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Levine Capital Newsletter May 2021

Levine Capital Newsletter May 2021

Real Estate Update May 2021

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

The State Of The Markets

It is certainly an interesting time in the world. We have been through a series of almost unprecedented events over the past year. While the world seems to be on track to opening up again after a year of lockdowns, some people are still dealing with the hangover, and the changes it has sparked may be around for a while. 

These are some of the key factors at play right now.

Low Rates & Plentiful Capital

Interest rates remain low. Along with the yields on many traditional investments. Yet, a lot of cash remains out there. Over the past year, individuals and institutions have been sandbagging their tremendous cash, and are eagerly looking for ways to deploy it intelligently for a profit. As the pandemic fades, and we adjust to the new normal, expect investors to become even more aggressive in putting their money to work. 

Rising Taxes

Last November, Americans voted for sweeping new tax reforms. The new white house administration and some local counties and states seem to be dead set on implementing new taxes and tax hikes. This is pushing investors out of the hardest-hit areas into those which are friendlier for investors. It also makes tax-saving investments like real estate more critical than ever. 

Inflation

We are now in a period of hyperinflation. This is driving down the value of idle capital and earned income while making it even more important for investors to invest in assets like real estate, which benefit from high inflation and have proven to historically outweigh it. 

Diverging Economics

While averages suggest the economy is strong, these statistics can hide the disparity in the deeper data. 

The past year has certainly sent the economy and the finances of many on diverging paths. Many have benefited from it, and have seen their wealth up by 30% or more in the past 12 months. 

Others have been floated by relief and stimulus, which may now be drying up. Those who can’t catch up could be adding to the financial distress in defaulting debt hidden in the shadows. 

This gap offers a great opportunity for investors to find assets at the right prices, and enjoy significant returns. 

This divergence will also show up geographically. With NYC taking a hard hit by the pandemic, investors are looking to move their capital to places like NJ and PA instead. 

The State Of The Real Estate Market

One of the most notable outcomes from the events of the past year has been the incredible rise of real estate and especially single-family homes. 

As things play out, we expect even more investors to put more of their attention and capital into real estate, further bolstering its performance. 

Residential Real Estate On Fire

The residential real estate market has been outperforming its past years, with great growth in asset prices and sales.

According to CNBC, US existing home sales hit a seasonally adjusted annualized rate of 6.75M in November 2020. If current trends hold and the inventory is available, we can expect even more sales this year. 

Home sales were up 22% in December. As of March 2021 NAR reports “The median existing-single-family home sales price jumped 18.4% to $334,500, both historic highs.”

What’s Most Important In Investing Now

While on the surface it may seem impossible to lose in real estate, it is important to be alert to the fact that there is a substantial amount of distress and defaulting debt under the surface, even if it may be declining and is quickly absorbed by demand. 

Amateur investors and funds alike are grossly overpaying for assets. Many newbies jump in to try and profit from this action with no plans for sustainability and little management experience. 

While real estate should absolutely be a significant part of your portfolio, this makes it more vital than ever for investors of all sizes to align themselves with managers with proven reputations, deep and long experience, and financial strength. 

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 upcoming case studies on the performance of these funds. 

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

We are also expecting to announce a new debt platform and credit strategy in conjunction with a notable international institutional investor. 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.