Real Estate Crisis could rival the 2008 financial crisis

Revelations 18:9-11 “The kings of the earth who committed fornication and lived luxuriously with her will weep and lament for her, when they see the smoke of her burning, 10 standing at a distance for fear of her torment, saying, ‘Alas, alas, that great city Babylon, that mighty city! For in one hour your judgment has come.’ 11 “And the merchants of the earth will weep and mourn over her, for no one buys their merchandise anymore

Important Takeaways:

  • Investors have sharpened their focus on this sector, given regional banks’ significant share in CRE lending. Even before the banking-industry turmoil, however, CRE was facing risks from long-term trends, with remote work threatening the office sub-sector.
  • What’s more, the sector is now facing a huge “refinancing wall”: More than half of the $2.9 trillion in commercial mortgages will be up for refinancing in the next couple of years. Even if current rates stay where they are, new lending rates are likely to be 3.5 to 4.5 percentage points higher than they are for many of CRE’s existing mortgages.
  • Commercial property prices have already turned down, and Morgan Stanley analysts forecast prices could fall as much as 40%, rivaling the decline during the 2008 financial crisis. These kinds of challenges can hurt not only the real estate industry, but also entire business communities related to it.

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Fleeing New Yorkers resulted in an estimated $34 billion in lost income -study

By Jonnelle Marte

(Reuters) -Millions of people have moved out of New York City during the pandemic, but at the same time, millions of others with lower incomes have taken their place, according to a study released on Tuesday.

All told, a net 70,000 people left the metropolitan region this year, resulting in roughly $34 billion in lost income, according to estimates from Unacast, a location analytics company.

About 3.57 million people left New York City this year between Jan. 1 and Dec. 7, according to Unacast, which analyzed anonymized cell phone location data. Some 3.5 million people earning lower average incomes moved into the city during that same period, the report showed.

“The exodus isn’t as big as people have been talking about,” said Thomas Walle, chief executive and co-founder of Unacast. “Maybe the greater impact is how the population is changing and how the demographics are changing.”

In Tribeca, a wealthy neighborhood in downtown Manhattan, residents who left this year earned an average income of about $140,000, Walle said. The typical person moving into the neighborhood earned an average $82,000, he said.

The dual hit to population and income across the city can have lasting consequences for New York City as it recovers from the economic crisis caused by the pandemic, Walle said. “The big question is, ‘How does real estate and retail in particular adapt to that?'” he said.

In the longer run, the changing demographics could lead to more affordable brands taking the place of higher-end stores, the researchers noted. At the same time, real estate developers may need to offer more lower-priced housing options, Walle said.

A separate report released earlier this year by StreetEasy found that vacancies rose and rents dropped between February and July in high-end neighborhoods, including the financial district downtown. But rents continued to rise in more affordable neighborhoods.

(Reporting by Jonnelle Marte; Editing by Stephen Coates)

U.S. 30-year, 15-year mortgage rates fall to lowest since Nov 2016: Freddie Mac

FILE PHOTO: A home is seen in the Penn Estates development where most of the homeowners are underwater on their mortgages in East Straudsburg, Pennsylvania, U.S., June 20, 2018. Picture taken June 20, 2018. REUTERS/Mike Segar

(Reuters) – Borrowing costs on U.S. 30-year and 15-year fixed-rate mortgages fell to their lowest levels since November 2016, in line with the recent decline in bond yields because of trade and recession fears, Freddie Mac said on Thursday.

Last week, the yields on 10-year Treasury notes briefly dipped below those on two-year notes <US2US10=TWEB> for first time in a dozen years. The “curve inversion” among these two debt maturities has often preceded prior U.S. recessions.

This market phenomenon touched off a fresh wave of buying in U.S. Treasuries, sending 30-year yields <US30YT=RR> to record lows.

The decline in mortgage rates is expected to help home sales and to stoke refinancing, putting more cash into consumers’ pockets, analysts said.

“The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity,” Freddie Mac’s Chief Economist Sam Khater said in a statement.

The interest rates on 30-year mortgages averaged 3.55% in the week ended Aug. 22, down from 3.60% a week earlier and 4.51% a year ago, the mortgage finance agency said.

The average 15-year mortgage rate decreased to 3.03% in the latest week, down from 3.05% the week before. It was 3.98% a year ago.

Interest rates on five-year adjustable-rate home loans averaged 3.32%, the lowest since November 2017.

(Reporting by Richard Leong; Editing by Chizu Nomiyama and Nick Zieminski)

U.S. mortgage application activity falls to five-month low

For Sale signs stand in front of houses in a neighborhood where many British people have purchased homes in Davenport, Florida, U.S.,

NEW YORK (Reuters) – A measure of U.S. mortgage application activity decreased for a second week to a five-month low as 30-year mortgage rates rose to their highest since June, data from the Mortgage Bankers Association released on Wednesday showed.

The Washington-based industry group’s mortgage market index fell 1.2 percent to 486.2 in the week ended Oct. 28, which was the lowest level since the week of May 27.

Interest rates on 30-year fixed-rate mortgages, which are the most widely held type of U.S. home loans, averaged 3.75 percent in the latest week, matching the level last seen in June, MBA said.

Mortgage rates increased with higher U.S. Treasury yields with 10-year yields hitting their highest levels in about five month last week.

U.S. bond yields climbed on speculation about whether overseas central banks may refrain from injecting more monetary stimulus to help their economies.

The group’s seasonally adjusted index on weekly applications to buy a home edged down 0.4 percent to 207.0 last week, which was the lowest since January.

The purchase activity gauge is seen as a proxy on home sales.

MBA’s weekly barometer on refinancing requests declined by 1.6 percent to 2,088.0, which was the weakest since June.

The share of refinancing activity rose to 62.7 percent of total applications, unchanged from the previous week.

(Reporting by Richard Leong; Editing by Chizu Nomiyama)

Strong U.S. housing data offers ray of hope for slowing economy

WASHINGTON (Reuters) – U.S. home resales rebounded strongly in December from a 19-month low and prices surged, indicating the housing market recovery remained intact despite signs of a sharp deceleration in economic growth in recent months.

The National Association of Realtors said on Friday existing home sales jumped a record 14.7 percent to an annual rate of 5.46 million units, after being temporarily held back by the introduction of new mortgage disclosure rules, which had caused delays in the closing of contracts in November.

Sales were also boosted by unseasonably warm weather. November’s sales pace was unrevised at 4.76 million units. Economists polled by Reuters had forecast home resales rebounding 8.9 percent to a 5.20-million rate.

Sales rose 6.5 percent to 5.26 million units in 2015, the strongest since 2006. Last month’s snap-back suggests that

November’s slump was a blip and should offer some assurance that domestic demand remains fairly healthy, even as growth appears to have braked sharply at the end of 2015 because of a downturn in manufacturing and mining activity.

“While the carryover of November’s delayed transactions into December contributed to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015,” said Lawrence Yun, NAR chief economist.

Housing is being supported by a strengthening labor market, which has resulted in an acceleration in household formation. Sales, however, remain constrained by a dearth of homes available for sale, which is limiting choice for buyers.

The economy has been hammered by a strong dollar, slowing global demand and deep spending cuts in the energy sector. Businesses are also placing fewer orders with factories while trying to reduce piles of unsold merchandise, which also is putting pressure on the economy.

The dollar was trading higher against a basket of currencies, while prices for U.S. government debt fell. The housing index rallied 3.6 percent, outperforming a broadly firmer U.S. stock market. Shares in the nation’s largest homebuilder D.R. Horton Inc surged 4.16 percent and Lennar Corp advanced 3.9 percent.

A separate report hinted at some stabilization for the downtrodden manufacturing sector. Data firm Markit said its Purchasing Managers Index bounced back in early January from December’s 38-month low as output and new business volumes increase at faster rates.

Weak reports on retail sales, inventories, exports and industrial production have left economists estimating that gross domestic product increased at an annual rate of less than 1 percent in the fourth quarter after expanding at a 2 percent pace in the July-September quarter.

A massive stock market sell-off, which has seen a sharp drop in the Standard & Poor’s 500 index since Dec. 31, is also adding to gloom over the economy.

In December, the number of unsold homes on the market tumbled 12.3 percent from November to 1.79 million units, the lowest level since January 2013. Supply was down 3.8 percent from a year ago. At December’s sales pace, it would take 3.9 months to clear the stock of houses on the market, the fewest since January 2005. That was down from 5.1 months in November.

A six-months supply is viewed as a healthy balance between supply and demand. With inventories still tight, the median house price jumped 7.6 percent from a year ago to $224,100. House prices increased 6.7 percent in 2015.

Although higher prices could sideline potential buyers, especially those wanting to purchase a home for the first time, they are boosting equity for homeowners, which could encourage them to put their homes on the market.

Realtors and economists say insufficient equity has contributed to the tight housing inventories. Last month, the share of first-time buyers was 32 percent, up from 30 percent in November and the highest share since August.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)