Commercial Real Estate Outlook Remains Strong

Commercial real estate price growth in large markets is expected to flatten over the next year, but strong leasing demand and investor appetite in smaller markets should keep the sector on solid ground, according to the latest National Association of Realtors quarterly commercial real estate forecast, https://www.nar.realtor/reports/commercial-real-estate-outlook.

Backed by the ongoing stretch of outstanding job creation in recent years, national office vacancy rates are forecast by Realtors to retreat 1.1 percent to 11.9 percent over the coming year. The vacancy rate for industrial space is expected to decline 1.1 percent to 7.8 percent, and retail availability is to decrease 0.4 percent to 11.4 percent. Even as new apartment completions bring more supply to many markets, the multifamily sector will still likely see a vacancy rate decline from 6.6 percent to 6.1 percent. 

Lawrence Yun, NAR chief economist, says the U.S. economy is on stable footing and is chugging along at a decent but unspectacular pace. “A very healthy labor market and stronger confidence and spending from both consumers and businesses boosted economic expansion to a solid 3.0 percent last quarter,” he said. “There’s legs for more of the same growth to close out the year, which bodes well for sustained interest in all types of commercial space.”

According to Yun, the appetite for commercial property is high, but investment activity does appear to be entering the maturation phase of the current cycle. The investor shift away from large markets to smaller ones is creating a divergence in sales activity. In the second quarter, large markets saw a 5 percent annual decline in sales, while Realtors® reported a sales boost of 4 percent in small markets.

“While inventory shortages are still driving prices higher in most markets, shrinking cap rates and the higher interest rate environment are expected to lead to a plateau in price growth over the next year, especially for Class A assets in large markets,” said Yun. “As a result, investors will continue to look to small and tertiary markets for properties that have the best opportunity to provide stability and generate solid returns.” 

Led by the industrial and multifamily sectors, Realtors® continue to report that leasing fundamentals for the four major commercial sectors are strong. Last quarter, the considerable appetite for industrial space — primarily from ecommerce and trade — resulted in distribution warehouses and logistic centers driving close to 70 percent of new construction leasing. Although 225.4 million square feet of additional space is currently in the pipeline, vacancy rates are still expected to trend downward as supply slowly catches up with demand.  

In the apartment sector, the pace of new construction is finally slowing in many markets after considerable building in recent years. However, rising household formation and the supply and affordability barriers to homeownership will continue to keep vacancies low and cause rents to maintain their trajectory of outpacing incomes.

“The economy is healthy for the most part, but headwinds abound in the short term,” said Yun. “A temporary slowdown in areas severely impacted by hurricanes Harvey and Irma, geopolitical tensions abroad and any minor correction in the financial markets could temporarily knock the economy slightly off course in coming months.”

NAR’s latest Business Creation Index (BCI), which launched in August 2016, showed ongoing positive developments for smaller commercial businesses in local communities. Over half of Realtors® have reported an increase in business openings and fewer closings every month since December, with food and beverage and retail making up the bulk of new businesses.

NAR reveals how long student debt delays homeownership

An overwhelming majority of Millennials with student debt do not own a home, and believe this debt is the cause for the delay, a new study from the National Association of Realtors and nonprofit American Student Assistance showed.

The study revealed the typical delay is about seven years.

But home buying isn’t the only factor affected by student debt. The study showed student debt is holding Millennials back from financial decisions and personal milestones such as saving for retirement, changing careers, continuing their education, marrying and having children.

“The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that’s influencing Millennials’ housing choices and other major life decisions,” NAR chief economist Lawrence Yun said.

“Sales to first-time buyers have been underwhelming for several years now, and this survey indicates student debt is a big part of the blame,” Yun said. “Even a large majority of older Millennials and those with higher incomes say they’re being forced to delay homeownership because they can’t save for a down payment and don’t feel financially secure enough to buy.”

In today’s market, only 20% of Millennial respondents own a home and the majority of them carry a student debt load that surpasses their income level at $41,200 versus an average annual income of $38,800.

Most of the survey’s respondents, 79%, indicated they borrowed money to pay for the education at a four-year college and about 51% said they are repaying a balance of more than $40,000.

Among those Millennials who do not own a home, 83% indicated their student loan debt has affected their ability to buy. The median amount of time Millennials expect to be delayed at buying a home is seven years, and 84% expect to postpone buying a home for a least three years.

And even among older Millennials who already own a home, student debt still continues to influence their decisions and prevent them from buying a trade-up home.

“Millennial homeowners who can’t afford to trade up because of their student debt end up staying put, which slows the turnover in the housing market and exacerbates the low supply levels and affordability pressures for those trying to buy their first home,” Yun said.

NAR explained that in order to keep the housing market moving, more options are needed to help reduce student debt levels for future students and help Millennials better manage their current debt levels.

“Student debt is a reality for the majority of students attending colleges and universities across our country,” ASA President and CEO Jean Eddy said. “We cannot allow educational debt to hold back whole generations from the financial milestones that underpin the American Dream, like home ownership.”

“The results of this study reinforce the need for solutions that both reduce education debt levels for future students, and enable current borrowers to make that debt manageable, so they don’t have to put the rest of their financial goals on hold,” Eddy said.

Currently, some lenders offer programs which allow those with student debt more options when it comes to home buying, including lenders who use Fannie Mae’s recently adopted policies which allow for student loan cash-out refinances and other options.

“Realtors are actively working with consumers and policy leaders to address the growing burden student debt is having on homeownership,” NAR President William Brown said. “We support efforts that promote education and simplify the student borrowing process, as well as underwriting measures that make it easier for homebuyers carrying student loan debt to qualify for a mortgage.”

However, this is just one study of many. In 2015, TransUnion announced the results of its study which seemed to show student loans have absolutely no impact on housing.

Another study from Fannie Mae showed that student debt does, in fact, delay homeownership, however college grads are much more likely to become homeowners at some point than those who don’t attend college.

NAR reveals how long student debt delays homeownership

An overwhelming majority of Millennials with student debt do not own a home, and believe this debt is the cause for the delay, a new study from the National Association of Realtors and nonprofit American Student Assistance showed.

The study revealed the typical delay is about seven years.

But home buying isn’t the only factor affected by student debt. The study showed student debt is holding Millennials back from financial decisions and personal milestones such as saving for retirement, changing careers, continuing their education, marrying and having children.

“The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that’s influencing Millennials’ housing choices and other major life decisions,” NAR chief economist Lawrence Yun said.

“Sales to first-time buyers have been underwhelming for several years now, and this survey indicates student debt is a big part of the blame,” Yun said. “Even a large majority of older Millennials and those with higher incomes say they’re being forced to delay homeownership because they can’t save for a down payment and don’t feel financially secure enough to buy.”

In today’s market, only 20% of Millennial respondents own a home and the majority of them carry a student debt load that surpasses their income level at $41,200 versus an average annual income of $38,800.

Most of the survey’s respondents, 79%, indicated they borrowed money to pay for the education at a four-year college and about 51% said they are repaying a balance of more than $40,000.

Among those Millennials who do not own a home, 83% indicated their student loan debt has affected their ability to buy. The median amount of time Millennials expect to be delayed at buying a home is seven years, and 84% expect to postpone buying a home for a least three years.

And even among older Millennials who already own a home, student debt still continues to influence their decisions and prevent them from buying a trade-up home.

“Millennial homeowners who can’t afford to trade up because of their student debt end up staying put, which slows the turnover in the housing market and exacerbates the low supply levels and affordability pressures for those trying to buy their first home,” Yun said.

NAR explained that in order to keep the housing market moving, more options are needed to help reduce student debt levels for future students and help Millennials better manage their current debt levels.

“Student debt is a reality for the majority of students attending colleges and universities across our country,” ASA President and CEO Jean Eddy said. “We cannot allow educational debt to hold back whole generations from the financial milestones that underpin the American Dream, like home ownership.”

“The results of this study reinforce the need for solutions that both reduce education debt levels for future students, and enable current borrowers to make that debt manageable, so they don’t have to put the rest of their financial goals on hold,” Eddy said.

Currently, some lenders offer programs which allow those with student debt more options when it comes to home buying, including lenders who use Fannie Mae’s recently adopted policies which allow for student loan cash-out refinances and other options.

“Realtors are actively working with consumers and policy leaders to address the growing burden student debt is having on homeownership,” NAR President William Brown said. “We support efforts that promote education and simplify the student borrowing process, as well as underwriting measures that make it easier for homebuyers carrying student loan debt to qualify for a mortgage.”

However, this is just one study of many. In 2015, TransUnion announced the results of its study which seemed to show student loans have absolutely no impact on housing.

Another study from Fannie Mae showed that student debt does, in fact, delay homeownership, however college grads are much more likely to become homeowners at some point than those who don’t attend college.

Playing Russian Roulette With The US Housing Finance System

Can Stock Photo

Forcing Fannie Mae and Freddie Mac into another bailout is an irresponsible game of chance.

Last month, Mel Watt, director of the Federal Housing Finance Agency (FHFA), announced that the two mortgage giants, Fannie Mae and Freddie Mac, could require a federal bailout of as much as $100 billion in the event of an economic downturn.

In fact, a bailout of these two institutions is inevitable as early as next year, if not sooner. The need for an emergency draw on the U.S. Treasury Department to fund these agencies, however, will have nothing to do with the financial health of either Fannie Mae or Freddie Mac.

Both agencies are exceptionally well-managed and regulated, and are highly profitable; they reported combined earnings of nearly $10 billion in the first six months of this year. As with the most recent meltdown of the housing market, irresponsible federal housing oversight will be the cause of their failures.

During the buildup to the collapse of the housing market that began in 2007, federal financial regulators ignored the many obvious predatory features of subprime lending and allowed reckless, exploitative, and fraudulent mortgage finance-related practices to permeate the mortgage market.

The result was nearly 8 million foreclosures since 2007, collapse of home prices of more than 30% nationally, and the near implosion of the U.S. financial system.

This time around, federal policy makers have structured bailout terms for Fannie Mae and Freddie Mac that require that all earnings of the two agencies be “swept” directly into the Treasury. Simultaneously, both agencies are required to wind down their capital reserves (savings needed to cover future losses) to zero by the end of this year.

Ironically, the agencies were taken into federal conservatorship because of inadequate capital reserves.

Treating Fannie Mae and Freddie Mac as two large cash cows for federal spending leaves them financially vulnerable to failure. As late as last Thursday, U.S. Treasury Secretary, Steven Mnuchin clarified the Administration’s position to wait until next year to address the capital levels for those agencies.

Next year, economic events, as simple as sharp, yet relatively short-lived, interest rate fluctuations, could again send these two agencies, hat-in-hand, back to the Treasury for another taxpayer handout.

The FHFA has attempted to limit the impact of losses for the two agencies by requiring both institutions to develop new ways to share risks with investors. Those efforts are promising but will be inadequate to offset the inevitable need for a future bailout if Fannie Mae and Freddie Mac have no capital cushion.

The announcement of another housing bailout for Fannie Mae and Freddie Mac, which manage a combined $5 trillion book of business, could unsettle capital markets, further limit access to mortgage credit, and elicit a new round of politically-motivated attacks against these agencies from Congress.

Shutterstock

Using Fannie Mae and Freddie Mac earnings for federal spending leaves taxpayers exposed to their future losses.

Playing a game of chance with the nation’s housing finance system would benefit neither households nor the economy. Already, the U.S. housing market is significantly under-performing. In spite of a nearly full one-percentage point bounce in the 2nd Q, 2017, homeownership in the U.S. remains near a 50 year low.

The Urban Institute estimates that more than 6 million loan originations are missing from the mortgage markets between 2009 and 2015, due to unnecessarily rigid underwriting requirements that are driven by fears of future housing market losses.

Young adults and people of color are among those households that are finding it particularly difficult to access homeownership. The homeownership rate for Blacks, for example, is  little changed since  since of the passage of the Fair Housing Act of 1968.

Some powerful Members of Congress believe the federal government should not support the mortgage market. Many politicians have argued that losses by the two government housing agencies justify shuttering them.

Fannie Mae Sells Over 10,000 Loans: UPB $2.5 Billion – DSNews

fanniemaeFannie Mae disclosed the result of its fourth reperforming loan sale recently. The deal was originally announced back on August 10, 2017, and included 10,700 loans totaling and unpaid principle balance (UPB) of $2.43 billion.

The loans were divided up into three pools, broken down in the following:

The first pool consisted of 4,200 loans with an UPB of $984,619,405—average loan size amounted to $234,433 with an average broker’s price opinion (BPO) loan-to-value ratio (LTV) of 109.61 percent. For pool one, the weighted average note was 4.54 percent.

The second pool, which had the smallest number of total loans, consisted of 2,001 loans with a BPO LTV rate of 97.54 percent. unpaid principle balance was $461,732,787 with an average loan size of $230, 751.

The final pool had the largest amount of loans and the largest aggregate UPD, at 4,482 loans for a total of $988,847,948, respectively. The BPO LTV was the lowest of the three groups, however, at 89.37 percent.

All three pools were sold to a single entity, MTGLQ Investors. The deal is expected to close on October 26, 2017. The pools were marketed by Citigroup Global Markets, Inc, who served as advisors.

It was additionally reported that the cover bid price for all three pools was 91.51 percent of unpaid principal balance, which amounts to 83.37 percent of the average broker’s price opinion.

According to Fannie Mae’s bulletin, Bidders that are interested in future sales of Fannie Mae non-performing and reperforming loans can register for ongoing announcements, training, and other information at here.

Fannie Mae Announces Enhanced Hybrid Adjustable-Rate Mortgage for Small-Loan Multifamily Borrowers

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Fix for Mortgage Giants Fannie Mae, Freddie Mac Remains on Back …

Mortgage-finance giants Fannie Mae and Freddie Mac, which have been under government control since the financial crisis, don’t appear to be getting a new life as quickly as some had hoped might happen under a Trump presidency.

Continue Reading Below

Overhauling the two companies remains a back-burner issue for the Trump administration and Congress, crowded out by matters such as taxes, immigration and flood insurance. Moreover, prospects that the Senate will eventually pass a broad revamp of the companies also have dimmed, according to people familiar with the matter.

The delays leave in limbo hedge funds and distressed-debt investors which have bought up shares in the companies in the hopes they could score a large windfall. The funds are effectively betting that Washington is unable to come up with a plan that eliminates Fannie and Freddie. They instead want the government to allow the companies to build up capital and return to private control.

In the Senate Banking Committee Chairman Mike Crapo (R., Idaho) and Sen. Sherrod Brown of Ohio, the panel’s ranking Democrat, have held months of closed-door talks, yet their efforts to develop bipartisan legislation remain far from bearing fruit, these people said.

“It doesn’t feel like Brown and Crapo [negotiations] will come to a conclusion,” said a Republican official familiar with the discussions.

At a private meeting in July, Mr. Brown remarked to Sens. Bob Corker (R., Tenn.) and Mark Warner (D., Va.) that he wanted to “put a wedge” between the pair as they developed a bipartisan plan with other members of the banking panel, according to a person in the room. Though the comments were said in jest, they were interpreted by some Senate staffers as a sign Mr. Brown may not be willing to commit to reshape the companies at this time, the person said.

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Messrs. Brown and Crapo, who are said to have a good personal relationship, have been bogged down by other issues, such as how to renew a federal flood-insurance program currently set to expire in December.

A spokeswoman for Mr. Brown said he and Mr. Crapo “are interested in results, and hope the Banking Committee can reach agreement on housing finance reform during this Congress.” Mr. Crapo said in a separate statement that he is working with Mr. Brown “to explore a number of options to fix the flawed system.”

The Trump administration, for its part, has its eyes on other issues — such as a tax overhaul — and has yet to outline its goals for a revamp of Fannie and Freddie. Treasury Secretary Steven Mnuchin on Thursday said the administration would focus on overhaul to the mortgage-finance system next year.

“Realistically this is a 2018 issue, but we’re going to fix it and when we fix it we want to make sure we never put the taxpayers at risk,” Mr. Mnuchin said, speaking at a conference hosted by Politico in Washington.

Fannie and Freddie shares jumped more than 16% Wednesday after Mr. Brown and a group of five other Democrats urged Treasury Secretary Steven Mnuchin and Federal Housing Finance Agency Director Mel Watt to allow the companies to retain some of their earnings to protect against a short-term loss.

While such a move would benefit the hedge funds urging the government to allow the companies to begin to recapitalize, it conflicts sharply with a group of moderate lawmakers, led by Messrs. Corker and Warner, who oppose unilateral steps by the FHFA to allow the companies to retain their earnings.

The delays are a setback for some hedge funds and other investors that bought up the companies’ common and preferred shares over the past few years, some of which have seen the timeline for their investments in the mortgage firms extend.

Richard Perry’s Perry Capital was an early hedge-fund holder of Fannie and Freddie shares. It told its clients in September 2016 it was closing down, citing “industry and market headwinds.” The firm has returned 80% of clients’ money since then as it has wound down its hedge fund, according to people familiar with the matter, but it continues to hold shares of Fannie and Freddie.

William Ackman’s Pershing Square Capital Management LP, which had roughly $12 billion in assets under management when it disclosed nearly 10% stakes in Fannie and Freddie’s common shares in late 2013, has seen its size fall to $9.7 billion since. It is down more than 35% from its high water mark, or the point at which investment losses make up for gains, at the end of 2014, though the losses are due largely to Pershing Square’s bet on drugmaker Valeant Pharmaceuticals International Inc.

Still, Pershing Square is up on its investment so far.

The firm told investors in an April presentation that the share price of Fannie’s and Freddie’s common stock were up 4% and 7% from Pershing Square’s average buying cost; the share prices have increased since then. Mr. Ackman said at an investment conference in 2014 the companies’ common stock could increase 10-fold over several years.

Fannie and Freddie play critical roles maintaining the plumbing of the U.S. mortgage market. They purchase loans from lenders and repackage them as securities that are insured if the loans default. The firms’ regulator seized the companies through a process known as conservatorship during the George W. Bush administration, and the Treasury Department agreed to inject vast sums to support some $5 trillion in debt securities issued by the companies.

The companies have thin capital reserves under the terms of their 2008 government-backstop agreements, but they have access to a combined $258 billion in Treasury assistance. They are required to send most of their profits to Treasury in exchange for that support.

Write to Andrew Ackerman at andrew.ackerman@wsj.com and Juliet Chung at juliet.chung@wsj.com

(END) Dow Jones Newswires

September 15, 2017 16:58 ET (20:58 GMT)

Monday Memo: Boeing investor day, Fed interest rate decision

TODAY: Boeing holds its annual investor “day” Monday and Tuesday at the company’s South Carolina facility. After the recent positive news of a 787 production-rate hike, expect some optimism on recouping the program’s $30 billion in deferred costs. … The National Association of Home Builders releases its housing-market index for September.

TUESDAY: The Commerce Department reports on August housing starts and the current account-trade deficit for the second quarter.

WEDNESDAY: Federal Reserve policymakers end their two-day meeting to review interest rates. The central bank is expected to hold rates steady for now while signaling its intent to raise rates once more before the end of the year. Look for the Fed’s statement and a news conference at 11 a.m. … The National Association of Realtors reports on existing home sales for August.

THURSDAY: The Federal Reserve releases data on U.S. households’ net worth for the second quarter.

Realtors association presents Lockport with $5000 grant – The Herald

Pictured from left to right: Three Rivers Association of Realtors CEO David McClintock; Lockport city council members Renee Saban and Joanne Bartelsen; Three Rivers Association of Realtors President Matt Persicketti; Lockport Mayor Steven Streit;
Three Rivers Association of Realtors President-elect Ken Pytlewski

Three Rivers Association of Realtors presented the City of Lockport with a $5,000 grant which will be used to update the city’s pedestrian plan.

The local Realtors Association secured the funds through the National Association of Realtors Smart Growth Action Grant program.

Three Rivers Association of Realtors CEO David McClintock, Association President Matt Persicketti and President-Elect Ken Pytlewski presented the check at the Sept. 6 Lockport City Council meeting.

Recent growth and the potential for more development have uncovered the need for an update to Lockport’s pedestrian plan which has not been done since 2003. The plan provides guidance that the city and its residents can use for future pedestrian infrastructure development. Pedestrian plans provide a crucial tool for creating desirable, livable communities that preserve historical elements while embracing growth. Pedestrian amenities also can improve property values.

– The Herald-News

REALTORS® Relief Foundation Accepting Donations for Hurricane Victims

The REALTORS® Relief Foundation, a 501(c)(3) administered by the National Association of REALTORS® (NAR), is collecting monetary donations at www.nar.realtor/rrf to provide housing-related assistance to victims of Hurricanes Harvey and Irma, the organization recently announced. NAR’s Leadership Team has already approved a $600,000 donation by the organization to the Foundation, and REALTORS® collectively have donated $1.2 million so far.

Every dollar donated goes directly to victims of disasters, NAR covers 100 percent of administrative expenses.

“The devastation caused by Hurricanes Harvey and Irma is enormous, and our thoughts and support go out to all those affected,” says NAR President Bill Brown. “The National Association of REALTORS® wants our members and the consumers they serve to know that the REALTOR® family is here for them; we encourage one and all to join NAR in donating to the REALTORS® Relief Foundation at www.nar.realtor/rrf.”

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The REALTORS® Relief Foundation was established 16 years ago after the 9/11 attacks. The foundation is dedicated to providing housing-related assistance to those whose lives have been impacted by disasters. Donations are tax-deductible

For more information, please visit www.nar.realtor/rrf.

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