Filed under: Apartment Building Investment Cycle, Multifamily Investments
Do the pitches you’re getting on apartment investment deals sound like this lately?
LOL but true right? Have a great weekend; we’ll think about what happened last time prices got this crazy next week-
Apartment building investors should be looking at renovation, value add and repurposing deals according Freddie Mac’s David Brickman, EVP for Multifamily Business. In an Executive Perspective note published last week Brickman covered these points:
- Demographic forces alone could create as many as 4.7 million more renter households by 2023.
- That even the 3.1 million new units expected over the next 10 years will not be enough to meet demand.
- Compounding the issue, the existing rental housing stock is aging. Nearly 60 percent of U.S. rental properties with 20 or more units were built before 1980.
- Supply already could be 1.5 million
Filed under: Commercial Real Estate, Multifamily Investments
CoStar is out with their latest Commercial Repeat Sale Indices (CCRSI) showing that:
- Commercial Real Estate prices post double-digit annual gains in May
- Momentum picks up in the General Commercial segment
- Improvements in market fundamentals underpin growth in commercial property pricing
- Capital flows remain healthy
- Distress levels continue to dissipate
- See link for numbers and details-
CoStar has been tracking the indexes of repeat commercial real estate sales since 1996. Note that the Value Weighted index is driven mostly by core properties while the Equal Weighted index is mostly driven by smaller, non-core property sales.
For apartment building investors the good news is that Read more
Filed under: Multifamily Investments, The Economy and Current Affairs
REIT.com had a piece called REIT Returns Outpace Broader Market in Solid First Half Showing out late last week and the part that caught my eye was the section titled: Apartment REITs Lead the Pack in First Half:
- Apartment REITs were the strongest performers during the first half.
- Total returns as of July 7 in the sector stood at 23.8 percent.
“There was increasing comfort in the market that fundamentals in the [apartment] sector were not decelerating as fast as many had feared,” said James Sullivan, managing director at Cowen & Co.
Apartment REIT managers are some of the best multifamily operators in the world and it pays to pay attention to what they’re doing. Unfortunately the returns on REIT shares are too often driven by capital flows from the stock market rather than the pure performance these managers generate. Patient contrarian investors can be rewarded however by waiting for apartment REITs to fall out of favor with stock market investors and pick them up at bargain prices.
Click on the image above or use this link to see the article on REIT.com: REIT Returns Outpace Broader Market in Solid First Half Showing
The apartment building loan rate we track came in today at 4.765% (see below for loan details), making it 22 straight weeks below the five percent mark. The spread to the 10 year Treasury (T10) also remained in the 2.1 and change range where it’s been since the beginning of March, indicating that the very competitive market for multifamily loans continues on.
For the gold plated ULI less than 60% LTV loan the spread dropped into the 1.2s from the 1.3 range where it had been holding since late February, taking the implied rate for these core institutional apartment loans down to 3.77%.
Speaking of the spread between the T10 and the Read more
That happy feet sound you hear is coming from apartment building investors as they see their results from the second quarter:
- Rents Up
- Vacancy Down
- New Supply Being Absorbed as soon and it’s built
Here’s the video report from MPF Research:
And it’s not just the usual Read more
Filed under: Multifamily Investments, The Economy and Current Affairs
A MacArthur Foundation survey conducted by Hart Research Associates shows that 70% of Americans polled think that the housing crises isn’t over and 19% think the worst is yet to come, good for apartment building investment I believe. As reported by the Wall St. Journal in an article titled: Allure of Homeownership Slumps Amid Worries of Continued Crisis the worst is yet to come figure is unchanged from last year, which may reflect a segment of the population that has been deeply scarred by collapse of the lending and housing bubbles. The still in the crises figure is down from 77% a year ago but it is still a big number that’s having a positive effect on apartment demand:
Referencing the chart above, the article stated that 51% of those polled said renting was more appealing than in past decades which is definitely positive for apartment building investors. Note that while urban apartment demand and development has been getting a lot of action, 35% of suburbanites think renting is Read more
The apartment loan rate we track popped up into the 4.70s today after spending the last three weeks in the 4.60s. Today’s 4.71% rate is about the same as it was a year ago, just before the taper tantrum hit. Monday quotes on the 10 year Treasury have climbed two weeks in a row now but remain below most recent highs of March, clocking in at 2.62 today. The downward march of the spread has flattened recently in the 2.0 – 2.15 range, including today’s number at 2.14. The ULI <60%LTV rate still looks like someone bouncing a ball down the stairs but their data is lagged a week so we’ll have to check back on Friday to see if that rate is going to tick up as well.
Speaking of the spread between the T10 and the ten year apartment loan rate, now that Read more
Filed under: Commercial Real Estate, REOs to Rentals- Single Family, Tom Barrack
Tom Barrack over at Colony Capital put up a nice presentation of where he sees the opportunities for real estate investment in the current market. While Colony is geared to serving their large institutional investors, those of us operating on a smaller scale can benefit from Tom’s insights as well.
My Exec Sum of the opportunities he sees that I think will impact smaller investors in North America (and my comments in parentheses):
- Commercial and residential real estate are great investments today because equities and debt are mispriced and the economy is regaining its feet. (There will be competition however).
- Distressed debt in the US is diminishing but they are continuing to resolve non-performing assets (which can create deals for long term holders as these turned around assets come back to the market).
- Single family residential for rent housing is stabilizing and becoming a institutional asset class (which can provide exits for those who have built portfolios of these properties).
- Mezzanine debt and what he calls ‘stretched senior debt’ is becoming more available for value add & opportunistic deals because institutional investors such as pension funds need the extra yield (it will be easier to finance turnaround commercial properties at higher LTVs).
- It’s a time to avoid Read more
Filed under: Apartment Markets and Demograhics, Multifamily Investments
Are there yet more new renters on the way? More new demand for apartment building investors? Bill McBride over at Calculated Risk has a piece out today on the latest Mortgage Monitor from Black Knight. Reams of data all organized nicely into charts and the good news is that the percent of of mortgages with negative equity has dropped to 10% but…
The numbers on mortgages that have been modified are in far worse shape and the story can be told in two charts. The first (on page 20 of the Monitor) showing that there are almost two million modified loans facing interest rate resets, meaning that the mortgage payment could be going up. The second chart completes the picture:
The title of the chart says it all: More than 40% of all modified mortgages are underwater and another Read more