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Levine Capital Newsletter: February 2022

Real Estate Update February 2022

Real Estate Update February 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…

Pandemic Financial Woes Are Over

According to Bloomberg Americans of all income levels have now financially recovered from the COVID pandemic. 

The job market and economy are now so hot that the Fed is expected to make four interest rate hikes this year in order to cool it down.

A side benefit of that is mortgage lending potentially becoming more profitable as mortgage rates also go up. 

The M&A Industry’s Impact On Real Estate

In spite of some major failures, and post-IPO or SPAC debacles, the mergers and acquisitions space has been experiencing a great amount of activity over the past couple of years.

Globe St. forecasts this high level of activity will continue in 2022 while pointing out that real estate is one of the top three expenses companies have. It is often one of their greatest assets, if not liabilities. That also makes it a notable part of corporate transactions. 

In turn, expect more commercial real estate to change ownership over the next year. Some will be sold off. Some refinanced. 

Stock Market Struggles As Billionaires Dump Stocks

In spite of talks of a booming economy, and some companies experiencing record growth and values, that hasn’t necessarily translated into great gains or results for stock market investors. 

In fact, Yahoo Finance reports that the S&P just had its worst month since the epic chaos of March 2020 when COVID stay-at-home orders began shutting things down. The NASDAQ also narrowly avoided its worst January ever. 

At the same time, notable CEOs and billionaires like Elon Musk and Jeff Bezos have been dumping billions of dollars in stock in their own companies. 

There are those desperately begging retail investors to buy in on the downslope. Claiming that the S&P 500 rarely goes down more than 15%, “outside of recessions.” Of course, some stocks have recently sold 30% to 70%, at which may just be the tip of the iceberg of a correction. 

The State Of The Real Estate Market

The real estate market continues to be one of the biggest beneficiaries of recent economic shifts.

$50B Is Now Chasing Real Estate Deals

While far more capital is currently expected to be searching for debt and commercial real estate investments, Globe St. reports an estimated $50B in capital is currently chasing deals in the SFR market.

Why Better Mortgage Ended Up Not Being That Good

Better.com was supposed to be one of those hot-shot tech companies that could transform the real estate and mortgage space. Most have failed miserably. Often due to disillusioned ideas, clearly coming from perhaps well-intentioned and frustrated entrepreneurs, but who have no understanding of these industries and how they work. Like the idea of building an innovative new company that can close loans in just 30 days. Which of course is pretty standard practice. Perhaps even pretty slow for real estate investors. 

So, the day after Better raked in $750M in new funding, the CEO publicly fired 900 employees on a now-infamous Zoom call, blaming the company for performing poorly. 

The Economic Times reports that Vishal Garg was recently allowed back as the CEO. Resulting in a high volume of resignations. 

There is plenty of room for modernizing, innovating, and improving in this space. Unfortunately, with the leadership of those that really know this space investors may continue to lose billions of dollars betting on the wrong horses in the race.

Jumbo Mortgages Growing In Popularity

Jumbo mortgages have been growing. High home prices, and the bullish real estate sector have certainly helped to be drivers of this. 

Jumbo mortgages now make up the highest percentage of the market they have in 15 years. Overall mortgage loan amounts grew by 14% last year according to CoreLogic. With jumbo mortgages becoming even cheaper than conventional-sized loans, more borrowers have needed to or opted to use them to both purchase and refinance homes. 

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.


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