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Supply Chain Backlog: The Cargo Ship Pile-Up at Ports Nov 20, 2021

Show notes

Supply chain problems continue as container ships pile up at U.S. ports. The number of ships waiting to offload off the Southern California coast just hit a new record. That's despite a new 24/7 schedule to get ships unloaded. There's also a new 'pop-up container yard' on the other side of the country to help get things moving.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

A record 111 container ships were sitting outside the ports of Los Angeles and Long Beach on November 10th. According to an Insider blog, that tops a previous record set on October 21st for 108 ships. (1)

Not Enough Dock Workers

Consumer demand has been surging and there's been an effort to speed things up but there aren't enough dock workers and truck drivers to unload and deliver all the goods. Insider says the size of the backlog is unprecedented.

Prior to the pandemic, there may have been as many as 17 ships waiting to unload. And now, it's typical to see more than 100 ships bobbing around offshore, and huge stacks of containers on the docks waiting to be picked up by truckers.

Supply Chain Disruptions Task Force

The White House launched a Supply Chain Disruptions Task Force last June to address the challenges at ports. Task force members met with local government leaders and companies to determine the cause of the bottlenecks and come up with solutions. The Port of Long Beach began the new 24/7 schedule in September. Los Angeles followed in October. According to the White House announcement, it's possible to move goods at the Port of L.A. 25% faster at night. (2)

Various companies and unions also agreed to expanded work hours. Some of those companies include Target, Walmart, UPS, FedEx, Samsung, and Home Depot. The commitment from those six companies will make it possible to move an additional 3,500 containers per week, through the end of this year.

Shipping Companies Face Big Fines

That hasn't solved the problem however, and shipping firms now face fines if they don't get those containers moving more quickly. Insider reports that the two Southern California ports will begin fining companies $100 a day for each container that's left on the docks for too long. They have three days to move the containers if they are being shipped by rail and nine days to move them if they are going by truck. Those fines are expected to start hitting companies on November 15th.

A global logistics company told Insider: "These containers would move if they could, but it's a combination of warehouse space, trucking and labor issues." American Shipper says, at the beginning of November, there were about 60,000 containers at these two ports for more than nine days, and they could all be eligible for fines.

Ports Running Out of Room

The government is also working on another potential solution with the announcement of a "pop-up container yard" at the Port of Savannah on the East Coast. The port will be able to redirect federal funds from a budget surplus to build the port. It will be a couple hundred miles inland from the coast along a rail line. That will give the Georgia Port Authority more space for containers that are waiting to be picked up. (3)

The worst back-ups are in Southern California however. About 40% of the nation's imports reportedly go through those two ports. But smaller ports, like the one in Georgia, are also dealing with ships that are unloading cargo faster than truckers can take it away.

The newly approved bipartisan infrastructure bill includes several measures to improve port operations. Among those measures are new grants and new grant flexibility, along with the Port Infrastructure Development Program to modernize ports and shipping routes.

The supply chain issues we've been facing have impacted all parts of the economy. As you know, the housing industry has been heavily impacted by a shortage of building materials. That's caused construction delays and higher prices for new homes, as well as material shortages for do-it-yourself homeowners renovating their properties.

You'll find more info by following links in the show notes at newsforinvestors.com.

You can also find out more about real estate investing at our website by joining RealWealth for free. As a member, you have access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources. That includes experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 - https://www.businessinsider.com/supply-chain-crisis-record-number-of-container-ships-ca-ports-2021-11

2 - https://www.independent.co.uk/news/world/americas/us-politics/supply-chain-crisis-holiday-shortages-plan-b1954506.html

3 - https://sports.yahoo.com/white-house-announces-pop-container-170539918.html

Amtrak Gets $66 Billion for a Major Expansion & Update Nov 17, 2021

Show notes

Amtrak is about to get a $66 billion upgrade that could open up new real estate markets. The funding is part of the $1.2 trillion Infrastructure Investment and Jobs Act. It's also the largest amount of government funding for passenger rail in Amtrak's entire 50-year history.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

Amtrak's CEO Bill Flynn is overjoyed. He had previously laid out a plan for Amtrak upgrades and expansion during the early months of the Biden administration. He told NBC News: "We have a clear vision for how we want to grow our business and reach more of America."

Amtrak Connects US

The plan is a 15-year strategy called "Amtrak Connects US." It calls for improvements to existing rail service as well as expansion into new cities and rural areas.

Amtrak says the expansion will reach a total of 160 NEW communities with upgraded service on at least 20 existing routes.

According to NBC News, the Rail Passengers Association has been lobbying members of Congress for several years to get this measure passed. (1) The association's president, Jim Mathews, says the current funding amount is "a down payment on literally decades of underinvestment." He says: "It's hard to explain to people how little this country has spent on rail. We as a country don't invest enough and it shows."

Major Upgrade Needed

The Northeast Corridor is an example of that kind of funding neglect. That's where Amtrak owns most of its own infrastructure and the experts say it needs updating. The director of a rail transportation program at Michigan Tech University says: "To increase ridership, you need convenience and reliability." He says he's not sure the Northeast Corridor has either one of those.

Part of the upgrade involves a 450-mile corridor from Washington, D.C. to Boston. According to an Amtrak study, that upgrade alone will generate $195 billion in economic activity and create more than 26,000 jobs.

Currently, Amtrak connects more than 600 destinations in 46 states, Washington, D.C., and three Canadian provinces. The only two states within the contiguous U.S. are Wyoming and South Dakota.

New Amtrak Stations in 10 States

Amtrak says that more than 10 states will get new Amtrak stations, including Wyoming. That station is headed for Cheyenne, Wyoming and will go south to Fort Collins, Denver, and Pueblo, Colorado. (2)

Another new station is headed for Columbus, Ohio, which is one of the nation's biggest cities currently without an Amtrak station. It'll be connected along a route from Cincinnati-to-Columbus-to-Cleveland.

Las Vegas, Nevada will also get a new station as a destination from Los Angeles. And a second Southern California route that runs through through Riverside County, will head to a new station in Phoenix. That station will also have a new direct connection to Tucson.

A new route through Tennessee will provide train service from Nashville and Chattanooga to Atlanta, Macon and Savannah, Georgia. That will give passengers access to the Georgia coast.

There are plans for a new station in Wilmington, North Carolina which will give passengers direct access to several other cities, and bring them close to the North Carolina coast.

Other new stations are planned for Rockford, Illinois; Iowa City, Iowa; Duluth, Minnesota; Allentown and Scranton, Pennsylvania; Rockland, Maine; Louisville, Kentucky; Montgomery, Auburn, and Mobile, Alabama; and Baton Rouge, Louisiana.

Amtrak plans to connect Houston and Dallas, along with Detroit and Toledo. And there are plans for more rail service across Florida connecting Miami, Tampa, Orlando, and Jacksonville.

The timeline for the entire upgrade plan is from now through 2035. Construction Dive reports that Amtrak carried 32 million passengers in 2019 and expects to have an additional 20 million riders from all these new connections. (3) And when there are new ways to connect, there are new real estate markets to explore.

If you'd like to find out more about Amtrak's plans for expansion, check the links in the show notes at newsforinvestors.com.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.nbcnews.com/news/us-news/amtrak-ceo-outlines-plans-spending-66-billion-infrastructure-funding-rcna4786

2 -https://www.amtrakconnectsus.com/wp-content/uploads/2021/06/Amtrak-2021-Corridor-Vision_2021-06-01_web-HR-maps-2.pdf

3 -https://www.constructiondive.com/news/amtrak-plans-major-expansion-by-2035-if-federal-infrastructure-bill-passes/608650/

The Real Estate News Brief: Fed Chair Finalist, Top Property Investing Sector, Adverse Market Fee Bonanza Nov 16, 2021

Show notes

In this Real Estate News Brief for the week ending November 13th, 2021... the two Fed Chair finalists, the top property investing sector, and the billions earned from a pandemic fee on refinancing loans.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

Economic News

We begin with economic news from this past week. President Biden is reportedly close to a decision on who he'll nominate as chief of the Federal Reserve. Fed Chief Jerome Powell's four-year term is up in February, and it appears that Biden is now deciding whether to keep Powell or replace him with Fed Governor Lael Brainard. Brainard is considered more progressive than Powell. She's described in a Barron's article as more "dovish on monetary policy and stronger on bank regulation." Some Fed watchers also believe that Brainard is more in tune with Biden's economic agenda, but Powell has strong support from moderate Democrats and Republicans, which gives him an edge over Brainard. Biden has said he'll make a decision "fairly quickly." Some believe he'll announce a nomination by Thanksgiving. (1) (2)

Whoever lands that job will be tackling inflation, which surged to a 31-year-high this last week. The consumer price index was up .9% in October, according to the government. That raises the annual rate of inflation from 5.4% in September to 6.2% in October, which is more than triple the Fed's target of 2%. It's also the highest rate of inflation since November of 1990. If you eliminate higher prices for food and energy, the core CPI is about 4.6%. That's up from 4% in September. (3)

The gauge the Fed watches more closely is the PCE which stands for personal consumption expenditures. That's rising more slowly. The PCE was 4.4% in September and 3.6% for the core rate. October numbers haven't come out yet.

Initial applications for state unemployment benefits dropped again. There were just 267,000 new claims last week while layoffs also fell to a record low. (4) Employers have been struggling to find enough workers to fill positions. There are currently 10.4 million job openings and just 7.4 million people listed as unemployed. One result of this lopsided situation: Companies are increasing hourly rates to attract candidates. Data from Indeed.com shows that jobs offering less than $15 an hour are scarce. (5)

Consumers are not very happy about the current economic situation. The University of Michigan Consumer Sentiment Index fell to its lowest level in a decade. The November reading was 66.8. That's a drop of about five points from October, and about 35 points lower than the pre-pandemic reading of 101. (6)

Mortgage Rates

On a more positive note, mortgage rates dipped below the 3% level this last week. Freddie Mac says the average 30-year fixed-rate mortgage was down 11 basis points to 2.98%. The 15-year was 2.27%. (7)

In other news making headlines…

Single-Family Build-to-Rent Boom

Investors are clamoring into the single-family build-to-rent market, as demand and rents soar. A new Green Street report shows that investors are earning 8% on average. That is the highest amount among the 18 property sectors analyzed by Green Street. As reported by the Wall Street Journal, the weighted average return for all property sectors is 6.1%. (8)

Housing economics consultant, Brad Hunter, says that builders provided almost 100,000 new rental homes in 2021, and that investors have pumped about $30 billion into this corner of the real estate market. The momentum has created a frenzy for land that's suitable for build-to-rent. One builder told the Journal: "You almost have to find the land before it gets put on the market."

GSE Bonanza from Adverse Market Fee

Remember the "adverse market fee" on refinancing loans during the pandemic? It was a 50 basis point fee for refi loans backed by Fannie Mae and Freddie Mac, and it earned those two GSEs a bundle!

According to the Federal Housing Finance Agency, Fannie and Freddie earned $5.3 billion from that fee. (9) It says the money will cover about 70% of the cost of the GSE's Covid relief programs, such as the moratorium on foreclosures, and forbearance programs that allowed homeowners to skip their mortgage payments.

The adverse market fee was in force for about 10 months, starting in October of last year.

Opendoor Buys RedDoor

iBuyer Opendoor will be able to pre-approve applicants in just "one" minute, with the acquisition of online mortgage broker RedDoor. The mortgage company was founded in 2018 and has partnered up with more than 70 lenders. (10)

The announcement comes at a time when Zillow has announced the elimination of its iBuying program, and has created doubts about the profitability of the iBuying business. But as HousingWire reports: "Some investors see add-on services… (like mortgages) as a possible way for iBuyers to eventually turn a profit."

Opendoor expanded into the mortgage business in 2019. And it reportedly "smashed through" earnings estimates for the third quarter with 5,988 homes sold. Year-over-year revenue was up 570%. With Zillow out of the picture, Opendoor now has one less competitor.

That's it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

You can also join RealWealth for free at newsforinvestors.com. As a member, you have access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.barrons.com/articles/federal-reserve-powell-brainard-biden-nomination-51636737103

2 -https://www.washingtonpost.com/us-policy/2021/11/11/brainard-fed-biden-powell/

3 -https://www.marketwatch.com/story/coming-up-u-s-consumer-price-index-for-october-11636550300?mod=economy-politics

4 -https://www.marketwatch.com/story/jobless-claims-slip-to-267-000-and-touch-new-pandemic-low-11636552204?mod=economic-report

5 -https://www.marketwatch.com/story/job-listings-offering-less-than-15-an-hour-are-starting-to-disappear-in-todays-tight-labor-market-11636657580

6 -https://www.marketwatch.com/story/u-s-consumer-sentiment-declined-in-early-november-to-decade-low-university-of-michigan-271636730264

7 -http://www.freddiemac.com/pmms/

8 -https://www.wsj.com/articles/building-and-renting-single-family-homes-is-top-performing-investment-11636453800?mod=hp_lead_pos10

9 -https://www.housingwire.com/articles/fannie-freddie-made-5-3b-from-adverse-market-fee/

10 -https://www.housingwire.com/articles/opendoor-buys-mortgage-brokerage-reddoor/

The Real Estate News Brief: Record High Homeseller Profits, Adding Value with ADUs, Top Destination States Nov 10, 2021

Show notes

In this Real Estate News Brief for the week ending November 6th, 2021… why it's a "banner year" for homeseller profits, how much an ADU will increase your home value, and which states are attracting the most newcomers.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

Economic News

We begin with economic news from this past week. The Federal Reserve has announced its "taper timetable." The Fed is currently buying Treasurys and mortgage-backed securities at a rate of $120 billion a month an economic stimulus. It now plans to reduce that amount by $15 billion per month in November and December, with similar reductions expected next year. If there's no adjustment to the pace of reductions, the tapering process would be complete by mid-2022. Although the Fed believes the economy is strong enough to begin the taper, Fed chief Jerome Powell says: "We don't think it's time yet to raise interest rates." (1)

The jobless rate dipped again this last week. There were only 269,000 initial claims for state benefits and 2.1 million continuing claims. Altogether, 2.67 million people are collecting either state or federal benefits. Before the pandemic, there were just under 2 million people getting unemployment checks. (2)

Construction spending was down slightly in September, compared to August. The census bureau says it was down about a half a percent, with a bigger drop for single-family homes. But compared to September of last year, it's up almost 20%. The National Association of Home Builders blames the dip on supply chain issues, higher material coasts, and the labor shortage. (3)

That pullback isn't helping the inventory problem. HouseCanary says it dropped close to record lows in September. And it expects the situation to get worse as we head into the next year. Higher home prices are contributing to the problem as fewer less expensive homes are put up for sale. (4) According to the St. Louis Fed, the nation had 6.5 months of supply in August. That dropped to 5.7 months of supply in September. (6)

Meanwhile, the homeownership rate hasn't changed over the last quarter. It's still at 65.4%, which is down from a high of 67.9% in the second quarter of last year. If you determine homeownership by age, it's highest for people over age 65 at about 80%. Regionally, the Midwest is the highest at about 71%. (7)

Mortgage Rates

Mortgage rates are backing off a bit from a recent rise. Freddie Mac says the 30-year fixed-rate mortgage was down 5 basis points to 3.09%. The 15-year was down 2 points to 2.45%. (8)

In other news making headlines…

New High for Homeseller Profits

Home sellers are realizing some big gains. ATTOM Data Solutions says they are getting almost 50% more than they paid for the home, or about $100,000. That's for a median-priced single-family home or condo. In the second quarter of this year, sellers typically gained about $89,000. (9)

ATTOM's chief product officer, Todd Teta, says: "The third quarter of this year marked another period in a banner year for a housing market boom that's steaming ahead through its 10th year." He says: "For now, the market engine seems to have nothing but high-octane gas in the tank."

ADUs Add Big Value to Homes

ADUs can also add a lot of value to your home. According to Porch.com. An accessory dwelling unit can add an average 35% onto the sale price. In some cities, such as Savannah, Georgia and Cleveland, Ohio, it can "double" the sale price. (10)

They can also generate passive income as rentals, but they are not cheap to build. The Porch.com study says the average cost of an ADU is $180,000. There are about 1.4 million of them in the U.S., according to 2019 information.

States Attracting the Most Residents

A new study on resident migration shows that Florida is the top destination for people looking to move to another state. The LendingTree analysis looked at mortgage loan data for the last year-and-a-half to identify pandemic migration patterns. The researchers say: "The Sunshine State has a long history of bringing in visitors and new residents, particularly retirees, thanks to a mix of affordable housing, no state income tax, and sunny weather." (11)

The analysis also found that Texas has the highest number of people moving "within" the state. Oklahoma and Florida were close behind Texas, while New York had the highest number of people fleeing the state.

That's it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

You can also join RealWealth for free at newsforinvestors.com. As a member, you have access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

Thanks for listening. I'm Kathy Fettke.

Link: for newsforinvestors.com - https://join.realwealth.com/?utm_content=Real%20Estate%20News%20Podcast&utm_campaign=Join%20for%20Free&utm_term=Description%20Text%20Link

Links:

1 -https://www.marketwatch.com/story/fed-slows-down-bond-buying-says-factors-boosting-inflation-are-expected-to-be-transitory-11635962420?mod=mw_latestnews

2 -https://www.marketwatch.com/story/u-s-jobless-claims-drop-to-pandemic-low-of-269-000-as-firms-avoid-layoffs-during-labor-shortage-11636029426?mod=economic-report

3 -http://www.mortgagenewsdaily.com/11022021_construction_spending.asp

4 -https://dsnews.com/daily-dose/11-04-2021/october-saw-net-new-inventory-levels-drop-once-again

5 -https://fred.stlouisfed.org/series/MSACSR

6 -http://www.mortgagenewsdaily.com/11032021_homeownership.asp

7 -http://www.mortgagenewsdaily.com/11032021_homeownership.asp

8 -http://www.freddiemac.com/pmms/

9 -https://magazine.realtor/daily-news/2021/11/04/home-sale-profit-margins-hit-10-year-high

10 -https://magazine.realtor/daily-news/2021/11/04/study-adus-can-add-35-to-home-s-value

11 -https://magazine.realtor/daily-news/2021/11/03/states-with-the-fewest-outgoing-residents

The Real Estate News Brief: Rent Rebound in Big Cities, Property Tax Bonanza, Smoke Alarm Lawsuit Nov 04, 2021

Show notes

In this Real Estate News Brief for the week ending October 30th, 2021... the rebound of big city rents, the state and local property tax bonanza, and a tragic reminder to check smoke alarms in rentals.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

Economic News

We begin with economic news from this past week. The latest report on the GDP shows a big slowdown in the third quarter. The Commerce Department says the economy downshifted from 6.7% in the second quarter to just 2% in the third. (1) The slowdown was expected but the Wall Street Journal had anticipated a beefier 2.8%. Economists say we're experiencing slower growth because government stimulus money is drying up while businesses struggle with supply chain issues and the nation continues to deal with the coronavirus.

Consumers are working and spending money however, which keeps the economy on the growth side. Consumer spending was up .6% in September. (2) And, the latest unemployment report shows that new state claims dropped to another pandemic low of 281,000. Existing claims also fell, from 2.48 million to 2.24 million. (3) The unemployment rate is currently at 4.8%.

Much of that spending went into new homes. New home sales rose in September despite higher price points. The sales rate grew to an annual rate of 14% while the median price rose to a new record high of $408,800. (4) The sales rate hit a six-month high in September, but it's almost 18% lower than it was a year ago.

The sale of existing homes went in the opposite direction. The National Association of Realtors says pending sales were down 2.3% in September, and compared to a year ago, they were down 8%. (5) A tight inventory continues to plague buyers, along with rising prices.

According to the latest report from the S&P CoreLogic Case-Shiller Home Price Index, national home prices are up 19.8% from a year ago. (6) For those who can buy, they are making those decisions quickly. The National Association of Realtors says that 86% of homes sold in September were on the market for less than a month. (7)

Mortgage Rates

Mortgage rates continue their slow climb skyward. Freddie Mac says the average 30-year fixed-rate mortgage rose 5 basis points to 3.14%. The 15-year was up 4 points to 2.37%. (8)

In other news making headlines…

Big City Rents Are Rebounding

Rents are rebounding in the nation's big cities. Realtor.com says that rents in many cities are now "higher" than they were at the beginning of the pandemic. Rents had dropped as tenants fled to less-crowded areas, but they are rebounding in a big way. (10)

Realtor.com's monthly rental report shows that rents in the ten largest U.S. tech cities, are now about 6.3% "higher" than they were when the pandemic first hit. The report says that the annual pace of rent growth for all U.S. rentals is about 13.6% right now. And it says there's no sign of it slowing down.

Realtor.com's manager of economic research, George Ratiu, says: "With rents continuing to surge to new highs nationwide, including in big tech hubs, September data confirms the U.S. rental market has moved past the recovery phase and is fully back in business."

Property Tax Bonanza

State and local governments have reaped the rewards of higher home prices. An analysis by the National Association of Home Builders shows that property tax collection is now the highest it's been since 2009. (9)

That review shows that homeowners paid $703.5 billion from Q3 of last year to Q2 of this year. That's a 13% increase from the previous year. State and local governments rely heavily on property tax. The NAHB says they get about 38% of their revenue from that tax base.

Tragic Lesson about Fire Alarms

A story out of Southern California is a tragic reminder to all landlords to make sure smoke detectors are working in all rentals. A fire at a short-term rental in Malibu killed a 22-year-old college student last January, and his father recently filed a lawsuit against the landlords, TripAdvisor, and a TripAdvisor subsidiary for negligence. (11)

The lawsuit was filed in Los Angeles by Brad Schneider. It claims his son, Grant, was not able to escape the fire because there were not enough smoke detectors in the home, and the ones that were there were not working.

That's it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.marketwatch.com/story/coming-up-third-quarter-gdp-11635423260?mod=economy-politics

2 -https://www.marketwatch.com/story/coming-up-spending-income-and-pce-inflation-for-september-11635509727?mod=bnbh_mwarticle

3 -https://www.marketwatch.com/story/u-s-jobless-claims-set-to-hit-new-pandemic-low-of-289-000-economists-predict-11635423655?mod=economic-report

4 -https://www.marketwatch.com/story/new-home-sales-soared-in-september-but-is-the-housing-markets-rebound-coming-to-an-end-11635257630?mod=economic-report

5 -https://www.marketwatch.com/story/coming-up-pending-home-sales-11635428965

6 -https://www.marketwatch.com/story/home-price-growth-is-slowing-down-but-that-doesnt-mean-prices-are-falling-11635254340?mod=economic-report

7 -https://magazine.realtor/daily-news/2021/10/22/inventory-boost-not-enough-to-satisfy-fall-house-hunters

8 -http://www.freddiemac.com/pmms/

9 -https://magazine.realtor/daily-news/2021/10/26/property-tax-boom-helps-state-local-coffers

10 -https://magazine.realtor/daily-news/2021/10/28/urban-rents-soar-as-cities-recover-from-pandemic-hit

11 -https://timesofsandiego.com/business/2021/10/22/father-of-mesa-college-student-sues-tripadvisor-com-landlord-after-sons-death-in-fire/

Zillow Quits iBuying Business, Unloads Inventory Nov 03, 2021

Show notes

Zillow has officially announced the end of it's iBuying program, Zillow Offers. The announcement comes just a few weeks after the company said it wouldn't be buying any more homes this year. And then there were reports that Zillow would be offloading thousands of homes at a discount.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

The iBuying frenzy has been growing among several competitors including Zillow, Redfin, Opendoor, Offerpad and others. There was a pause in those programs during the pandemic, but the iBuyers were back in full swing this year. And Zillow was one of the more exuberant ones.

Home Price Forecasting

But Zillow apparently miscalculated the value of the homes it was buying. The company's financial results show a $304 million write-down for the homes that were purchased for more than it can sell them for. It expects to lose another $240 to $265 million for homes that it is contracted to purchase in the next quarter.

CEO Rich Barton told investors: "We've determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility." (1)

Zillow now expects to wind the home-flipping arm of its business down over several months. That includes a 25% reduction in its workforce, which will impact about 2,000 employees.

Zillow's iBuying Binge

The company has been on a buying binge. According to the Wall Street Journal, Zillow bought 3,800 homes in the second quarter, and ended the third quarter with an inventory of almost 10,000 homes and another 8,000 homes under contract to buy. It only sold about 3,000 homes, and many were sold at a loss. The Journal says that Zillow also expects to lose between 5% and 7% on the remaining homes. (2)

An analyst for KeyBanc looked at the financials for 650 homes in Zillow's inventory. That's about one-fifth of the homes the company owns. As reported by MarketWatch, he found that Zillow was selling two-thirds of them at a discount of 4.5%. Most of the discounted homes that he found are in San Diego; Charlotte, North Carolina; and Las Vegas. (3)

Offloading Homes to Investors

According to Bloomberg, Zillow is hoping to sell about 7,000 homes to institutional investors for close to $2.8 billion. The report says they will likely be sold to various buyers, and not as a single sale. (4)

Barton founded the company 16 years ago. The iBuying arm of the business is relatively new. Barton wanted to hit 5,000 home flips a month and had predicted, last year, that Zillow Offers could generate $20 billion a year.

What Went Wrong?

Zillow has been an aggressive player in the iBuying market, offering more than competitors. That won Zillow some homes, but in markets that may have cooled off slightly, the anticipated price growth didn't materialize. It sounds a little like the scenario in 2005 when people thought home prices only go up. Right now, they are still going up, but Zillow apparently miscalculated by how much.

The New York Times also reports that the company underestimated the risk of holding homes for too long between a purchase and a sale. (5) Zillow had previously said that labor and material shortages were impacting the business. The company couldn't turn them around fast enough. And that's a huge departure from a relatively risk free business model that Zillow was founded on.

Barton and Zillow's CFO, Allen Parker, said in a shareholder letter: "Our aim was to become a market maker, not a market risk taker." On a more positive note, there will be thousands of homes hitting the market at a discount from the previous sale price, and possibly of interest to investors both big and small.

You'll find links to our sources in the show notes at newsforinvestors.com.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.prnewswire.com/news-releases/zillow-group-reports-third-quarter-2021-financial-results--shares-plan-to-wind-down-zillow-offers-operations-301414460.html

2 -https://www.wsj.com/articles/zillow-quits-home-flipping-business-cites-inability-to-forecast-prices-11635883500

3 -https://www.marketwatch.com/story/zillow-stock-dives-after-analyst-highlights-two-thirds-of-homes-bought-are-underwater-11635785293

4 -https://www.ocregister.com/2021/11/01/zillow-to-sell-7000-homes-for-2-8-billion-after-flipping-flop/

5 -https://www.nytimes.com/2021/11/02/business/zillow-q3-earnings-home-flipping-ibuying.html

Investors Are Buying More, Paying Less than Consumers Nov 01, 2021

Show notes

Investors were busy in the second quarter of this year. They increased their share of purchased residential properties. But even though they bought more than consumers, they spent less. So where are these great deals? The RealtyTrac report has a few answers.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

RealtyTrac published the results of its analysis with data from its parent company, ATTOM Data Solutions. (1) It found that investor purchases accounted for 15.4% of all U.S. residential purchases in the second quarter of this year. That's up 3.9% from Q2 of last year when investors accounted for 11.5% of all home purchases. (2)

If you compare Q2 to Q1 of this year, investor purchases were about the same. Although the numbers show a year-over-year increase, RealtyTrac's executive vice president, Rick Sharga, doesn't believe they represent a significant change of course. But, he says they do disprove the idea that investors are gobbling up too much of the inventory. He says: "Historically investors have always accounted for somewhere between 10% and 15% of residential home purchases, and our data shows that this is still the case today, albeit at the high end of that range. But the data doesn't support the 'Wall Street is buying up Main Street' theme that's been a popular theory for the past year or so."

States Attracting the Most Investors Activity

So where are investors placing their bets? New Hampshire tops the list, with Delaware, Georgia, Arizona, and Mississippi rounding out the top five. In the second tier is Florida, North Carolina, Oklahoma, Arkansas, and Nevada. Investor share ranges from 23.2% of all purchases in New Hampshire to 18.7% of purchases in Nevada.

As for the ten states with the lowest share of investor purchases - Vermont tops that list, followed by Alaska, New Mexico, Montana, and Idaho. The other five states include Oregon, West Virginia, Wyoming, Washington, and Iowa. Investor share of purchases in Vermont are less than 1%, while Alaska is 1.9%. The share increases to about 11% for Iowa.

Biggest Investor Discounts

So what's this about buying more and paying less? RealtyTrac says that in the second quarter, investors paid an average of 29.4% less than your typical consumer. That's on a national basis among 38 states with full reporting data. Investors got a better deal, on average, in 33 out of 38 of those states. For investors, the median price of a home was $205,000. For consumers, it was $290.230.

As for the states with the biggest investor discounts, Arkansas was number one. It had the highest investor discount at 76.9%. Michigan was next with a 60% discount to investors. Louisiana and Nebraska were both about 55%. West Virginia and Oklahoma were around 50%.

Sharga is quick to point out that investors are not getting special treatment. They are just better shoppers. And, he says: "Another misconception is that investors are overpaying for properties, making it difficult for consumers to compete and artificially driving up prices. But successful investors tend to look for below-market pricing in order to make a profit…" Plus, many buy in cash, which often comes with a discount.

In Q2 of this year, 79% of investor purchases were in cash compared to 69% for Q2 of last year. While that figure varies from state-to-state, the report shows that the share was more than 50% in all states, except for Alaska.

There's a link to the RealtyTrac report in the show notes at newsforinvestors.com.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.realtytrac.com/newsroom/wp-content/uploads/sites/14/2021/10/Oct-21-RealtyTrac-RE-Investor-Purchase-Activity-Press-Release.pdf

2 -https://www.realtytrac.com/blog/realtytrac-investor-purchase-report-fall-2021/

The Real Estate News Brief: New Rate Hike Timeline, Surge in Foreclosures, & Single-Family Rent Growth Oct 26, 2021

Show notes

In this Real Estate News Brief for the week ending October 23rd, 2021... the Fed's new rate hike schedule, a new wave of foreclosures, and a rent growth surprise for some single-family homes.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

Economic News

We begin with economic news from this past week with comments from Fed Chief Jerome Powell. It looks like the timeline for interest rate hikes has been pushed up again. Last month, there was more of a debate as to whether it would happen in 2022 or 2023. Powell indicated that conditions for a rate hike would probably be reached next year. That includes the Fed's goal of maximum employment. The inflation requirement has already been met. That's when inflation remains above 2% for a sustained period of time. Powell also said that now is the time to begin tapering the Fed's bond-buying strategy. Policymakers will discuss a tapering plan next month.

Jobless claims fell to a fresh pandemic low last week. There were only 290,000 initial claims for state benefits. Continuing claims also fell. They were down 290,000 to 2.48 million. (2) Millions of jobs are going unfilled, however, which is making it difficult for businesses to meet the demand for goods and services. That's also creating supply chain issues that are driving up prices, and inflation.

Home buyers are going full steam ahead to lock in deals before mortgage rates rise any higher. The National Association of Realtors say that existing home sales were up 7% from August to September. That's a seasonally-adjusted annual rate of 6.29 million homes. (3) Part of that increase is due to more inventory, but NAR Chief Economist Lawrence Yun says that inventory was quickly gobbled up.

On the other side of the housing supply issue, residential construction was down due to those supply chain issues, and a labor shortage. The government says that September home starts were down 1.6% compared to August, and that permits were down 7.7%. Multi-family permits were down the most. They fell 21% while single-family permits were down just 1%. (4)

Despite all the headwinds that builders face, the National Association of Home Builders monthly confidence index shows an increase of four points to a reading of 80. Anything over 50 is positive. Although builders have to keep raising prices, they are encouraged that demand and home sales "remain strong." (5)

Mortgage Rates

Mortgage rates rose slightly this last week. Freddie Mac says the 30-year fixed-rate mortgage was up four points, to 3.09%. The 15-year was up three points, to 2.33%. (6)

In other news making headlines…

Foreclosures on the Rise

Foreclosure filings jumped higher in September, after pandemic-related moratoriums were lifted. ATTOM Data Solutions released its Q3 foreclosure report which shows that foreclosure filings were up 24% compared to August, and 102% from a year ago. (7)

Economists have been predicting a spike in foreclosures, but RealtyTrac's Rick Sharga says: "Despite the increased level of foreclosure activity in September, we're still far below historically normal numbers." He says they are almost 70% lower than they were before the pandemic. And light years away from the number of foreclosures in mid-2009.

Foreclosure filings were approaching 600,000 per quarter back then. Currently, there are 45,500 filings for the third quarter of this year.

Single-Family Rent Growth

Single-family rent growth quadrupled in August. CoreLogic says the year-over-year rate of growth was 9.3%, and represents the fastest annual rent growth in 16 years. (8)

The single-family category includes both detached and attached units, such as duplexes, triplexes, quadplexes, townhomes, row homes, co-ops, and condos. Rent growth spiked the most for detached homes. Annualized rent growth for attached units was 6.4% while the rent for detached homes rose 11.7%.

The city with the highest rent growth was Miami. Rents in Miami were up 21.5%. That pushed Phoenix into second place for the first time in almost three years. Rounding out the top five are Las Vegas, Austin, and Dallas.

New Forecast for Top Markets in 2022

New forecasts are coming out about next year's hot real estate markets. PwC just released its 2022 Emerging Trends in Real Estate report. The report includes a top-10 list of highly ranked real estate markets for 2022. Several of them are also on our list of recommendations for single-family rentals. Those markets include Tampa/St. Petersburg, Charlotte, Dallas/Fort Worth and Atlanta.

PwC is also recommending those cities, and others, for the construction of new homes. If you have been following RealWealth, you know that we have expanded our focus on existing single-family rentals to also include the construction of new rental homes. Our recommended markets include Charlotte, North Carolina; Cincinnati and Dayton, Ohio; Dallas, Texas; Park City, Utah, and several Florida markets.

You can find out more by joining RealWealth for free at newsforinvestors.com. As a member, you have access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

That's it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.marketwatch.com/story/feds-powell-says-elevated-inflation-could-last-well-into-next-year-11634917919?mod=economy-politics

2 -https://www.marketwatch.com/story/jobless-claims-fall-to-pandemic-low-of-290-000-as-businesses-try-to-avoid-layoffs-due-to-labor-shortage-11634819765?mod=u.s.-economic-calendar

3 -https://www.marketwatch.com/story/existing-home-sales-rise-as-some-buyers-are-motived-by-fomo-11634826649?mod=economic-report

4 -https://www.marketwatch.com/story/construction-on-new-homes-slows-as-supply-chain-woes-hit-the-housing-market-11634647997?mod=economic-report

5 -https://www.marketwatch.com/story/home-builders-grow-more-confident-in-spite-of-continued-supply-chain-headaches-11634565934?mod=economic-report

6 -http://www.freddiemac.com/pmms/

7 -https://www.attomdata.com/news/market-trends/foreclosures/attom-september-and-q3-2021-u-s-foreclosure-market-report/

8 -https://www.corelogic.com/intelligence/single-family-rent-growth-approaches-double-digits/

9 -https://fortune.com/2021/10/18/hot-real-estate-markets-2022-outlook-real-estate-buying-a-house/

Home Sellers Should Plant a Tree! Oct 23, 2021

Show notes

If you're selling your home and you have a green thumb, you might want to plant a tree. Or pay someone else to plant one for you. According to a new survey by Trees.com, some real estate agents believe that just "one" healthy tree can increase property values by 30%.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

Trees.com started off as a blog in 1997 which has evolved over time into a shopping site for plants and trees, along with plenty of educational material. (1) The survey was done last month with the help of 1,250 licensed real estate agents, and 78% of them said that poor landscaping has a negative impact on the value of a property.

The Value of a Well-Positioned Tree

When it comes to the best way of upgrading your landscaping, 59% of the agents said "add a tree." 20% of the agents said that one tree will increase the property value by 30%. That's one in five of the agents participating in the survey. If you do the math on a home that's worth $300,000, 30% of that amount is $90,000!

Another 40% of the agents estimated the additional value would be 10 to 20% or $30- to $60,000. The remaining 40% estimated a range of between 1 and 5%. Of course, a lot would depend on the tree, and what it looks like in the yard.

Aesthetic Charm

Washington-state real estate broker, David North, says that trees can add "aesthetic charm" to a home. He told Trees.com: "A tree is one of the most natural and interesting ways to add color, texture and contrast to any home's yard." He says: "The natural beauty of a tree can be especially powerful when it distinguishes one property from others, whether by different shape, color, or size."

Ecosystem Upgrade

Trees also improve the ecosystem of the property. California real estate broker, Kimo Quance, says they help with "stormwater management, pollution filtering, and soil fertilization. During warmer months, trees are a natural cooling system, providing shade. Then, in colder months, trees that lose their leaves let sunlight filter through to warm the home." They can also help stabilize soil and prevent mudslides, if there's an incline to the property.

Landscaping Elements

The survey also ranked various landscaping elements, and grass was the most important feature for improving value. It didn't include the estimate value of the grass, but you might surmise that it could rival the added value of trees. Trees were next on the list, followed by flowers, hedges, mulch, and fountains.

Hardscaping Features

As for the hardscaping features of a property, the agents ranked decks as most important. After that, driveways were second on that list, followed by an outdoor kitchen, artificial grass, a gazebo, and a firepit.

Inside Greenery

The survey also touched on greenery "inside" the home. 54% of the agents say it's a good idea to have indoor plants as part of the staging, but most of those agents were in the Southern and Western regions of the country. So indoor greenery may be more important in those areas.

There's a link to the Trees.com survey results in the show notes at newsforinvestors.com.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

https://www.trees.com/poor-landscaping-can-decrease-property-value-by-as-much-as-30

Crypto Mortgage Payment Experiment a Success! Oct 23, 2021

Show notes

It's a big first for cryptocurrency and real estate. The nation's second largest lender says it successfully accepted mortgage payments, in crypto, from a handful of borrowers. It was part of a pilot program by United Wholesale Mortgage that was successful, but is now being put back on the shelf, for a later date.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

UWM announced the good news this last week. It says that it "successfully evaluated and accepted the first-ever cryptocurrency mortgage payment in September and five more… in October." (1) It was the first time that any U.S. lender has accepted cryptocurrency as a home loan payment.

UWM CEO Mat Ishbia said in the announcement: "As we said last quarter, we were going to look into accepting cryptocurrency and test it to see if it's a faster, easier and cheaper solution and thanks to our innovative technology team members, the transactions were successful." But he also said that: "Due to the current combination of incremental costs and regulatory uncertainty in the Crypto space, we've concluded we aren't going to extend beyond a pilot at this time."

Test-and-Learn Process

As it turns out, the program was more of a "test-and-learn" process in preparation for crypto's future use. UWM says it would resume the use of cryptocurrency and blockchain technology once it becomes something that will "propel the organization forward."

The program allowed for the use of three kinds of crypto including Bitcoin, Ether, and Dogecoin. Ishbia told CNBC that borrowers "liked" the idea and thought it was "cool" but ultimately, the program only attracted six people. Ishbia says: "There was not enough demand at the end of the day to really push the envelope too hard." (2)

Investment Tool vs. Currency

As CNBC reports, the experiment provides proof that many people view crypto as an investment tool, and not a currency to buy things. At least not yet. Most cryptocurrency users hold on to their virtual coins, hoping for an astronomical return, as some early investors have seen. CNBC calls it the HODL mindset which stands for "hold on for dear life."

According to Coinbase, just one Bitcoin is worth more than $60,000. It was first introduced in 2009, but in the last five years, it has gained about 8,600%. Market cap is $1.2 trillion.

Ethereum or Ether has also done well. Current price is about $3,800 per coin with a market cap of more than $480 billion. Over five years, that coin has gained about 27,000% in value.

Dogecoin began as a joke and became wildly popular when Elon Musk promoted it in a tweet. It's now worth only about $.25 cents per coin, but that also represents more than 100,000% growth. Market cap for Dogecoin is more than $26 billion.

Using Crypto Creates Taxable Event

So there's money on the table for some investors if they want to "cash in." One problem with doing that however, is that using crypto will create a taxable event. CNBC says the IRS views crypto as property, and the six homeowners who just paid UWM in crypto will likely face a big tax bill.

A CoinTracker CPA told CNBC: "The one thing that a lot of people don't realize is that whenever you spend cryptocurrencies to buy a cup of coffee, or any type of consumer item, that triggers a capital gains event."

As for UWM's future plans, Ishbia says the lender will be able to turn the program back on when the demand is there. He says: "We know how to do it now."

You can find out more by following links in the show notes at newsforinvestors.com.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.uwm.com/about-us/media-resources/press-releases/2021/october-14-2021

2 -https://www.cnbc.com/2021/10/14/united-wholesale-mortgage-ditches-its-plan-to-accept-bitcoin-ethereum.html