Archive for Real Estate – Page 2

15 Dec

Federal Reserve just hiked interest rates for the 7th time this year – so why are mortgage rates coming down?

By D. Brian Blank, Mississippi State University 

The Federal Reserve raised interest rates by half a percentage point on Dec. 14, 2022, to a range of 4.25 to 4.5%, the seventh increase this year. So far in 2022, the Fed has lifted its benchmark short-term rate, which influences most other borrowing costs in the economy, by 4.25 percentage points from a low of near zero as recently as March.

But even as the U.S. central bank lifts rates – and plans to keep doing so in 2023 – homebuyers are beginning to notice a pleasant surprise: Mortgage rates have been falling.

What’s going on?

We asked Brian Blank, a finance professor who has researched mortgage rates and bank loans, to explain the paradox of falling mortgage costs at a time of rising base interest rates.

What’s happening with mortgage rates?

After soaring for much of 2022, mortgage rates and other long-term rates are starting to come down.

The average rate on a 30-year mortgage has fallen 0.75 percentage points in the past month or so, after hitting a 20-year high of 7.08% in early November. Rates reached 6.33% on Dec. 8, the lowest level since September. This occurred over the same period as the Fed lifted its benchmark interest rate 2 percentage points.

Another key rate that fell is the yield on 10-year Treasury bonds, which has declined by a similar amount, to 3.5%.

Why are mortgage rates falling if the Fed is still hiking?

The short and rather boring technical answer is that bond markets anticipated this rate hike many months ago. And as market factors largely dictate the costs of borrowing, the increase was already absorbed into home loan rates.

Mortgage rates, while rising due to the Federal Reserve’s rapid hiking pace, are actually more closely linked to the interest rate on Treasury securities, specifically the yield on the 10-year Treasury bond. That security began to anticipate the Fed’s interest rate increases a year ago and rose from less than 1.5% in December 2021 to more than 3.25% by June.

And now, with signs that inflation has already peaked and amid growing concerns of a slowing economy, these longer-term rates are coming down in anticipation of fewer future Fed rate hikes than expected only a short time ago. In fact, mortgage and other long-term rates may keep falling over the coming months – assuming the Fed manages to get inflation under control so it is able to lower its benchmark rate again.

Why do mortgage rates follow the yield on the 10-year Treasury bond?

Even though 30-year mortgages can be held for three decades, most people sell their house or refinance within a decade, which means the investor who is receiving the mortgage payments is effectively investing in a 10-year bond.

As a result, the average 30-year fixed rate mortgage interest rate is normally 1 to 2 percentage points higher than the yield on the 10-year Treasury bond.

However, when the economy has more uncertainty than usual, like earlier this year, this spread can get as large as 3 percentage points. This uncertainty can be the result of a potential economic downturn, the possibility of the Fed raising rates more than expected, inflation, Fed balance sheet changes or all of the above – as happened in 2022.

Why are mortgage rates higher than Treasury yields?

Since the United States Treasury is more likely to pay investors back than almost any individual homeowner, investors charge a higher interest rate due to the additional risk they are taking.

Even though individuals go to banks to borrow, banks often sell those loans to investors, who then receive the money individuals pay back on the loan.

Since individuals default on mortgages more often than the U.S. government defaults on Treasury bonds, investors require a higher return to purchase the rights to receive the payments from those mortgages.

If mortgage rates fall, will the Fed have to raise rates even higher to control inflation?

Falling mortgage rates preceded an increase in the home purchase index, which is a measure of current market conditions to purchase homes. This suggests the housing market may finally start to pick up steam after slowing down all year.

Since the Fed is trying to slow economic activity to bring down inflation, this could cause housing prices to increase again, thus forcing the Fed to raise its target rate more than planned.

However, I believe the effective federal funds rate, which is the market rate directly influenced by the Fed’s target range, is already sufficiently restrictive to slow the housing market and restore more normal economic conditions in 2023. Moreover, the decline in mortgage rates is still quite small – they remain over double what they were a year ago – so the drop isn’t likely to have much of an impact alone.

What the Fed itself thinks about this challenge – and where it projects to take interest rates next year – is what I and many other economists and investors will be monitoring closely after it met for the last time of 2022. It should tell us what to expect in 2023 – so stay tuned.

Article updated to include Fed raising rates.The Conversation

About the Author:

D. Brian Blank, Assistant Professor of Finance, Mississippi State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Opinions Real Estate
02 Dec

REIT Aims To Improve Value for Unitholders

Source: David Chrystal (12/1/22)

To achieve this end, the board of trustees is currently weighing various options, noted an Echelon Capital Markets report.

The Firm Capital Apartment REIT (FCA.U:TSX.V) posted a year-over-year AFFO/unit, or adjusted funds from operation per unit, gain in Q3/22 and during the quarter, commenced a strategic review, reported Echelon Capital Markets analyst David Chrystal in a Nov. 15 research note. Firm Capital invests in U.S. multifamily properties, owns assets and interests in joint venture investments, and provides debt financing.

The Canada-based real estate investment trust’s Q3/22 AFFO/unit was US$0.09, a 7% increase over Q3/21, Chrystal relayed. The figure beat Echelon’s estimate of US$0.06 due to a foreign exchange gain.

Target Price Decreased

However, Echelon reduced its target price on the REIT to US$7 per share from US$7.50, following the release of its Q3/22 results, to reflect writedowns carried out during the quarter on certain investments. The trust’s current share price is about US$4.67.

“Given the current capital market environment, a significant NAV discount is likely to persist under the trust’s current structure,” wrote Chrystal.

The target price could be raised in the future, Chrystal noted, if First Capital were to divest certain assets at an international financial reporting standards net asset value (NAV) of US$8.44 per unit.

This is because Echelon predicts near-term “incremental impairment of certain assets in the trust’s Northeast markets, where operations remain challenged due to regulatory issues delaying evictions and collections.”

Strategic Review Underway

The REIT’s board of trustees, in fact, may decide, during its strategic review, to dispose of some assets. The objective of the review is to “identify, evaluate and pursue potential strategic alternatives aimed at maximizing unitholder value,” Chrystal relayed.

Other options under consideration include effecting some type of merger or acquisition, privatizing, and changing the business to a real estate merchant bank or value-add model.

“Given the current capital market environment, a significant NAV discount is likely to persist under the trust’s current structure,” wrote Chrystal.

Distributions Paused

The analyst pointed out that while the review, in progress, is taking place, distributions by the REIT are and will remain on hold.

“A quarterly review will determine if the trust will allocate capital to unitholder distributions, unit repurchases, or reinvestment,” Chrystal added.

Echelon maintained its Buy rating on the First Capital Apartment REIT.

 

Disclosures:
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Disclosures For Echelon Wealth Partners Inc., Firm Capital Apartment REIT, November 15, 2022

Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients.

Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.

U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.

ANALYST CERTIFICATION

Company: Firm Capital Apartment REIT | FCA.U-TSXV

I, David Chrystal, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.

Financial News Real Estate Stock Market News
07 Nov
Real Estate Investing

A brief history of the mortgage, from its roots in ancient Rome to the English ‘dead pledge’ and its rebirth in America

By Michael J. Highfield, Mississippi State University 

The average interest rate for a new U.S. 30-year fixed-rate mortgage topped 7% in late October 2022 for the first time in more than two decades. It’s a sharp increase from one year earlier, when lenders were charging homebuyers only 3.09% for the same kind of loan.

Several factors, including inflation rates and the general economic outlook, influence mortgage rates. A primary driver of the ongoing upward spiral is the Federal Reserve’s series of interest rate hikes intended to tame inflation. Its decision to increase the benchmark rate by 0.75 percentage points on Nov. 2, 2022, to as much as 4% will propel the cost of mortgage borrowing even higher.

Even if you have had mortgage debt for years, you might be unfamiliar with the history of these loans – a subject I cover in my mortgage financing course for undergraduate business students at Mississippi State University.

The term dates back to medieval England. But the roots of these legal contracts, in which land is pledged for a debt and will become the property of the lender if the loan is not repaid, go back thousands of years.

Ancient roots

Historians trace the origins of mortgage contracts to the reign of King Artaxerxes of Persia, who ruled modern-day Iran in the fifth century B.C. The Roman Empire formalized and documented the legal process of pledging collateral for a loan.

Often using the forum and temples as their base of operations, mensarii, which is derived from the word mensa or “bank” in Latin, would set up loans and charge borrowers interest. These government-appointed public bankers required the borrower to put up collateral, whether real estate or personal property, and their agreement regarding the use of the collateral would be handled in one of three ways.

First, the Fiducia, Latin for “trust” or “confidence,” required the transfer of both ownership and possession to lenders until the debt was repaid in full. Ironically, this arrangement involved no trust at all.

Second, the Pignus, Latin for “pawn,” allowed borrowers to retain ownership while sacrificing possession and use until they repaid their debts.

Finally, the Hypotheca, Latin for “pledge,” let borrowers retain both ownership and possession while repaying debts.

The living-versus-dead pledge

Emperor Claudius brought Roman law and customs to Britain in A.D. 43. Over the next four centuries of Roman rule and the subsequent 600 years known as the Dark Ages, the British adopted another Latin term for a pledge of security or collateral for loans: Vadium.

If given as collateral for a loan, real estate could be offered as “Vivum Vadium.” The literal translation of this term is “living pledge.” Land would be temporarily pledged to the lender who used it to generate income to pay off the debt. Once the lender had collected enough income to cover the debt and some interest, the land would revert back to the borrower.

With the alternative, the “Mortuum Vadium” or “dead pledge,” land was pledged to the lender until the borrower could fully repay the debt. It was, essentially, an interest-only loan with full principal payment from the borrower required at a future date. When the lender demanded repayment, the borrower had to pay off the loan or lose the land.

Lenders would keep proceeds from the land, be it income from farming, selling timber or renting the property for housing. In effect, the land was dead to the debtor during the term of the loan because it provided no benefit to the borrower.

Following William the Conqueror’s victory at the Battle of Hastings in 1066, the English language was heavily influenced by Norman French – William’s language.

That is how the Latin term “Mortuum Vadium” morphed into “Mort Gage,” Norman French for “dead” and “pledge.” “Mortgage,” a mashup of the two words, then entered the English vocabulary.

Establishing rights of borrowers

Unlike today’s mortgages, which are usually due within 15 or 30 years, English loans in the 11th-16th centuries were unpredictable. Lenders could demand repayment at any time. If borrowers couldn’t comply, lenders could seek a court order, and the land would be forfeited by the borrower to the lender.

Unhappy borrowers could petition the king regarding their predicament. He could refer the case to the lord chancellor, who could rule as he saw fit.

Sir Francis Bacon, England’s lord chancellor from 1618 to 1621, established the Equitable Right of Redemption.

This new right allowed borrowers to pay off debts, even after default.

The official end of the period to redeem the property was called foreclosure, which is derived from an Old French word that means “to shut out.” Today, foreclosure is a legal process in which lenders to take possession of property used as collateral for a loan.

Early US housing history

The English colonization of what’s now the United States didn’t immediately transplant mortgages across the pond.

But eventually, U.S. financial institutions were offering mortgages.

Before 1930, they were small – generally amounting to at most half of a home’s market value.

These loans were generally short-term, maturing in under 10 years, with payments due only twice a year. Borrowers either paid nothing toward the principal at all or made a few such payments before maturity.

Borrowers would have to refinance loans if they couldn’t pay them off.

Rescuing the housing market

Once America fell into the Great Depression, the banking system collapsed.

With most homeowners unable to pay off or refinance their mortgages, the housing market crumbled. The number of foreclosures grew to over 1,000 per day by 1933, and housing prices fell precipitously.

The federal government responded by establishing new agencies to stabilize the housing market.

They included the Federal Housing Administration. It provides mortgage insurance – borrowers pay a small fee to protect lenders in the case of default.

Another new agency, the Home Owners’ Loan Corp., established in 1933, bought defaulted short-term, semiannual, interest-only mortgages and transformed them into new long-term loans lasting 15 years.

Payments were monthly and self-amortizing – covering both principal and interest. They were also fixed-rate, remaining steady for the life of the mortgage. Initially they skewed more heavily toward interest and later defrayed more principal. The corporation made new loans for three years, tending to them until it closed in 1951. It pioneered long-term mortgages in the U.S.

In 1938 Congress established the Federal National Mortgage Association, better known as Fannie Mae. This government-sponsored enterprise made fixed-rate long-term mortgage loans viable through a process called securitization – selling debt to investors and using the proceeds to purchase these long-term mortgage loans from banks. This process reduced risks for banks and encouraged long-term mortgage lending.

Fixed- versus adjustable-rate mortgages

After World War II, Congress authorized the Federal Housing Administration to insure 30-year loans on new construction and, a few years later, purchases of existing homes. But then, the credit crunch of 1966 and the years of high inflation that followed made adjustable-rate mortgages more popular.

Known as ARMs, these mortgages have stable rates for only a few years. Typically, the initial rate is significantly lower than it would be for 15- or 30-year fixed-rate mortgages. Once that initial period ends, interest rates on ARMs get adjusted up or down annually – along with monthly payments to lenders.

Unlike the rest of the world, where ARMs prevail, Americans still prefer the 30-year fixed-rate mortgage.

About 61% of American homeowners have mortgages today – with fixed rates the dominant type.

But as interest rates rise, demand for ARMs is growing again. If the Federal Reserve fails to slow inflation and interest rates continue to climb, unfortunately for some ARM borrowers, the term “dead pledge” may live up to its name.The Conversation

About the Author:

Michael J. Highfield, Professor of Finance and Warren Chair of Real Estate Finance, Mississippi State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Opinions Real Estate
27 Oct

Building subsidized low-income housing actually lifts property values in a neighborhood, contradicting NIMBY concerns

By Anthony W. Orlando, California State Polytechnic University, Pomona 

The Research Brief is a short take about interesting academic work.

The big idea

Building multiple publicly subsidized low-income housing developments in a neighborhood doesn’t lower the value of other homes in the area – and in fact can even increase their worth, according to a new peer-reviewed study I co-authored.

For the study, we looked at 508 developments financed through the federal Low-Income Housing Tax Credit program and built in the Chicago area from 1997 to 2016. We then examined their influence on more than 600,000 nearby residential sales, using data from local property assessments and tax records. We chose Chicago because of its size, well-established neighborhoods, substantial amount of subsidized housing developments, well-documented racial and ethnic segregation, pockets of persistent and concentrated poverty and excellent data coverage. While some readers may have pictures of dilapidated buildings in their minds, the projects we looked at were generally well built and well maintained.

We found that, relative to comparable homes in other neighborhoods, average home prices jumped by 10% within a quarter-mile of the first affordable housing development that was built in a neighborhood and 2% within a quarter-mile over a 15-year period or through 2016. To ensure we were isolating the effect of the low-income housing program, we also looked at preexisting market trends to make sure neighborhoods that showed the faster price growth weren’t already growing at a faster rate before the low-income housing.

What was more striking to us, however, is that additional developments in the same area generally further increased housing prices. Building two more developments increased prices by a total of 3 additional percentage points, on average, within a quarter-mile and 4 percentage points over the next quarter-mile. In other words, a neighborhood within a quarter-mile of all three developments saw gains of 13% on average over the period.

These additional effects are important because low-income housing projects are disproportionately concentrated geographically, especially in lower-income areas.

We also found that these effects occurred regardless of whether it was a low- or high-income neighborhood and no matter its racial composition.

While other studies have previously shown Low-Income Housing Tax Credit developments typically have positive effects on surrounding property values, ours was the first to look at the impact of several projects in one neighborhood.

Why it matters

Homeowners are often worried that the development of publicly subsidized housing in their neighborhoods will lower the value of their homes.

The primary concerns seem to be that such housing developments will lead to higher levels of crime and poverty, as well as requiring wealthier residents to pay higher costs for services and education, according to a 2012 study of “not in my back yard,” or NYMBY, opposition. These concerns are particularly acute when multiple projects are clustered closely together, reminding many Americans of public housing projects that concentrated poverty and crime in the mid-20th century.

But today’s affordable housing developments are different than those of the past, which were often cheaply built and poorly maintained. The Low-Income Housing Tax Credit program supports private developers who have an incentive to build high-quality buildings and implement good property management.

Although local homeowners often oppose these buildings, our results show that they are less cause for concern than people may think.

What still isn’t known

We didn’t measure the effects of the new developments on area rental prices, so we don’t know how the subsidized rental units affected rents in unsubsidized properties nearby. That is a subject for future research. Similarly, while we demonstrated statistically that the developments themselves catalyzed the positive changes in values, we did not examine which particular aspects of the developments were the primary drivers of that change.

What’s next

We’re currently finishing up our follow-up study in Los Angeles – another large city but with very different dynamics from Chicago’s. Our findings, which are currently undergoing peer review, show markedly similar effects, though we found the biggest gains in property values after multiple projects in a neighborhood.

We also are examining whether the observed property value effects differ when factoring in the size of the building, the presence of market-rate units and the type of developer.

Sean Zielenbach, president of SZ Consulting and a co-author of the study, contributed to this article.The Conversation

About the Author:

Anthony W. Orlando, Assistant Professor of Finance, Real Estate and Law, California State Polytechnic University, Pomona

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Financial News Real Estate
06 Oct

THIS is Why the Real Estate Tide is Turning

Here’s your next step to get a handle on the global property market.

By Elliott Wave International

Treat houses as a consumption item — or simply as a place to live, and history shows that real prices will fluctuate only modestly over the decades.

Treat houses as an investment, and the value of houses takes on the characteristics of the stock market.

This is from the January 2012 Elliott Wave Theorist, a monthly publication which covers financial markets and major cultural trends — in the wake of the prior housing bust:

Real home prices [in a U.S. index] stayed within a range of 66-123 [from 1890] until 1997. Then they went straight up for 9 years. Inflation doesn’t account for the rise in real prices, because inflation has been factored out. And loans were available for decades without causing real prices to soar. Why did it finally happen? … Real estate began to take on the aura of being an investment.

As we know, after going up for 9 straight years, the housing market then crashed — just like the stock market is apt to do at times.

That same psychology of “a house as an investment” sent prices soaring again in the most recent housing bubble.

However, trouble has already started to brew. Here’s a Sept. 2 CNBC headline:

1 in 5 home sellers are now dropping their asking price as the housing market cools

This brings us to Elliott Wave International’s latest analysis — which is provided in the just-published special report “Home Prices: How Much Trouble Are YOU In?”

Here’s just one of the several charts you’ll find in the special report, along with the commentary:

Many of the cities that led the real estate market on the way up are now doing so on the way down. Home sellers in former boomtowns have been quickest to lower asking prices. …

Nationally, Redfin reports that the percentage of sellers lowering their prices is the largest since it started tracking the data in 2012. … The tide is turning.

Likewise, builders themselves have been reducing prices. A Sept. 24 Yahoo Finance article noted:

Almost 1 in 4 home builders reported reducing their price this month, up from 19% in August … Home builder confidence fell three points to its lowest level since May 2014.

You’ll find more evidence in the special report that the “tide is turning” for the U.S. housing market, including examinations of housing starts and what’s going on with a firm that’s been a big player in the housing flipping business.

And getting back to asking prices, you may be interested in knowing that on August 15, Bloomberg reported that asking prices in the United Kingdom fell at their fastest pace in two-and-a-half years.

Speaking of which, the coverage in the special report extends beyond the U.S. as Elliott Wave International looks at European, Asian-Pacific and Australian property markets.

Here’s the good news: You can access the special report “Home Prices: How Much Trouble Are YOU In?” for free for a limited time.

Just follow this link: “Home Prices: How Much Trouble Are YOU In?”

This article was syndicated by Elliott Wave International and was originally published under the headline THIS is Why the Real Estate Tide is Turning. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Financial News Real Estate
17 Aug

The Final Act BEFORE a Housing Bubble Bursts

Here’s a time-tested indicator of trend turns in financial markets

By Elliott Wave International

Financial history shows that feverish foreign buying of a financial asset usually marks the end of that asset’s upward trend.

The reason why is that foreign buyers tend to enthusiastically jump on a trend after it’s already run its course — or nearly so.

You can find an example of this going as far back as Tulip Mania in Holland in the 1600s. But let’s stick with history which goes back just a generation or so, namely, the commercial real estate boom of the late 1980s.

Japan’s stock market had been racing higher and Japanese investors were pouring money into U.S. real estate. One of their prize purchases was Rockefeller Center in 1989. Mitsubishi paid $2 billion for this “Hope Diamond of world real estate.” By 1995, Rockefeller Center went bankrupt and Mitsubishi lost its entire investment.

Another case in point is the U.S. stock market in 2007.

The August 2007 Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus worldwide financial markets, showed this chart and said:

Foreigners jumped into the U.S. market like never before in May [2007]. The new record was a full third higher than the old one, which was set in February 2000, one month after the Dow Industrials’ 2000 peak. … The first five months of [2007] produced what was easily the biggest gusher of net foreign buying in history. The record suggests that falling prices lie directly ahead for the U.S. market.

Two months after that analysis was provided, the Dow Industrials topped, and then entered a bear market which lasted nearly a year and a half.

What does all of this have to do with today?

Get this: Chinese investors spent a record $6.1 billion on U.S. homes from April 2021 through March 2022, according to the National Association of Realtors.

Canada was second on the list — buyers there spent $5.5 billion on U.S. residential real estate. Buyers from India ranked third at $3.6 billion.

So this July Washington Post headline is not surprising:

The housing market, at last, appears to be cooling off

Here’s a quote from the Elliott Wave Theorist, a monthly publication which has provided analysis of financial markets and major cultural trends since 1979:

A burst in the U.S. housing bubble could have enormous repercussions in the world economy. The aggregate value of housing is far greater than that of the stock market, so fluctuations in house prices may have a much greater effect on consumer spending.

This was written in January 2006 — about six months before the peak in the prior housing bubble, which helped to usher in the Great Recession.

Another housing market indicator is none other than the stock market. In other words, the housing market tends to be correlated with the trend of the stock market.

Elliott wave analysis can help you anticipate what’s next for the stock market. If you need a refresher on the Elliott wave model, you are encouraged to read Frost & Prechter’s book, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from this Wall Street classic:

In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4. The two interruptions are apparently a requisite for overall directional movement to occur.

You can delve deeper into the Wave Principle by reading the entire online version of the book for free!

The only requirement for free and unlimited access is a Club EWI membership, which is also free.

Club EWI is the world’s largest Elliott wave educational community and members enjoy complimentary access to a wealth of Elliott wave resources on financial markets, investing and trading without any obligations.

Simply follow the link to get started right away: Elliott Wave Principle: Key to Market Behavior — get instant access — free.

This article was syndicated by Elliott Wave International and was originally published under the headline The Final Act BEFORE a Housing Bubble Bursts. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Financial News Real Estate Stock Market News
16 Aug
Real Estate Investing

2 REITs to Buy and Hold

By Ino.com

– Despite the macroeconomic headwinds, real estate investment trusts (REITs) are expected to remain resilient due to rising demand, appreciation of property prices amid the high inflation, and increasing rental income. Moreover, REITs are considered ideal investments in uncertain market conditions since they pay out at least 90% of their income as dividends.

So, quality REITs LTC Properties (LTC) and Getty Realty (GTY) could be ideal investments to survive the short-term market fluctuations and create solid long-term returns.

High inflation, rising interest rates, and economic uncertainties have discouraged home buyers this year. However, increased regional population distribution, rising demand for rental properties, and appreciating property prices bode well for real estate investment trusts (REITs).

In addition, the inclination of businesses toward local sourcing after the pandemic is expected to drive further growth in this sector. The real estate sector in the United States is projected to grow at a 3.7% CAGR to $412.60 billion by 2025.

Moreover, REITs are considered safe investments in uncertain times since they must pay at least 90% of their taxable income as dividends.

Fundamentally sound REITs LTC Properties, Inc. (LTC) and Getty Realty Corporation (GTY) could offer diversification, inflation hedge, and superior dividend returns to long-term investors.

Free Mini Options Boot Camp – Click Here >>

LTC Properties, Inc. (LTC)

LTC invests in senior housing and healthcare properties. It invests in four broad segments: Skilled Nursing centers (SNF); Assisted Living Facilities (ALF); Independent Living Facilities (ILF); and Memory Care facilities (MC). Its operations include sale-leasebacks, mortgage financing, joint ventures, construction financing, and structured financing solutions.

On July 1, LTC declared a monthly cash dividend of $0.19 per common share for July, August, and September 2022. Its dividend payouts have grown at a 6.3% CAGR over the last three years and a 0.2% CAGR over the past five years. Its dividend payout ratio is 98.28%, while its current dividend translates to a 5.24% yield.

On May 12, LTC confirmed a $36 million investment for refinancing debt on four assisted living communities and a land parcel.

According to LTC’s Chairman and CEO, Wendy Simpson, “Year-to-date, LTC has used its flexibility and creativity to invest more than $110 million, with a current focus on newer construction. We will continue to identify new and strategic opportunities across a variety of financing vehicles to put our capital to work in a way that benefits all LTC’s stakeholders.”

LTC’s total revenues increased 12.8% year-over-year to $43.02 million in the fiscal 2022 second quarter ended June 30, 2022. Its operating income came in at $54.11 million, up 201.4% year-over-year. FFO attributable to common shareholders, excluding non-recurring items, amounted to $24.49 million, up 9.8% year-over-year. Its FFO per common share improved 12.3% year-over-year to $0.64.

The consensus FFO estimate of $2.53 for the fiscal year 2022 represents a 7.3% improvement year-over-year. The consensus revenue estimate of $161.80 million for the current year represents a 4.2% increase from the previous year. The company has surpassed the consensus revenue and FFO estimates in each of the trailing four quarters.

LTC has gained 27.9% over the past six months and 23.2% over the past year to close the last trading session at $43.48.

LTC’s POWR Ratings reflect this stable outlook. The REIT has an overall rating of B, which translates to a Buy in the POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

LTC is also rated B in Growth, Momentum, and Sentiment. Within the REITs – Healthcare industry, it is ranked #1 of 16 stocks. Click here to learn more about POWR Ratings.

Getty Realty Corporation (GTY)

GTY invests in convenience stores, automotive service centers, and other single-tenant real estates, such as drive-through quick service restaurants. Its operations include acquisition, financing, and development, and it has a variety of national and regional brands as its tenants.

On July 27, GTY announced that its board of directors declared a dividend of $0.41 per share common payable on October 6 to holders of record on September 22. Its dividend payouts have grown at a 5.8% CAGR over the last three years and an 8.3% CAGR over the past five years. The stock’s four-year average dividend yield is 4.96%, while its current dividend translates to a 5.51% yield.

GTY’s total revenues increased 6.5% year-over-year to $41.18 million in the fiscal 2022 second quarter ended June 30, 2022. Its operating income came in at $37.34 million during the same period, up 98.2% year-over-year. Adjusted FFO amounted to $25.38 million, up 8.3% year-over-year. Its adjusted FFO per common share improved 1.9% year-over-year to $0.53.

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The consensus FFO estimate of $2.10 for the fiscal year 2022 represents an 11.6% improvement year-over-year. The consensus revenue estimate of $163.45 million for the current year represents a 6.2% increase from the previous year. It’s no surprise that the company has topped the consensus FFO estimates in three of the trailing four quarters.

GTY has gained 5.4% over the past six months to close the last trading session at $29.74.

GTY’s POWR Ratings reflect this stable outlook. The company has an overall rating of B, which translates to a Buy in the POWR Ratings system. It also has a B grade for Momentum, Stability, and Sentiment. In the 33-stock REITs – Retail industry, it is ranked #3.

Beyond what’s stated above, there are GTY grades for Growth, Value, and Quality. Click here to learn more about POWR Ratings.

About the Author

Mangeet Kaur Bouns’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. She earned a bachelor’s degree in finance from BI Norwegian Business School. Mangeet is a regular contributor for StockNews.com.

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Source: 2 REITs to Buy and Hold

Opinions Real Estate Stock Market News
28 Jul

What a Major Indicator of “Housing Busts” is Showing Now

“It was the first such decline since November 2015”

By Elliott Wave International

The housing market tends to go the way of the stock market, and nearly everyone knows that the stock market has been sliding.

There’s another housing market indicator that the July Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, mentioned:

[Home] sales declines invariably lead the way into housing busts. This one … should arrive faster and more forcefully than the experts expect.

Homes sales have already begun to decline:

  • U.S. existing home sales fall for third straight month; house prices at record high (Reuters, May 19)
  • Sales of existing homes fell in May, and more declines are expected (CNBC, June 21)

Sales of luxury homes in some areas have dropped significantly. As examples, in Nassau County, NY, Oakland, CA, Dallas, TX, Austin, TX and West Palm Beach, FL, annual drops in the rate of upper-end home sales for the three months ended April 30 stretched from 32.8% to 45.3%.

As June numbers roll in, more signs of a real estate slowdown are evident. For instance, the number of active U.S. home listings jumped 18.7% in June from a year earlier, the largest annual increase since the data started in 2017.

The housing bubble is by no means confined to the U.S. Bloomberg reports that New Zealand, Australia and Canada look even more “frothy” than the U.S.

And, then there’s China. Here’s a chart and commentary from the June Global Market Perspective:

Month-to-month prices of China’s new-home sales turned negative in September, and they’ve continued to fall since. The year-over-year average of new home prices also fell in April. It was the first such decline since November 2015.

In Elliott Wave International’s view, housing markets around the globe are on shaky ground and those who bought at the peak of this latest housing boom better be prepared.

It was mentioned at the top of this article that housing markets within a nation tend to trend with that nation’s stock market.

Elliott wave analysis can help you get a perspective on stock markets anywhere in the world.

If you’re unfamiliar with the Elliott wave model, you are encouraged to read Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior.

Here’s a quote from that book:

In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form but not necessarily in time or amplitude. Elliott isolated five such patterns, or “waves,” that recur in market price data. He named, defined and illustrated these patterns and their variations. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns of the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.

If you’d like to read the entire book, do know that you can access the online version for free once you join Club EWI, the world’s largest Elliott wave educational community.

Club EWI is free to join, and members enjoy complimentary access to videos and other resources on how the Wave Principle can help them navigate financial markets.

Just follow this link to get started: Elliott Wave Principle: Key to Market Behavior — get instant and free access now.

This article was syndicated by Elliott Wave International and was originally published under the headline What a Major Indicator of “Housing Busts” is Showing Now. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Economics & Fundamentals Financial News Real Estate
06 Jan

Real estate in the metaverse is booming. Is it really such a crazy idea?

By Theo Tzanidis, University of the West of Scotland 

The idea of spending thousands or even millions of dollars to buy fictitious “land” in a virtual world sounds, to be frank, absurd.

But in recent months, we’ve seen significant investments in virtual land within the metaverse. PwC is among the latest to dive in, having purchased real estate in The Sandbox, a virtual gaming world, for an undisclosed amount.

If other reported sales are anything to go by, it would have been a handsome sum. One person recently bought a plot of land in the Snoopverse – a virtual world rapper Snoop Dogg is developing within The Sandbox – for US$450,000 (around £332,500).

Meanwhile, the Metaverse Group, a real estate company focused on the metaverse economy, reportedly bought a piece of land in Decentraland, another virtual platform, for US$2.43 million.

Let’s refresh on what the “metaverse” is. You probably heard the term a lot when Facebook re-branded to Meta in October 2021. Other companies, such as Nike and Microsoft, have also announced they will launch into this space.

The metaverse describes a vision of a connected 3D virtual world, where real and digital worlds are integrated using technologies such as virtual reality (VR) and augmented reality (AR). This immersive environment will be accessible through the likes of VR headsets, AR glasses and smartphone apps.

Users will meet and communicate as digital avatars, explore new areas and create content. The idea is the metaverse will develop to become a collaborative virtual space where we can socialise, play, work and learn.

There are several metaverses already – for example in virtual gaming platforms like The Sandbox and virtual worlds like Decentraland. In the same way a website is part of the broader 2D world wide web, individual metaverses will form a larger, connected metaverse.

Importantly, as in the real world, it is and increasingly will be possible to buy things in the metaverse – including real estate.

Virtual land as an NFT

Transactions in the virtual world are generally monetised using cryptocurrency. Other than cryptocurrenies, non-fungible tokens (NFTs) are the primary method for monetising and exchanging value within the metaverse.

An NFT is a unique digital asset. Although NFTs are primarily items of digital art (such as videos, images, music or 3D objects), a variety of assets may constitute an NFT – including virtual real estate. On platforms like OpenSea, where people go to buy and trade NFTs, there are now plots of land, or even virtual houses.

To ensure digital real estate has value, supply is limited – a concept in economics called “scarcity value”. For example, Decentraland is made up of 90,000 pieces or “parcels” of land, each around 50 feet by 50 feet.

We’re already seeing examples where the value of virtual real estate is going up. In June 2021, a digital real estate investment fund called Republic Realm reportedly spent the equivalent of more than US$900,000 to buy an NFT representing a plot on Decentraland. According to DappRadar, a website which tracks NFT sales data, it was the most expensive purchase of NFT land in Decentraland history.

But then as we know, in November 2021, the Metaverse Group bought their plot in Decentraland for US$2.4 million. The size of this purchase was actually smaller than the former – 116 land parcels compared to 259 bought by Republic Realm.

It’s not just Decentraland seeing appreciations. In February 2021, Axie Infinity (another virtual gaming world) reportedly sold nine of their land parcels for the equivalent of US$1.5 million – a record, the company said – before one land parcel sold for US$2.3 million in November 2021.

While it appears that values are climbing, it’s important to acknowledge that real estate investment in the metaverse remains extremely speculative. No one can be certain if this boom is the next great thing or the next big bubble.

The future of metaverse real estate

Financial incentives aside, you may be wondering what companies and individuals will actually do with their virtual land.

As an example, the Metaverse Group’s purchase is in Decentraland’s fashion precinct. According to the buyer the space will be used to host digital fashion events and sell virtual clothing for avatars – another potential area for growth in the metaverse.

While investors and companies are dominating this space at the moment, not all metaverse real estate will set you back millions. But what could owning virtual land offer you? If you buy a physical property in the real world, the result is tangible – somewhere to live, to take pride in, to welcome family and friends.

While virtual property doesn’t provide physical shelter, there are some parallels. In shopping for virtual real estate, you could buy a piece of land to build on. Or you could choose a house already built that you like. You could make it your own with various (digital) objects. You could invite visitors, and visit others’ virtual homes too.

This vision is a while away. But if it seems completely absurd, we should remember that once upon a time, people had doubts about the potential significance of the internet, and then social media. Technologists predict the metaverse will mature into a fully functioning economy in the coming years, providing a synchronous digital experience as interwoven into our lives as email and social networking are now.

This is a strange fantasy come true for someone who was a gamer in a former life. Some years ago, a younger version of my conscience was telling me to stop wasting time playing video games; to go back to study and focus on my “real” life. Deep inside I always had this wish to see gaming overlapping with real life, Real Player One style. I feel this vision is inching ever closer.The Conversation

About the Author:

Theo Tzanidis, Senior Lecturer in Digital Marketing, University of the West of Scotland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Financial News Real Estate Stock Market News
23 Nov

Real Estate ETF IYR – Trader Tip Video Analysis

By TheTechnicalTraders

IYR ETF trader tip: Using the daily chart, Technical Traders goes over IYR ETF, which had a beautiful pullback over the last month and a half and has rallied back up. Chris details how this can be seen as two different types of patterns. You can argue this is a cup and handle or a pause and consolidation before continuing to go much higher.

By using the Fibonacci extension, we can better understand where the momentum in this rally should take us going forward. Based on the current price, that would bring us somewhere up around that seven and a half percent upside move in the real estate market.

TO LEARN MORE ABOUT IYR ETF – WATCH THE VIDEO

Subscribers: Please let us know what you would like to learn and we will add it to the roster of our weekly Technical Trader Tips!

Non-subscribers: Please enjoy these micro-lessons as a way to further your education and understanding of how a technical trader…well…trades!

TO EXPLORE THE DIFFERENT TRADING STRATEGIES CHRIS OFFERS, PLEASE VISIT US AT THE TECHNICAL TRADERS. YOU’VE GOT MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!

Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.

TheTechnicalTraders.com

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