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Levine Capital Newsletter: November 2021

Levine Capital Newsletter November 2021

Real Estate Update November 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…


While headlines about inflation may be getting old, it seems that we may only be experiencing the tip of the iceberg. 

Yes, many are feeling it at the pump, and finding what used to buy a week’s worth of groceries now only pays for what can be carried out of the supermarket in one hand. Yet, more seems to be coming. 

Taxes are going to be an area of inflation. Insurance companies and others are jumping on the bandwagon to blame huge spikes in premiums of as much as 30% on inflation. 

Real estate happens to be one of those great investments that can help keep us ahead of it. Though investors also need to be pricing broad increases into their projections and forecasts. 

The Government Is Coming For Retirement Savings Plans

There have been many tax proposals aimed at grabbing a larger slice of investments and savings over the past year. We’ve seen rumors of limits on traditional IRAs. Though many can work around this by establishing self-directed IRAs for their family members, as well as leveraging other tax-saving vehicles.

Now new directives are taking aim at employee 401k plans. In particular, creating directives to direct individual retirement savings into political causes by default. Allocation into funds also happens to mean higher fees for managers, without any fiduciary responsibility to put worker interests and safety first.

This, in tandem with the big shift away from in-house employees, is likely or at least should bring a new revolution in self-directing retirement investments into safer, higher return investments outside of the public stock market. 

The Power & Value Of Names

How much do names matter?

Your name is pretty much the only thing you are given for free when you enter this world. It is probably one of the only things you’ll get to take with you. It is one of the few, along with any real estate with your name on it that will survive long after you are gone. 

Names matter in investing. The reputation of the names you align with and who you invest with will make all the difference in your performance and results. It can take many years to build one, and seconds to ruin it. 

This applies to even the biggest billion-dollar firms. Just look at Facebook. Well, what was Facebook is now changing its name to Metaverse after endless scandals. Sooner or later poor business models and products catch up with everyone. Just look at Zillow. It looked like they got away with the horribly flawed Zestimate for many years. Even raising an IPO despite losing billions in investor money. Now the cracks have formed. Not only have they announced that they are getting out of the house flipping business after throwing everything they had into it, they may also have to lay off at least 25% of their staff according to Bloomberg. 

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.

Commercial Real Estate Sales Set New Records

COVID restrictions and ongoing mandates have appeared to put the final nail in the coffin of some types of commercial real estate. Physical office space is extinct. Retail has certainly changed. A fact only being accelerated by big firms like Walmart which continue to eliminate the human element. Possibly at their own peril. 

Of course, many of these buildings can be repurposed and should be. There is a huge need for new types of commercial buildings and an urgent and growing need for more housing. 

The Wall Street Journal and Realtor Magazine report that commercial property sales just set a new record. Clocking almost $200B in sales volume in Q3 2021 alone. Almost a 20% lift from the same period in 2019. 

Driving this massive surge in CRE sales, along with a huge influx of investment capital has been sales of life science labs, industrial property, eCommerce distribution centers, and multifamily apartment buildings. 

Mortgage Fraud Risk Climbs

The latest 2021 Mortgage Fraud Report from CoreLogic shows an almost 40% increase in mortgage fraud risk since last year. 

The most common types of mortgage fraud continue to center around:

  1. Occupancy
  2. Identity
  3. Income
  4. Property
  5. Transaction
  6. Undisclosed real estate debt

Overall this is relatively low, at about 0.83% of loan applications, or 1 in 120. Note this is not loans actually made. Technology has gotten much better at identifying potential fraud before it makes it through the application process. 

The bulk of mortgage fraud increases have also been highly concentrated in a few states. This includes:

  • NV
  • HI
  • DC
  • Arizona

Rents & Demand For Rentals Are Rising

NAR reports that tenants continue to face serious sticker shock when their lease renewals come up. With some rents continuing to surge 40% over last year. Of course, we’ve seen some rents rocketing even faster than that, and at all levels of the market. 

Other new data seems to support this ongoing trend over the long term

New data from lender Ally Home and their survey of both would be repeated and first-time homebuyers show incredible fear about the prospect of buying a home. 

75% to 90% said they are even more fearful of buying a home than having teeth pulled, heights, filing tax returns, or commitment. Many are also afraid of being able to afford a mortgage or taking on debt. 

This is all moving in favor of landlords and rental property operators, as well as lenders who back professional landlords. 

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, 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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