Traders in futures markets have signaled a 77.5% probability of a quarter percentage point cut at next week’s Federal Reserve meeting and a 22.5% chance of a half percentage point cut, according to the CME’s FedWatch tool.
Mortgage investors closely monitor the actions and statements of the Fed’s policy-setting Federal Open Market Committee, or FOMC, when deciding the coupon rates they’ll accept – effectively, what mortgage rates people pay for their homes.
An unlikely voice weighed in on Monday advocating for the bigger cut: Judy Shelton, President Donald Trump’s intended nominee for the Fed’s Board of Governors, whose members vote on monetary policy as part of the FOMC.
While her name hasn’t been officially submitted to the Senate for confirmation, Trump said in a tweet three weeks ago that he planned to nominate Shelton and Christopher Waller for the Fed board’s two empty seats.
Richard Lamondin wants apartment operators to stop flushing money down the toilet.
As CEO and co-founder of Miami-based EcoSystems, which focuses on water saving strategies in the multifamily industry, he’s had a hand in replacing 70,000 toilets in apartment buildings across the country to save his clients a cumulative $15 million in water fees.
“For multifamily owners and operators, their highest utility expense is often the water bill,” Lamondin says. “Even if they pass that on to residents, there’s still a lot of economic benefit, in addition to the environmental impact, of focusing on water conservation.”
(Bloomberg Opinion) –Last year, developers in the U.S. completed 211,000 new housing units in buildings of 50 units or more, the biggest number on record. The total number of new apartments constructed didn’t come close to setting any records, though.
These numbers are from Characteristics of New Housing, an annual Census Bureau data release that is so chock-full of interesting information (for example: 88% of apartments completed in 2018 had in-unit laundry facilities) that I briefly contemplated interrupting my vacation to write about it when it came out two weeks ago. I resisted then, but now I’m back at my desk and the new numbers don’t seem to have gotten much attention. They should!
Characteristics of New Housing data go back to 1971 at the earliest, but other, less-detailed census data from before the 1970s indicate that those 211,000 new units in 50-plus-unit apartment buildings in 2018 almost certainly represent an all-time annual high. The construction of multifamily housing in the U.S. used to be skewed much more toward smaller structures. In the 1920s, for example, more than a million new housing units were constructed in two-unit buildings. From 1999 to 2018 — twice as long a period — only 83,000 such units were built. As recently as the mid-1980s, more than one-quarter of all new housing units constructed in the U.S. were in buildings of two to 19 units. In 2018, that share was just 4%, a new low.
Following some months of moderate rent growth, the average U.S. multifamily rent rose by $12 in June 2019 to $1,465, according to the latest Matrix Monthly report by Yardi Matrix. At the same time, year-over-year rent growth rose to 3.2%, up by 40 basis points from May’s seasonally adjusted 2.9% year-over-year rent growth.
Rents have risen 2% so far in the second quarter, and 2.6% overall this year. The number of renter households rose to an all-time high in the first quarter of 2019, rising by more than 600,000 to 43.8 million, and Yardi does not anticipate demand for multifamily will slow any time soon.
The economy has added 172,000 jobs per month this year, below the average of 200,000 jobs per month that has held since 2010. However, Yardi still considers this solid growth given the lateness of the economic cycle and an unemployment rate below 4%.
Fannie Mae issued a new forecast that predicts the average U.S. rate for a 30-year fixed mortgage will be 3.7% in the second half of 2019, down from the 3.9% the mortgage financier called for a month ago. That compares to a 4.4% average rate in the first quarter and 4% in the second quarter.
Cheaper mortgage rates will cause a heat-up in home prices, according to the forecast. Last month, Fannie Mae said it expected home prices to grow 4.6% in 2019. In the new forecast, it called for a 5.4% increase.
“With lower mortgage rates taking effect, the deceleration in house price growth that was so prominent over the past year may be pausing,” Fannie said in commentary that accompanied the new forecast.
E-commerce and last mile logistics tenants are fueling additional demand for industrial space expansion in the U.S., spurring midsize space users to dominate the industrial market.
Midsize industrial tenants—those who occupy 50,000-sq.-ft. to 300,000-sq.-ft. boxes, are driving industrial demand in key markets, including Indianapolis, Chicago, Atlanta and Dallas, according to a report from real estate services firm Avison Young.
For example, between January 2017 to June 2019, tenants in Chicago signed 872 industrial leases totaling 97.3 million sq. ft., with an average size of 111,629 sq. ft. Tenants in Atlanta signed 320 industrial leases totaling 36.2 million sq. ft., with an average size of 113,243 sq. ft. Dallas tenants signed 490 leases totaling 52.5 million sq. ft., with an average size of 107,265 sq. ft. Tenants in Indianapolis signed 41 leases totaling 52.5 million sq. ft., with an average size of 146,341 sq. ft., according to Avison Young.
For years, apartment experts predicted that yields on investments in apartment rental properties would rise. Years passed, but cap rates in the sector remain historically low, and are getting lower.
“Cap rates have not risen in the last five years,” says Chris Espenshade, managing director with real estate services firm JLL. “Why should we expect they would rise in the next five?”
New investors keep finding reasons to buy apartment properties, and prices for these assets keep rising. That strong demand from buyers seems likely to keep cap rates low.
“New investors are coming in at a rate that I have never seen before,” says Brian McAuliffe, president of CBRE Capital Markets. “The multifamily investment market continues to be very active.”
The current real estate cycle is stretching into its second decade—with no clear end in sight. While there have been hiccups in some segments (we’re looking at you, retail), multifamily has been a rock. And despite being the favored asset type of many classes of investors, driving cap rates ever lower, the sector’s fundamentals have held up. To modify a phrase from Arrested Development’s George Bluth, there’s always money in multifamily.
For six years we’ve been tracking sentiment in the sector as part of our NREI Research Series. In fact, the response to and success of our annual multifamily research reports is what led us to expand the effort into other property types and topics. In that time, sentiment among respondents for multifamily has always been bullish. Yet that enthusiasm has moderated some from year to year. The big takeaway in this year’s edition is that optimism has ticked back up after dipping some in 2018.
(Bloomberg)—The wealthy masses are starting to bet their money on a new U.S. tax break after more than a year of indecision.
The latest data point: Bridge Investment Group announced Tuesday it has $509 million that it is deploying in projects in opportunity zones. The money was gathered from about 500 investors, according to a person with knowledge of the matter, who asked not to be identified discussing the private fundraising. The minimum investment was $250,000, but average check size was closer to $1 million, the person said.
The new fund shows that 18 months after Republicans pushed through a tax overhaul with generous incentives to invest in low-income communities, money managers are indeed having some success enticing large numbers of clients to pool cash for qualifying projects.
As this real estate cycle stretches out, the availability of financing for speculative development appears to be more constrained than during the last market peak, although opportunities continue to present themselves to investors betting on the growing e-commerce distribution sector.
Financing of speculative construction is somewhat common in the industrial sector and typically the only way development occurs when it comes to apartment, seniors housing and self-storage properties. It’s far less available for retail and office construction, but it is emerging in single-family build-to-rent communities.
“Things are robust and positive in terms of the overall amount of capital looking for investments in the real estate space,” says Lauro Ferroni, director of research with real estate services firm JLL. “We projected a minor decline in overall transaction volume for the U.S. in 2019, and we are really seeing the market moving in line with those expectations, so we aren’t seeing any real surprises at the moment.”