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Levine Capital Newsletter – April 2022

Real Estate Update April 2022

Real Estate Update April 2022

Find out what’s happening in the market now, what’s driving trends and investor choices, as well as the latest updates from Levine Capital…

The State Of The Markets

Key factors at play right now…

The New $2.5 TRILLION Tax Hike 

The current administration is again proposing a massive new tax hike. This time to raise another $2.5T increase in the amount US taxpayers will fork out. While still leaving a $1.5T deficit in the budget. 

Parts of this massive proposal include adding a new minimum 20% income tax. As well as again reviving the goal of taxing unrealized gains. 

This could certainly help create a massive redistribution of wealth in America. Though savvy individuals and families will find investment opportunities that will help them minimize tax liability, and maximize breaks. 

Can The Fed Achieve A ‘Soft’ Landing?

New coverage by both Bloomberg and The Washington Post proclaims that the Fed has now made a US recession inevitable. 

Incomes are already being slashed by soaring taxes, while inflation is eating up how far the remaining dollars from income can go. 

Now the Fed appears to be moving towards a more severe pace of interest rate hikes, which could bring down the economy.

In order to cool the economy, they would have to make borrowing painfully expensive and spike unemployment. 

Soft landings, which mean cooling the economy, without crashing it, have very rarely been pulled off. Markets almost inevitably overcorrect.

On the bright side, this does bring lots of opportunities for those investing in distressed assets, and those funding them. 

Rents Are Still Surging

According to Zumper, multifamily property rents are still growing fast. After a furious year of residential rental rate increases, the National Rent Report shows 2022 is delivering gains that even outpace 2021.

The median rent on one-bedroom apartments has hit a new all-time high. Current trends from Q1 put the market on pace for another 30% increase in rents by the end of the year. 

The State Of The Real Estate Market

Deals and trading volumes in real estate continue to abound. 

Foreclosures Surge In Early 2022

Foreclosures have been growing over the past year. They rose almost 11% from January to February 2022, and almost 130% year over year to February 2022.

While that seems like a big leap, it may not be that significant when put into context. For example, that represents only around 25,000 units in February. When around 500,000 housing units sell each month in a strong year. The market can quickly snap these up, and will still be starving for more. 

There is certainly likely to be more foreclosure coming through the pipeline. Both are due to court backlogs finally being processed in the wake of COVID. As well as the result of new policies and rampant inflation in housing costs. 

However, it is important to pay attention to where pockets of foreclosures are popping up. Nationally foreclosure rates pale in comparison to 2008. Yet, there are places like Cleveland, OH, and Kissimmee, FL where 1 in 300 to 1 in 400 housing units are now in foreclosure. 

A steady feed of foreclosures may be great for investors who are desperate for more deals. Though saturated pockets of distress may stall house price growth in those areas.

Tommy Hilfiger Flips Another Big One

Celebrities and wealthy CEOs and fund managers have become increasingly involved in flipping houses.

Fashion mogul Tommy Hilfiger reportedly just closed another big deal himself. This time a $50M home in Aspen. He purchased it just 3 months ago for only $31M. Not a bad profit by any measure. 

Jumbo Mortgage Loan Securitization Hits A New High

Data from CoreLogic shows the securitization of jumbo mortgage loans hitting a new 14 year high. At almost $50B for 2021. 

A breakdown of these loans being securitized shows that borrowers now have credit scores an average of 30 points better than during the previous high. As well as 5% better DTI ratios, and 5% lower LTVs on average. 

That suggests that these loans and borrowers are of even better quality. 

As they exceed the conforming limits for Fannie Mae and Freddie Mac, jumbo mortgage loans are typically sold into the private secondary market. 

What’s Most Important In Investing Now

This moment is all about positioning. It is about positioning your portfolio to benefit the most from what’s next while minimizing your downside exposure to risk and taxes, and maximizing the upside. 

Talk to one of our experts to answer all the questions you still have about the market, what’s smart for your portfolio, and where the best opportunities are now. 

Levine Capital Updates

We are pleased to announce a new investment opportunity that can be characterized as a high risk-adjusted yield, safe, and liquid investment. The hallmark of the investment strategy is to provide capital to fund 1st lien position loans backed by real estate collaterals, sell the loans for a profit to institutional buyers in the secondary market, and, most importantly, recycle funds over and over. More details about our upcoming webinar will be coming soon! 

Be sure to check our site for the latest developments here and check out the latest news and insights on the market in our news section.

Including:

  1. What Is A Private Lender In The Real Estate Business?
  2. 3 Major Factors Of Commercial Real Estate Lending
  3. What Are The Best Strategies For Making Money In Real Estate?