Amherst: The state of single-family rental investments

4 charts break down the market

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The single-family rental market is now past 200,000 properties owned by institutional capital. And this is probably a low estimate, with the latest numbers coming out only for the year 2016, according to a new white paper from Amherst Capital Management, a BNY Mellon investment boutique specializing in U.S. real estate.

This means that total institutional investment in SFR homes is about $33 billion as of 2016. Nonetheless, while media outlets sometimes refer to the “Wall Street” landlord when discussing SFR, the final data point below proves the market remains very diverse.

Amherst noted in its report that the since the number are derived from county record data based on buyer name tagging, they may not cover all purchases by the listed institutional buyers.

The company tracks properties in the county record and transaction data from Corelogicthat are owned by institutional pools of capital by identifying buyers allied with each of them.

Using the data, Amherst created the following charts to show how the SFR has shifted geographically and by investor size.

Sandeep Bordia, head of research and analytics at Amherst Capital, explained, “Institutional activity in the SFR market continues to increase, driven by relatively attractive valuations, modestly strong home price appreciation and stable financing.”

“Our data shows that newer entrants and mid-sized institutions accounted for the majority of institutional SFR home purchases over the last year, compared to a slowdown in buying activity among larger institutional holders,” said Bordia. “We believe that evolving demographics, financial factors and shifting consumer preferences, will keep demand for SFR homes elevated over the coming years.”

These first two charts break down how the main players in the SFR space have shifted.

The biggest institutional players (such as Blackstone, American Homes 4 Rent [“AH4R”] and Colony/Starwood) slowed their purchasing in 2015–2016, while the mid- sized players (such as Progress, Main Street Renewal, Altisource and Connorex) were more active in 2015– 2016 versus prior years.

The second chart looks at the same data but by market share for year of purchase.

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(Source: Amherst InsightLabs estimates based on Corelogic County Record and Transaction Data as of Q4 2016)

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(Source: Amherst InsightLabs estimates based on Corelogic County Record and Transaction Data as of Q4 2016)

These next two charts show the geographical shift of where institutional investors are buying.

While the West had historically seen interest from early entrants in this space, as those institutions’ share of total purchases fell, so did the West’s proportion within all institutional purchases.

As an added noted, the color-coded arrows in the bottom left indicate metro areas where share has increased, fallen or stayed roughly the same in 2016 from prior years.

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(Source: Amherst InsightLabs estimates based on Corelogic County Record and Transaction Data as of Q4 2016)

Overall, while the SFR market sits at $33 billion, it’s still only a small drop in the bucket compared to the total value of single-family homes, which is estimated at about $26 trillion.

This means that even among the 15 million or so single-family rentals, institutions own less than 2%.

Article and images provided by: housingwire.com
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Local leaders make case for Amazon HQ2 in Sacramento

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Sacramento Mayor Darrell Steinberg is shown trying out virtual reality goggles, prompting a smile from Barry Broome, president and CEO of the Greater Sacramento Economic Council, at an Oct. 18 news conference at Golden 1 Center. The event marked Sacramento’s proposal to get Amazon to choose the River City as the second location for its headquarters. GSEC sent a set of six virtual reality riffles to Amazon as part of its proposal. Each set of goggles shows a view of various sites from around the region in 360 degrees. 

A combination of access to talent, sites ready to go and connection with the Northern California “mega-region” make the case for Amazon.com Inc. to locate a second headquarters in the Sacramento region, local leaders said Wednesday.

Following a rally at Golden 1 Center in downtown Sacramento for the formal bid, members of the Greater Sacramento Economic Council shared some details from the package. Amazon (Nasdaq: AMZN) requested regions submit bids by Thursday.

“The truth of the matter is, we could’ve put this together in 10 days,” said Barry Broome, Greater Sacramento’s CEO. “These explosive, dynamic companies, they can’t wait.”

John Krueger, executive vice president with Greater Sacramento, said the local package includes 100 pages of analysis and 80 pages of formal proposal. That included identifying 12 sites where Amazon could partially or wholly establish a future second headquarters with 50,000 employees eventually.

The local sites include the Railyards and former Sleep Train Arena sites in Sacramento, Metro Air Park and the Aerojet/Easton campus in Sacramento County, West Sacramento’s Bridge District, Elk Grove’s Southeast Policy Area and United Auburn Indian Community land in Placer County. Other sites include the future Folsom Ranch development in Folsom, an area on Twelve Bridges Road in Lincoln, El Dorado Hills in El Dorado County, 290 Conference Center Drive in Roseville and the planned Sutter Pointe development at the south end of Sutter County.

Greater Sacramento did not release the full proposal, citing a request for confidentiality from Amazon for all bid packages.

 

Officials put the bid’s cost at about $200,000 to $250,000, but noted it’s also part of Greater Sacramento’s new marketing and branding efforts.

Article and image provided by: Sacramento Business Journal

Builder confidence rebounds from shock of recent hurricanes

Could soon see material price increases and labor shortages

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Builder confidence increased in October as homebuilders recovered from the initial shock of the recent hurricanes, according to the latest Housing Market Index from the National Association of Home Builders and Wells Fargo.

Builder confidence in the market for newly built single-family homes increased four points to 68 in October, more than making up for last month’s three-point drop, and rising to its highest point since May.

“This month’s report shows that home builders are rebounding from the initial shock of the hurricanes,” NAHB Chairman Granger MacDonald said. “However, builders need to be mindful of long-term repercussions from the storms, such as intensified material price increases and labor shortages.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as good, fair or poor.

The survey also asks builders to rate traffic of prospective buyers as high to very high, average or low to very low. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates most homebuilders view conditions as good rather than poor.

All three of the index’s components increased in October including the component that measures current sales conditions, which increased five points to 75. The index charting sales expectations over the next six months also increased five points to 78 while the component which looks at buyer traffic rose one point to 48.

“It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer,” NAHB Chief Economist Robert Dietz said. “With a tight inventory of existing homes and promising growth in household formation, we can expect the new home market continue to strengthen at a modest rate in the months ahead.”

And homebuilders aren’t the only ones who see mounting potential for new home sales. Freddie Mac’s monthly Outlook for September forecasted new home sales will be the main driver of total home sales going into 2018.

Article provided by: housingwire.com

Mortgage Monday: Mortgage Rates Sideways to Slightly Higher

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Mortgage rates were sideways to slightly higher today, depending on the lender.  Underlying bond markets suggested a bit more movement, and that will likely be reflected in tomorrow morning’s rate sheets unless bonds improve overnight.

In other words, effective rates are just a bit lower this afternoon than bond market trading levels would imply.  This happens fairly often when bonds move during the day, but not by a wide enough margin to prompt mortgage lenders to reissue the day’s rate sheets.

All that having been said, the change would still be fairly minimal in the bigger picture, with most any lender continuing to quote the same interest rate (just with slightly higher upfront costs).  After dropping at the best pace in more than a month to the lowest levels in roughly a month on Friday, this modest pullback isn’t yet cause for concern, but that could change if the weakness continues tomorrow.
Today’s Most Prevalent Rates

  • 30YR FIXED – 3.875-4.0%
  • FHA/VA – 3.5%
  • 15 YEAR FIXED – 3.25%
  • 5 YEAR ARMS –  2.75 – 3.25% depending on the lender


Ongoing Lock/Float Considerations

  • 2017 has proven to be a relatively good year for mortgage rates despite widespread expectations for a stronger push higher after the presidential election in late 2016.  Most of the rate spike was done by the end of 2016 and we’ve generally moved sideways to lower since then
  •  The biggest question is whether or not this counter-intuitive trend has an expiration date.  Rates haven’t been immune from brief corrections back toward higher levels, and each correction causes concern that the good times are over.
  • Despite those concerns, we’ve seen rates make new lows in April, June, and September.  Although rates have been rising since early September, they’d have to move even higher before we’d consider a change in the bigger picture theme.
  • All of the above having been said, past precedent suggests we’re due for a much bigger dose of volatility some time soon.
  • Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders.  The rates generally assume little-to-no origination or discount except as noted when applicable.  Rates appearing on this page are “effective rates” that take day-to-day changes in upfront costs into consideration.
Article and image provided by: mortgagenewsdaily.com

Is Your Millennial Real Estate Game Lacking?

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Maybe it’s time to adjust your strategy.

“They have to give up their coffee three times a week.”

“They need to keep their car until it’s paid off and then continue to drive it for years.”

“If they really want to buy a house, they need to change their lifestyle.”

These are just a few of the comments overheard on a recent day as two presumably hungry mortgage professionals met over lunch within earshot of our table at a local restaurant. Curiously, they both seemed to agree that these strategies were key to turning millennials into homeowners.

The strategies don’t seem out of line, really… unless you actually know some millennials and are in touch with how they act, who they are, what they like, what they want, and what they respond to. There’s an obvious grain of salt here, as we’re about to speak in pretty broad generalities about millennials. But, it’s clearly an important topic given the sheer number of them out there and the hope that at least some will transition from renting or living at mom and dad’s house to a place of their own.

There are countless articles out there geared toward helping the real estate agent and mortgage professional reach the millennial market. Not surprisingly, many of them are focused on social media proficiency as a means for message delivery. But what about the message itself?

The fact that specific messaging is largely not being tailored to this critical market is concerning. It further illustrates the disconnect between millennials and the real estate industry as a whole. Are millennials unrealistic in their expectations – in both thinking that the market will come to them when they’re ready or giving up the idea of homeownership altogether? Or, are real estate and mortgage professionals simply not approaching and talking to millennials in a way that makes sense to them?

It’s a combination of both, really, but for the sake of this article, we’re going to focus on the latter. Reaching buyers is all about knowing your target. Do you wonder why so many industry professionals are using such a traditional, old-school approach? We do, too.

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The avocado toast argument

Australian real estate mogul Tim Gurner caused a major debate earlier this year when he went on the Australian news program 60 Minutes and famously told millennials to stop buying avocado toast if they wanted to become homeowners. “When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he said. “We’re at a point now where the expectations of younger people are very, very high. They want to eat out every day, they want to travel to Europe every year. The people that own homes today worked very, very hard for it, saved every dollar, did everything they could to get up the property investment ladder.”

Leaving some of the more negative generalizations and characterizations aside, millennials have, indeed, proven how much they value their leisure pursuits. That means that ordering a latte in a café or avocado toast in a restaurant isn’t so much about the drink or the meal as it is sitting in the café or restaurant with a friend or loved one, enjoying the experience.

Will millennials forgo the things – or, more appropriately, the experiences – they love to buy a house? Some will. For the rest, it may just be up to the real estate and mortgage folks to adjust their tactics in order to coax these potential buyers into the market.

Do millennials even want to buy homes?

This has been a matter of much debate. According to the 2017 homebuyer Insights Report from Bank of America, the answer is a resounding “Yes.”

“If there’s one thing to take away from our report this year, it’s that forward-thinking millennials are buying homes – and they’re happy with their choice,” the report said. “This growing group of millennials is seeing the value of getting into a home. In fact, nearly 80 percent who bought homes report that homeownership has had a positive long-term impact on their financial picture. Clearly, the millennial generation is coming of age and realizing it might not make sense to wait anymore to purchase their first home.”

But, what are they willing to give up to get there? Might you be able to convince a millennial that paying off their car and not trading it in for a new one, as suggested by one of the restaurant mortgage pros, is the smart move if a millennial wants to buy a home? Possibly. But there are two inherent problems with that idea tied to a lack of understanding of millennials in general:

1. It assumes that a millennial has a car they can pay off, and not a lease, which is far more likely. “One-third of millennial car buyers chose a lease last year, which helped push auto lease volume to a record of 4.3 million and 31 percent of all new auto purchases, according to market research by Edmunds.com,” said the Dallas Morning News.

2. It assumes that millennials will act in a way that is opposite their nature for the sake of becoming a homeowner. Yes, we’re back to coffee and avocado toast, but it also applies to new cars. “Younger buyers in particular are more likely to view cars as technology that needs to be continually upgraded,” Jessica Caldwell, executive director of strategic analytics at Edmunds.com told the Dallas Morning News.

Mortgage options

Of note is the fact that, during the overheard, hour-plus conversation between the two mortgage professionals, only FHA and conventional loans were discussed. So much of working with buyers today, and, especially millennials, is about being creative, which is why there are so many other loans out there worthy of investigation.

In addition to FHA, which would allow millennials to put down just 3.5% with more lenient credit scores than many conventional loans, there are Fannie and Freddie loans out there that require just 3% down. There are also “lender-branded specialty mortgages” with a minimum of 3% down that have “strong appeal to millennials,” said HSH.com. “Several lenders are offering loans with a 3 percent down payment requirement to offset the burden of saving for a down payment. For instance, Chase’s DreaMaker mortgage is directed at low-to-moderate income buyers, as well as those with less-than-perfect credit.”

Lennar also just introduced a new loan program through its subsidiary called the Eagle Home Mortgage’s Student Loan Debt Mortgage Program in which borrowers “can direct up to 3% of the purchase price to pay their student loans when they buy a new home from Lennar,” according to the builder’s news release. That could mean getting rid of $13,000 in student loans.

And $13,000 buys a lot of avocado toast and coffee. Maybe even a couple trips to Europe.

Article and images provided by: realtytimes.com

Home Foundations And Why Material Matters

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The typical single-family home can weigh anywhere from 80,000 to 160,000 pounds. Foundations provide a solid base for a home’s weight, help to ensure the house stays level and provides a base for construction to take place. Foundations matter, and so does the material that they’re made of. Here’s a closer look at both, starting with materials and why they matter.

Before buying or constructing your dream home, it’s important to be familiar with foundations to help you better understand how to prevent damage or make necessary repairs. Let’s start with materials and why they matter.

Foundation Materials:

Concrete

The most common material used to create a home’s foundation is concrete—by far. Typically poured or constructed with a series of cinder blocks, concrete is fairly inexpensive, easy to find and produce, and strong. Although poured concrete is prone to cracking, these repairs are often affordable and easy to have done, especially if it is being done from the interior.

Drawbacks of concrete vary based on the type of foundation. Cinder blocks may buckle over time and can involve expensive repairs. Poured concrete requires a mixer on site to perform installation. This means installation costs can escalate if a concrete facility isn’t close by.

Pre-Built Walls

Pre-built walls typically consist of studded wall construction that’s been coated in a concrete layer. It installs quickly, is always level and makes discovering problems easier. However, pre-built walls are more expensive than other types of foundations.

Stone and Brick

Laid stone and brick are two other foundation types commonly found in older homes. Stone foundation usually isn’t equipped with the right type of drainage systems. Brick foundations, though typically thick and adequate, tend to degrade over time and are also prone to mortar issues.

Foundation Types

Foundations don’t just come in many materials, they take different shapes. Let’s take a look at the three most popular foundation types — slabs, crawlspaces and basements:

Basements

Cold weather climates are the most popular location for basement installation. This is because the foundation of the home needs to exist beneath the frost level in order to sufficiently support it. They’re typically made of poured concrete, and many also serve as a place where home appliances are located (i.e., hot water tanks, furnaces, washing machines, etc.). Occupants often take advantage of the extended headroom to turn the area into additional living space.

Prone to flooding, fully underground basements can be costly if your yard doesn’t quickly absorb or drain rainfall. Basement walls and floors are also susceptible to cracking, which require repair to keep moisture out and maintain structural integrity.

Slabs

A slab is nothing more than poured concrete that exists on a grade of land. This type of foundation is particularly popular in warm weather climates, where water tables are higher. It’s installed about a foot underground and usually reinforced with steel.

Slabs are a cheaper type of foundation and, unlike a basement, reduce flooding risk. However, slabs are prone to cracking and can also provide difficulties for incorporating heating and cooling ducts into the home.

Crawlspaces

Crawlspaces are foundations that exist beneath a home with limited headroom. Though headroom is at a premium, it’s typically enough to store certain appliances, piping, ductwork and more. The majority don’t permit the additional living space of a basement because they’re approximately two to four feet high.

Installing a crawlspace is cheaper than a basement, but more expensive — yet more functional — than a slab. Other big disadvantages include susceptibility to moisture issues and serving as a favorite place for pests and rodents to seek shelter in. The good news is, you can waterproof your crawlspace.

Worried that your foundation may be in need of repair? According to this article on HomeAdvisor, signs that your foundation needs attention include misaligned exterior doors and windows, cracks in stonework, sheetrock, and floors, bulges in the floor, or interior doors sticking or jamming. Consult a professional if you think your foundation is in trouble.

Article and image provided by: realtytimes.com

Hipsters create hot housing markets

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Realtor.com and Yelp ranked the Hottest Hipster Markets in America, and Columbus, Ohio came in first place. 

Farm-to-table restaurants, dive bars, breweries and independent record stores give a city a “hipster” vibe – and also attract unexpected home buyers.

Realtor.com and Yelp ranked the Hottest Hipster Markets in America, which have strong buyer demand with homes selling in about 30 days. Javier Vivas, director of economic research for Realtor.com, said in a news release that “a concentration of hipsters seems to be an indicator of a hot housing market.”

Columbus, Ohio, ZIP 43202, came in first place for its art, music, theater and museums. Columbus is home to Ohio State University, which creates a pipeline of young design talent. Behind New York and Los Angeles, Columbus has the highest number of fashion designers.

Merriam-Webster defines a hipster as “a person who is unusually aware of and interested in new and unconventional patterns (as in jazz or fashion).”

In California, “flipsters,” or millennials hipsters who flip homes, are taking over the market and changing the aesthetic of neighborhoods, The Los Angeles Times reported. A specific subset of flipsters forgo traditional vertical fences for horizontal board fences in the front yard, per The Los Angeles Times.

“That immediately identifies a house — OK, someone has come in and hipsterized this,” David Raposa, head of Los Angeles-based City Living Realty, told The Los Angeles Times. He said it’s a way for flipsters “to put their stamp on a house, a kind of advertisement for buyers who can then expect an upgraded, hip house.”

Here are the top 10 metro areas following Columbus:

 

2. Seattle, Wash. – ZIP 98122

3. San Diego, Calif. – 92104

4. Fort Wayne, Ind. – 46802

5. Rochester, N.Y. – 14620

6. San Francisco, Calif. – 94117

7. Long Beach, Calif. – 90814

8. Louisville, Ky. – 40217

9. Grand Rapids, Mich. – 49506

10. Colorado Springs, Colo. – 80903

Yelp used data to rank zip codes by the share of businesses with reviews containing the word “hipster.” Then Realtor.com calculated the Market Hotness Index for each zip code, based on the number of page views each market received on the real estate site. Yelp and Realtor.com combined both sets of data to identify the zip code in each hot metro area with the most hipster businesses.

Find the full list here.

Article and image provide by: Sacramento business Journal