Will Janet Yellen Play Scrooge Ahead of Christmas
Hold on to your Christmas stockings…the Fed is expected to raise rates on Wednesday.
This will be the first time this year and only the second time since the recession ended in 2009 that Yellen and company have felt confident enough in the economy to pull the trigger.
Situs RERC CEO Ken Riggs says for Commercial Real Estate it may not mean much at this point as this has been telecasted as much as Trump being named President-elect. The market has been looking for this over the past 18 months and the economy and the financial markets are doing well enough to see a bump in short-term rates. Investors are more nervous about the 10-year Treasury up over 100 basis points since its prior low. CRE investors are tuned into what economic growth means to their top revenue line and worried about inflation on their expense side of the equation.
It’s widely expect the Fed will raise its policy interest rate by a quarter point.
Its main rationale for a rate raise is that the economy has made solid progress in 2016. While it remains anemic by historical standards, economic growth has been strong enough that the labor market continues to tighten.
Job growth has averaged about 180,000 per month, somewhere close to twice the pace needed to keep up with underlying population growth. As a result, the unemployment rate has fallen below the level that Fed officials have signaled is consistent with “full employment,” one of their two Congressionally-mandated goals for the real economy.
Situs’ Riggs cautions, “While CRE continues to be a favored investment option; get your sea legs ready as we enter into uncharted territory.”
The Trump Effect: Mortgages Hit New 2016 Highs
Freddie Mac reports average fixed mortgage rates moving higher for the sixth consecutive week, to their highest rate of the year. Expect even higher mortgages to follow if as expected the Fed moves to hike rates next week.
“The 10-year Treasury yield dipped this week following the release of the Job Openings and Labor Turnover Survey”, says Sean Becketti, chief economist, Freddie Mac.
“The 30-year mortgage rate rose another 5 basis points to 4.13 percent, starting the month 18 basis points higher than this time last year. As rates continue to climb and the year comes to a close, next week’s FOMC meeting will be the talk of the town with the markets 94 percent certain of a quarter-point-rate hike.”
The Russian are Coming, The Russians are Coming
The number of Russians who have expressed interest in buying luxury properties in the U.S. has spiked by 35% over the previous year following the billionaire’s win, according to global real estate consultancy Knight Frank.
Knight Frank said Russians are interested in vacation homes as well as investment properties. Nearly all are looking to spend between $500,000 and $5 million on a residential property, while 10% are hoping to buy commercial real estate.
The two most popular destinations are New York City and Miami.
“Many of our customers are going go to the Art Basel Miami Beach exhibition and will see real estate there,” said Marina Kuzmina, head of international sales at Knight Frank Russia. “A few customers are interested in the opportunity to buy property in development projects of Donald Trump, and we have received requests from U.S. developers wishing to cooperate with Russia.”
Some investors see Trump’s election as a sign that relations between Russia and the West may soon improve. Trump has praised Vladimir Putin as a strong leader, and the Russian president has made clear that he preferred Trump over his rival Hillary Clinton.
Russian purchases of U.S. property accounted for roughly 15% of Knight Frank’s international sales as recently as 2014.
Some of the Russian purchases were extraordinary. Ekaterina Rybolovleva, the daughter of billionaire Dmitry Rybolovlev, made headlines in 2011 when she purchased the then most expensive apartment in Manhattan. The Central Park West condo was bought by a trust under the name of the then 22-year old for $88 million.
Rybolovlev himself bought a $95 million beachfront estate in Palm Beach, Florida in 2008. The seller? Donald Trump.
read more: CNN
CRE: Go North Young Man & Woman
Real estate firm CBRE says Canada hit a record level for commercial real estate sales in the third quarter and is on track to beat an annual record set during the 2007 boom.
The firm says sales of office space, apartments, land and other commercial properties hit $11.2 billion in the quarter ended Sept. 30 and forecast that for the full year there will be more than $35 billion in deals across the country to surpass the current $32.1-billion record.
Greg Kwong, regional managing director of CBRE Calgary, said overall Canada has benefited from investors looking for stable returns in a low-growth world.
“Most investors are looking for yield, because they can’t get it in the banks, in the treasury bills, in bonds,” said Kwong.
In the third quarter, Toronto kept its top spot for commercial investments at $3.5 billion and Vancouver saw $1.6 billion in transactions, with activity in both cities above the 30-month average.
In Calgary, where office vacancies have shot to record highs, sales still managed to jump 146 per cent to $1.2 billion compared with the previous quarter.
Kwong said the ramp-up in Calgary could be maintained because investors are looking at a wide range of assets including industrial and retail properties, though last quarter’s spike was driven largely by the Canada Pension Plan Investment Board making a major office space buy.
read more: Global News
We’re Worth More
The net worth of U.S. households increased in the third quarter as U.S. stock prices and real estate values continued to flourish, a report by the Federal Reserve showed.
Household net worth rose to $90.2 trillion over the quarter, up from a slightly downwardly revised $88.6 trillion in the previous period.
Wealth has been aided by rising stock prices, as indexes continue to hit new records.
Household borrowing rose at a 4.0 percent annual rate, the report also showed, down from a downwardly revised 4.3 percent growth rate in the second quarter of 2016.
The U.S. unemployment rate dropped last month to 4.6 percent, its lowest level in nine years and consistent with a nation at full employment. The housing market also continues to strengthen.
Flipping Out on Home Flipping
Home flipping dipped in the third quarter as the chronically low inventory and higher prices plaguing the housing market made it more challenging to buy real estate cheaply enough to turn a nice profit.
There were 45,718 single family homes and condos flipped during the quarter, according to Attom Data, down 7% compared with a year ago. In the second quarter, flipping — defined as a property that is sold in an arms-length sale for the second time within a 12-month period — had touched a nine-year high.
Flippers, like most real estate buyers, are finding that the supply of homes is tight and prices are high. But flippers focus on a particular metric that most traditional buyers overlook, according to Attom Vice President Daren Blomquist — the discount to estimated market value of each property.
Starbucks $10 Cup of Coffee Priced Just Right?
It’s not about the $10 cup of coffee.
Critics have derided Starbucks Corp.’s push into higher-end coffee bars, which the chain discussed in detail on Thursday, at an all-day confab with Wall Street investors and analysts. Skeptics questioned whether millennials would pony up for pricey drinks such as the $10 Nitro cold-brew coffee, which is infused with nitrogen gas. Others poked fun at descriptions of exotic beans small-batch roasted in Seattle. They are missing the point.
Starbucks is not trying to change its current business model by going even more upmarket than it already is, nor is it trying to convince folks to spend more on its run-of-the-mill drip coffee just because it’s served by hipsters in hats and leather-lined cloth aprons (the new uniform of the higher-end Roastery stores).On the contrary, Starbucks has launched a completely separate, brand new restaurant chain — one that rejects the old model of brick-and-mortar ubiquity, while also getting back to the chain’s roots.
read more: Bloomberg
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