Displaying items by tag: income

The Federal Reserve’s tightening campaign surprisingly has had a muted impact on the broader economy as evidenced by continued expansion despite the highest rate in decades. In terms of the stated goal of curbing inflation, results are mixed as well. 

 

However, the vector which immediately responded to tighter policy is real estate given that affordability has declined due to higher rates. In some markets, activity has simply cooled, while in those with poor fundamentals, prices are falling more precipitously. 

 

Within real estate, commercial real estate (CRE) is the most challenged given oversupply and the recent rise of remote work. For Barron’s, Rob Csneryik covers why some contrarian investors are seeing opportunity in the beaten-down sector.

 

In essence, it’s a buyer’s market with so many traditional sources of funding out of the picture, leading to more favorable terms and higher returns. Further, there is less risk with values already down so much. Many believe that office occupancy rates will start to gradually rise especially if the economy does weaken which would give employers more leverage to force employees back to the office. CRE would also likely benefit from a mild recession as it would compel the Fed to cut rates which would turn a major headwind into a tailwind. 


Finsum: Commercial real estate is the weakest segment of the real estate market. However, some contrarians see opportunities amid the carnage.

 

Published in Eq: Real Estate
Wednesday, 04 October 2023 05:26

How Annuities Can Help Lead to a Secure Retirement

Eric Henderson, the president of Nationwide Financial’s annuity division, recently shared some thoughts on annuities and how it can help reduce financial stress for retirees. Henderson has been with the company for nearly 40 years and been instrumental in helping Nationwide’s annuity business grow to over $100 billion in assets. 

He believes that this is a great time for annuities given that short-term rates are above 5% in many instances. It’s been benefiting from volatility in fixed income and equities in addition to a cascade of uncertainties including inflation, monetary policy, recession risk, geopolitics, etc. 

Annuities can help investors side-step these risks while also taking advantage of historically high rates. So far, fixed annuities have seen the biggest increase in sales, but there has been strength in other types of annuities as interest and awareness grows.  

In terms of trends, Feldman sees more shorter-term, annuity products being introduced given the combination of uncertainty and increasing demand. Additionally, he sees the potential for ‘customized’ annuities that are created to fit an individual’s specific needs.   

Overall, he believes that at some point investors evolve from a ‘wealth accumulation mindset’ to focusing more on maximizing income. He believes this is the best time in decades for investors to build healthy income streams, and it also provides needed diversification given a shaky economic outlook. 


Finsum: Nationwide’s head of annuities, Eric Henderson, shared his thoughts on the category’s increase in popularity and some interesting trends. 

 

Published in Wealth Management

Ever since the Fed embarked on its tightening campaign starting in the early months of 2022, the real estate market experienced the most immediate impact due to rising mortgage rates negatively affecting home affordability.

 

Initially, publicly traded real estate stocks saw deep drawdowns while private real estate performed much better. Now, this gap is beginning to shrink as private real estate has been following public real estate lower. One factor is that it’s increasingly becoming clear that high rates are not going to disappear anytime soon due to the resilience of the economy and inflation. In fact, inflationary pressures seem to be reigniting given the recent strength in oil and auto workers striking.

 

In terms of when private real estate will bottom, some indicators to watch are an increase in transaction volume even at lower prices, a change in monetary policy, and increase in lending standards. Currently, all 3 are working against private real estate given that many markets are ‘frozen’ as sellers are unwilling to cut prices, while buyers don’t see many attractive deals at current yields. The Fed’s focus remains on stamping out inflation whether through further hikes or keeping rates ‘higher for longer’. Finally, lending standards are unlikely to loosen especially with so many banks struggling with balance sheet issues and/or an inverted yield curve. 


Finsum: Private real estate was immune to the weakness in public real estate for so long. Find out why this is starting to change.

 

Published in Eq: Real Estate

One of the consequences of tighter monetary policy is to curtail housing demand by squeezing affordability. As a result, all sorts of housing activity has cooled such as mortgage applications, new home construction, renovations, and house flipping. While there are all sorts of losers, it’s presenting an opportunity for many private real estate funds who are finding a buyer’s market.

 These funds raise money with multi year holding periods so are less affected by the change in the funding environment at least in the short and intermediate-term. Another factor in the real estate market is that many regional banks are pulling back from extending credit given their balance sheet concerns. Overall, it’s a risk for the broader economic outlook but a unique opportunity for private real estate investors.   

And, more money is being allocated to real estate - public and private. In the first-half of the year, 43% of institutions surveyed, increased their allocation to real estate by an average of 76 basis points. Sovereign wealth funds also increased real estate exposure from 6.9% to 7.9%. In terms of geography, private real estate continues to be dominated by North American investors.

 

Published in Eq: Real Estate

One of the best real-time measures of the population’s interest in a subject can be gleaned through Google search data. Since the start of the year, searches for the topic are up by 50% and continue to climb with rates. In fact, there is a 0.9 correlation between search volume and longer-term rates.

 

According to Standard Life, interest in the topic really accelerated once rates exceeded 4%. Currently, many annuities are offering returns in the 7% to 8% range which is leading to strong demand from retirees or those close to retirement who are looking for income. 

 

Recent months have seen rates continue inching higher, while inflation expectations have moderated. Higher real rates are also adding to the appeal of annuities given concerns about the economic outlook and costs.

 

Two more contributing factors behind annuity demand are pent-up demand and demographics. For more than a decade, rates were so low that annuities simply didn’t deliver sufficient returns for investors or retirees. Instead, monetary policy was designed to push them higher up the risk curve in order to generate yield. 

 

Demographics also can’t be ignored. Next year, 12,000 Americans will be reaching retirement age every day. And by 2031, 70 million Americans will be above retirement age. The population is even older in Europe and Japan and will likely be interested in boosting their income during retirement. 


Finsum: Google search data shows that interest in annuities has surged since the beginning of the year. It’s not a coincidence that this happened as long-term rates were breaking out to multi decade highs. 

 

Published in Wealth Management
Page 3 of 39

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…