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Why US Real Estate Has Prospered During COVID – International Banker

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By Cary Springfield, International Banker

This article was originally published in the Winter/February 2021 edition of International Banker

It is safe to say that the majority of financial markets experienced unparalleled levels of turbulence in 2020. A global pandemic caused a sharp worldwide economic contraction, leaving a spate of global markets decimated—in many cases, both demand and supply were severely affected. The devastation has been nowhere as apparent as it has been in the United States, where the virus continues to wreak havoc, with the daily death rate remaining well above 3,000. But although most US markets endured bearish periods during 2020, the real-estate market was one of the few to experience continuous sustained growth, as house prices rose consistently throughout the year.

Of course, house-price appreciation in the US is nothing new. Since January 2012, prices have risen almost continuously by around 70 percent on average across the nation. But with the coronavirus severely impacting household incomes, it would only be reasonable to assume that the resultant lack of income security would have a dampening effect on demand for homes. Indeed, according to figures published in November by the US Congressional Research Service, nearly half of all American households had experienced “at least some loss of employment income since March 2020, when the economic effects of the pandemic first became apparent”.

And yet robust demand for homes coupled with decidedly constrained supply have allowed the housing market’s bullishness to continue throughout 2020—a bullishness that is expected to remain throughout the coming year at the very least. The outbreak of the pandemic at the end of 2020’s first quarter initially saw home sales plummet, as uncertainty gripped the country and led to a nosedive in market interest for both buying and selling homes. Government directives such as shelter-in-place and social-distancing requirements meant that buyers were discouraged from seeking new accommodations, while sellers were less keen on listing their properties and interacting with prospective buyers.

In April and May, therefore, home sales plunged to their lowest levels since the aftermath of the 2007-09 global financial crisis over a decade before. But activity subsequently rebounded, with sales surging over the summer and throughout the latter half of the year. Sales of previously owned houses reached a 15-year high in October, before marginally declining a month later.

Further highlighting the buoyant US residential real-estate market last year, the Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for November showed that mortgage applications for new home purchases increased by a whopping 34.7 percent from a year earlier. “November new home sales activity, both mortgage applications and home sales, ran at a pace considerably ahead of 2019, showing the ongoing strong growth in housing demand and new residential construction,” noted Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Accompanying this flurry of housing-market activity has been strongly appreciating house prices, which have risen consistently throughout the year. The S&P CoreLogic Case-Shiller 20-City Home Price Index, which covers changes in the value of single-family housing stock in Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, Washington DC, Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland (Oregon), Seattle and Tampa, posted a 9.1-percent year-over-year gain in November, up from 8.0 percent in the previous month. Even in April and May, when housing-market activity was relatively subdued, house prices continued their upward march.

So, why has this been the case? It would seem that a combination of higher housing demand and limited supply has contributed to the appreciation. From a demand perspective, buyer interest has surged since the summer on the back of a significantly expansive monetary policy adopted by the Federal Reserve System (the Fed). In early March, the Fed cut rates by 50 basis points, before lowering them again 10 days later to its lower bound of 0-0.25 percent. The US central bank has also bought substantial volumes of mortgage bonds since March 2020—it purchased $300 billion of the debt securities backed by US home loans during each of March and April, followed by a further $100 billion per month since then, which has helped to send mortgage rates repeatedly to new record lows during the year. As such, prospective homebuyers were incentivised in 2020 to take advantage of the historically low rates and purchase a home, with the International Monetary Fund (IMF) noting that the housing demand was largely prompted by a “fear of missing out” on such attractive rates.

On the supply side, meanwhile, there has been a much greater reluctance from homeowners to sell their homes during the pandemic. A handful of states have stay-at-home orders still in place, while mask mandates and some degree of restrictions on business are currently in effect throughout most states. As such, the pandemic has only emphasised the need for residents to remain in their homes while authorities strive to bring the spread of the virus under control. The coronavirus’s highly infectious nature has further underlined the tendency for people to remain in their current dwellings and follow the new social-distancing norms.

This dearth of supply has underpinned much of the positive price action the US real-estate market has witnessed over the last year or so. Indeed, even when home sales fell in April and May, the low existing inventory of houses meant that prices remained resilient in the face of declining demand. And when demand surged during the following months, the supply of houses remained muted, with concerns surrounding the transmission of COVID-19 and economic anxiety keeping homeowners in their existing homes. “New listings, despite improving from their April lows, were only slightly higher than one year ago through August,” the Federal Reserve Bank of St. Louis noted in October. “As a result, inventory continued to decline: In August 2020, there were less than two-thirds the number of homes on the market as there were in August 2019.”

In a clear attempt to prevent another full-blown housing-market crash in the same vein as the global financial crisis, moreover, US authorities have been significantly more proactive in ensuring the pandemic does not put homeowners under any undue pressure. Specifically, it has provided relief in the form of a foreclosure and eviction moratorium, which was enacted in March and prevents direct mortgage servicers from any new foreclosure action as well as suspending any in progress for single-family properties insured by the Federal Housing Finance Agency (FHFA). “Extending Fannie Mae and Freddie Mac’s foreclosure and eviction moratoriums through January 2021 keeps borrowers safe during the pandemic,” said FHFA Director Mark Calabria. “This extension gives peace of mind to the more than 28 million homeowners with an Enterprise-backed mortgage.”

Will house prices continue to rise in 2021? Given how far the US remains from achieving any semblance of normalcy due to the coronavirus, it would seem that restrictive measures will force the Fed to keep its accommodative monetary policy in place for some time to come. Indeed, it stated in late January that it planned to keep its benchmark rate near zero, where it is likely to remain until at least next year, if not longer. The Fed’s review of its monetary-policy framework, which was completed last year, concluded that a new policy framework that “seeks to achieve inflation that averages 2 percent over time” will also ensure that rates remain low until inflation at least moves above its target. Such a scenario seems highly unlikely to transpire in 2021.

“Circumstances are far from being back to the pre-pandemic normal. However, the latest stimulus package and with the vaccine distribution underway, and very strong demand for homeownership still prevalent, robust growth is forthcoming for 2021”, Lawrence Yun, chief economist for the National Association of Realtors (NAR), stated in December. Yun expects home prices to rise by 3 percent in 2021, further underlining that the strong bullish sentiment the US real-estate market experienced during a COVID-wracked 2020 is not going away anytime soon.

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Hot real estate market sparks warnings to potential buyers as complaints to regulator double

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As home sales in the province continue on a dizzying trajectory, the province’s real estate watchdog and regulator are warning buyers to be wary of what they may be getting into.

The Real Estate Council of B.C. (RECBC) and the Office of the Superintendent of Real Estate said that in the first three months of 2021, they have seen an increase in inquiries and complaints.

Calls to the regulator were up 42 per cent over the previous year, while complaints, such as how offers were made and accepted, were double the number received in the same period in 2020.

“Buying a home is one of life’s biggest financial decisions. There are potential risks at the best of times, but with the added pressure and stress of the current market conditions, those risks are amplified,” Micheal Noseworthy, superintendent of real estate, said in a statement.

 

 

The Real Estate Board of Greater Vancouver says sales in the region have continued at a record-setting pace.

Residential home sales covered by the board totalled 5,708 in March 2021, up 126.1 per cent from March 2020, when the COVID-19 pandemic hit, and up 53.2 per cent from February of this year.

Rural and suburban areas have experienced the biggest spikes.

For the past two weeks, Jay Park has been in the middle of the buying frenzy.

He and his partner are trying to upgrade from their one-bedroom apartment to a two-bedroom condo or townhouse in Vancouver.

“I wish we had done this a month or two ago,” he said.

 

A condo tower under construction is pictured in downtown Vancouver in February 2020. (THE CANADIAN PRESS/Darryl Dyck)

 

Park put an offer on a $1-million condo, $4,000 above asking price.

“To entice the [seller], we put in a subject-free offer, but it wasn’t successful,” he said. “They accepted $110,000 over asking price that was also subject-free.”

The hot market has led to bidding wars. Some would-be buyers have even lined up outside for days to try to get a jump on a property.

Erin Seeley, the CEO of the council, is warning buyers to do their research and be aware of risks before making an offer.

“It’s really important that buyers have engaged with their lender before they’re making offers so they know how to stay within a reasonable budget,” she said.

Seeley said some of the complaints the council has heard from buyers is that they weren’t aware the seller has a right to take an early offer.

“And the seller was really in the driver’s seat about setting the pricing,” she said.

 

Demand continues to outstrip supply for housing in cities like Vancouver. (Rafferty Baker/CBC)

 

Aaron Jasper, a Vancouver realtor, advises clients to avoid cash offers and to include finance clauses even if it may mean they lose a deal.

“There’s a lot of frustration among buyers, feeling pressure to take some risk,” he said.

“You’re better to be delayed perhaps a year getting into the market as opposed to being completely financially ruined.”

Jasper also says realtors are limited in the advice they can give to clients on legal matters, home inspections, potential deficiencies with homes, and financing.

‘Caught up in the craziness’

Other tips from the council include seeking professional advice before making a subject-free offer or proceeding without a home inspection, and speaking to a professional to determine how market conditions may be affecting prices.

Meantime, people like Jay Park say they are still keen to buy. Park has more viewings scheduled and is optimistic.

“It’s a very exciting time for us, but I also don’t want to get caught up in the craziness and make a purchase that’s above our means.”

Source: – CBC.ca

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Black Press Media introduces one of Western Canada’s best real estate platforms helping home buyers Find. Love. Live. that new home

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Need an agent who knows the community?

Or, is it time to look for a new place to live, but you don’t know what’s on the market?

Whatever the real estate need is for residents in the communities of British Columbia, Yukon & Alberta, there’s a new way to do that one-stop shopping – by visiting Today’s Home.

The slogan for the site is “Find. Love. Live.”

“We want people to find their dream home, love it, and live in it,” said group publisher Lisa Farquharson.

Building on the success of Black Press Media’s niche digital platforms – Today’s Home brings the same wealth of knowledge and local expertise to the search for a home, be it buying, selling, or even just daydreaming about what changes you can make in the future.

Search hundreds of listings that local real estate agents have available.

The listings cover properties around the region, from a one-bedroom, one-bath condo for $339,900 to million-dollar acreages throughout the province of BC, Yukon, Central Alberta and beyond.

Click on a listing, and see not only the realtor handling the property sale, but links to his or her other listings and social media feeds. With the click of a mouse, take a virtual tour of the property, find the property’s walking score, and learn about nearby amenities.

There are links available to schedule a showing, or send the agent a comment or question.

Want to share a listing? When you click on the share button, you’ll actually send an attractive digital flyer of the prospective property, not just a link.

There’s even a button to help determine how much you have to spend, courtesy of the convenient mortgage calculator.

Plus, scroll down the page on Today’s Home and find a list of expert local real estate professionals who can answer questions or help with that home sale, Farquharson explained.

Today’s Home offers the advantage of the massive reach that Black Press Media has built throughout Western Canada with its network of community newspapers and online products. That allows the public to tailor real estate searches based on location, price, and other key factors while allowing real estate professionals to gain unprecedented audience reach with their listings.

Today’s Home will dovetail into the media company’s existing print real estate publications.

“Black Press Media has real estate solutions in print and now we can add in the digital component,” Farquharson said.

Watch for expansion of the Today’s Home platform in the near future, she added. That will come as Black Press Media adds a new component – the development community. Developers will be able to reach a huge audience when their projects are ready for presentation.

For information on Today’s Home, contact group publisher Lisa Farquharson at 604-994-1020 or via email.

Happy house hunting!

Source: – Aldergrove Star

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PGIM Real Estate, Revera Affiliate Target UK Market in Newly Formed JV

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Real Estate Sales In September

PGIM Real Estate has been active in recent months providing capital to facilitate blockbuster senior housing acquisitions. Now the firm is looking to capitalize on demand for senior housing in the United Kingdom.

The Madison, New Jersey-based real estate investor and lender announced this week it is entering into a joint venture with Signature Senior Lifestyle, an affiliate of Revera, to develop and operate senior housing communities around greater London

Mississauga, Ontario-based Revera serves 20,000 older adults in long-term care homes and retirement residences in Canada. It is also the majority shareholder of Sunrise Senior Living, one of the largest senior housing providers in the U.S. The company operates a portfolio of 12 communities in the U.K. under the Signature Senior Lifestyle brand, with one community in development that is slated to open in autumn 2021.

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The JV has one development underway — a senior housing community, or “prime care” home, in southwest London. PGIM worked with Elevation Partners, a London-based investor and asset manager in U.K. health care real estate, in sourcing, structuring and executing the venture. Additionally, PGIM will retain the firm to leverage its expertise.

PGIM and Revera did not respond to requests for comment from Senior Housing News regarding details about its development pipeline.

London is emerging as a future hotbed of senior housing development, spurred by favorable demographic growth trends and a lack of available supply, and the PGIM-Revera venture will find competition.

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Maplewood Senior Living CEO Gregory Smith told SHN last month that demand for U.K. senior housing is comparable to major U.S. markets such as New York and San Francisco, where supply has historically been constrained.

Maplewood and its investment partner, Omega Healthcare Investors (NYSE: OHI) are looking to expand its luxury Inspir brand to the U.K., and identified five suburban markets around London with high barriers to entry that are favorable for the brand’s growth.

Revera CEO Tom Wellner sees similar untapped upside potential for senior housing in the U.K.

Source: – Senior Housing News

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