Regulation Reversal – Good for Commercial Real Estate Industry
Wall Street regulators have begun an exit from Washington with Mary Jo White, the chairwoman of the Securities and Exchange Commission becoming the first to announce plans to leave the agency after Donald Trump’s upset victory. Other financial regulators are expected to follow.
It comes as President-elect Trump has pledged to dismantle Dodd-Frank, the financial regulatory overhaul Congress passed in response to the 2008 financial crisis.
“The significant increase in Regulations over the last few years are hurting the financial industry, crippling banks and significantly impacting shareholder value,” says Situs Executive Managing Director Steven Bean, who agrees with the plan to reduce regulations. “To me, the pendulum swung too far and greatly increased the banking cost to the average consumer. Most of the regulations were supposed to protect consumers but reality is they reduced availability to credit. It’s time for a fresh set of eyes to review portions of the Dodd Frank Act. Additionally, for Freddie Mac and Fannie Mae, someone needs to have a plan to grow the housing market and expand it for millennials and first-time buyers.”
For the last several years, it has been difficult for many first-time homebuyers who might have a blemish or two on their credit report to qualify for a mortgage because banks became overly cautious after paying nillions in penalties and fines.
And says Bean “Cutting some of the red tape without losing some needed regulation will also assure Commercial Real Estate Markets remain strong.”
Homes or Stocks — Here’s the Better Investment
The typical stock portfolio offered a higher return on investment than the typical home from January 2010 to May 2016, according to Redfin.
In partnership with investment advisory firm FutureAdvisor, Redfin’s latest analysis compared gains in median home prices with returns on a median stock portfolio in 24 major U.S. metro areas.
While there were slight variations, a median financial portfolio earned between 63 and 70 percent since 2010 in each of the 24 metros studied, offering a higher rate of return than the housing market in all but four metros. The exceptions were Miami (where home prices increased 73.3%) and three metros in Northern California: San Jose (74.7%), San Francisco (72.7%) and Oakland (67.6%). These were all housing markets where prices skyrocketed and crashed the most during the bubble years.
Other metros, such as Philadelphia (home prices up 11%) and Baltimore (11.4%), have had a more steady recovery. Their residents would have had a much higher return investing in stocks than in the housing market during this time. However, a great deal of value can be derived from a home purchase beyond its price appreciation.
“There are pros and cons to any investment, but real estate is unique in that it offers the advantage of forced savings through the monthly mortgage payment,” said Redfin chief economist Nela Richardson. “The fact that homeowners build an increasing share of equity just by paying their mortgages every month enforces a savings discipline on consumers that is absent in stocks. For this reason, real estate historically has served as the primary engine of wealth creation, particularly for the middle class.”
In most cities, multi-family buildings, condos and co-ops had higher appreciation than single-family homes. The best time to buy in 2010 was December, with home prices appreciating 46 percent since then, compared to just 36.8 percent for homes purchased in June of that year.
Home Foreclosures Skyrocket to Highest in Nearly Ten Years
October’s month-over-month increase in U.S. foreclosure activity was the biggest in more than nine years.
The 27% rise in homes with foreclosure filings — such as default notices, scheduled auctions or bank repossessions — was the sharpest spike since August 2007, says property information provider Attom Data Solutions.
The flare-up in foreclosures is concerning, said Daren Blomquist, senior vice president at Attom Data Solutions. “The increase in October isn’t enough evidence to indicate a new foreclosure crisis emerging but it certainly demonstrates that this housing recovery is not completely devoid of risk,” he said in a news release announcing October’s Foreclosure Market Report.
Year-over-year increases in all types of foreclosure activity were seen in 28 states and the District of Columbia, with the biggest ascents seen in Colorado (64%), Georgia (22%), Pennsylvania (20%), Arizona (17%) and New York (10%).
“While some states are still slogging through the remnants of the last housing crisis, the foreclosure activity increases in states such as Arizona, Colorado and Georgia are more heavily tied to loans originated since 2009 — after most of the risky lending fueling the last housing boom had stopped,” Blomquist said.
Other key findings in the report:
October also saw a 25% jump in properties beginning the foreclosure process, the biggest month-over-month jump since December 2008, when the U.S. was deep in economic crisis.
Bank repossessions likewise saw a monthly rise of 25%, though they fell by 6% year-over-year.
Scheduled foreclosure auctions rocketed to a month-over-month rise of 30%, the steepest since January 2006, when the housing-bubble prices were peaking.
How Much The Richest Earn in Top Ten U.S. Cities
10. San Jose, California
Income required to be in the top 10%: $225,852
Income required to be in the top 5%: $298,164
Income required to be in the top 1%: $517,000
9. Dallas, Texas
Income required to be in the top 10%: $157,995
Income required to be in the top 5%: $216,494
Income required to be in the top 1%: $425,060
8. San Diego, California
Income required to be in the top 10%: $163,080
Income required to be in the top 5%: $215,800
Income required to be in the top 1%: $428,000
7. San Antonio, Texas
Income required to be in the top 10%: $128,575
Income required to be in the top 5%: $170,030
Income required to be in the top 1%: $357,000
6. Phoenix, Arizona
Income required to be in the top 10%: $139,500
Income required to be in the top 5%: $187,000
Income required to be in the top 1%: $381,151
5. Philadelphia, Pennsylvania
Income required to be in the top 10%: $164,098
Income required to be in the top 5%: $215,724
Income required to be in the top 1%: $424,552
4. Houston, Texas
Income required to be in the top 10%: $156,557
Income required to be in the top 5%: $216,189
Income required to be in the top 1%: $423,345
3. Chicago, Illinois
Income required to be in the top 10%: $163,059
Income required to be in the top 5%: $218,557
Income required to be in the top 1%: $479,844
2. Los Angeles, California
Income required to be in the top 10%: $159,008
Income required to be in the top 5%: $218,018
Income required to be in the top 1%: $466,895
1. New York, New York
Income required to be in the top 10%: $172,000
Income required to be in the top 5%: $247,596
Income required to be in the top 1%: $608,584
read more: CNBC
Texas Community Goes Underground For Doomsday Prep
Some upper-income Texans are headed down below, not Australia, but below the surface.
An investor group is planning for a doomsday scenario by building a $300 million luxury community replete with underground homes. There will also be air-lock blast doors designed for people worried about a dirty bomb or other disaster and off-grid energy and water production.
The development, called Trident Lakes, is northeast of Dallas.
Residents will enjoy an equestrian center, 18-hole golf course, polo fields, zip lines and gun ranges. Retail shops, restaurants and a row of helipads are also in the works. For those looking to “get away,” they’ll also be able to enjoy three white sand beaches and a neighborhood spa.
“We’ve evolved it into long-term sustainability instead of a survival community,” Trident Lakes CEO Jim O’Connor told the Houston Chronicle, adding that the 400 planned condos will house about 1,600 people. “The concept is to build a community that will last two centuries or longer. That means we’re looking at designs that include earth structures that won’t be exposed to the elements.”
Residents will first be able to move-in possibly as soon as 2018, O’Connor said, with construction slated to potentially begin next year.
“It’s not just a hole in the ground to hide in — it’s going to be one of the most plush resorts in all of Texas, if not America,” Trident Lakes spokesperson Richie Whitt told the Sherman Herald Democrat.
“People are getting fearful of this world — there’s ISIS, there are things like Zika virus to race relation and the police brutality they see on TV — people are nervous. People want a place they can have safety for themselves and for the future of their families,” Whitt added. “If need be, it’s going to be one of the safest places on Earth.”
read more: CBS Radio
American Apparel Files for Second Bankruptcy
American Apparel filed for its second bankruptcy protection in just over a year on Monday, weighed down by intense competitive pressures facing U.S. teen retailers and a rocky relationship with its founder.
The second bankruptcy comes as the retailer struggles to overcome years of losses and rising online competition. The company became a part of popular culture for its racy advertising and mercurial founder, Dov Charney.
American Apparel, known as much for its sexually charged advertising, listed assets and liabilities in the range of $100 million to $500 million, according to a Delaware court filing.
Separately, Canadian apparel maker Gildan Activewear Inc said it agreed to buy intellectual property rights related to the American Apparel brand and certain assets from American Apparel for about $66 million in cash.
Gildan will not be purchasing any retail store assets, it said in a statement.
The bankruptcy filing allows American Apparel to hold an auction for its assets and business under which Gildan’s proposed acquisition would constitute the initial bid.
“Gildan has asked for the opportunity to maintain certain of our manufacturing, distribution and warehouse operations in and around Los Angeles,” American Apparel Chairman Bradley Scher said in a letter to employees, a copy of which was obtained by Reuters.
Throughout the competitive sale process, American Apparel will run its business as usual in the United States and this will have no noticeable effect on day-to-day operations in the United States, Scher said in the letter.
read more: Reuters
Lock the Door! Your Boomer Parents Have Decided to Downsize
Peculiar items are popping up at the home of Cathy and Mark Schroeckenstein, a young couple in Minneapolis.
A cement bunny appeared on the doorstep. A rusted baker’s rack materialized on the patio. A lamp that is “like so gaudy….kind of gold” and “really old school” was plopped in the kitchen, says Ms. Schroeckenstein.
The culprits, it turned out, were her in-laws.
David and Christine Schroeckenstein, both in their 60s, plan to relocate to a sleek Scottsdale, Ariz., condo from Minnesota after David, an allergist, retires next month. They have no intention of lugging decades’ worth of accumulated treasures. So they admit they are stealthily dumping them on their grown children.
“We don’t want to take it to the Goodwill; we feel like they should take it, and they should want it—but they don’t,” said Christine, a retired nurse who also unloaded two porcelain dogs that have been in the family for generations to a daughter in Denver.
“This next generation just looks at it like, ‘what a pile of crap,’” she sighed.
Economists have long talked about the great transfer of wealth that is under way from the baby boomers to Generation X and millennials. Less noticed is the great transfer of tchotchkes, mementos, lawn ornaments, curio cabinets and faded family heirlooms that are now causing friction and subterfuge in families. And baby boomers who are paring down are also fending off their own parents’ stuff.
read more: Wall St Journal
Make Me an Offer I Can’t Refuse
The Beverley Hills mansion made famous from Hollywood classics such as “The Godfather” and “The Bodyguard” has been put up for sale for the price of $175 million.
The compound boasts more than 28 bedrooms and suites, six structures over five prime acres of land, two swimming pools and a seven bedroom guest house which has played host to numerous A-list stars.
The current owner is real-estate investor Leonard Ross, according to reports, who bought the compound over four decades ago for less than $2 million. Newspaper mogul, William Randolph Hearst and actress Marion Davies, had both previously owned the mansion and the estate was even a destination on Jacqueline and John F. Kennedy’s honeymoon before becoming the west coast presidential election headquarters for JFK. For many movie fans though, the house is probably more famous for the gruesome horse head scene in ‘The Godfather’.
The luxury property was last formally on the market in 2007 for around $165 million, however, Ross opted to take the house off the market less than a year later.
According to the Wall Street Journal, Ross, has finally decided to sell the Beverley Hills mansion because he is “getting up there (in age).”
Still Ahead
Now that President-Elect Donald Trump has chosen Reince Preibus as chief of staff and Steve Bannon as Chief Strategist it’s anyone’s guess who he will pick for key positions that will affect Commercial Real Estate, clearly the actions of the new administration will occupy most of the media attention this week. There are also some key data coming this week, that should provide updated information on the state of our industries:
TODAY
Mortgage Applications 7:00 a.m. ET
Housing Market Index for November 2016, 10 a.m. ET
Housing and Insurance Subcommittee Hearing, “Modernizing Appraisals: A Regulatory Review and the Future of the Industry,” 10 a.m. ET
TOMORROW
Housing Starts for October , 8:30 a.m. ET
Fifth Avenue Lockdown
The Secret Service wants to shut down traffic on New York’s Fifth Ave. around Trump Tower when the President-elect is in town: sources tell the NY Daily News’ as President-elect Donald Trump prepares for gridlock in Washington, the city he leaves behind should get ready for the real thing. The NYPD and the U.S. Secret Service are negotiating over how to secure Manhattan’s Trump Tower, the President-elect’s home and headquarters, with measures that could include shutting down Fifth Ave. The two sides are scheduled to meet Thursday to develop plans to keep troublemakers at bay, according to a police source, who said the Secret Service wants to keep traffic off of Fifth Ave. whenever Trump is in town. But top brass in the police department believes shutting down even a portion of one of the city’s major avenues would be a nightmare especially with the holiday shopping season ahead.”
read more: NY Daily News
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