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Levine Capital Newsletter JUNE 2022

Levine Capital Newsletter - JUNE 2022

Real Estate Update JUNE 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…

Major Layoffs & Hiring Freezes

We seem to be clocking up more and more similarities to the economy and markets of the 2008 Great Recession, the 70s stagflation, as well as the shift from the Rolling 20s to the Great Depression.

Last month we covered how the stock market was regressing. We already have the supply shortages. Now we have the mass layoffs and hiring freezes too. 

Bank of America has downgraded its outlook for the S&P 500. This follows the worst April performance on record since the 1970s. 

This is happening with the largest corporations in fields which should be benefiting the most from the current economy. Yet, companies like Tesla are laying off 10% of their workforce, and are stopping hiring. We’ve seen similar moves at Paypal, and other tech giants. Coinbase just announced that it is laying off 18% of its workers after bitcoin fell by around two-thirds from its peak. 

In the short term, this should drive more individuals to invest in real estate to preserve their wealth, and create new streams of income. 

Mortgage Rates Almost Double

As the Fed is still just beginning its rate hike spree, mortgage rates have already almost doubled in 2022. Now close to 6% for a traditional 30-year mortgage. 

If the Fed follows the path of raising rates to meet inflation levels to get it under control, rates still have a long way to go up. 

The last time rates were this high happened to be November 2008, according to Mortgage News Daily. Though some experts are forecasting the Fed will have to reverse course and bring rates back down in 2023.

Private Money Lending Through IRAs

Private investors are increasingly finding more needs and benefits in lending money through their IRA accounts. 

No intelligent person is just going to sit there while their retirement account continues to take a severe beating in the stock market, and other traditional investments that are diving toward the bottom. 

By converting 401ks and IRAs to self-directed options, individual investors can take control of their investment portfolios, and move into alternative investments. Like investing in mortgage notes, bridge loans, real estate, and private equity. All with the same tax perks these accounts are opened for. 

The State Of The Real Estate Market

Deals and trading volumes in real estate continue to abound. 

Industrial Real Estate Slips, In Favor Of Residential

As retail and office real estate took a beating from COVID, and fundamentally changed, investors sought out more security and better yields in industrial, multifamily, and residential single-family home real estate. 

The belief was that more warehouses and distribution centers would be needed to accommodate and facilitate the boom in online shopping, and home delivery. 

Unfortunately, that trend seems to have been short-lived and the demand was met too fast. This is especially evident in Amazon’s latest moves. 

In NY, Amazon is now leasing out its warehouse space to other companies as online business drops. After they got big tax breaks on the promise of creating more jobs. Globe St. further reports that Amazon is now delaying the opening of new fulfillment facilities it has built for another two years. 

This leaves multifamily and single-family real estate as the best plays for investors now. 

Home Sellers Begin Cutting Prices

After hitting new record highs in February and March 2022, house price growth appears to be moderating. 

As many as 40% of home sellers in some areas have been reducing their asking prices. Sales prices in a few cities may be floating down. 

Smart lenders have already built this in with the LTVs that they are providing to borrowers, and are still well insulated from market changes. 

It is also important to point out that put in context, any slowing from an appreciation that has raged from 20% nationally, to 40% or more in some markets may bring some welcomed balance and sustainability to the market.

As it clears out the novices, and competition from retail buyers, investors will find more negotiability and value. As well as efficiency in marketing and bidding on new deals. 

The Power Of Private Lending In Times Like These 

Private lenders that are amassing their private capital have great advantages in times like these. 

This can insulate them from issues in capital markets, interest rate increases, and stricter underwriting criteria. 

In turn, it enables them to continue to provide the most competitive loans to well-qualified and experienced front-line investors. 

What’s Most Important In Investing Now

Right now, it is all about taking action.

Don’t just sit there and watch your portfolio take the hits in other sectors. Move your money to more secure positions, with attractive dividends to benefit from current changes. 

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. Are Foreclosures On The Rise?
  2. How Levine Capital Hedges Against Inflation
  3. What’s Driving The Demand For Single Family Rental Homes?