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Levine Capital Newsletter July 2021

Levine Capital Newsletter July 2021

Real Estate Update July 2021

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…

Amazon & The Big Tech Battle For Real Estate Market Dominance

Amazon has long desperately wanted to dominate the real estate space. With the grocery business finally under its belt, we could see the tech giant focus even more of its energy and capital on this sector in the months to come. 

Amazon is of course already one of the largest landlords in the country and the largest in Seattle. Jeff Bezos as well has been selling off massive amounts of Amazon stock to buy real estate for his portfolio.

While Amazon has toyed with adding houses to its online store, the latest play has included obtaining the keys to thousands of apartment buildings nationwide. A move that it says will help with deliveries, but surely also helps to integrate it into every property across America.

Tesla, Google, and Apple have also been making their moves, from smart home kits to investing in home builders and positioning themselves to be the preferred solutions provider to meet new solar mandates.

Mortgage Delinquency Rates Falling

According to data compiler CoreLogic, mortgage delinquency rates began turning around earlier this year. 

April reportedly marked the first month since the beginning of the pandemic that mortgage delinquencies began to decline. 

In contradiction to many media outlets and other political groups spreading fear over a pending tsunami of foreclosures and evictions, and using that to create new rules and policies, CoreLogic says the national mortgage default rate stood at a modest 4.7% in April.

Defaults fell in every single state, except for WY. NY and NYC of course were among the areas with the most mortgage loans in default, taking second place on both a city and state level. 

Banks have also been reporting record gains and new loan origination highs while acing financial stress tests. 

The New Infrastructure Plan

The new trillion-dollar infrastructure plan that has commanded so many headlines recently aims to raise enormous sums for a variety of new national projects. 

According to the White House’s official website and online briefing room, the largest category of spending in this bill will be $109B specifically slated for building roads and bridges. This doesn’t include tens of billions more slated to help ailing rail and public transportation networks. 

It is an interesting expense given that most international cities building for the future are aiming to do away with traditional roads altogether. Such as Saudi Arabia’s new futuristic city, Neom, which plans to have no roads, and to depend on hyperloop type underground transportation and flying taxis instead. 

Another part of this deal that may have been overlooked by most is the inclusion of $40B to be spent on stepping up IRS enforcement to chase down taxpayers and bring in more revenues. A plan that hopes to produce $100B in additional funds through the Internal Revenue Service according to the New York Times.

The State Of The Real Estate Market

Everyone knows that the real estate market has been on fire over the past year. Here are some of the most influential trends impacting the space now, and the outlook ahead.

Existing Home Sales Slow To 1.4% 

According to the National Association of Realtors (NAR), existing home sales fell to a growth rate of just 1.4% in June 2021. A month that has traditionally been one of the busiest in the real estate industry. Also known as peak home buyer season. 

The amount of inventory of unsold homes also rose by 3.3% between May and June 2021. 

Yet, home prices still surged ahead at their fastest rate since 1999, at a pace of 23.4%. 

Incoming Renters Ready To Pay 15% More For Apartments

In last month’s newsletter, we reported that some landlords had already recorded rental rate increases of 14%, with lower-cost markets seeing an average monthly rental rate increase of 12%. 

Now Realtor Magazine reports that apartment hunters are on the move, and on average are willing and able to pay 15% more than existing tenants in the areas they are moving to. 

In addition to Rochester, NY, Allentown, and Harrisburg, PA is among the markets which have seen around a 20% year-over-year growth in rental rates. 

New Foreclosure Moratorium Until 2022

New dual rules from the FHFA and CFPB are cementing new guidelines for mortgage servicers and dealing with defaulting borrowers. 

The effective culmination of these combined rules appears to be a new foreclosure moratorium on most properties. Preventing lenders from filing first foreclosure notices until 2022. 

Other provisions of these rules demand more from servicers in terms of providing borrowers loan modifications with easier terms. 

Two exceptions that may help fuel the market with more deals are for abandoned properties, and when homeowners default during a trial loan modification. 

What’s Most Important In Investing Now

It’s all about taking action. 

Those who have not increased the share of real estate-related investments in their portfolios are missing out, big time. 

Cash flows and equity have been rising at double digits per year. This sector also provides the most cushion from any unexpected downside pressure or collapse of the stock market and other alternative investment sectors. 

Check out our recent blog posts on the Steps To Get Started In Private Equity Real Estate Investing, and optimize your portfolio now. 

Levine Capital Updates

As a company, Levine Capital continues to be extremely bullish on single-family homes and multifamily investments. 

We’ve had great success with Fund II and Fund III. Keep an eye out for our case studies on the performance of these funds. 

Check out this property tour with our principals and Daniel of TCS Anika Homes, and see what we’ve been investing in for yourself here.

The Aggregation Fund has been doing phenomenal for our family and investors providing tax-advantaged steady cash flow. It is now open for new investments!

Also, be sure to check out the latest news and insights on the market in our news section.

Including:

  1. Active versus passive investing
  2. Getting started in private lending
  3. Why the smart money loves income properties so much

We are also expecting to announce a new debt platform and credit strategy with a focus on SFR and small multifamily.  Be sure you are subscribed to our social feeds and email newsletter to be one of the first to find out how we are doing it and to get access if you qualify. Plus, to get access to our upcoming live Q&A with one of our deal sponsors.