rent.” It’s a bigger slice of personal spending. Short-term accommodation accounted for just 1% of U.S. household budgets in 2016, compared to the 16% spent on housing, according to analysis from the Economic Policy Institute, a think tank based in Washington, D.C.

The rise of the sharing economy means the prices of both are linked more than ever. Airbnb Inc., which revolutionized travel by making it (slightly) cheaper and easier to find a decent place to stay in popular tourist destinations around the world, has also faced criticism for driving up rents and hollowing out neighborhoods while municipal authorities struggle to catch up.

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Home prices climb 6.9% in December

But new listings decline to the lowest level since 2012

In December, home sale-prices climbed 6.9% year over year, rising to a median of $312,500 across 217 housing markets, according to new data from Redfin.

Month over month, home sale-prices rose 1.1% on a seasonally adjusted basis, marking the largest increase since February of 2018.

Daryl Fairweather, Redfin’s chief economist, said December’s price growth is largely attributed to the nation’s relatively low mortgage rates, which boosted homebuyer demand during the month.

“Low mortgage rates and a strong economy fueled homebuyer demand in December, which boosted both home sales and prices,” Fairweather said. “Prices heated up in West Coast metros like Seattle and Los Angeles, which indicates the slowdown of 2019 has officially ended in these markets.”

According to Redfin’s analysis, the number of homes listed for sale in December increased by 6.8% from the previous year, marking the fifth consecutive month of increases.

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Top 10 U.S. Counties with Foreclosure Start Increases in 2019

According to ATTOM Data Solutions’ just released 2019 Year-End U.S. Foreclosure Market Report, foreclosure filings were reported on 493,066 U.S. properties in 2019, down 83 percent from a peak of nearly 2.9 million in 2010 to the lowest level since tracking began in 2005.

ATTOM’s annual year-end foreclosure report provides a unique count of properties with a foreclosure filing during the year based on publicly recorded and published foreclosure filings collected in more than 2,200 counties nationwide, with address-level data on nearly 25 million foreclosure filings historically, also available for license or customized reporting.

One key takeaway from the 2019 foreclosure market analysis is bank repossessions have decreased 86 percent since their peak in 2010. Lenders repossessed 143,955 properties through foreclosure (REO) in 2019, down 37 percent from 2018 and down 86 percent from a peak of 1,050,500 in 2010 to the lowest level as far back as data is available — 2006.

Another key takeaway from ATTOM’s year-end foreclosure market report is foreclosure starts hit a new record low nationwide. Lenders started the foreclosure process on 335,985 U.S. properties in 2019, down 9 percent from 2018 and down 84 percent from a peak of 2,139,005 in 2009 to a new all-time low going back as far as foreclosure start data is available — 2006.

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Multifamily market expected to grow in 2020

Following a record-setting 2019, the apartment market is predicted to see more new builds

According to a new report from RealPage, the U.S. apartment market is set to receive more new units in 2020 than it has in any of the last 30 years.

The multifamily market had a rollercoaster of a year in 2019.

Multifamily vacancies hit record lows, with occupancy levels reaching as high as 95.8%, according to RealPage. This is 40 basis points above figures in 2018.

The real estate tech company says it expects about 371,000 new apartment units to hit the market this year, which is a 50% increase compared to last year’s expected new builds.

With all of the new supply expected to hit the market this year, this means about 17% more apartment units will be added to the market.

“Developers have struggled to produce enough new housing to meet demand in recent years,” said Greg Willett, chief economist at RealPage. “However, the volume of apartments on the way in 2020 certainly could test the market’s ability to absorb a big block of additional units in a short time frame.”

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Proximity to Rail Service to Play a Bigger Role in Industrial Site Selection

As rail service has become faster, industrial developers are increasingly considering rail access in site selection.

A growing truck driver shortage, along with improved efficiency of U.S. rail operations, has more shippers considering rail transportation as a viable alternative to long-haul trucking. As a result, some developers are placing new industrial development projects adjacent to rail access sites.

Industrial developers and investors are considering the advantages of rail access when choosing locations for new projects, says Tray Anderson, who heads the logistics and industrial services platform in the Americas for real estate services firm Cushman & Wakefield. While rail access doesn’t drive location decisions, it has become a risk mitigation strategy, offering an alternative to trucking if the driver shortage escalates.

Rail’s efficiency, safety, cost savings and superior delivery windows are widely recognized, says Reagan Shanley, executive vice president of industrial development at Denver-based The Broe Group and its affiliate OmniTRAX, a railroad developer/operator that connects businesses to class I railroads nationally. A 2018 American Trucking Association’s study found that moving products by rail was 45 percent less expensive per ton than shipping by trucks. The exceptions, according to Anderson, include non-competitive destinations only served by one rail line and seasonal shipments of agricultural products, when pricing escalates.

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