Fannie, Freddie and Ginnie do $13.5B in apartment investment lending biz during Q1, +81% YoY.
Filed under: Multifamily Investments, The Economy and Current Affairs
Bonds backed by Fannie Mae and Freddie Mac tied to apartment investments soared to a record as the government-supported mortgage companies made low-cost loans on rental properties amid a continued slide in home values. Fannie Mae, Freddie Mac and Ginnie Mae sold $13.5 billion of securities tied to apartment buildings in the first quarter of 2012, an 81 percent increase from the year-earlier period and up from $5.2 billion issued in all of 2008, according to data compiled by Bloomberg. It’s the highest quarterly issuance since records began in 1993.
The interest rate for a 10-year, fixed multifamily loan Read more
Rising rates won’t necessarily lead to higher cap rates on CRE, apartment building investments. CBRE debt & equity podcast.
Filed under: Commercial Real Estate, Multifamily Investments, The Economy and Current Affairs
Great podcast on the financing market for CRE and apartment building investment with a look at potential impacts from events around the world.
“In this Global In-Sights podcast, Spencer Levy, Executive Managing Director for CBRE Capital Markets, shares his view on the commercial real estate debt and equity finance markets. What are current key sources of capital, what is the current pricing of CRE debt, and what are expectations going forward? Are there key sectors that are attracting most of the capital flows? What are expectations for interest rates and how are investors underwriting the possibility of an interest rate spike in the next 2 to 3 years? What are some of the key positive trends that we suggest our clients look out for when selecting markets in which to invest?”
A few bullet points: Read more
European debt-crisis issues are lessons for the US. We’re just a few years behind them and if we pay attention…
European debt-crisis issues are lessons for the US. They belong in the political debate. Both political parties are responsible for our growing debt issues. Bush ran up huge deficits. Obama continued them. Each party blames the other. See the whole post here: Back from Paris
Especially pay attention to item #4. that begins: Private holders of Greek debt had several years to get out…
For extra credit from ‘The Only Thing New In History’ department: Yet another sovereign debt crisis If that link no longer works use this one to see the PDF.
The bullet points:
- Having believed the myth that governments don’t default, many banks and investors will take huge losses in Europe’s sovereign debt crisis.
- The historical regularity of government defaults—more than 250 have occurred since 1800*—gives the lie to the notion that holding sovereign debt is “risk-free.”
- The sovereign debt crisis of post–World War I Europe provides highly relevant lessons for today.
*Referencing Rogoff & Reinhart’s work in “This Time Is Different”. See ‘Whodunit’ in the column to the right for this essential book.
A new (and simple to understand) economic model that actually works- Via Bridgewater Associates
Three related research pieces from the guy about whom former Fed Chairman Paul Volcker said had a degree of detail that is “mind-blowing” and admits to feeling sometimes that “he has a bigger staff, and produces more relevant statistics and analyses, than the Federal Reserve.”- The Economist
A Template for Understanding…
…How the Economic Machine Works and How it is Reflected Now
Ray Dalio | October 2008 (Updated March 2012): The economy is like a machine. At the most fundamental level it is a relatively simple machine, yet it is not well understood. I wrote this paper to describe how I believe it works. My description is not the same as conventional economists’ descriptions so you should decide for yourself whether or not what I’m saying makes sense. I will start with the simple things and build up, so please bear with me. I believe that you will be able to understand and assess my description if we patiently go through it.
An In-Depth Look at Deleveragings
Ray Dalio | February, 2012: The purpose of this paper is to show the compositions of past deleveragings and, through this process, to convey in-depth, how the deleveraging process works.
Why Countries Succeed and Fail Economically
Ray Dalio | June, 2011: This study looks at how different countries’ shares of the world economy have changed and why these changes have occurred, with a particular emphasis on the period since 1820. As explained in this study, the rises and declines in countries’ shares of the world economy occur as a result of very long-term cycles that are not apparent to observers who look at economic conditions from a close-up perspective.
Zero Bound Interest Rates, The Zirp Dimension, Stagflation and #Multifamily
Filed under: Multifamily Investments, The Economy and Current Affairs, Value Investor's Guide to Apartment Buildings
Zero interest rates and apartment building investment.
First my condolences to Bill Gross on the loss of his brother-in-law. Reading his piece in PIMCO’s latest Investment Outlook it is clear that the world’s biggest bond manager is running out of places to generate returns for their investors and by extension this applies to all income investors, especially retired people trying to live on interest income. For those would like to retire soon you may have to delay that decision for “an extended period’ as Edward Harrison over at Credit Writedowns put it in Permanent Zero and Personal Interest Income.
Gross’ points out that the Fed’s zero interest rate policy (ZIRP) which they have just announced to maintain through 2014 and their defacto though opaque continuation of quantitative easing (QE2.5 as he tweeted it) threaten to take us into another dimension where their policies have the opposite effect of their intentions.
“Much like the laws of physics change from the world of Newtonian large objects to the world of quantum Einsteinian dynamics, so too might low interest rates at the zero-bound reorient previously held models that justified the stimulative effects of lower and lower yields on asset prices and the real economy.” – Bill Gross
His bullet points:
- Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside.
- Most short to intermediate Treasury yields are dangerously close to the zero-bound which imply limited potential room, if any, for price appreciation.
- We can’t put $100 trillion of credit in a system-wide mattress, but we can move in that direction by delevering and refusing to extend maturities and duration.
For more views on this and Europe too see also Entering the Debt Dimension from Phil’s Picks on the Phil’s Stock World Blog.
What does this mean for Multifamily?
The Zirp Dimension leads to Stagflation where economic growth remains anemic yet prices on essential Read more
Find the freight trains in your life and get on them instead of in front of them.- Barry Sternlicht Video via @Michael_MBA
Filed under: Commercial Real Estate, Multifamily Design & Development, Multifamily Investments, The Economy and Current Affairs
Great advice from Barry Sternlicht plus much, much more on real estate, investment, capital, leadership, opportunity, Europe, China while speaking at the Schack real estate conference. He is one very smart guy while being personable and humble, a rare but valuable combination. Reminds me a bit of my virtual mentor Tom Barrack, and not just because of the haircut! Barry even mentions wanting to learn how to surf, something Tom could definitely help with.
Here’s the link to the video: Barry Sternlicht at Schack RE Conference For more great video from the conference Read more
Hoisington Quarterly Review and Outlook “Recession in 2012″.
Filed under: Multifamily Investments, The Economy and Current Affairs
Housington Investment Management runs about $4B in fixed income institutional money so they pay very close attention to the economy, government as well as fiscal and monetary policy. In fact Dr. Lacy Hunt, co-author of the report, is one of Mauldin’s most highly regarded economists. Here’s the exec sum (see the whole article at http://bit.ly/wM9DIY):
High Debt Leads to Recession
As the U.S. economy enters 2012, the gross government debt to GDP ratio stands near 100% (Chart 1). Nominal GDP in the fourth quarter was an estimated $15.3 trillion, approximately equal to debt outstanding by the federal government. In an exhaustive historical study of high debt level economies around the world, (National Bureau of Economic Research Working Paper No. 15639 of January 2010, Growth in the Time of Debt), Professors Kenneth Rogoff and Carmen Reinhart [Again with those two!] econometrically demonstrated that when a country’s gross government debt rises above 90% of GDP, “the median growth rates fall by one percent, and Read more
Is a Gold Standard the Answer to Our Monetary Crack-Up?
My brother Tom shared an article from the Cato Institute entitled: “Why Gold-Defined Money Is the Answer to Our Monetary Crack-Up”. 
I agree with the writer in theory but as Yogi Berra said: In theory, there is no difference between theory and practice. In practice, there is. A couple points:
With a fixed currency like a gold standard innovation and value creation that grows the economy will be constrained and what growth does occur will cause prices to fall, hurting the producers of goods and limiting real returns to their investors. There has to be some mechanism to grow money supply at the approximate rate of real growth in the economy.
The real problems we’re facing around the world are from excess leverage and at the end of every debt binge the unwinding happens in three ways. Debt creation can be reduced and austerity can be imposed to make room for Read more
Credit Rate Spreads as Indicators
Vince Farrell of Soleil Securities Group sent me his take on what key credit spreads are indicating about the financial landscape and economic prospects. For a little background, a ‘spread’ is trader talk for the difference between two financial instruments, in this case the interest rates offered different debt instruments. As with most spreads these have a historical ‘normal’ range and their trend away from or back towards normal are used to measure optimism or pessimism in hearts and minds of those who create or invest in the referenced instruments.
Vince finds that while most of the credit spreads he follows are wide by historical norms, they are narrowing and the trends are positive for the credit markets and eventually the economy. Here are his comments: Read more
Why buy Multifamily in ’09?
Filed under: Multifamily Investments, The Economy and Current Affairs, Value Investor's Guide to Apartment Buildings
As I sit here looking out at the snow while I’m taking time to review and update my goals for the year there are stars aligning to make the new year a positive one. Especially if you are looking for alternatives for your investment and retirement money. The stock market hasn’t been good to us (I look at my account statement from between my fingers!) and the prognosis for the next year or two isn’t much better.
In contrast there are a number of reasons to consider owning multifamily properties, specifically apartment complexes with more than 100 units. Before I go into the reasons why now is a good time let me first be clear about what I’m NOT recommending, the landlording business. The reason to focus on properties with more than 100 units is that they are large enough to support both professional management and professional maintenance; most likely having both onsite full time if not living there. As an owner of this type of property your job is to review the management reports and manage the managers, not unclog toilets or take phone calls from tenants. Read more
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