Displaying items by tag: real estate

Wednesday, 11 March 2020 15:45

Lower Rates are Not Flowing Through to Mortgages

(New York)

In what comes as a very important sign for the wider US economy, lower rates and yields are apparently not flowing through to mortgages in the way that many expected. One of the bright economic spots in the big market volatility recently has been the hope that much lower rates would stimulate more housing demand. Mortgages rates have actually risen by 20 bp since March 5th despite the huge fall in Treasury yields. Even since mid-February (when the market was peaking), mortgage rates have only dropped 15 bp to 3.35% for a 30-year fixed.


FINSUM: This is very important because it takes a 75 bp fall for a typical homeowner to save money on a refinancing. We are not even close to that yet, so hard to see any economic boost coming.

Published in Bonds: MBS
Friday, 24 January 2020 21:03

US Real Estate Getting Hot

(New York)

After about three years of being a laggard and worrying investors that a recession may be coming, US real estate looks to be turning the corner. Not only have home sales been rising, but new mortgage data looks very encouraging. Home lenders extended $2.4 tn in new home loans last year, the most since 2006. That figure is a whopping 46% increase from 2018. One economist from Freddie Mac described the situation bluntly, saying “When a large and cyclical part of the economy—housing—is starting to improve, it’s a good sign for the economy at large”.


FINSUM: It is important to note that most of this was refinancing activity because of the drop in rates, so it is not as massive an increase as it appears. Still, good momentum.

Published in Eq: Real Estate
Thursday, 23 January 2020 12:14

US Real Estate Looking Healthy

(Atlanta)

US Real estate has been a worry spot for the last few years. For the last three years or so everyone thought real estate might be the initial signal that the economy was headed lower. However, that never materialized and real estate has been looking modestly better for the last several months. The end of 2019 continued that streak as existing home sales rose 3.6% in December as low unemployment helped support the housing market.


FINSUM: We think the housing market is just solid and steady right now. No huge speculative gains, no gigantic increases in debt etc. It is a nice contrast to publicly-traded securities!

Published in Eq: Real Estate
Wednesday, 13 November 2019 08:29

The Best Place to Invest in Retail

(New York)

Retail is dying, right? Brick and mortar is doomed, supposedly, but that assumption creates some opportunity. The reality is that despite the broader headwinds the industry is facing, some malls and some REITs are doing well. Macerich, for instance, is a large REIT that owns several “trophy” malls amidst its 47 properties. The stock is trading at just 7x earnings, which incredibly cheap for a REIT. Apartment REITs, for instance, are trading at 20x. Its dividend cover ratio is fairly tight, but its overall model looks solid and it is yielding 10.9%.


FINSUM: There is a lot of opportunity in retail stocks, but you need to know where to look, and it takes quite an understanding of the space to sift through the options. Macerich looks solid.

Published in Eq: Real Estate
Thursday, 24 October 2019 08:42

Hopes for the Housing Market Just Cratered

(New York)

Hopes for the housing market had been rising strongly in the last couple of months. After nearly a year in the doldrums, existing homes sales rose for a pair of months in July and August, giving the market hope that falling mortgage rates had revived the market. However, in September, sales again fell sharply, with existing home sales dropping 2.2% from the previous month. Prices, however, are rising, as short supply is moving asking prices higher.


FINSUM: Prices are holding up okay, but there is not much buying and building occurring, which means housing will be contributing less to the economy overall.

Published in Eq: Real Estate
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