FOREIGN INVESTMENT IN U.S COMMERCIAL ASSETS SPIKE IN 2018
October 24, 2018| By Michael Gerrity | Original Content of World Property Journal
According to new research by global property consultant CBRE, more commercial real estate investment capital crossed U.S. borders in both directions during H1 2018, with foreign inflow up by 29% from the first half of 2017, and U.S. outflow up by 15% in H1 of 2018.
On net, the U.S. commercial real estate market had a capital surplus of roughly $12 billion. Savvy foreign investors have several strategies to mitigate foreign exchange risk when acquiring U.S. assets, one of which is purchasing forward contracts to hedge against U.S. dollar depreciation.
French company Unibail-Rodamco's acquisition of Westfield, which included a $7.7 billion shopping mall portfolio, elevated inbound capital flows from REITs and France, as well as foreign retail acquisitions, to record highs.
CBRE further reports the cost of hedging against U.S. dollar depreciation is rising worldwide, reducing effective yields for many foreign investors, despite the continuing attractiveness of the U.S. market in growth and liquidity terms. Inbound capital flows have eased in the past 24 months, providing more opportunities for domestic investors. CONTINUE READING
NAR FORUM EXAMINES REALTOR® ROLE IN PROPERTY VALUATION and APPRAISAL PROCESSES
Nov 4, 2018| By Market Watch Staff | Original Content of Market Watch News
On Saturday, at the 2018 Realtor [®] Conference & Expo in Boston, Massachusetts, the National Association of Realtors [®] hosted its 2018 Appraisal Forum. The forum, officially titled, "Demystifying Agent-Appraiser Communication: Law, Liability and Best Practice," highlighted proper approaches for communication and cooperation between agents and appraisers.
The event began with a panel conversation between Lynn Madison, Owner of Madison Seminars in Schaumburg, Illinois; John Torvi, Vice President of Marketing and Sales at the Herbert H. Landy Insurance Agency in Needham, Massachusetts; Melanie McLane, owner of Jackson Real Estate in Jersey Shore, Pennsylvania; and Charlie Lee, associate counsel with NAR.
Lee focused on clarifying the misconception that real estate professionals are prohibited from speaking to appraisers. In reality, Lee said, no rules or requirements on the federal, state, or agency level prohibit an appraiser and agent from speaking to one another during the appraisal process. However, Lee reminded Realtors [®] that appraisers and real estate professionals have separate and distinct roles during the home buying process.
"Real estate professionals (brokers, agents) have a responsibility to serve their clients, while appraisers are brought into this process exclusively to develop the best appraisal they can. Still, real estate professionals are encouraged to communicate with appraisers in a professional and productive manner, as relevant information from real estate professionals may help an appraiser independently arrive at an opinion of value. However, and most importantly, a real estate professional should never communicate with the intent of trying to influence an appraiser's appraisal," said NAR's Lee. CONTINUE READING
THE U.S CITIES MOST FLOODED WITH HIGH-END APARTMENTS
October 16, 2018| By NREI Staff| Original Content of National Real Estate Investor News
New data from RentCafe shows that more than 25 percent of apartment buildings in some U.S. cities are now high-end units.
Visit any urban center in a major U.S. cityand you'll see a similar view: cranes dotting the landscape and billboards advertising units in the latest luxury apartment projects. Has the focus on high-end units gotten out of hand?
New research from RentCafe found that luxury rental properties had accounted for 79 percent of all apartment construction in the U.S. And in the 2018 that number has grown to a whopping 87 percent. In many cities, a full 100 percent of projects completed in the first half of the year were upscale units.
Yardi Matrix tracks the data, with a database of more than 80,000 large-scale apartment developments with at least 50 units across more than 130 markets in the United States. The firm considers units class B+ or above as high-end or luxury projects.
The findings are consistent across all regions. The Southwest has led the way with 88 percent of new projects consisting of high-end units in 2017. The Mid-Atlantic was next at 87 percent.
According to RentCafe:
The most active metros in the high-end apartment segment last year were neither New York nor L.A. Metro St. Louis has built nothing but high-end apartments in 2017. Supported by local tax breaks, the urban rehabilitation of St. Louis is driven by luxury developments in an attempt to attract new residents. The luxury market is also thriving in Las Vegas metro — where 100 percent of the apartments built in 2017 were luxury — boosted by Californians moving to Vegas in greater numbers and the area’s great economic outlook. CONTINUE READING
APARTMENT PERMITS IN U.S HIT TWO-YEAR LOW ON GLUT, RISING COSTS
October 19, 2018| By Katia Dmitrieva| Original Content of Bloomberg News
It looks like U.S. apartment and condominium builders are reacting to rising costs and a supply glut the same way: slowing down.
Multifamily housing permits -- - those for buildings with two or more units -- dropped last month to the lowest level since March 2016, government figures showed Wednesday. That follows signs of an oversupply of apartments in some U.S. markets, but higher costs are also having an impact.
“The biggest issue is construction cost and within that, labor costs. Because of that, some deals just don’t pencil out,” Jeanette Rice, Americas head of multifamily research at brokerage CBRE Group Inc., said by phone.
There’s also an overbuilding of units in urban cores that’s suppressing rent growth, she said. Builders in previous years were able to secure easier financing from banks and the labor market wasn’t as tight, creating incentives to build, she said.
“Developers are working through all this, but it takes time,” Rice said.
The slowdown in multifamily permits was driven by declines in the Northeast and Midwest. The South saw a slight drop, while permits rose in the West.CONTINUE READING
DID YOU HEAR? DENIRO HELPS SIMON START DEVELOPMENT IN ATLANTA
October 19, 2018| By Tony Wilbert| Original Content of Costar News
American actor and director Robert De Niro took a break from the big screen this week to help kick off construction of the new Nobu Hotel and Restaurant Atlanta.
The new hotel and restaurant will mark Nobu’s entry into Atlanta and help anchor Simon Property Group’s $300 million redevelopment and expansion of Phipps Plaza in Buckhead. Simon announced its plans to redevelop the Belk department store in November 2017, and the process accelerated when Belk closed over the summer.
The new development also will include One Phipps Plaza, a 13-story, 350,000-square-foot office building and a three-story, 90,000-square-foot Life Time health and entertainment center with 30,000 square feet of coworking space.
Academy Award-winning actor De Niro, a shareholder in Nobu, joined Japanese chef Nobu Matsuhisa, top Simon Property Group executives including President of Simon Malls and Chief Administrative Officer John Rulli, and local dignitaries and elected officials to celebrate the official start of the redevelopment. In addition to using huge ceremonial sledgehammers to tear down a faux wall, the dignitaries participated in a ceremonial sake ceremony complete with shots of the Japanese rice wine.
“It will be great,” De Niro said of the Nobu hotel and restaurant in Atlanta. “I come to Atlanta pretty often because I do movies here. And I stay in Buckhead.” CONTINUE READING
COMMERCIAL REAL ESTATE MORTGAGE DEBT SURGES TO NEW RECORD
October 1, 2018| By Mark Heschmeyer | Original Content of Costar News
Mortgage debt underlying offices, apartments and other non-farm commercial real estate rose the most in any quarter on record to a new high of $3.27 trillion as all major investor groups increased their holdings amid strong economic growth.
The $52.3 billion growth in the second quarter for debt on office, multifamily, retail, industrial and hotel properties outpaced by 1.6 percent the previous record growth from the first quarter, leading to the record total debt as of June 30, according to the Mortgage Bankers Association.
"The four major investor groups all increased their holdings, and multifamily mortgage debt outstanding topped $1.3 trillion for the first time," Jamie Woodwell, the association's vice president of commercial real estate research, said in releasing the data.
Overall demand for commercial real estate is rising, fueled by job growth and early benefits of the new tax law passed in December, as U.S. economic growth rose 4.2 percent in the second quarter, the strongest since 2014. The four major investor groups are bank and thrift; federal agency and government sponsored enterprises; life insurance companies; commercial mortgage-backed securities and other asset-backed securities issuers.
Woodwell added that "strong property fundamentals and values, coupled with still-low mortgage rates and strong loan performance" all support the growth of commercial real estate lending.
Commercial banks hold the largest share of the retail, office, industrial, hospitality and multifamily mortgages, $1.3 trillion, or 40 percent of the total. In the second quarter, banks and thrifts had the largest increase in dollar terms in their holdings of commercial mortgage debt – an increase of $23.9 billion, or 1.9 percent.CONTINUE READING
FHA TO REQUIRE SECOND APPRAISAL FOR CERTAIN REVERSE MORTGAGES
September 28, 2018| By HUD Public Affairs | Original Content of Housing and Urban Development News
WASHINGTON – The Federal Housing Administration (FHA) today announced that it will begin requiring lenders originating new Home Equity Conversion Mortgages (HECMs), commonly referred to as reverse mortgages, to provide a second property appraisal under certain circumstances. FHA is instructing lenders to provide a second independent property appraisal in cases where FHA determines there may be inflated property valuations.
FHA’s new requirement takes effect for case numbers assigned on or after October 1, 2018 through September 30, 2019. FHA will periodically review this guidance and, based on the results, may renew these requirements beyond fiscal year 2019. Read FHA’s Mortgagee Letter.
FHA will perform a risk assessment of appraisals submitted for use in new HECM originations. Based on the outcome of that assessment, FHA may require a second appraisal be obtained prior to approving the reverse mortgage for an insurance endorsement. Under the new policy, lenders must not approve or close a HECM before FHA has performed the collateral risk assessment and, if required, a second appraisal is obtained. Where a second appraisal is required by FHA, lenders must use the lower value of the two appraisals.
The appraisal validation policy announced today will further reduce risks to FHA’s Mutual Mortgage Insurance Fund (MMIF) and protect the health of the HECM program. The financial soundness of FHA’s reverse mortgage program is contingent on an accurate determination of a property’s value and condition. The property value is used to determine the amount of equity that is available to the borrower and it is also used by FHA to determine the amount of insurance benefits paid to a mortgagee.CONTINUE READING
STARTER-HOME AFFORDABILITY HITS A DECADE LOW
August 27, 2018| By NREI Staff | Original Content of National Real Estate Institute News
Starter homes are now more costly to purchase than at any time since 2008, when the last boom came to a crashing halt. In the second quarter, first-time buyers needed almost 23 percent of their income to afford a typical entry-level home, up from 21 percent a year earlier, according to an analysis by the National Association of Realtors.
The property market, after years of price gains that outpaced income growth, is showing signs of slowing as sales decline. The affordability crunch is especially severe at the low end of the market and in hot areas where supplies are tightest and values have risen most. A jump in mortgage rates this year only made it worse.
“When prices go up at the entry level, that’s where the affordability issue is most acute,” Charles Dougherty, a Wells Fargo & Co. economist, said in a phone interview. “People are hesitant to stretch the amount they’re willing to pay.”
The most expensive U.S. markets include San Francisco and New York, where the median household needed about 65 percent of its income to buy a home in the second quarter, according to an analysis from Trulia. The share was 59 percent in Los Angeles and 55 percent in Miami...CONTINUE READING
MARKETS MAY BE SIGNALING RISING RECESSION RISK: FED STUDY
August 27, 2018| By Ann Saphire| Original Content of BusinessInsider News
SAN FRANCISCO (Reuters) - A narrowing gap between short-term and long-term borrowing costs could be signaling heightened risk of a U.S. recession, researchers at the San Francisco Federal Reserve Bank said in a study published on Monday.
The research relies on an in-depth analysis of the gap between the yield on three-month and 10-year U.S. Treasury securities, a gap that like other measures of short-to-long-term rates has narrowed in recent months.
Several Fed officials have cited this flattening yield curve as a reason to stop raising interest rates, since historically each time it inverts, with short-term rates rising above long-term rates, a recession follows.
The study, published in the San Francisco Fed's latest Economic Letter, bolsters that view.
"In light of the evidence on its predictive power for recessions, the recent evolution of the yield curve suggests that recession risk might be rising," wrote San Francisco Fed research advisers Michael Bauer and Thomas Mertens.CONTINUE READING
RETAIL VACANCIES AT ALL-TIME HIGH, BUT DON'T PANIC
August 14, 2018| By Bob Smith | Original Content of CoStar News
There's more vacant retail space than ever. But it's contained to a relatively small number of chains.
Retailers say they plan to close a record 111 million square feet of space across the country this year, according to a CoStar analysis. That exceeds last year’s previous record of 105 million square feet.
Just five retailers are accounting for more than half the vacated space: Sears, Bon-Ton, Sports Authority, J.C. Penney and Toys "R" Us.
Department store Bon-Ton, sports retailer Sports Authority and Toys "R" Us filed for Chapter 11 bankruptcy protection. Sears Holdings Group said it would close 78 Sears and K-Mart stores next month, and J.C. Penney shut 138 stores last year.
Combined, these add up to about 55 percent of the total square feet vacated in the past three years, said Drew Myers, senior real estate analyst at CoStar Portfolio Strategy.
"The reality is it’s only a few major big-box retailers," Myers said. "This can be seen as a warning sign, but it points to a change in the retail market today."
He added that, at 4.6 percent, the overall retail vacancy rate has been consistent for several quarters and points to a stable retail environment. Class C malls, those that generate less than $350 a square foot in non-anchor store sales annually, are struggling, but the overall mall vacancy rate remains below 4 percent, according to CoStar data.CONTINUE READING
OPEN OFFICE SPACES MUST EVOLVE TO COMPETE IN A WEWORK WORLD, EXPERTS SAY
August 16, 2018| By Lou Hirsh | Original Content of CoStar News
The long-hailed concept of “open” office plans is getting pushback amid complaints about a lack of privacy and unwanted workplace interruptions, prompting developers and designers to scramble to figure out how to provide the latest corporate perk: Alone time.
The concerns about too many workplace disruptions are circulating in corporate and academic circles as developers try to compete with a growing nationwide onslaught of non-traditional space providers such as WeWork that are serving tenants demanding flexibility well outside the hours of 9 to 5.
For landlords trying to land tenants seeking top office space to lure the best job prospects, getting things right often means navigating differences in office cultures, many of which require more flexible, multiple-use space configurations among other elements. The answer can be as simple as providing a mix of open and private areas to fit multiple situations during the workday, according to experts at a recent San Diego forum presented by the local chapter of the Washington, D.C.-based Urban Land Institute.
Tiffany English, principal in the San Diego office of design firm Ware Malcomb, said offices are increasingly taking on hybrid setups, providing areas where teams can come together and other spaces designed for an increasing need for alone time during the workday. The exact mix is determined by factors including work schedules and CONTINUE READING
COURT OF APPEALS DECLARES FHFA STRUCTURE UNCONSTITUTIONAL
July 17, 2018| By Ben Lane | Original Content of Housingwire News
For the third time in recent memory, a government agency borne out of the housing crisis has been declared unconstitutional by a federal court.
The first two times it was the Consumer Financial Protection Bureau. But now, it’s the Federal Housing Finance Agency that has been found to be operating in violation of the Constitution.
The Court of Appeals for the Fifth Circuit ruled this week that the federal government’s regulator of Fannie Mae and Freddie Mac is not constitutionally structured.
Much like the earlier rulings involving the CFPB, the FHFA ruling deals with the agency’s leadership structure and whether a single director that wields as much authority as the CFPB director or the FHFA director is a violation of the Constitution’s separation of powers.
The CFPB was initially ruled unconstitutional in a majority opinion authored by Supreme Court Justice nominee Brett Kavanaugh. That initial ruling was later overturned by the full Court of Appeals, which ruled the CFPB’s structure to be constitutional.
But the CFPB wasn’t out of the woods. Just last month, District Judge Loretta Preska of the New York Southern District declared the CFPB unconstitutional, citing Kavanaugh’s ruling repeatedly.CONTINUE READING
LIFE INSURERS' STRONG COMMERCIAL MORTGAGE PERFORMANCE LIKELY TO CONTINUE
June 29, 2018| By Michael Tucker | Original Content of MBA NewsLink
Relatively stable commercial real estate fundamentals should drive strong investment results for U.S. life insurers over the next 12 to 24 months, said Fitch Ratings, New York.
The agency's U.S. Life Insurer's Mortgage Update called life insurers' mortgage loan loss experience "very favorable" over the past year, "as evidenced by low credit impairments and a low percentage of troubled mortgages."
The overall credit quality of performing lifeco mortgages remains high. The National Association of Insurance Commissioners reported 61 percent earned "strong" credit metrics and 34 percent earned "adequate" metrics. The Mortgage Bankers Association found life insurance company loans have one of the lowest delinquency rates among major investor groups. Life company portfolios that were 60 or more days delinquent fell 0.01 percentage points during the first quarter to 0.02 percent.
"Favorable credit metrics have benefited from a stable economic recovery in recent years, generally modest levels of new construction and low interest rates," the Fitch report said.
Fitch noted some credit concerns remain, including more aggressive underwriting in the hotel and multifamily sectors--both of which are further along the commercial real estate cycle than other sectors--new construction in some markets, retail properties with challenged anchor stores, increased exposure to single tenants in commercial mortgage-backed securities and a continued increase of interest-only loans as a percentage of total loans.CONTINUE READING
MORTGAGE RATES CONTINUE RECENT DECLINE
July 5, 2018| By Adam DeSanctis| Original Content of Freddie Mac News
MCLEAN, Va., July 05, 2018 (GLOBE NEWSWIRE) -- Freddie Mac (OTCQB:FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing that mortgage rates over the past week maintained their recent slide.
Sam Khater, Freddie Mac’s chief economist, says after a rapid increase throughout most of the spring, mortgage rates have now declined in five of the past six weeks. “The run-up in mortgage rates earlier this year represented not just a rise in risk-free borrowing costs, but for investors, the mortgage spread also rose back to more normal levels by about 20 basis points,” he said. “What that means for buyers is good news. Mortgage rates may have a little more room to decline over the very short term.”
Added Khater, “Although the current economic expansion is in its 10th year, residential single-family real estate was initially slow to recover. Now, backed by the demographic tailwind provided by millennials reaching the peak age to buy their first home, the housing market should have some room to grow going forward.”
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs...CONTINUE READING
BANKS GET MORE GENEROUS WITH WITH CONSTRUCTION LOANS FOR MORE APARTMENTS
June 18, 2018| By Bendix Anderson| Original Content of National Real Estate Investor News
It’s getting a little easier to find a construction loan to build a new apartment property, compared to the end of 2017.
“Banks are getting more aggressive,” says David Webb, vice chairman of debt and structured finance with CBRE Capital Markets, based in Washington, D.C. “It is getting easier to get deals done.”
Last year, many banks cut back on how much they were willing to lend on new apartment projects. Now, many larger banksare once again taking on new customers for construction loans. The size of these loans remains relatively small compared to the total cost to develop a project—but the loan amounts have stopped shrinking. And other lenders, including private equity debt funds, have rushed in to fill the gap in developers’ budgets with products like mezzanine financing.
Today, apartment developers are able to get non-recourse construction loans that cover 50 percent to 60 percent of the total development cost of an apartment project, according to CBRE. That’s about the same as banks offered earlier this year.
This stability is a big change from last year, when construction loans were getting smaller and smaller, falling from the high point achieved two or three years ago, when the loans typically covered 60 percent to 65 percent of the cost of the project. In 2017, many larger banks had made about as many construction loans as they could fit onto their balance sheets without triggering the new “capital requirement” regulations that force banks to set aside cash of offset certain risks. CONTINUE READING
COURT FINDS TAX APPEAL ATTORNEYS NOT ENGAGED IN APPRAISAL PRACTICE
June 27, 2018| By Appraisal News Staff| Original Content of Appraisal News
The Circuit Court of Cook County, Illinois (Chancery Division) on June 20 ruled that attorneys who referenced comparable property valuations and market values based on an income approach as part of tax appeal proceedings were simply engaged in the traditional practice of law and not in appraisal practice.
The case, Illinois State Bar Association vs. Illinois Department of Financial and Professional Regulation, was filed in July 2017 after two Illinois attorneys were accused by the IDFPR of engaging in unlicensed appraisal practice after they submitted comparable property valuations, income approach information and market value opinions as part of two tax assessment appeals in DuPage County and McHenry County.
ISBA filed a complaint seeking a declaration that the IDFPR lacked authority to prosecute, discipline or sanction lawyers for engaging in the practice of law for advocating on behalf of clients in real estate tax assessment proceedings. The case also sought to enjoin the IDFPR from initiating, maintaining or threatening prosecution of attorneys for engaging in that activity.
The main question before the court was whether an attorney representing a client in a tax proceeding violated the state’s Appraisal Act and functioned as an unlicensed appraiser when providing an analysis of comparable property valuations or developing an opinion of market value utilizing the income approach in a legal brief supporting a tax appeal.
ISBA issued a statement when it filed suit noting, “Arguments based on property valuation are common in many legal fields and have long been typical of real estate tax assessment practice. The ISBA believes that making such arguments on behalf of clients clearly constitutes the practice of law, does not entail the submission of an appraisal, and is well beyond... CONTINUE READING
CORE LOGIC: HOME EQUITY GAINS TOP $1 TRILLION IN FIRST QUARTER
June 8, 2018| By Alcynna Lloyd| Original Content of HousingWire News
Homeowner equity topped $1 trillion in the first quarter of 2018, according to the Q1 2018 home equity analysis from CoreLogic, a property information, analytics and data-enabled solutions provider.
omeowners with a mortgage, about 63% of all homeowners, saw equity increase by 13.3%, a total of $1.01 trillion, since the first quarter last year. The average homeowner gained about $16,300 in equity over the last year.
The total number of mortgaged residential properties with negative equity decreased 3% from the fourth quarter to 2.5 million homes, or 4.7% of all mortgaged properties. This is a drop of 21% from 3.1 million homes in the first quarter last year.
Home-price growth has accelerated in recent months, helping to build home-equity wealth and lift underwater homeowners back into positive equity the primary driver of home equity wealth creation,” CoreLogic Chief Economist Frank Nothaft said. “The CoreLogic Home Price Index grew 6.7% during the year ending March 2018, the largest 12-month increase in four years.
This chart shows which states saw the largest equity gains from last year.
The average growth in home equity was more than $15,000 during 2017, which is the most in four years. Washington led all states with 12.8% appreciation, and homeowners had larger home equity gains...CONTINUE READING
APPRAISAL INSTITUTE RELEASES GUIDE TO RESIDENTIAL GREEN ADDENDUM
June 19, 2018| By Appraisal Institute Staff| Original Content of Appraisal Institute News
The Appraisal Institute, the nation’s largest professional association of real estate appraisers, today released a guide to complete and use the organization’s “Residential Green and Energy Efficient Addendum.”
This guide helps appraisers, real estate agents, energy and green raters, lenders, builders, the secondary mortgage market and sustainability organizations understand how each section of the addendum applies to valuation and marketing of the property.
Since its release in 2011, “The Residential Green and Energy Efficient Addendum” has gained ever-increasing acceptance as a tool to communicate the high-performance features of a home. The addendum is mapped to the Real Estate Standards Organization and the Mortgage Industry Standards Maintenance Organization to allow the data to be transferred to the MLS and secondary mortgage market portal.
The most recent version of the addendumis 820.05, which is available in PDF format at no charge on the Appraisal Institute’s website. The 820.05 Residential Green and Energy Efficient Addendum Detailed Instructionsdocument should be used along with this guide. Individuals who should complete the addendum include the builder, energy or green rater, architect, solar installer, or a combination of these professionals. Appraisers can complete the addendum if they have all the necessary documentation and adequate knowledge of the project...CONTINUE READING
NEW HOME MORTGAGES FOR MILLENIALS JUMP IN APRIL, ELLIE MAE REPORTS
June 6, 2018| By Ella Mae Staff| Original Content of Ella Mae News
Millennial home-buyers across the country exercised their purchase power in April as competition for limited housing inventory continued. Eighty-nine percent (89 percent) of mortgage loans made to Millennial borrowers during the month were for new home purchases, up one percentage point from the month prior, and the highest percentage since May 2017, according to the latest Ellie Mae Millennial Tracker™.
Interest rates also continued to rise in April to 4.73 percent, on average, up from 4.63 percent the month prior. This is the highest interest rate recorded since Ellie Mae began tracking Millennial loan data in January 2014.
As interest rates crept up, average loan amounts to Millennials fell. The average amount was $194,300 in February, $192,055 in March and $188,171 in April.
“Most Millennials are buying a house because there are major changes happening in their lives such as starting a family, getting a new job, or because they’ve decided that they want to build equity and stop renting,” said Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. “We believe Millennial home purchases will continue to climb this summer and while interest rates may slightly impact the size of homes borrowers can get for their money, we don’t foresee it impacting their desire to buy.”
Overall, conventional loans represented 67 percent of all closed loans to Millennial borrowers, while FHA loans held steady at 29 percent from the previous month. VA purchase loans for Millennial borrowers represented 79 percent of all VA closed loans in April, steady from the month prior, and up from 66 percent... CONTINUE READING
MORE THAN HALF OF THE US HOUSING MARKETS WERE OVERVALUED IN APRIL
June 5, 2018| By Diana Olick| Original Content of CNBC News
As the sharp gains in home prices continue, more markets are seeing values higher than their local economies can support.
Prices nationwide jumped 6.9 percent in April from a year ago, according to the latest monthly value report from CoreLogic. While that is slightly less than the 7 percent annual jump in March, it is still making more and more markets unaffordable.
Of the nation's 50 largest housing markets, 52 percent were considered overvalued in April. CoreLogic determines affordability "by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals (such as disposable income)." In March, 50 percent of markets were considered overvalued.
A market is considered overvalued when home prices are at least 10 percent higher than the long-term, sustainable level. By the same metric, 34 percent of the largest markets were considered at value and 14 percent were undervalued.
Not all expensive markets, however, are considered overvalued. San Francisco, for example, where prices are up more than 12 percent from a year ago, is considered at value, because local incomes can support the area's prices. Boston is also considered at value.
Overvalued markets include Denver, Washington, D.C., Houston, Miami, CONTINUE READING
MULTIFAMILY INVESTORS FACE A CUTBACK IN LOAN SIZE
June 5, 2018| By Bendix Anderson| Original Content of NREI News
Rising interest rates are already making a differencefor apartment properties. Borrowers can no longer secure the large permanent loans that have become used to.
“Delivering full-leverage loans has become a challenge,” says Dustin Dulin, managing director in the capital markets platform of real estate services firm JLL. “It is not as easy to underwrite the deals… Back in 2015, almost every deal underwrote cleanly.”
The change is carving a hole in the budgets of borrowers who need to buy or refinance apartment properties. To fill the gap, borrowers have to come up with more equity, often either from their own balance sheets or from new equity partners. Eventually, higher interest rates are expected to get in the way of transactions—though that hasn’t happened yet.
“Competition from mid-size banks and alternative lenders is making lending rates attractive, historically speaking,” says Justin Bakst, director of capital markets with research firm CoStar Group. CONTINUE READING
LAS VEGAS RESIDENTS AS MAY NEED DEEPER POCKETS
May 29, 2018| By Alcanna Lloyd| Original Content of HousingWire News
Perhaps underperforming income growth and rising unemployment would suggest low home prices, but Las Vegas is the most overvalued housing market in the nation, a new report for Fitch Ratings says.
Fitch Ratings Managing Director Grant bailey explained that although Las Vegas’s price to rent remains lower than buying a home and the population is growing, home prices still have overshot economic fundamentals, according to an articleby Samantha Sharf for Forbes.
The Forbes shows Las Vegas’s ranking as the most overvalued housing market in the nation can be attributed to the relationship between growing populations, low unemployment rates and technology driven markets.
In a sign of the times, five of the five most overvalued places in America are located in the western half of the country. Why? All the overvalued markets show strong fundamentals such as a fast-growing population or low unemployment rate typically associated with hot, tech-driven markets found out west.
These support some level home price growth. But the momentum has gotten ahead of itself, says Bailey, leading to higher home prices than the underlying economy would suggest. Meanwhile, Fitch sees some cheaper Midwestern markets like Cleveland and Detroit, as well as some pricey but high-earning cities like New York... CONTINUE READING
BRIAN MONTGOMERY FINALLY CONFIRMED AS FHA COMMISSIONER
May 23, 2018| By Caroline Basile | Original Content of CoStar News
Montgomery was confirmed as FHA commissioner on Wednesday by a vote in the Senate of 74 to 23.
Yesterday, while speaking at the Mortgage Bankers Association’s Commercial/Multifamily Servicing and Technology Conference, a senior advisor for the Department of Housing and Urban Development's Multifamily Housing Programs Robert Iber said he was told that a full Senate vote on Montgomery’s nomination is expected this week. Well, now that's here.
The vote came six months after the Senate Banking, Housing, and Urban Affairs Committee approved Montgomery’s nomination to lead the FHA. This will be Montgomery's second time to serve as FHA commissioner. He previously held the job under former President George W. Bush, staying on for six months after former President Barack Obama's inauguration.
In addition to previously serving in the position of assistant secretary for Housing and FHA commissioner at HUD, Montgomery also held a handful of other top positions throughout the government and housing industry, including co-founder and partner at the Collingwood Group, deputy assistant to the president and cabinet secretary, board member on the Federal Housing Finance Board, the Housing and Economic Recovery Act of 2008 Oversight Board, and NeighborWorks America Board.Shortly after the confirmation announcement, HUD Secretary Ben Carson tweeted a photo of him calling Montgomery to congratulate him on his confirmation.
Brian brings a wealth of housing knowledge and experience to HUD having held this position in two previous administrations, and we are excited to welcome him back to the Agency,” Carson said in a statement provided by HUD.CONTINUE READING
ROLLBACK OF FINANCIAL CRISIS-ERA RESTRICTIONS SEEN AS UNLIKELY TO ACCELERATE COMMERCIAL REAL ESTATE LENDING
May 23, 2018| By Mark Heschmeyer | Original Content of CoStar News
The U.S. House of Representatives passed legislation Tuesday offering regulatory relief for a range of banking organizations, lifting strict lending rules on thousands of small and medium-sized banks that had been adopted as part of the 2010 Dodd-Frank law enacted in the wake of the previous financial meltdown.
The compromise measure passed the House with one of the largest levels of bipartisan support in recent memory, 258-159, approving the regulatory rollback legislation passed by the Senate earlier this year and handing a legislative win to President Trump, who is expected to sign the bill sponsored by Senator Mike Crapo (R-ID) into law.
While the bill leaves some of the Dodd-Frank regulatory measures in place, it loosens many of the rules covering much of the banking system. The legislation will leave fewer than 10 big U.S. banks subject to stricter federal oversight, while freeing thousands of banks with less than $250 billion in assets from the post-crisis regulations.
While the act includes significant reforms to bank commercial real estate lending rules, the actual impact on real estate lending may be limited in scope, industry observers said.
Most significantly for banks that make real estate acquisition, development or construction loans, the measure narrows the definition of lenders' exposure to "high volatility...CONTINUE READING
CHIPOTLE: FROM SINGLE SHOP TO SURPRISE DEPARTURE
May 24, 2018| By Molly Armbrister | Original Content of CoStar News
As any mother of a graduating senior will tell you, it all happens in the blink of an eye.
One minute you have a scrappy burrito joint on a corner near the University of Denver, and before you know it, the $12 billion fast-casual restaurant concept you helped spawn is off to sunny California to be with its new CEO.
But Denver will always have its memories, as well as its 77 Colorado Chipotle locations.
Wednesday’s news that Chipotle Mexican Grill (NYSE: CMG) would withdraw its corporate headquarters from the city it has called home for 25 years came as a surprise to the business community here, which has watched Chipotle grow from a single shop on East Evans Avenue into a nationwide staple for a quick dinner out for $10 or less.
Founded in 1993, Chipotle was a homegrown grown success story, combining things that have come to be known as quintessentially Colorado: Mexican food, an appeal to young people and a tinge of a hippie vibe, with an emphasis on responsibly sourced products and environmental consciousness.
With the goal of putting a fresh spin on fast food, founder Steve Ells created a business that grew to 2,441 restaurants with a $12.1 billion market cap, and was at the front of a new trend in the region.CONTINUE READING
FOR FIRST TIME IN 3 YEARS, BANKS EASE LENDING STANDARDS FOR COMMERCIAL REAL ESTATE LOANS
May 16, 2018| By Mark Heschmeyer | Original Content of CoStar News
For the first time in nearly three years, U.S. banks are reporting that they have loosened their lending spigots for some types of commercial real estate loans during the first quarter of this year.
The Federal Reserve’s quarterly survey of senior loan officers released this week found that banks are easing standards and terms on commercial and industrial loans to large and middle-market firms, while leaving loan standards unchanged for small firms. Meanwhile, banks eased standards on nonfarm nonresidential loans and tightened standards on multifamily loans. Lending standards on construction and land development loans were left unchanged.
The April 2018 Senior Loan Officer Opinion Survey on Bank Lending Practices also included a special set of questions intended to give policy makers more insight on changes in bank lending policies and demand for commercial real estate loans over the past year. In their responses, banks reported that they eased lending terms, including maximum loan size and the spread of loan rates over their cost of funds.
Almost all banks that reported they had eased their credit policies cited more aggressive competition from other banks or nonbank lenders as the reason. A significant percentage of banks in the survey also mentioned increased tolerance for risk and more favorable or less uncertain outlooks for property prices, for vacancy rates or other fundamentals... CONTINUE READING
GET READY CHICAGO AND SAN FRANSISCO, IT'S AMAZON GO TIME
May 15, 2018| By Jennifer Waters| Original Content of CoStar News
Chicago and San Francisco will soon be hosting new Amazon Go cashier-less grocery stores, according to Amazon.com, which posted job openings for both locations on its website.
The job postings confirm rumors that have been running rampant for months as the world’s biggest online retailer takes its first steps to expand the cashier-less grocery store concept beyond its Seattle hometown.
In a confirmation to CoStar, an Amazon spokesperson said, "We plan to open Amazon Go in Chicago and San Francisco." It’s unclear when the stores might open.
The job openings for store managers and an assistant manager, first reported by the Seattle Times, tout Amazon’s self-proclaimed creation of "the world’s most advanced shopping technology so you never have to wait in line," by having shoppers use the Amazon Go app to track prices of items removed from shelves. The first Amazon Go store opened in January, at which time Amazon hinted that it was looking at other locations.
In February, Curbed Chicago reported that building-permit plans for an "Amazon store" were filed for a downtown location at 203 N. LaSalle, across from the James R. Thompson Center at Randolph and LaSalle. CONTINUE READING
JUMP IN INTEREST-ONLY LOANS IN CMBS RAISES CAUTION FLAG
May 17, 2018| By John Doherty| Original Content of CoStar News
"Leverage isn’t an issue. Loan structure has become an issue." -- Justin Bakst, Director of Capital Markets Analysis for CoStar.CoStar analysts are tracking a little-considered data point that could suggest trouble on the horizon for commercial real estate.
Owners of commercial real estate are carrying interest-only loans at a higher rate than they did right before the last recession. However, leverage levels on debt remain nowhere near the danger levels of 2007.
But the preponderance of interest-only loans means owners could see increases in monthly debt payments right as the real estate performance of their properties - and cash flow - slows down.
And for owners with maturing interest-only loans, the ability to refinance at the sub-3 percent interest rates of recent years is highly unlikely, as interest rates have already risen and are projected to continue.
Either way, the situation could lead to an increase in commercial mortgage defaults, especially if fundamentals soften and property values slip.
"Leverage isn’t an issue yet," said Justin Bakst, director of capital markets analysis for CoStar. He specializes in risk assessment, and expects an economic downturn in the coming years that will impact rents and lower property values. "Structure of loans has become an issue," he cautioned. CONTINUE READING
COMMERCIAL/MULTIFAMILY BORROWING UP 1 PERCENT YEAR-OVER-YEAR
May 17, 2018| By Ali Ahmad| Original Content of MortgageBankersAssociationNews
According to the Mortgage Bankers Association's (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, first quarter 2018 commercial and multifamily mortgage loan originations increased one percent compared to the same period last year and, in line with the seasonality of market, first quarter originations were thirty-three percent lower than the fourth quarter of 2017.
"Borrowing and lending backed by commercial real estate is starting 2018 at roughly the same pace at which it started 2017," said Jamie Woodwell, MBA Vice President of Commercial Real Estate Research. "The property types drawing the most attention of late continued to follow different paths, with retail originations declining while multifamily and industrial increased. It was the strongest first quarter on record for originations of loans for life insurance companies and the GSEs, Fannie Mae and Freddie Mac."
First quarter 2018 originations increased one percent compared to first quarter 2017.
A rise in originations for hotel, multifamily and industrial properties led the overall increase in commercial/multifamily lending volumes when compared to the first quarter of 2017. The first quarter saw a 54 percent year-over-year increase in the dollar volume of loans for hotel properties, an 18 percent increase for multifamily properties, a 14 percent increase for industrial properties, a one percent decrease for office properties, a 27 percent decrease in retail property loans, and a 39 percent decrease in health care property loans. CONTINUE READING
TOYS R US STORES SET TO BE BID ON BY TARGET, BIG LOTS AND ALDI, AMONG OTHERS
March 28, 2018| By Lauren Thomas| Original Content of CNBC News
Several Toys R Us stores are scheduled to be auctioned off later this week, according to court documents filed Tuesday that were reviewed by CNBC.
Out of the 58 "qualified bids" being considered, Target and Aldi both are looking at one location in Kendall, Florida, which is near a handful of college campuses. Big Lots is bidding on five stores — in Fresno, California; Exton, Pennsylvania; Durham, North Carolina; Woodbridge, Virginia, and Indianapolis. Furniture chain Raymour and Flanigan is looking to bid on three stores — two in New Jersey and one in New York. Golf & Tennis Pro Shop, which owns PGA Tour Superstore, will bid on the same Indianapolis store as Big Lots, along with a store in Vernon Hills, Illinois.
Other names on the list of bidders (see a full list below) include Ashley Furniture, Shoe Station, Food Bazaar and Fit Factory.
Real estate investment trusts Federal Realty and Urstadt Biddle will both bid on the same Toys R Us store in Emeryville, California.
More than 10 privately owned real estate firms and equity groups are also hoping to own some of Toys R Us' real estate. Many of the businesses listed, such as Red Mountain Group, are known for acquiring distressed retail assets and renovating them.
The auction of these properties will take place Thursday, according to the court documents filed in Virginia. Then, Toys R Us' debtors have until April 12 to approve any final sales. CONTINUE READING
IS THERE A CORRELATION BETWEEN QUALITY SCHOOLS AND HOME VALUE?
May 14, 2018| By ValuationReview Staff| Original Content of ValuationReview
The latest Collateral Analytics Research Article analyzes the impact of school quality on home values across the U.S. and specifically how it affects the trends and levels of residential home price premiums over time, Collateral Analytics announced.
Elementary schools may matter even more than high schools in driving locational preferences of home buyers with children. In particular, elementary schools with higher math and language test scores are correlated with more expensive housing, the research reveals.
Using paired samples, many households are willing to pay substantially more to be in better school districts, even 58 percent more in one example for very similar homes.
“Studies have shown that school quality matters a great deal,” Collateral Analytics President Michael Sklarz said in the article. “Households which value school quality the most will tend to cluster and live in locations with better school ratings. This has been known for some time, but our research has enabled us to create a new set of home price series for elementary, middle and high school areas throughout the nation.” CONTINUE READING
PHOENIX REMAINS ONE OF BEST MULTIFAMILY MARKETS FOR RENT GROWTH
May 4, 2018| By Michael Petrivelli| Original Content of CoStar News
It is becoming common to see Phoenix rank among the top rent growth markets in the nation for multifamily. In CoStar’s most recent quarterly update, the Valley of the Sun’s 4.6 percent year-over-year gains were sixth-best among major U.S. metros, trailing only Orlando, Las Vegas, Sacramento, Jacksonville and Inland Empire. But Phoenix has the rare distinction of being a metro that can sustain robust rent growth while absorbing an inundation of new supply.
Many landlords in development-heavy markets have had difficulty pushing rents. Of the 17 markets expanding inventory by more than 6 percent at the end of the first quarter of 2018, only Phoenix, along with other Sun Belt metros Orlando and Tampa, boasted rent gains of 4 percent or more. Meanwhile, rent growth faltered in many quickly expanding markets including Washington D.C., Nashville, Kansas City and Raleigh.
Phoenix’s sturdy fundamentals have translated into consistently strong rent growth in recent years. Vacancies have held steady since construction began to ramp up in 2013, and this year demand is outpacing supply by a considerable margin, compressing vacancies to an all-time low in the second quarter of 2018. Jobs, a low cost of living and housing affordability are driving people to Phoenix and propping up renter demand.
Based on Apartments.com data, most searches for Phoenix apartments outside of the metro are coming from L.A., San Francisco, Chicago and New York-markets that are growing increasingly unaffordable to many residents.CONTINUE READING
MANCHESTER LANDS FINANCING TO BUILD $1.5 BILLION, MIXED-USE PROJECT
May 7, 2018| By Lou Hirsh| Original Content of CoStar News
Aftermore than a decade of delays, the $1.5 billion, mixed-use redevelopment of the U.S. Navy southwest headquarters is set to break ground on June 1, after developer Manchester Financial Group recently obtained sufficient private equity to finance construction of the downtown San Diego project known as Manchester Pacific Gateway.
Those equity sources have not been identified, though the developer has described them as pension and other domestic equity funds tied to major Fortune 500 companies.
Led by longtime local developer Douglas Manchester, the development firm last year began demolition of older buildings on the U.S. Navy’s waterfront campus, parts of which date back to the 1920s. But construction of 3 million square feet of planned new elements – including offices, hotels, retail and public spaces – has yet to proceed.
The Navy in 2006 chose Manchester Financial Group to commercially develop most of the 12-acre Navy complex, on condition that the developer build the Navy its own adjacent new office tower. However, the project was delayed by numerous environmental, legal and financing challenges over the years.
Perry Dealy, project manager for Manchester Pacific Gateway, noted that the developer as of late last year was still aiming to finance the project through a conventional construction loan.CONTINUE READING
SHOPPING AND ENTERTAINMENT MECCA IN SOUTH FLORIDA NEARING APPROVALS
May 9, 2018| By Paul Owers| Original Content of CoStar News
As South Florida awaits word on its chances to land Amazon’s coveted second headquarters, another massive development moves closer to reality.
Triple Five Worldwide, the company that built the Mall of America in Minnesota, is working on an even bigger retail and entertainment destination at Interstate 75 and Florida’s Turnpike in northwest Miami-Dade County.
Topping 5 million square feet at full build-out, American Dream Miami would be much more than just the nation’s largest mall. It would rival an amusement park with its own ferris wheel, an aquarium, submarine ride and an indoor ski park, water park and skating rink, to name a few of the planned entertainment options that would greet visitors.
“When was the last time you went to the mall and could go on a submarine ride?” asked Robert Granda, director of retail investment sales for the Franklin Street brokerage. “An indoor ski slope in Florida? It’s crazy.”
Abutting the $4 billion project to the south is a separate development by the Graham Cos. that would include a 3 million-square-foot business park, 1 million square feet of retail and 2,000 residential units. The two projects will total 511 acres of new development.
Miami-Dade County officials have signed off on both developments. The Miami-Dade... CONTINUE READING
IN A SIGN OF PROTEST, AMAZON PAUSES DEVELOPMENT OF DOWNTOWN SEATTLE HIGH-RISE OVER PROPOSED 'HEAD' TAX
May 3, 2018| By Randyl Drummer | Original Content of CoStar News
Amazon has stopped pre-construction work on its 17-story Block 18 high-rise near its corporate headquarters while it awaits a Seattle City Council vote on a contentious proposal to tax worker hours at high-grossing businesses.
The council is considering a "head tax" seeking to raise roughly $75 million a year to pay for affordable housing and services for the homeless in the city, which has seen an explosion of growth, driven largely by Amazon and other tech companies.
The e-commerce giant said in a statement it has paused construction planning at the 405,000-square-foot Block 18 at 7th and Blanchard until the council can vote on the issue and is studying the possibility of subleasing its recently leased space in another 722,000-square-foot tower under construction on Rainier Square.
“I can confirm that pending the outcome of the head tax vote by City Council, Amazon has paused all construction planning on our Block 18 project in downtown Seattle and is evaluating options to sub-lease all space in our recently leased Rainier Square building," said Amazon Vice President Drew Herdener in the statement.
The move comes on the heels of Amazon’s confirmation that it plans to add 2,000 engineers and other research and development jobs at its Boston tech hub, and expand into 430,000 square feet at WS Development's massive Seaport waterfront project. The company also announced plans to add 3,000 jobs at its Vancouver, British Columbia office.CONTINUE READING
FROM SENATORS, PESSIMISM FROM SENATORS, PESSIMISM ON HOUSING REFORM
April 25, 2018| By Mike Sorohan | Original Content of Mortgage Bankers Association
Senators from both sides of the aisle, appearing here at the Mortgage Bankers Association's National Advocacy Conference, expressed skepticism that Congress can pass comprehensive housing reform legislation this year.
"Comprehensive housing reform remains my highest priority," said Senate Banking Committee Chairman Mike Crapo, R-Idaho. "While we have bipartisan cooperation on housing reform, we do not have a final solution, but we are working on it."
Crapo said the Senate and House are capable of moving "quickly" on housing finance reform, but he said the slow pace of action in Congress make it more likely that such legislation continues to face barriers. "I know there is support for Johnson-Crapo," he said referring to the housing finance reform bill he co-wrote with former Sen. Tim Johnson, D-S.D. "We know there are good proposals out there, like the one that the Mortgage Bankers Association proposed. But the next step is always difficult."
Crapo said he is aware of actions the Trump Administration could take to make some broad secondary market reform happen administratively. "And I am open to that," he said. "But I have not seen anything from the Administration that suggests this will happen any time soon."
Crapo did offer praise for S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, of which is he is chief sponsor. The bill includes several MBA-supported priorities... CONTINUE READING
MERGER OF T-MOBILE AND SPRINT COULD RESHUFFLE MILLIONS OF SQUARE FEET OF OFFICE, RETAIL AND TOWER SPACE
April 30, 2018| By Mark Herschmeyer | Original Content of CoStar News
The leaders of T-Mobile US and Sprint Corp. are likely to reshuffle their retail line-ups and cell tower networks while keeping headquarters operations in both Seattle and Kansas City should they win approval for a $26.5 billion merger announced Sunday.
The new company, to be called T-Mobile, would be headquartered in Bellevue, WA, with a second headquarters in Overland Park, KS, according to the companies.
This past February, T-Mobile extended its lease on its 900,000 square feet of headquarters space in Bellevue. It leases another 1.7 million square feet of office space across the country.
Even though T-Mobile is the larger of the two firms, Sprint leases almost twice as much office space – more than 3.8 million square feet in the Kansas City metropolitan area.
John Legere, current president and chief executive of T-Mobile U.S., would lead the combined company. In interviews and conference calls on the deal Sunday, he called the decision to maintain two headquarters a no brainer. The twin HQs would enhance the combined company's ability to attract talent from across the country to compete for dominance in the race to build a so-called fifth generation, or 5G, cellular network. CONTINUE READING
AS WE WORK GROWS, NO SINGLE LANDLORD SEEN HAVING EXCESSIVE LEASING EXPOSURE
May 2, 2018| By Jacquelyn Ryan| Original Content of CoStar News
When the much-anticipated Dock 72 office tower opens in the revitalized Brooklyn Navy Yard this summer, Boston Properties Inc. and Rudin Management Co. will become WeWork’s largest landlords by a longshot.
WeWork’s lease for 222,000-square-feet at the joint venture’s $380 million development, part of a larger project to turn that stretch of the Hudson River on the outer borough into a hub for creative and tech firms, brings the Boston-based national real estate investment trust and New York family-real estate firm each up to about half a million square feet in lease agreements with the co-working giant.
That’s nearly double the amount of space WeWork leases with any other landlord in the country now. And still, with all that space, WeWork’s deals with Boston Properties only make up about 0.8 percent of the real estate trust’s 50.3 million square foot portfolio, according to Boston Properties' data. For WeWork, Boston Properties holds less than 5 percent of its more than 10 million-square-foot presence.
That seems to reflect a trend.
While WeWork is expanding at breakneck pace, doubling its footprint nationwide with about 90.5 percent year-over-year growth in 2017, the company has yet to dominate a substantial portion of any large landlord’s portfolio.CONTINUE READING
DEADLINE APPROACHING TO CHALLENGE PROPERTY TAX APPRAISALS
April 25, 2018| By Mihir Zaveri| Original Content of Chron News
Harris County residents who believe their property has been inappropriately valued will have until May 15 to challenge the appraisal.
Property tax protests are critical for many residents as the valuations set by the Harris County Appraisal District determine their property tax bills. Tens of thousands of protests are routinely filed every year by residential and commercial property owners as they seek to lower their valuations and tax bills.
According to the latest financial report from the district, the number of protests filed has been steadily increasing every year since 2012. In 2016, more than 378,000 property tax accounts were protested.
The process has taken on additional significance after Hurricane Harvey, which wrought significant damage on thousands of Harris County homes and buildings, leading some jurisdictions to wonder how the new appraisals would impact public coffers.
Some jurisdictions are asking for the district to re-appraise properties because of the devastation.
The full impact will not be clear until the protests are resolved. CONTINUE READING
A BUBBLE IN COMMERCIAL REAL ESTATE MAY BE ABOUT TO POP
April 18, 2018| By Wolf Richter| Original Content of Business Insider News
Commercial real estate loans at banks in the US reached a record of $4.3 trillion. This amount is now 11% higher than it had been during the crazy peak of the prior commercial real estate bubble before it imploded during the Financial Crisis. In CRE, leverage is everything. Banks, particularly smaller regional banks that specialize in it, are on the hook.
Fed governors have pointed at CRE as one of the places where "elevated" prices threaten "financial stability" because of leverage and the connection to banks. CRE loans were in part responsible for the near-collapse of the financial system during the Financial Crisis, after CRE prices - the value of the collateral for those loans - turned down.
And now, these bubble prices have started to turn down once again.
Commercial real estate prices collapsed nearly 40% during the Financial Crisis, according to the Green Street Commercial Property Price Index (CPPI). Then prices more than doubled from the low in May 2009 and peaked in September 2017, when the index was 27% above the crazy peak of the prior bubble.
But since September 2017, the index has dropped 1.7%, including a 1% drop in March from February. It is now down 2.1% from March last year and back where it had been in May 2016.CONTINUE READING
THE APPRAISAL SUBCOMMITTEE DENIES BANK'S REQUEST FOR APPRAISAL WAIVER
April 25, 2018| By Federal Register Staff| Original Content of Federal Register News
The Appraisal Subcommittee unanimously rejected a temporary waiver request from TriStar Bank of Dickson, Tennessee, during a special meeting April 23 in Washington. The Appraisal Institute led industry efforts opposing the bank’s request for a waiver of certification requirements, which would have allowed appraisals to be completed by non-certified appraisers.
The ASC board heard a summary of comments received during a 30-day public comment request published in the Federal Register and gave representatives from TriStar Bank the opportunity to address the board.
During deliberations, several ASC board members questioned the supporting documentation provided by the bank, including information on purported increases in turnaround times. The board did not see the nominal increased turnaround time as representing a scarcity of appraisers, especially considering comments submitted by local appraisers who had worked for the bank.
The ASC board offered to provide TriStar Bank with the names of local appraisers who expressed interest in working with the bank during the open comment period as the bank attempts to resolve ongoing operational issues. CONTINUE READING
CMBS DELINQUENCY RATE INCREASE FOR FIRST TIME SINCE MID-2017
April 12, 2018| By Michael Tucker| Original Content of Mortgage Bankers Association
The commercial mortgage-backed securities delinquency rate posted a rare increase in March, but it was modest, said Trepp Senior Managing Director Manus Clancy.
March marked the first time the rate has ticked up since June 2017, Trepp said.
The overall delinquency rate for U.S. commercial real estate loans in CMBS rose four basis points in March to 4.55 percent, Trepp reported. The ratings firm also breaks down delinquency rates for pre-financial crisis "CMBS 1.0" loans and the rate for post-crisis "CMBS 2.0+" loans. The post-crisis loan delinquency rate was 0.55 percent in March, while the delinquency rate for loans originated before 2008 was 47.84 percent.
Delinquency readings for three of the five major property types fell in March, Clancy said. The industrial sector saw the largest decrease, falling 23 basis points to 5.31 percent. The retail delinquency rate fell 17 basis points month-over-month and the multifamily sector's delinquency rate improved by one basis point. The office sector incurred March's largest increase--34 basis points--and the hotel sector's delinquency rate increased 12 basis points.But several metrics including loan-to-value ratios and debt service coverage deteriorated "modestly" quarter-over-quarter, noted S&P Global Ratings, New York. CONTINUE READING
HOTEL METRICS HEALTHY, BUT CAP RATES CREEP UP
April 12, 2018| By Michael Tucker| Original Content of Mortgage Bankers Association
U.S. hotels continue to see growth across all travel segments, but hotel capitalization rates have started to increase, analysts said.
TravelClick, New York, reported average daily room rates rose 0.7 percent during the first quarter as bookings increased 1.7 percent. This marks an ongoing positive trend from the beginning of the year, TravelClick Senior Industry Analyst John Hach noted. "With the spring travel season kicking off, the improved month-over-month performance across business and leisure transient bookings is very encouraging news for hoteliers," he said. "Additionally, as we head into the second quarter of 2018, the data show that both rates and occupancy are continuing to hold steady for now."
But US Realty Consultants, Columbus, Ohio, said U.S. hotel capitalization rates have "ticked up." The firm's Hotel Investor Survey found early signs of modest cap rate weakening, "although overall yield expectations continue to show strong investor interest, particularly in the full-service sector."
Discount rates--an investor's required rate of return--have held largely flat for full-service hotels, increasing just 10 basis points since the last survey in summer 2017, but limited-service hotels saw 50 basis point discount rate increases, USRC said. At the same time full-service and limited-service hotel capitalization rates increased by 30 basis points and 40 basis points, respectively.
For both full-service and limited-service hotels, overall ADR growth...CONTINUE READING
BANKS DISAPPOINTED IN PROPOSED STRESS TEST CHANGES
April 11, 2018| By Kelsey Ramirez| Original Content of HousingWire News
Tuesday night, the Federal Reserve announced its proposed changes to its annual stress test procedures – and they’re not going to benefit the big banks.
The new proposed changes would lead to slightly higher capital requirements for some of the largest and most complex groups, but would give relief to some smaller lenders, according to an article by Sam Fleming and Alistair Gray for the Financial Times.
Currently, banks must hold a fixed buffer equivalent to 2.5% of risk-weighted assets, above and beyond minimum levels. However, this would now be replaced with a new buffer with a floor of 2.5%, but that could go higher, based on how much capital a bank loses in the hypothetical stress test, according to an article by Aaron Back for The Wall Street Journal.
Thus, a bank with a common equity tier 1 capital ratio of 9% that falls to 6% under the Fed’s most severe scenario would have to hold an extra 3 percentage points of capital, not 2.5 points as under the existing system. The net effect is to raise capital requirements on banks that see more volatile results during a crisis.
Nomura’s Steven Chubak estimates Goldman Sachs and Morgan Stanley might each have to retain additional capital thanks to the changes. However, more commercially-focused banks like Citigroup, Bank of America and JPMorgan Chase should be less affected.
But smaller lenders, or those not considered “systemically important” would see a significant decrease in their capital requirements – between $10 billion and $45 billion in aggregate, according to the Financial Times article.CONTINUE READING
DOWNTOWN CHICAGO FEELING EFFECTS OF APT. SUPPLY BUILDUP, SLOWING JOB GROWTH
April 6, 2018| By John Doherty | Original Content of CoStar News
After adding thousands of flashy, expensive high-end apartments over the past three years, downtown Chicago is feeling the effects. Apartment vacancy in the downtown submarket increased 200 basis points in 2017 to hit 13%, nearly twice the market average of 6.9%.
Rent growth has been flat and concessions are up, with some owners offering months of free rent to stabilize new buildings, and new product is pricing lower than 12 months ago.
Apartment inventory increased 70% in the downtown submarket this cycle, according to CoStar data, to approximately 39,000 units. An additional 20% more units are under construction, with 7,000 new units under construction in the downtown submarket alone.
Similar waves of new apartment construction have hit a select number of other markets, including Nashville, downtown Denver and Seattle’s Lake Union submarket.
"It makes you a little bit nervous. This situation is really calling for a lot of caution," said Anthony Rossi, Sr., president of Chicago’s M&R Development, which has developed high-end multi-family and mixed-use projects throughout Chicago...CONTINUE READING
TARGET RAMPS UP SMALL-STORE STRATEGY IN NYC
April 4, 2018| By Diana Bell | Original Content of CoStar News
Target is making sure Walmart and Amazon can’t rest on their laurels in the New York City metro, unveiling three new small-format stores slated to open in the coming years: one each in Manhattan’s Upper East Side, Staten Island and Brooklyn.
The retailer signed a lease with landlord TF Cornerstone to anchor ground-floor retail space within The Fairfax (pictured, above), a 315-unit apartment building located at 1201 Third Ave. in New York City. When the 22,600-square-foot store opens next year, it will be Target's seventh in Manhattan. This summer, locations on the Lower East Side and East Village will come online. A Hell’s Kitchen location will follow in 2019.
Steve N. Gonzalez, director of leasing for TF Cornerstone, said his company was "thrilled to be partnering with Target to open its first-ever store on the Upper East Side at The Fairfax," adding its quick shopping experience will make it "a valuable resource" for both Fairfax residents and the Upper East Side community.
Ripco's Richard Skulnik, who is working with Target for its ongoing small-store rollout, represented the retailer in lease negotiations. Cushman & Wakefield's Christian Stanton and Andy Kahn acted on behalf of TF Cornerstone. CONTINUE READING
COULD INDUSTRIAL REAL ESTATE GET CAUGHT IN TRADE WAR CROSSFIRE?
April 6, 2018| By Jacquelyn Ryan | Original Content of CoStar News
Larry Callahan heads one of the largest developers of industrial real estate in the Southeast, with projects located from Tennessee to Florida.
As the chief executive of Patillo Industrial Real Estate in Georgia, Callahan leads his family-owned business in developing and managing warehouse-distribution projects for businesses as varied as compressor creator Bitzer U.S. Inc. to King’s Hawaiian Bakery.
Like the rest of what is known as the industrial real estate market, the hottest asset class in all of commercial real estate for the past two years, Callahan’s business has been booming.
Right now, he’s not too worried about the impact of President Donald Trump’s posturing on trade.
"I do not believe that the first impact of tariffs (and retaliatory tariffs) has been fully priced into assets like industrial real estate," he said. "And I would argue that the impact of a first round of tariffs on the pricing of industrial real estate is minimal."CONTINUE READING
APARTMENT VACANCIES ON THE RISE, RENT GROWTH STARTS TO COOL
March 29, 2018| By RealPage Staff | Original Content of RealPage News
RICHARDSON, Texas (March 29, 2018) – The U.S. apartment market’s performance stumbled during the first quarter of 2018. Occupancy backtracked to 94.5 percent in March, down from 95 percent a year earlier, according to real estate technology and analytics firm RealPage, Inc. (NASDAQ:RP). Annual rent growth cooled to 2.3 percent, the slowest pace of increase since the third quarter of 2010.
“While some loss of apartment market performance momentum is normal when cold weather in much of the country discourages household mobility, the occupancy downturn in early 2018 is pronounced,” said RealPage chief economist Greg Willett. “With so much new supply coming on stream, even a short period of sluggish demand can do some real damage. It’s difficult to maintain pricing power in such a competitive leasing environment.”
Today’s 94.5 percent occupancy rate represents a return to more normal conditions, after the apartment market was unusually tight in 2012-2017. Occupancy averaged 95 percent in that six-year period, peaking at 95.6 percent as of mid-2016. However, current occupancy matches the long-term average registered over the past 25 years. CONTINUE READING
FHFA ANNOUNCES JUNE 2019 IMPLEMENTATION OF THE NEW UNIFORM MORTGAGE-BACKED SECURITY
March 28, 2018| By FHFA Staff | Original Content of Federal Housing Financing Agency
Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced that on June 3, 2019 Fannie Mae and Freddie Mac (the Enterprises) will start issuing a new, common security, the Uniform Mortgage-Backed Security (UMBS), in place of their current offerings of TBA-eligible mortgage-backed securities. The new UMBS will be issued through the Enterprises' joint venture, Common Securitization Solutions (CSS), using the Common Securitization Platform (CSP).
This announcement provides market participants with certainty about the timing of the Enterprises' transition to UMBS and enables them to make the preparations necessary to ensure that the transition is smooth. The announcement coincides with the Enterprises and CSS having attained three critical milestones: completion of key application development for issuance of the UMBS on the CSP, completion of system-to-system testing, and initiation of end-to-end (pre-parallel) testing.
"The transition to the new, common security requires planning, investment, and preparation by a wide variety of market participants," said FHFA Director Melvin L. Watt. "We have now set the specific date that the Enterprises will start issuing the UMBS and I urge the industry to get ready now to ensure smooth, successful implementation." CONTINUE READING
FHFA RELEASES WORKING PAPER APPRAISERS SHOULD READ
April 4, 2018| By Appraisal News Staff | Original Content of Appraisal News
The Federal Housing Finance Agency (FHFA) released Working Paper 18-01, co-authored by FHFA staff members Jessica Shui and Shriya Murthy, that every appraiser, and anyone who relies on appraisals, should take notice of, according to a FHFA release.
Appraisal management companies became prominent largely due to their nature as intermediaries that prevent lenders from directly pressuring appraisers to “facilitate” transactions, but this function was only intended to be the means to an end—a means of approaching unbiasedness in appraisals. Simply playing the firewall is not all an AMC can do to improve appraisals; there is still the matter of quality assurance. An accurate, well-documented appraisal cannot support an inflated valuation, the release said.
“In this paper, we specifically study the differences in quality between appraisals associated and unassociated with appraisal management companies. Our analysis indicates that, when compared to non-AMC appraisals, AMC appraisals generally demonstrate a similar degree of overvaluation,” the FHFA said. “At the same time, AMC appraisals seem to be more prone to contract price confirmation and super-overvaluation. Beyond valuation statistics, AMC and non-AMC appraisals seem to share a similar propensity for mistakes, a somewhat-unexpected finding given that the former tend to use a greater number of comparable properties. CONTINUE READING
CORELOGIC: ENTRY-LEVEL HOUSING SHORTAGE PUSHES UP HOME PRICES IN JANUARY
March 6, 2018| By Kelsey Ramirez| Original Content of HousingWire News
Home prices increased in January, but the increase was even more pronounced among entry-level homes, according to the latest Home Price Index and HPI Forecast from CoreLogic, a property information, analytics and data-enabled solutions provider.
Home prices increased 6.6% from January 2017 to January 2018, and increased 0.5% from December to January, the report showed.
“Entry-level homes have been in particularly short supply, leading to more rapid home-price growth compared with more expensive homes,” CoreLogic Chief Economist Frank Nothaft said. “Homes with a purchase price less than 75% of the local area median had price growth of 9% during the year ending January 2018.”
“Homes that sold for more than 125% of median appreciated 5.3% over the same 12-month period,” Nothaft said. “Thus, first-time buyers are facing acute affordability challenges in some high-cost areas.”CoreLogic forecasted home prices will continue to increase, rising 4.8% from January 2018 to January 2019. However, this increase will... CONTINUE READING
GROCERY-ANCHORED CENTERS REMAIN CHOICE OF RETAIL INVESTORS, DESPITE GROWING COMPETITION, INVESTMENT RISK
March 13, 2018| By Randyl Drummer| Original Content of CoStar News
Sales of U.S. grocery anchored shopping centers rose more than 5% in 2017, bucking the trend of declining trading volume across most major types of commercial property last year as investors poured into the grocery sector seeking to take advantage of its near-legendary income reliability.
Neighborhood centers anchored by supermarkets and other grocery retailers have continued to attract buyers, even as grocers slowed expansion, opening nearly 29% fewer stores last year following a burst of expansion and store openings of 2016, according to JLL’s recent Grocery Tracker 2018 report.
Meanwhile, market fundamentals for neighborhood centers that constitute the bulk of grocery-anchored centers continue to look very healthy relative to malls and power centers, CoStar analysts say.
Annual demand growth for neighborhood grocery-anchored centers has outstripped supply since 2010 and is expected to do so again in 2018 before reaching a tipping point next year, according to CoStar's 2018-2022 retail forecast. CONTINUE READING
PENDING HOME SALES STUMBLE 4.7 PERCENT IN JANUARY
FEBRUARY 28, 2018 | By NAR Staff Members | Original Content of National Association of Realtor News
WASHINGTON (February 28, 2018) — After seeing a modest three-month rise in activity, pending home sales cooled considerably in January to their lowest level in over three years, according to the National Association of Realtors®. All major regions experienced monthly and annual declines in contract signings last month.
The Pending Home Sales Index,* www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, fell 4.7 percent to 104.6 in January from a downwardly revised 109.8 in December 2017. After last month’s retreat, the index is now 3.8 percent below a year ago and at its lowest level since October 2014 (104.1).
Lawrence Yun, NAR chief economist, says pending sales took a noticeable step back to start 2018. “The economy is in great shape, most local job markets are very strong and incomes are slowly rising, but there’s little doubt last... CONTINUE READING
FHA EXPANDS FORECLOSURE RELIEF FOR 2017 DISASTERS
FEBRUARY 26, 2018 | By MBA NewsLink Staff | Original Content of Mortgage Bankers Association News
The Federal Housing Administration announced expanded mortgage relief to FHA-insured homeowners who live or work in areas impacted by Hurricanes Harvey, Irma and Maria as well as California wildfires and subsequent flooding and mudslides.
In Mortgagee Letter 2018-01 (https://www.hud.gov/sites/dfiles/OCHCO/documents/18-01ml.pdf), FHA instructed mortgage servicers to offer additional options to eligible disaster victims in Texas, Louisiana, Georgia, Florida, South Carolina, California, Puerto Rico and the U.S. Virgin Islands, allowing them to remain in their homes while reducing losses that would otherwise negatively impact FHA's Mutual Mortgage Insurance Fund.
"It's clear that FHA homeowners in these areas need more help to get back on their feet as they recover from these storms," said HUD Secretary Ben Carson. "Today, we offer immediate relief to these borrowers which will allow them to resume their mortgage payments without crippling payment shock and fees while protecting our insurance fund in the process." CONTINUE READING
ANALYSIS: CRE REACHES 'LATE STABLE' STAGE
MARCH 1, 2018 | By Michael Tucker | Original Content of Mortgage Bankers Association News
The commercial real estate market has reached a "late stable" stage with some "moderate" signs of distress, reported RCLCO, Los Angeles.
The late stable stage precedes the early downturn stage, RCLCO said.
"Multiple metrics and indicators continue to suggest that we are in a ‘late stable' stage of the market cycle for most property types in most geographies," the company's State of the Real Estate Market report said. "We continue to have limited reason to fear an impending or sharp downturn in real estate performance in certain property types and geographies."
RCLCO said its base case scenario assumes the current late stable conditions will likely extend through this year, "though we continue to be wary of potential ‘left tail' events that could derail this trajectory."
On balance, the consulting firm anticipates moderating but generally positive operating and investment performance in the near future, largely due to a strong economy and "healthy" property market fundamentals.CONTINUE READING
APPRAISERS KEY TO PROPERTY TAX APPEALS, APPRAISAL INSTITUTE SAYS
FEBRUARY 28, 2018 | By Appraisal Institute Staff| Original Content of Appraisal Institute
Highly qualified appraisers are able to assist homeowners with appeals of property taxes, which can be a homeowner’s largest annual expense, the nation’s largest professional association of real estate appraisers said today.
“Sometimes errors are made in how local governments calculate the amount of tax a homeowner owes,” said Appraisal Institute President James L. Murrett, MAI, SRA. “It’s possible for assessments to be based on flawed information, such as incorrect square footage or number of bedrooms or bathrooms or even location.”
Assessors can’t look at each property individually every year as an appraiser might for mortgage financing, employee relocation or other single-property appraisal assignments, Murrett said.
He added that homeowners shouldn’t assume that the assessor is out to get them in assessing a property’s value and therefore determining the amount of tax owed. Property tax assessors usually are elected officials; it’s not in their best interest to alienate voters, he noted.However, Murrett advised, homeowners can consider a property tax appeal and should be prepared with all the necessary information.Many appraisers collaborate with property tax consultants and attorneys who specialize in tax appeal matters, which could provide...CONTINUE READING
CBRE PREDICTS RECORD INVESTMENT IN 2018
Increase in Activity Will Be Minor, but Company Tells Real Capital Attendees Don't Fear End of Cap Rate Compression
FEBRUARY 28, 2018 | By Garry Marr| Original Content of CoStar News
The end of cap rate compression may be coming, but the executive managing director of CBRE Ltd. in Canada says there are mitigating factors that may slow the trend.
"Firstly, there is a limit to how high and how fast the Bank of Canada can move," Paul Morassutti told a real estate audience at the Real Capital conference in Toronto, pointing to Canadian household debt. "It means rate hikes pack a very serious punch."
Morassutti, who is also an executive vice president with CBRE, noted 10-year Canada bond yields are now 70 basis points higher than in earlier 2017, after three quarter point movements in the central bank's overnight lending rate.
"With the combination of rising interest rates and compressing rates, we now have spreads at or below the 10-year average across all asset classes," he said, noting every bank in Canada has forecast a minimum of two more rate increases in 2018.CONTINUE READING
FEDS SEE INCREASED CRE LENDING RISK AS VALUATIONS PEAK AND LOW INTEREST RATE ENVIRONMENT COMES TO AN END
Multifamily, Owner-Occupied Property Loan Delinquencies Reverse Course, Start Moving Up
MARCH 1, 2018 | By Mark Heschmeyer| Original Content of CoStar News
New data and commentary from federal financial regulators are pointing to signs of increased risks in CRE lending.
Notably, the amount of delinquent multifamily and owner-occupied property loans on the books of U.S. banks increased in the fourth quarter of last year, according to statistics released this week by the Federal Deposit Insurance Corp. (FDIC).
And while the increases and total volumes are small, the uptick marks a change in the trend after multifamily delinquency levels hit the lowest mark ever recorded by the FDIC. The FDIC also reported a second quarterly increase in delinquencies for owner-occupied property loans, although by a low 0.4% to $6.74 billion.
The change in multifamily loan deliquency was more dramatic percentagewise, increasing 14.4% from the third quarter to the fourth quarter of 2017 to $1.08 billion. That change iin direction follows decreases of 4%, 8.1% and 9.8% over the first three quarters of 2017.CONTINUE READING
WALL STREET SNAPS UP CHEAP SINGLE-FAMILY RENTALS
Feb 16, 2018 | By Patrick Clark| Original Content of Bloomberg News
For Invitation Homes Inc., the U.S. landlord built by Blackstone Group LP, the 220 houses it owned in working-class areas around Atlanta were outliers, filled primarily with low-income tenants paying rents well below those at its other properties.
For another company with big private equity ties, the homes were an opportunity.
Promise Homes Co., a firm started last year with $130 million from investors including Ares Management co-founders Tony Ressler and Michael Arougheti, purchased the houses from Invitation Homes for $22 million in August. The startup set about a strategy built around helping tenants improve their finances, aimed at keeping them in their rentals and minimizing costly turnovers.
As Wall Street’s rental-home industry matures from its early days of frenzied homebuying after the foreclosure crisis, upstarts such as Promise are turning to cheaper houses that have largely been cast aside by big, CONTINUE READING
JANUARY NEW HOME PURCHASE MORTGAGE APPLICATIONS INCREASED 18.4 PERCENT YEAR OVER YEAR
Feb 13, 2018 | By Ali Ahmad | Original Content of Mortgage Bankers Association News
he Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for January 2018 shows mortgage applications for new home purchases increased 18.4 percent compared to January 2017. Compared to December 2017, applications increased by 34 percent. This change does not include any adjustment for typical seasonal patterns.
"Mortgage applications for new homes surged in January and were up 18 percent on a year over year basis," said Lynn Fisher, MBA Vice President of Research and Economics. "This complements other positive news on US job growth suggesting that economic fundamentals are strong. Based on applications, we estimate that new home sales were running at a pace of 700,000 on a seasonally adjusted annual basis - the highest such estimate in our survey which began in 2013."
By product type, conventional loans composed 71.7 percent of loan applications, FHA loans composed 15.3 percent, RHS/USDA loans composed 1.2 percent and VA loans composed 11.7 percent. The average loan size of new homes decreased from $339,203 in December to $338,918 in January. CONTINUE READING
HOTEL FINANCINGS POWERING SURGE IN CMBS MARKET
Feb 13, 2018 | By Mark Heschmeyer| Original Content of CoStar News
CMBS issuance this year is off to a strong start, driven, as it was last year, by single-borrower deals totaling $4.7 billion so far.
Notably, hotel properties again have been one of the stars of the current run and have facilitated a number of large refinancings and acquisitions. Issuance of CMBS loans in the hotel sector grew from $2.7 billion in 2016 to nearly $14.5 billion in 2017, according to JLL.
Slightly more than half of this year's private-label deals by dollar amount are backed by hotel properties -- $2.9 billion in all with two more in the pipeline. The loans this year range from $190 million to $960 million averaging $415 million.
"The size of the CMBS market is where it should be at this point in the cycle, and it's continuing to provide a valuable alternative for property types that might not be getting life company or other institutional money because of lender selectivity." said Tom Fish, executive managing director and co-head of JLL Capital Markets, Finance.
However, the current run of hotel deals may be due for a slowdown. Early warning signs of declining hotel performance have emerged, says Fitch Ratings. Fitch has seen an increase in the volume of hotel loans transferring to special servicing and performance metrics in seven of the top U.S. metropolitan markets are under pressure by oversupply. CONTINUE READING
WHAT AN OVERHAUL OF FANNIE MAE AND FREDDIE MAC WOULD MEAN FOR COMMERCIAL REAL ESTATE
Feb 8, 2018 | By Ely Razin| Original Content of Forbes News
CMBS loans for multifamily properties have increasingly been going to Fannie Mae and Freddie Mac in the decade since the global financial crisis, we found in a recent analysis of the commercial mortgage-backed securities market. At the same time, the rumblings of change are making themselves heard in the distance. If the latest efforts to overhaul the U.S. housing finance system don’t fall by the wayside the way previous attempts did, such changes – especially coming as Fannie and Freddie are on the rise – could have broad implications for the securities market as well as lenders, taxpayers, multifamily lending and the housing finance system.
CrediFi examined a sample of $150 billion in loans secured by 5,000 commercial properties across the U.S. that were originated from 2003 through the first six months of 2017 and found that almost all the multifamily CMBS loans originated pre-crisis have left the CMBS world since 2009. When receiving new financing, 61% of the loans, or $18.7 billion, became agency loans, with slightly more going to Fannie Mae than to Freddie Mac. Most of the rest moved on to lenders’ balance sheets, with just a sliver going back into CMBS.
The CrediFi analysis is bolstered by findings from the Financial Stability Oversight Council, which found in its 2017 annual report that while CMBS issuance fell by over a quarter year-over-year in 2016 – a reversal of the post-crisis trend of rising issuance – agency lending rose 23.7% in 2016, when it accounted for over 60% of securitized commercial loans issued. CONTINUE READING
AVERAGE HOME SELLER PROFITS AT 10-YEAR HIGH OF $54,000 IN Q4 2017
Feb 7, 2018 | By ATTOM STAFF| Original Content of Attom Data Solutions
IRVINE, Calif. – Feb. 1, 2018 — ATTOM Data Solutions, curator of the nation’s largest multi-sourced property database, today released its Year-End and Q4 2017 U.S. Home Sales Report, which shows that home sellers in Q4 2017 realized an average home price gain since purchase of $54,000, up from $53,732 in the previous quarter and up from $47,133 in Q4 2016 to the highest since Q3 2007 — a more than 10-year high.
That $54,000 average home seller profit represented an average 29.7 percent return on investment compared to the original purchase price, up from 28.8 percent in the previous quarter and up from 26.8 percent in Q4 2016 to the highest average home seller ROI since Q3 2007.
“It’s the most profitable time to sell a home in more than 10 years yet homeowners are staying put longer than we’ve ever seen,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “While home sellers on the West Coast are realizing the biggest profits, rapid home price appreciation in red state markets is rivaling that of the high-flying coastal markets and producing sizable profits for home sellers in those middle-American markets as well.”CONTINUE READING
CHANGES IN COMMERCIAL REAL ESTATE ARE REWRITING LANDLORD RULES FOR THE 21ST CENTURY
Jan 30, 2018 | By Marcus Moufarrige| Original Content of Forbes News
The digital transformation is more than just another buzzword. As the millennial workforce prepares for middle age, Gen Z is now also entering the workplace and continuing the drive for better technology and mobility. The future of commercial real estate is forcing landlords to evolve and meet a new set of tenant demands.
The entire landscape is evolving as we increasingly see consolidation and specialization in new and upcoming industries. Even finance, which has previously been accused of being slow to adapt to the digital world, is beginning to embrace flexible office space and diverting from its traditional office background. Tenants now have a much longer list of requirements than the traditional amount of square footage based on X amount of square feet per head.
Using office space in multiple ways to provide greater flexibility and efficiency is rapidly rising to the top of wish lists in boardrooms across the globe. The key words here are "flexible" and "service." Commercial real estate is being disrupted by tenants who have seen that flexibility and service can be a reality thanks to companies offering these types of CONTINUE READING.
ENOUGH WITH THE DOOM AND GLOOM. RETAIL AND ITS REAL ESTATE HAVE BRIGHT SPOTS.
Top retail real estate owners in the U.S. have maintained occupancy rates at or above 95 percent.
Jan 24, 2018 | By Lauren Thomas| Original Content of CNBC News
Retail isn't just decades-old apparel brands and antiquated shopping malls.
The future for many industry names is bright and booming, despite dire headlines. And malls and shopping centers are taking on a new image of their own, bringing in experiential tenants and living spaces as department stores and other big-box anchors scale back.
"Store closures grabbed the headlines and drove the retail apocalypse narrative in 2017 and into 2018," said Deborah Weinswig, managing director of FGRT (formally Fung Global Retail & Technology).
However, "total in-store sales continued to grow, yielding an uplift in sales densities across US retail," she said. CONTINUE READING
THE 10 MOST EXPENSIVE U.S. STREETS FOR OFFICE SPACE
While location is what makes these streets so desirable, competition for space from technology companies is what's driving up rents.
Jan 26, 2018 | By Patricia Kirk| Original Content of National Real Estate Investor News
Many of the nation’s most prominent companies are willing to pay a considerable premium for a high-profile address, according to the latest study by real estate services firm JLL, which ranks the priciest U.S. streets for office space. Asking rents for office space on the 47 most expensive U.S. streets average $48.65 per sq. ft. — nearly 47 percent more than the average for office rent nationally.
While location is what makes these streets so desirable, the movement of major technology companies to more prestigious locations has created competition with financial, legal and consulting services firms, driving up rents.
Maturing tech companies have office space needs that are similar to the professional services industries that have traditionally occupied top class-A buildings, says JLL Director of U.S. Office Research and report author Scott Homa. He notes that major tech players are leasing large blocks of space in the most desirable office locations from Menlo Park, Calif.’s Sand Hill Road to Main St. in Cambridge, Mass. Half of the 10 most expensive U.S. office streets are now in tech hub cities. CONTINUE READING
PROPERTY SALES VOLUME DROPS AGAIN IN 2017 BY 7 PERCENT
Jan 24, 2018 | Commercial Real Estate Direct Staff Report | Original Content of Commercial Real Estate News
The volume of commercial properties that changed hands last year declined by 7 percent to $463.9 billion, according to Real Capital Analytics. That marks the second year in a row in which sales volumes have declined. In 2016, they were down 11 percent from the previous year.
The New York research firm blamed the weaker sales volume on the growing gap in pricing expectations between sellers and buyers. The latter don't expect capitalization rates, which determine pricing levels and are reliant on interest rates, to decline, while the former remain stubborn with their pricing expectations.
Every major property sector, with the exception of industrial, saw a decline in sales volume last year. Sales of hotel properties plunged by a sector-leading 24 percent to $27.5 billion; retail properties fell by 18 percent to $63.4 billion, and office properties dropped by 8 percent to $131.9 billion. CONTINUE READING
THREE CRE JOBS THAT WILL CHANGE WITH THE RISE OF PREDICTIVE ANALYTICS
Jan 25, 2018 | By Marc Rutzen | Original Content of Forbes News
After speaking with hundreds of commercial real estate professionals during the development of our real estate predictive analytics platform, we’ve realized that although everyone wants to capitalize on big data and predictive analytics, few people have a solid understanding of the impact emerging predictive analytics technologies could have on jobs.
There are three commercial real estate jobs I believe will be fundamentally disrupted by the power of predictive analytics and machine learning. After the widespread adoption of predictive analytics products in real estate, chances are good the roles of these professionals will look much different.
The job of the average real estate broker today is difficult and time-consuming. Each week, brokers must make hundreds of calls to generate leads, analyze dozens of potential deals to produce broker opinions of value (BOV), market listings through multiple channels, attend walk-throughs, collect and vet offers and ultimately guide deals through closing.CONTINUE READING
AVOID THESE FOUR COMMON COMMERCIAL REAL ESTATE INVESTING MISTAKES
JANUARY 17, 2018 | By Michael Episcope | Original Content of Forbes News
Buying and managing investment property — be it houses, multifamily units or commercial real estate — is hard work. Owners must choose between paying to outsource and handling everything themselves. The latter can range from finding financing and performing maintenance to resolving emergencies and legal problems. All these tasks extract a price in terms of time, aggravation and mistakes for owners who lack expertise in all of these areas.
Complicating matters further, finding properties with potential is a big challenge facing investors today. High property prices in top markets are driving investors into secondary markets and new types of properties, notes National Real Estate Investor. But these are assets that require deep industry knowledge and experience and challenges I faced as an active individual real estate investor that inspired me to co-found Origin Investments to help individual investors address these obstacles.CONTINUE READING
3 COMMERCIAL REAL ESTATE TRENDS TO WATCH IN 2018
JANUARY 17, 2018 | By Ely Razin | Original Content of Forbes News
Political and economic uncertainty has pervaded the past year, with the U.S. economy showing signs of growth amid low inflation and a distressed retail segment in 2017, as accountants struggle to understand all the implications of the recently passed changes to the tax laws and Europe prepares for Brexit. Here’s a look at three commercial real estate trends to watch in 2018.
With Jerome Powell set to take over as new Federal Reserve chairman, there is some uncertainty surrounding the Fed, specifically whether it will stick to its plan to continue raising interest rates and what it might do about the stubbornly low inflation. The benchmark lending rate rose in December by a quarter percentage point, to a target range of 1.25% to 1.5%. At its December policy meeting, the Federal Reserve left unchanged its forecast for three 2018 rate hikes, following three increases in 2017.
Yet the 10-year Treasury rate has been fairly stable since its steep rise in the second half of 2016, indicating that the market may not be convinced the Fed will be raising rates significantly. The Federal Open Market Committee signaled late last year it expects job market growth to slow, by leaving out prior comments saying further strengthening was expected and instead saying monetary policy would help the labor market “remain strong.” CONTINUE READING
SLOW AND STEADY GROWTH: 2018 PERFORMANCE FORECAST FOR TOP 4 COMMERCIAL REAL ESTATE SECTORS
JANUARY 9, 2018 | By Champaign Williams | Original Content of Forbes News
Following one of the longest economic expansions in U.S. history, Colliers International economists forecast 2017 was the year of the market’s peak.
There are several factors that indicate the cycle’s best years are in the past, Colliers International Chief Economist Andrew Nelson wrote in the company’s 2018 Outlook report, including slowing deal volume, eight consecutive months of declining commercial property prices, plateaued cap rates, a widening divide between seller asking prices and buyer bids and investors going in search of riskier assets for better returns.
Though the cycle is getting long in the tooth, the industry is expected to continue riding the waves of the strong economy to steady growth, albeit at a more moderate pace than years past. CONTINUE READING
ECONOMIC PANEL PREDICTS HOUSING WILL CONTINUE TO GAIN GROUND IN 2018
JANUARY 9, 2018 | By Elizabeth Thompson | Original Content of National Association of Home Builders
The newly enacted tax law will create a more favorable tax climate for the business community, which should spur job and economic growth and keep single-family housing production on a gradual upward trajectory in 2018, according to economists speaking at the NAHB International Builders’ Show® in Orlando, Fla., today.
“We expect that tax reform will boost GDP growth to 2.6 percent in 2018, and this added economic activity will also bode well for housing, although there will be some transition effects in high-tax jurisdictions,” said NAHB Chief Economist Robert Dietz. “Ongoing job creation, expected wage increases and tight existing home inventory will also boost the housing market... CONTINUE READING
LAS VEGAS AMONG CITIES EXPECTED TO BE A TOP 2018 HOUSING MARKET: REPORT
These will be the top 10 housing markets of 2018
JANUARY 3, 2018 | By Kelsey Ramirez | Original Content of HousingWire News
To determine its predictions for the best real estate markets of 2018, realtor.com’s economic data team looked at the number of sales of existing homes and their prices, along with the amount of new home construction in the 100 largest markets.
Realtor.com also analyzed the local economies of each area, along with population trends, unemployment rates, median household incomes and other factors.
“People are going to continue to seek out pockets of affordability that remain in the market,” realtor.com Chief Economist Danielle Hale said. “A lot of these places are more affordable than surrounding areas, yet still have strong economies. Even though prices are expected to grow, most of these markets will still remain relatively affordable in 2018.” CONTINUE READING
HOUSING OUTLOOK 2018: 6 PREDICTIONS FROM THE EXPERTS
JANUARY 3, 2018 | By Samantha Sharf | Original Content of Forbes News
In 2017 Americans learned to expect the unexpected, whether it be politics, weather or housing. Driven by record low inventory, little about the housing market went as forecast last year. “We thought there would be some things to take the pressure off,” reflects Skylar Olsen, senior economist at home search site Zillow. Interest rates would rise. Construction would pick up. Price growth would moderate. “That did not happen at any impactful level.”
Instead the market got hotter: inventory tightened, prices rose, mortgage rates barely budged and, though new home construction picked up at the end of the year, it was not at the starter price points where new inventory is needed most. Like the soaring stock market, the housing market often seemed disconnected from the tumult in Washington and natural disasters elsewhere. Observes Javier Vivas, director of economic research for Realtor.com: “We saw the economic growth and the economic momentum function as an override for a lot of external forces.” CONTINUE READING
CMBA: CRE ORIGINATORS EXPECT 'STRONG' 2018
JANUARY 4, 2018 | By MBA NewsLink Staff | Original Content of Mortgage Bankers Association
Commercial and multifamily mortgage originators expect another strong year according to the Mortgage Bankers Association's 2018 CREF Outlook Survey.
Nearly four in five (78 percent) of top commercial/multifamily firms expect originations to increase in 2018, with nearly one-fourth (22 percent) expecting an overall increase of 5 percent or more across the entire market. When forecasting just their own firm's originations, nearly half (47 percent) expect to see an increase of 5 percent or more in 2018.
"Mortgage bankers look to 2018 as another growth year for the commercial and multifamily mortgage markets," said MBA Vice President for Research and Economics Jamie Woodwell. "The majority of top firms expect a ‘very strong' appetite from lenders and a ‘strong' appetite from borrowers to drive commercial mortgage originations higher." CONTINUE READING
HOW MAJOR REAL ESTATE DEVELOPERS ARE EXPERIMENTING WITH CO-LIVING
JANUARY 3, 2018 | By Omri Barzilay | Original Content of Forbes News
In the last decade, coworking has proven itself to be more than just a trend. It has dramatically changed the way many of us work today and reframed notions of how an office should look. And then came co-living.
Co-living, a style of shared urban residence, typically involves furnished apartments with communal kitchens and common spaces – and an emphasis on amenities and community. The advantages for Millennials include affordability flexibility and ease of use.
Not so long ago, a few startups like Common, The Collective, Ollie and WeLive by WeWork, started experimenting with applying the cowering... CONTINUE READING
CONSTRUCTION SPENDING THROTTLES PAST EXPECTATIONS IN NOVEMBER , LED BY RESIDENTIAL BUILDING
Construction spending rose 0.8% in November, to a seasonally adjusted annual rate of $1.26 trillion, said Commerce Department
JANUARY 3, 2018 | By Andrea Requier | Original Content of Market Watch News
The monthly gain was led by the private sector, where spending was up 1.0%. Construction outlays in the public sector were up only 0.2% for the month. Overall spending was 2.4% higher than in November 2016, and spending for the year to date was 4.2% higher than the same period a year earlier.
September and October spending levels were revised up to a net 0.4% increase... CONTINUE READING
Commercial Real Estate Lenders To Keep An Eye On In 2018
Who are the up-and-coming commercial real estate lenders in New York City we might expect to see more of in 2018?
December 27, 2017 | By Ely Razin | Original Content of Forbes News
CrediFi took a look at who’s been on the rise this year to get some insight. Here are some of our findings:
Wells Fargo is on track to be the top originator of New York City commercial mortgages for 2017, based on its lending record for the first nine months of the year.
The San Francisco-based bank originated nearly $4 billion in NYC commercial real estate loans in the first nine months of the year – about $1 billion of it in Q3, when it financed properties including Vornado Realty Trust’s $500 million acquisition of the 840,000-square-foot office tower at 330 Madison Ave.
There are two caveats here, though. CONTINUE READING
CRE INDUSTRY GROUPS APPLAUD OUTCOME OF TAX BILL
'Huge Victory' for Sector Seen Mainly in Preserving, Expanding Existing Tax Benefits of Commercial Property Ownership
DECEMBER 20, 2017 | By Randyl Drummer | Original Content of Costar News
Late changes to the Tax Cuts and Jobs Act, the first major overhaul of the U.S. tax code in more than 30 years, further sweetened a deal already loaded with benefits for commercial property owners as earlier concerns gave way to full-throated praise for the final bill Wednesday by groups from virtually every corner of the CRE industry.
The Republican-controlled U.S. House of Representatives gave final approval to the $1.5 trillion legislation Wednesday, sending the bill to President Donald Trump for his signature. The Senate passed the bill by a partisan vote of 51-48 in the early hours, and the House followed suit by approving it for the second time in two days after a procedural mishap forced another vote... CONTINUE READING
PRIVATE CRE, PUBLIC EDUCATION DEVELOPMENT AMONG CONSTRUCTION SPENDING HIGHLIGHTS
Private construction provided a bright spot, on both year-to-date private residential and non-residential spending, a report from the Associated General Contractors of America showed.
DECEMBER 7, 2017 | By Gail Kalinoski | Original Content of Commercial Property Executive
Aided by increases in private commercial real estate and public educational development, overall construction spending reached a record high in October, according to the Associated General Contractors of America. However, the Arlington, Va.-based association noted public-sector investments in infrastructure continued to lag behind earlier levels, according to an analysis of new government data.
Association leaders said federal, state and local officials need to address the growing shortfall in transportation, water and wastewater infrastructure spending. “It is essential to increase the nation’s investment in roads and other transpiration facilities to keep the economy growing. And investment in safer highways, drinking water and wastewater systems are important for public safety and health,” Stephen Sandherr, the association’s CEO, said in a prepared statement...CONTINUE READING
FEDS SEE SMALLER MULTIFAMILY FINANCE MARKET IN 2018
FHFA Lowers 2018 Multifamily Lending Caps for Fannie Mae and Freddie Mac
DECEMBER 5, 2017 | By Mark Heshmeyer | Original Content of CoStar News
Following two years of increased originations, the Federal Housing Finance Agency (FHFA) is lowering its projections for the multifamily lending market in 2018.
FHFA, which oversees Freddie Mac and Fannie Mae, announced that the 2018 multifamily lending caps for each government-sponsored enterprise will be $35 billion. That is down from $36.5 billion in 2017. The 2018 limit returns to the same lending cap set in 2015 and reflects the FHFA's expectations that the overall size of the 2018 multifamily originations market will be slightly smaller next year.
In fact, the nation's largest 25 banks have already cutback on multifamily lending. The amount of multifamily loans on their books has shrunk $3.3 billion through Nov. 22 since the end of July, according to Federal Reserve data... CONTINUE READING
CRE INDUSTRY FOCUSED ON TAX CUTS FOR 'PASSTHROUGH' ENTITIES AS TAX REFORM ENTERS FINAL STRETCH
Apparent Victory for Commercial Property Owners as First Major Tax Overhaul in Three Decades Speeds Toward Completion
December 4, 2017| By Randyl Drummer | Original Content of CoStar News
The U.S. Senate and House of Representatives have started work to reconcile differences between their two tax bills, including the timetable for reducing the corporate tax rate from 35% to 20%.
Of special interest to commercial real estate investors is how the final legislation will tax so-called "pass-through" entities such as sole proprietorships, partnerships, limited liability companies and S corporations. Tax treatment of pass-throughs is among several differences between the two bills with regard to businesses.
Senate Republicans early Saturday passed a hastily crafted $1.5 trillion overhaul of the tax code on a party line vote of 51-49, with only Bob Corker R-TN, breaking party ranks to vote against the final draft of the bill... CONTINUE READING
WHICH COMPANIES CARRY THE HIGHEST VALUE IN LEASES FOR US OFFICE AND INDUSTRIAL REAL ESTATE?
Updated - Analysis of Top 1,000 US Leaseholders Representing $135 Billion in Rent Value Confirms Rapid Ascent and Influence of Tech Tenants, Importance of Govt. Occupiers to CRE Landlords
November 30, 2017 | By Randyl Drummer | Original Content of CoStar News
The top 1,000 corporate, government and institutional occupiers in the U.S. hold leases worth an aggregated rent value of more than $135 billion, encompassing just over 8.4 billion square feet of office, industrial and flex space across about 115,500 properties, according to a recent analysis of CoStar Group tenant data.
The study ranks occupiers by the current value of rents paid across their U.S. real estate portfolios in CoStar's database. Total rent value was calculated by multiplying the space occupied by tenants in each building by the estimated rent value per property in the U.S. and providing a total lease value for each occupier across markets... CONTINUE READING