All Quiet on the Brexit Front in Real Estate Lending – At Least for Now …
All the uncertainty in the United Kingdom after last year’s Brexit vote hasn’t had a huge effect on the UK’s real estate lending market.
That was the conclusion of five real estate finance professionals who participated recently in a roundtable directed by the Real Estate Capital news service. Among the participants was Lisa Williams, Managing Director, Loan Servicing, for Situs.
Market uncertainty suppressed the volume of real estate financing transactions in the months following the referendum, but the market has already bounced back, said Williams, who is head of the European primary servicing business at Situs, which manages a European loan book of about €35 billion across more than 15 European countries for clients including banks, debt funds and private investors.
“Not many deals were done in the third and fourth quarters of 2016,” Williams said. “This year we have seen a definite uptick in the UK. It is busier than last year. We either see very large deals or smaller £50 million to £100 million transactions. There are more deals in secondary markets and a focus on sectors like hotels, student accommodation and PRS [private rented sector] residential.”
Williams said she has noticed one change since the Brexit vote.
“There has been a lot more refinancing this year. Loans that are two to three years in are starting to refinance, much more so than 12 months ago,” she said.
That may ring alarm bells in some quarters. If sponsors are trying to take advantage of higher valuations to increase their leverage and extract equity, that could be an indicator of an overheating market with conditions aligning for a future crash, but the participants in the roundtable discussion said they didn’t believe that is likely.
Many believed that London, as a world-class city, would continue to thrive despite Brexit, but they feared that the UK’s regional centers might suffer. The participants said that fear seems to have been misplaced, as technology, media and telecommunications companies in such cities as Manchester, Leeds and Birmingham are still able to recruit among their large student populations.
“Millennials do not have to work in London now where they face a long commute,” Williams said. “They are now working and living in cities like Manchester where they can work and live in the city center.”
read more: Real Estate Capital
… But Latest Brexit Talks End In Acrimony
Brexit talks ended in stalemate, with both sides deadlocked over the divorce bill and tensions spilling over as the European Union’s negotiator mocked Prime Minister Theresa May.
European Chief Brexit Negotiator Michel Barnier said Britain is refusing to acknowledge its financial obligations and wants a deal that’s impossible to achieve. In the coded language of the EU, the “sufficient progress” needed to move on to trade talks hasn’t been made.
The pound weakened to its lowest in a week as the failure of the talks increases the chances of the U.K. tumbling out of the EU without a deal in 2019. The acrimony was clear as Barnier cited May’s oft-repeated and much-derided slogans to make the point that the U.K. cannot have it all.
“Brexit means Brexit, leaving the single market means leaving the single market, and if that’s what’s been decided there will be consequences,” Barnier told a news conference in Brussels alongside Brexit Secretary David Davis.
Negotiations on the future relationship can’t start until EU leaders agree to it, and it’s now looking unlikely they will do that at the next summit in October. That would push it back to December, leaving barely a year to sort a trade deal. The EU won’t discuss transitional arrangements until progress has been made on the divorce issues.
read more: Bloomberg
Labor Day 2017: Working Harder for that Home Down Payment
As the long Labor Day weekend kicks off, we’re reminded that people across the USA are working even harder to achieve the “American Dream” of homeownership, but many worry that dream is getting more difficult to achieve.
“Homeownership is affecting this generation in much the same ways it has affected previous generations, but with a twist,” says the Collingwood Group Managing Director Tom Booker. “Down payments have been a challenge for young borrowers, as is qualifying for a mortgage for new homebuyers, with heightened credit underwriting standards and the lack of housing supply making matters worse. The twist is that while today’s interest rates are low and employment is robust, wages have not risen to keep up with rising home prices.”
A recent survey shows that most millennials still want to buy and own a home — and that they consider it to be a fundamental part of the “American dream.” However, ValueInsured’s quarterly survey revealed that even among non-homeowning millennials interested in buying homes “within the next year,” their confidence in their ability to do so was below 50 percent.
In summer 2016, confidence in homebuying rose to 47 percent of millennials. Now, in the summer 2017, that number is 34 percent, its lowest percentage in the last 18 months.
In surveys consistent year after year, about eight in 10 millennials say they want to buy homes. In 2016, 34 percent of all home purchases were by millennials.
According to Bank of America’s lead executive in consumer lending D. Steve Boland, “The overwhelming majority of millennial homeowners say their current home is a ‘stepping stone’ to their forever home.”
>>> Collingwood’s Tom Booker will be on “Mornings with Maria” at 7:30 a.m. today. We invite you to tune in to the Fox Business Network. <<<
U.S. Pending Home Sales Unexpectedly Drop 0.8% In July
With inventory woes throughout the country continuing to stall contract activity, the National Association of Realtors released a report on Thursday showing an unexpected drop in pending home sales in the U.S. in the month of July.
NAR said its pending home sales index fell by 0.8 percent to 109.1 in July from a downwardly revised 110.0 in June. Economists had expected pending home sales to rise by 0.5 percent.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
“With the exception of a minimal gain in the West, pending sales were weaker in most areas in July as house hunters saw limited options for sale and highly competitive market conditions,” said NAR chief economist Lawrence Yun.
read more: RTT News
Hurricane Harvey Housing Woes
After search-and-rescue efforts wind down for survivors of Harvey, federal officials warned Texas that housing for thousands of displaced residents could be a long-term problem that in prior storms was fraught with unhealthy trailers and hundreds of millions of dollars wasted.
The Collingwood Group Vice Chairman Brian Montgomery, former Assistant Secretary of HUD and FHA Commissioner in Houston, says, “Texas is about to undergo one of the largest recovery-housing missions that the nation has ever seen. It’s going to be a long, tedious and sometimes frustrating process.”
FEMA announced before Harvey’s rain stopped falling that 30,000 people would need shelter from the storm that dropped a record 50 inches of rain. An estimated 9,000 displaced people are now at the George R. Brown Convention Center in Houston, which has a capacity for only 5,000.
Harvey Sends Gas Prices Higher
Retail gasoline prices in Texas and across the country spiked by at least a dime following disastrous Hurricane Harvey.
AAA Texas on Thursday reported the average price at the pump statewide was $2.26 per gallon. That’s 12 cents higher than a week ago, when Harvey threatened Texas, and 4 cents above Wednesday’s price.
The association survey says U.S. gasoline prices Thursday averaged $2.45 per gallon — that’s 10 cents higher than a week ago and a nickel increase since Wednesday.
read more: Associated Press
Jobs Report: Good News Ahead for Housing, Mortgage Industries
Employment boomed in August, according to the ADP National Employment Report.
The report predicts an increase of 237,000 jobs in August, up significantly from last month’s prediction of 178,000.
Source: ADP, Moody’s Analytics
“The job market continues to power forward,” Moody’s Analytics Chief Economist Mark Zandi said. “Job creation is strong across nearly all industries. Mounting labor shortages are set to get much worse.”
More Good News: U.S. GDP Growth Revised Up to 3% Pace in the Second Quarter
The U.S. economy expanded at its most robust pace in more than two years in the spring and appears to have momentum going into the second half of the year, supported by solid consumer spending and a pickup in business investment.
Gross domestic product, a broad measure of the goods and services produced across the U.S., rose at a seasonally and inflation-adjusted annual rate of 3% in the second quarter, the Commerce Department said Wednesday. That was the strongest quarter in more than two years and some forecasters expect growth will remain around that pace in the third quarter.
Since the recession ended in mid-2009, economic growth has fluctuated from quarter to quarter while averaging a little more than 2% a year. It is far from clear that a sustained breakout from that modest pace was building as the expansion entered its ninth year; similar past accelerations have proven fleeting. But some promising trends are under way, including a global pickup in growth supporting exports, rising employment supporting household income and spending, and robust corporate profits and confidence, supporting investment.
read more: Wall St Journal
And Even More Good News: US Consumer Confidence Improves Again in August
American consumers give today’s economy the highest grade in more than 16 years.
The Conference Board said Tuesday that consumers’ assessment of current economic conditions hit the highest level this month since July 2001. The business research group’s overall consumer confidence index, which takes into account Americans’ views of current conditions and their expectations for the next six months, rose to 122.9 in August from 120 in July.
read more: Associated Press
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