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Levine Capital Newsletter – March 2022

Levine Capital Newsletter - MARCH 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…

$7 A Gallon Gas

Some analysts believe that gas prices could soon hit $7 a gallon due to inflation and new global political issues with the east and Ukraine. What will that mean for other markets?

It would certainly make everything more expensive and may add to supply chain issues. 

Everything will be more expensive to produce, move, and ship. It might take time for those costs to appear on shelves, though with massive countermeasures expect recent inflation to be multiplied. 

On the bright side, for real estate investors dealing in existing homes, this could certainly fuel more price increases ahead. 

The End Of COVID Mandates

Even the strictest jurisdictions are finding they are finally having to cave to voter pressure to allow most COVID-related vaccine and mask mandates to expire. 

This may not be true for all businesses and employers, such as those in healthcare and tough counties like Los Angeles, but overall there is a great easing. At least for now. 

Many other countries are also lifting testing and vaccine requirements for travel. The United States may be the exception. This may encourage more international visitors to come back, though may continue to dampen international travel by Americans. 

Domestic travel and tourism will probably see an uptick and account for most of the economic improvements this year.

The Office Market Appears To Be Rebounding

According to Globe St., and some lenders, the office market seems to have been regaining more activity than anticipated. This includes office building occupancy and rents rising.

The big question is what will this space be used for. Especially with flipping office buildings probably the more common strategy today. 

We may only need 20% of the office space we used to if that. 

Institutional investors seem to have been shifting their billions in capital to multifamily and industrial property instead. 

More conversions of old office buildings could help provide more inventory in other sectors, such as rental housing. 

The State Of The Real Estate Market

Deals and trading volumes in real estate continue to abound. 

OpenDoor Follows Zillow’s Dangerous Path

Zillow is now most famous for its financial demise, after trying to convert its business to house flipping, and finally having to admit it has no idea how to calculate property values.

Some may have found it surprising to see their rival OpenDoor appear to continue to double down on the same strategy in the wake of Zillow’s failure. 

For a while, they boasted of lots of acquisition activity. Now HousingWire reports they too seem to be on the edge of the precipice. They lost more money than Zillow last year, at almost $700M. While admitting they are stuck holding almost $6B in unsold real estate inventory. 

That seems almost impossible in the current market. Most properties are flying off the shelves for well above value, almost instantly. Especially with some funds willing to pay premiums above the market value of 50% or more. 

The only explanation for this is that they have overpaid so much they cannot find buyers for this inventory. That is a huge amount of deals, which they may soon have to liquidate at a loss, like Zillow. 

Tax Season Is Here

This year’s tax season may be more quirky than ever. Yet, it is a great time of opportunity for investors. 

Firstly, there is the opportunity to max out your contributions to self-directed retirement accounts for tax breaks. 

As millions receive their tax refunds it is a great time to be flipping and selling property, as well as to be financing front-line flippers to do the heavy work. 

At the same time, many will find they are hit with larger tax bills than ever. Often leading to more distress, and in turn, more motivated sellers of real estate for investors to buy from. 

Peak Home Buying Season Is Coming 

Spring brings the annual beginning to peak home-buying season. Often front-loaded with more real estate listings and inventory coming onto the market. Then a flood of buyers got out to look at properties for sale. This increases through the summer as the weather improves, people go on vacation, and the pressure to relocate before the new school year starts kicks in.

It is a great time to be selling property. 

This may be especially true this year as many experts expect home prices to continue to rise, with sales only held back by the amount of inventory available to trade hands. 

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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