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Mogul Minute 5/18/2016
May 18 | 2016

Here at RealtyMogul.com, we keep our finger on the pulse of all things real estate, from finance to technology and everything in between. We make a point of sharing interesting articles and think pieces among RealtyMogul.com staff to help our team stay abreast of the market, and ahead of the curve.

So we thought, why not share some of these insights with you.

Got A Minute? Here’s some recommended reading with key points from the content:

U.S. Stocks Tumble With Bonds on Fed Rates Rhetoric as Oil Rises (Bloomberg)

  • Stocks fell on Tuesday and the US treasury yield curve flattened to the narrowest since 2007 amid growing speculation that the Federal Reserve will bump up rates in the immediate future after a pair of Fed officials suggested higher rates may be warranted. On Tuesday, Atlanta Fed President Dennis Lockhart and San Francisco’s John Williams said two rate increases this year may be warranted, while Dallas Fed President Robert Kaplan said a hike may come soon. Lockhard said, “currently my assumption is two, possibly three [rate increases this year].”
  • o Global equities have struggled to extend gains since reaching a four-month high on April 20 as investors scrutinize U.S. data for clues to the timing of the Fed’s next policy move.

Amazon planning second grocery store: Report (CNBC)

  • Reports originally surfaced in mid-2015 that Amazon would be creating a brick-and-mortar store where customers can order their groceries online then pick up at the store. The first one is planned to be in Sunnyvale, CA while it a report this week shows that the second will be in San Carlos, CA. This news comes amid reports that Amazon is also planning to expand its store-brand product offerings into items like nuts and laundry detergent.

Freddie Mac Launches New Credit Risk Structure for Affordable Housing Loans (Globestreet)

  • The new product is called “Multifamily Structured Credit Risk (SCR) Debt Notes.” Private investors are sold a portion of the credit risk on certain multifamily mortgage loans that back targeted affordable rental housing tax-exempt bonds guaranteed by Freddie Mac.
  • SCR Notes are unsecured and unguaranteed corporate bonds — SCR Notes are not backed or secured by the reference pool itself — that transfers the first-loss credit risk of a specified pool of mortgages to private capital markets credit investors. Freddie Mac retains the senior loss credit risk.
  • Freddie just sold $52M of these notes whose reference pool consisted of 50 multifamily mortgage loans originated between 2007-2015 with an unpaid balance of $1.04B.

Rental costs continue to surge past incomes (MarketWatch)

  • In April, rent was 3.7% higher year-over-year and the highest growth level since before the financial crisis. Rental growth continues to be much larger than wage growth.
  • The article cites many reasons for the rental growth including: people doubling up in apartments, people who basement squatted during the recession now forming their own households, baby boomers selling big homes and moving to apts, constrained new supply, and a tighter mortgage credit environment.
  • Six million would-be homeowners have shifted to renting, or have left the housing market altogether. But rental housing stock only rose by 5.2 million units over that period.
  • In interesting chart showing the year-over-year change in rent from 2005-2015.

E-Commerce Drives Surge in U.S. Warehouse Rental Prices (WSJ)

  • According to new data from CBRE, rental rates for prime warehouse space increased 9.9% nationally year-over-year in 2016. The growth is fueled largely by e-commerce and the need to get customers items faster. “There are huge premiums being placed right now on being close to the consumer – speed of service, speed of delivery is a critical component of why people choose to buy from one retailer over another. To get the goods to consumers fast, you have to get close to them.” – David Egan, CBRE’s head of industrial and logistics research for the Americas.
  • The growth in the U.S. far outpaced the 2.8% increase in industrial leasing rates that CBRE measured around the world, and six American markets were among the nine markets world-wide with the strongest growth in rents. The top rental rates in Oakland, with its scarce space and ready access to San Francisco Bay-area consumers, were by far the fastest-growing in the world, soaring 29.8% year-over-year, nearly twice the rate of prices in the Northern New Jersey region, another hot market.

Chinese pour $110B into US real estate, says study (The Guardian)

  • A huge surge in Chinese buying of both residential and commercial real estate last year took their five-year investment total to more than $110B. Unsurprisingly, this makes them the largest foreign buyers of US property as they have now overtaken Canada.
  • According to the study,  the figure for the second half of this decade is likely to double to $218B despite a slowdown in Beijing’s capital outflows.
  • While several of their commercial purchases have made headlines, the study shows that Chinese buying of US residential far outpaces its investment in commercial. Between 2010-2015, Chinese purchased $17B into CRE and over $93B into residential. The main reasons for this uptick include the growth of private wealth and motivation to get money outside China as the yuan has recently devalued.
Tim Ednoff Headshot
Written by , Associate - Commercial Equity at RealtyMogul.com

Tim evaluates investment opportunities as well as performs due diligence and writes content for various equity and debt transactions. Outside of the office, Tim is an avid sneaker collector, a passionate health and fitness advocate, and a dedicated podcast enthusiast.

 
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