Hope everyone had a great 4^th of July holiday!

According to CBRE, one of NYC's budding commercial property sectors - the life sciences market - hasn't lost a step during the pandemic era. Even in the face of a broader economic downturn, NYC's lab tenant demand has ramped up significantly since year-end 2019, which has coincided with improvements in nearly all of the lab sector's fundamentals.

Among the milestones reached in 2020 were the first leases signed at a pair of NYC's newest life sciences developments. Protara Therapeutics leased 10,000 sq. ft. at Cure, Deerfield Management's redevelopment of 345 Park Avenue South into a premier life sciences hub and ecosystem.

Across the East River in Long Island City, ReOpen NY completed an 18,000 sq. ft. lease at Alexandria Real Estate Equities' redevelopment of the Bindery Building.

This momentum has carried into 2021, as NYC's lab leasing activity has already reached a record high for a single year, at 257,000 sq. ft. through May 2021. This year's leasing activity has been bolstered by the Icahn School of Medicine at Mount Sinai's 165,000 sq. ft. research-focused lease at 787 Eleventh Avenue and C16 Biosciences' 19,000 sq. ft. lease at the Hudson Research Center, where the Bill Gates-backed startup will relocate from its incubator space at BioLabs New York.

The flow of venture capital (VC) funds into the NYC life sciences market has been one of the most telling indicators in recent years of the city's expanding profile as a major hub for the sector. Following a record-setting 2017, which saw NYC's life sciences funding balloon to $1.38 billion, VC funding has seen no less than $697 million raised annually, with funding reaching its second-highest total in 2020 at $942 million.

This blistering performance has only intensified further in 2021, with NYC's life sciences VC funding off to its strongest start ever. In Q1 2021, funding amassed its highest quarterly total on record, at $393 million. And with an additional $144 million raised through roughly the first two months of Q2, 2021's year-to-date total of $537 million is now 60% ahead of the prior high point set last year through the same time frame.

Just as important as the sheer dollar volume of VC funding over the past few years is the mix of firms that are raising the capital, with a clear link between those firms receiving VC funding and those who ultimately sign lab leases in NYC. Indeed, Hibercell, a startup born out of research at the Icahn School of Medicine at Mount Sinai - which has received multiple rounds of funding including a new round in 2021 - signed a lease in early 2019 at the Hudson Research Center. Volastra Therapeutics, which inked a lease in 2020 at the Mink Building, has also received multiple funding rounds. More recently, Immunai leased space at the Alexandria Center for Life Science in Q1 2021, after receiving funding in both 2020 and 2021.

While details of the proposal have yet to be revealed, the pared-down compromise, which CNN reports would cost $1.2 trillion over eight years, comes after days of intensive negotiations with a group of senators, including moderate Democratic Sens. Jeanne Shaheen, Kyrsten Sinema and Jon Tester and Republicans Rob Portman, Susan Collins and Mitt Romney.

The bill is part of the president's larger $4 trillion economic agenda and would entail $560B in new spending, including more than $100B on roads and bridges, $49B on public transit, $65B on broadband infrastructure and $73B on power infrastructure, Fox Business reports.

Sen. Mark Warner, a Virginia Democrat, told The New York Times the bill also provides $40B to the Internal Revenue Service for more enforcement, a move that could lead to $100B in tax revenue gains. Another $20M in federal funds would be used for a program that is projected to lead to $180B in private financing.

The compromise represents a slimming down of Biden's initial $2.25 trillion infrastructure proposal.

"No one got everything they wanted in the package," Sinema said Thursday. "We all gave some to get some."

Supporters heralded the agreement as historic, but the bill will still face scrutiny on Capitol Hill. The compromise stripped out many of Biden's spending proposals on childcare, education and efforts to combat climate change, the Times reported. It was unclear as of press time if Biden's plan to upgrade 4 million buildings across the country to help reduce carbon emissions remained in the bill. The compromise includes $47B set aside for "resilience," according to the Times, which would start to tackle the issue of climate change.

But many of those other proposals may yet be debated as Congress still plans a separate reconciliation bill that could pass without any Republican votes.

“They’ve given me their word. Where I come from, that’s good enough for me,” Biden said, referring to the five Republican senators who took part in the negotiations.

The exact financing mechanism for the plan was not revealed, but the NYT reports the bill would avoid raising taxes on the middle class — a key Biden pledge — and wouldn't reverse any of the business tax cuts that were enacted under President Donald Trump in 2017.

Wall Street appeared to cheer the deal, with the Dow Jones Industrial Average jumping more than 300 points by mid-afternoon Thursday.

“President Biden’s agreement with a bipartisan group of senators on an infrastructure spending package will not only get hundreds of thousands of Americans back to work but will go down as a historic moment for our nation,” said Carlo Scissura, president and CEO of construction trade group the New York Building Congress. “Building new infrastructure is the tried-and-true method to getting out of an economic crisis, and we must use the lessons of the last year and a half to develop new public works that serve all communities. The road ahead is no doubt long, but today’s moment of unity is a giant step forward to heal and grow our nation. Now is the time to capitalize on this momentum, come together and rebuild our nation.”

Source: Bisnow

The SBA has been making grants from the fund for about three weeks but told applicants in an email on Wednesday that it can't fund additional applicants, The New York Times reports.

Most of the applicants for grants from the fund will receive nothing. The agency was able to pay grants of as much as $10M to 105,000 restaurant operators, but there are another 265,000 applicants who received nothing.

“We need Congress to act on the RRF Replenishment Act to provide the SBA with the funds they need to complete this important mission," National Restaurant Association Executive Vice President of Public Affairs Sean Kennedy said in a statement. “These operators have made all of the cuts and changes they can to stay open for the last year and are once again worried they won’t make it another month."

A bill has been introduced in the Senate to add another $60B to the fund, but it has gotten no traction, Restaurant Business reports, and Congress will be in recess until later this month. The program was officially supposed to end July 14 in any case.

Under the program, restaurants were eligible for tax-free federal grants equal to the amount of their pandemic-related revenue loss, as calculated by subtracting their 2020 gross receipts from 2019 gross receipts. For restaurants not in business for all of 2019, the SBA had a separate formula for calculating the grants.

The fund wasn't designed for large chains, applying to entities that own or operate 20 or fewer establishments. Those businesses can be under the same or various names but had to be in operation as of March 13, 2020.

The industry has been recovering as pandemic-related restrictions disappear nationwide and demand for eating out has risen, but restaurants still haven't recovered to pre-2020 levels of business.

Eating and drinking places added a net 186,000 jobs in May, according to the Bureau of Labor Statistics, the fifth month in a row for employment gains, though some restaurants are reporting that it is hard to find workers. The industry is still about 1.5 million jobs short of its pre-pandemic numbers.

Source: Bisnow

The set of opportunities awaiting multifamily owners and investors in the near and longer term is considerable, and the secret to unlocking those opportunities may vary depending on who you ask. At the National Multifamily Housing Council’s NMHC Annual Meeting, held June 8-10 at the Manchester Grand Hyatt in San Diego, Connect Commercial Real Estate asked four industry experts, each of whom provided a different answer.

In the view of Jeff Lee, president of NewPoint Real Estate Capital, opportunities for the next five years revolve around “data and analytics” and using these to create “a different experience for the customer.”

Powering the next 12 months, said NMHC COO Kenny Emson, will be the momentum that gathered steam during the pandemic. “The pent-up demand is huge,” he told Connect.

Advised Hessam Nadji, CEO of Marcus & Millichap, “The value-add component of our business still makes a lot of sense. It has continued to make sense whenever we have seen a market recovery or a new expansion cycle.”

SVP of acquisitions at Passco, Gary Goodman thinks the sheer demographic size of the combination of Millennials and the up-and-coming Generation Z will propel the market. At the same time, Goodman noted, “The cost of development right now is through the roof.” Accordingly, he doesn’t think we’ll be seeing a lot of new supply added, certainly not in secondary and tertiary markets.

Property tax bills going out this month are revealing the carnage wrought by the pandemic on New York City’s commercial real estate market.

From the Empire State Building to the Four Seasons, property owners saw the value of their buildings drop. The lower assessments stand to provide tax relief, but also serve as a ominous reminder of the damage done to commercial buildings as Covid-19 emptied out Manhattan.

All told, New York expects property tax revenue to drop by $1.6 billion, or about 5%, in the coming fiscal year. That’s the most significant decline since the early 1990s, and a major blow to the city’s largest source of revenue.

“The Finance Department thinks the value, particularly of Manhattan commercial property, was definitely reduced as a result of Covid,” said George Sweeting, deputy director for the New York City Independent Budget Office. “That’s a huge concern going forward if their view is correct.”

Just about every corner of commercial real estate was touched. Office buildings saw their market value for tax purposes drop by 16% citywide, according to data released last month by the Department of Finance. Hotels and retail property sank more than 20%.

A review of the city’s final tax roll shows in a more granular way how the city delivered tax relief -- block by block -- in Manhattan. Even as widespread vaccinations fuel optimism about a recovery, the data underscore the long road ahead for New York as it recovers from the pandemic.

Hotels, in particular, are still struggling. While the industry received some of the biggest cuts to value, there were significant differences among properties.

The St. Regis, the luxury property owned by Qatar’s sovereign wealth fund, for instance, had its taxable value cut by 36%. So, too, did the Four Seasons. The New York Hilton Midtown -- one of the city’s largest hotels -- was initially given no relief, but got a reduction of 13% on the final tax roll.

Office landlords also saw big cuts, even as many continued to collect rent from tenants. Billionaire real estate families, including the Solows and Dursts, saw some of their skyscrapers cut in value by more than $100 million.

Reduced office demand in New York could be a challenge for landlords for years to come if companies embrace remote work. Still, the lower assessments could pad profits at some buildings that remain leased.

Consider the 33-story office tower at 11 West 42nd Street, across from the New York Public Library and Bryant Park, which counts fashion label Michael Kors, banking firm CIT Group Inc., and New York University as tenants.

Revenue at the property, which is owned by Tishman Speyer and Silverstein Properties, climbed to about $61.5 million from $59 million last year, while net operating income dipped slightly as a result of higher expenses, loan documents show. The property was 89% occupied at the end of 2020.

Despite that, the tower’s market value for tax purposes was reduced by 25% to $253 million. If the tax rate on the building stays the same, that could translate into about $3.5 million in savings this coming fiscal year, potentially boosting profit by almost 30%.

Two Vornado Realty Trust properties in Midtown also received steep reductions from the city, despite having leases with major tech tenants that have surged in value during the pandemic. One 12-story office building, which is leased to Amazon.com Inc. for at least another decade, had its taxable value cut by 14%. At Penn 11, which counts Apple Inc. as a tenant, the taxable value dropped by 23%.

The changes puzzled Ruth Colp-Haber, chief executive of commercial real estate brokerage Wharton Property Advisors.

“You would think if they got these decreases in their tax assessments it’s because they were nearly vacant and rents have fallen off dramatically, but that’s certainly not the case here,” she said. “They’re considered good buildings, and Vornado is a top landlord.”

Silverstein, Vornado and Tishman declined to comment.

Even in normal years, valuing all the property in New York is an enormous task. The city uses a mass appraisal methodology, which means it doesn’t necessarily take into account information in loan documents or other sources that could give it a picture of a specific building’s performance.

Instead, the city relies on information that building owners submit about their properties. But a lag in that reporting meant that the data used for the most recent assessments were from 2019 and didn’t reflect the realities of the pandemic.

As a result, the city relied on more current macroeconomic data like the unemployment rate and office vacancies to adjust the assessments.

“Given the unprecedented disruption caused by the pandemic, the NYC Department of Finance had to adjust pre-pandemic data reported by property owners to factor in economic conditions that reflected pandemic impacts across several sectors,” spokesman Curtis Simmons said in a statement. “The goal of the department during this extraordinary period was to reflect real estate market trends as accurately as possible.”

Despite the broad reductions, haggling over the bills is likely to stretch out as property owners challenge their assessments. And, even if there is a quick bounce back in the real estate market, the lower values from this year are likely to weigh on city revenue for some time. That’s because property taxes are typically assessed on the average value over the previous five years, an arrangement aimed at blunting increases in an appreciating market.

Federal aid will help New York avoid drastic cuts to services in the short term, said Ana Champeny, director of city studies at the Citizens Budget Commission. But damage to property tax revenue stands to be a significant challenge for the recovery, since it has fueled so much of the city’s ability to spend on social services and other programs.

“The question for the city is really a long-term one,” she said. “Until we know what happens with remote work and office use and tourism, it’s not going to be entirely clear about how the commercial real estate market is going to recover.”

Source: Bloomberg

Total retail rent collections approached 91% last month, the first time since March 2020 that collections eclipsed the 90% mark. May collections clocked in at 90.85%, up more than a percentage point over April figures, according to new research from Datex Property Solutions.

National tenants performed even better than the national average, at 94.27% (versus 93.45% in April). Rent collections among non-national tenants came in at 87.12%, nearly two percentage points higher than April’s figure and only 1.4% off its 2020 high. And collections for both national and non-national tenants are now less than one percent from their peaks for all of 2020; at this point last year, aggregate collections were down 48% from current numbers.

Mark Sigal, CEO of Datex Property Solutions, tells GlobeSt.com that landlords will likely take “a harder line” in 2021 (as opposed to 2020, when “landlords bent over backwards to not evict laggard rent payers,” he said). That, in turn, will push non-national tenants to pay their rents on time, driving higher collection rates.

“This is also bolstered by the fact that the rent relief agreements negotiated in 2020 are mostly being paid down in terms of deferred rents, freeing up capital,” Sigal said. “At the same time, a stronger market with more deals that have a percentage rent component should grow aggregate rents throughout the year.”

Sigal predicts the heady summer travel market will also bolster several retail categories (and thus retailers’ capacity to pay rent and expand with new leases at higher rents). He cites a rolling 31-day view of TSA checkpoint travel numbers that shows a 470% increase relative to this same time last year.

“What do consumers do when they plan and take vacations? They exercise so they look good in their summer wear or swim wear. They get haircuts, manis and pedis, and buy new outfits. They eat at nice restaurants and re-stock on the essentials and sundries that were not replenished in the year prior,” Sigal said. “Having foregone a year of travel, and relatively flush, the consumer will likely overspend, which bodes well for more categories of retailers.”

Finally, consumer spending is expected to tick up as the country full reopens over the next few weeks. This will translate to stronger sales for retailers, Sigal says, which will in turn drive higher rent collections.

“Meanwhile, as more landlords negotiated percentage rent clauses into their leases as part of the mass of rent relief agreements they granted their retailers in 2020, we expect to see a rise in the number of tenants eclipsing their breakpoints, creating adjunct income from retail portfolio owners,” he says.

Source: Globest.

Across California, many stores, restaurants, strip malls and shopping centers now stand vacant after shutting down during the COVID-19 pandemic. But could those brick-and-mortar buildings be repurposed to help solve the state's housing crisis?

The Huntington Oaks shopping Center in Monrovia is just one of the many strip malls, large and small, struggling to stay alive. But even before the pandemic, consumer spending habits had already shifted.

Woman found dead, her mouth taped and hands bound, in South Los Angeles, LAPD says

"There has been an acceleration of retail to online sales," said state Sen. Anna Caballero, "and what that means is that people are not walking into retail stores like they were before."

The result is vacant commercial and retail property on prime real estate, near major highways and with plenty of parking -- ideal, some lawmakers say, for multi-family housing.

"There's a real need for apartments, condos and townhouses," Caballero said.

According to Caballero, California needs to build as many as 3.5 million housing units by 2025 to meet Gov. Gavin Newsom's campaign goal -- and production is way behind.

LAUSD Superintendent Austin Beutner proposes affordable housing plan for employees

LAUSD Superintendent Austin Beutner announced the district is looking to build affordable housing for teachers and staff.

It's why she's authored Senate Bill 6, known as the Neighborhood Homes Act. If passed, SB6 would allow multi-family housing to be built on zoned commercial properties.

"We're trying to create the opportunity for local governments to make some choices for themselves that provide them a quick way to be able to approve housing and get it built," Caballero said.

SB 6 would require a certain percentage of new units to be affordable housing. That number is still being negotiated.

"The key here is that these are going to be units that are more urban," Caballero said. "It's not like it's converting it to a single-family neighborhood. It's converting it to a more urbanized type of development, and you can do that even in rural agricultural districts."

The idea of converting commercial space to housing isn't new. In 1999, the city of Los Angeles passed the Adaptive Reuse Ordinance.

"That was groundbreaking," said Roberto Vasquez, an architect with the Los Angeles-based firm Omgivning. "That was bold reform."

The ordinance gave developers permit incentives to convert historic, abandoned buildings into residential projects.

"And we saw just a tremendous amount of benefit and increase in housing production once that ordinance was passed," Vasquez said. "Why was it so successful? Because it did those things that SB 6 is trying to do."

Omgivning created a concept plan for the conversion of an L.A. strip mall into housing units.

"Anytime we can cut the process down, time-wise, I believe -- and we believe as a firm -- that everyone wins," Vasquez said. "The city of L.A. will win in this case, a lot more housing units. We have a housing shortage, and the developers wins, the bank wins."

If SB 6 continues to receive committee approval, it could appear before the full assembly as early as mid-August. Newsom would then have to sign or veto it within 30 days.

Source: ABC

C-PACE financing has been gaining in popularity and new legislation set to take effect in New York City is expected to further catapult the use of the structure in retrofits and ground-up construction projects.

Commercial Property Assessed Clean Energy (C-PACE) financing has been on a sharp upward trajectory over the past several years with the cumulative amount of capital invested jumping from $111.2 million in 2014 to $2.07 billion through 2020. “It’s no longer accurate to say that C-PACE is poised for explosive growth. That growth is happening,” says Colin Bishopp, executive director of PACENation, a non-profit organization that works to expand access to residential and commercial PACE. “We’re in the early stages of really rapid growth for Commercial PACE.”

The growth is due to a convergence of factors. Two of the big drivers are greater awareness and access as more states and local municipalities ranging from Chicago to Tulsa get programs up and running. PACE-enabling legislation has been passed in 36 states plus Washington, D.C., and PACE programs are now operating in 24 states as well as the nation's capital. The pandemic also shined a spotlight on C-PACE as an alternative source of capital. Some states allow for the retroactive use of C-PACE, which enabled owners and developers to tap C-PACE financing to free up needed operating capital.

“Even though PACE is at a small scale nationally, it’s rate of increase has been dramatic,” says Thomas O'Connor, a partner, chair of the real estate finance group and a member of the real estate practice group at Duval & Stachenfeld LLP in New York City. Additionally, the focus on sustainable projects, reducing carbon footprints and ESG is providing a strong tailwind. “Investors and major institutions are looking for investments that are environmentally and socially centered, and PACE financing is right down the middle on that. This is ESG financing in its purest form,” he says.

First introduced about a dozen years ago, PACE is a financing mechanism that allows residential and commercial property owners and developers to access low-cost, long-term funding for energy efficiency, renewable energy and water conservation projects. Some jurisdictions also allow for PACE to be used to finance projects that benefit social good, such as seismic resiliency in California and wind resiliency in Florida.

The state passes the law enabling PACE financing, and then a program administrator—such as an economic development authority, city or private entity—operates the program and facilitates the use of financing by property owners and developers.

“It is absolutely going mainstream for a couple of reasons. You’re getting demand pull from governments as they begin to mandate certain requirements for energy efficiency and renewables,” notes Eric Alini, a managing partner at Counterpointe Sustainable Real Estate, a PACE lender. Property owners and developers also are feeling the push of incentives that PACE offers in terms of reasonably priced, low-risk, long-term financing. PACE offers long-term, fixed rate financing, generally 25 to 30 years, with current rates that typically range between 5 percent and 6 percent.

For example, Counterpointe SRE provided $13.7 million in mid-construction financing for a mixed-use multifamily project in suburban San Diego late last year at a rate of 6 percent. The Poway Outpost is a 53-unit multifamily properity with 44,000 sq. ft. of retail space under construction in Poway, California. The PACE-qualifying elements of the new construction project include seismic resiliency, HVAC, LED lighting, water conservation and building envelope measures. The non-recourse loan allowed for a delay in the first repayment up to 24 months, and also included greater than 20-year amortization. The C-PACE loan provided additional financing that also includes a $21 million construction loan.

PACE financing is not a loan or grant, but rather it is structured as a special assessment on the property’s regular tax bill and is processed the same way as other local public benefit assessments, such as sidewalks or street improvements. “It also is important to note that the capital comes from private investors,” says Alini. PACE is a public-private partnership between the state, county and tax collector to create a municipal lien financed by private capital. PACE doesn’t work in all cases, but it is a weapon in the quiver of a property owners that are looking for financing solutions for their capital stack, he adds.

Some borrowers are using C-PACE as a lower cost alternative to replace mezzanine financing in the capital stack. Compared to mezzanine financing, C-PACE tends to have easier terms, fewer documents and less risk of foreclosure. “The basic economics of a PACE loan are very compelling, and at the end of the day, people make deals that make sense, and PACE loans make sense for all of the players,” says O’Connor.

However, while a mezzanine loan is junior to the primary loan, such as a bank construction loan, the C-PACE loan is senior. That does create a hurdle for traditional lenders that require first position on a construction loan or mortgage. “It is not a sticking point, it is the sticking point and why C-PACE has had a slow rollout,” says O’Connor. PACE financing requires the consent of the mortgage lender, and first mortgage lenders are not inclined to consent to financing that is going to be paid in front of them. “As more and more lenders are willing to do that, I think there will be market pressure on other lenders to do so as well if they want to stay competitive,” he says.

Some industry observers believe that New York City could be a “game changer” in propelling growth for C-PACE financing. The commercial real estate market is impacted by what happens in New York simply due to the concentration of “who’s who” in real estate players and financial institutions based in the city, notes O’Connor. So, when the major institutions start participating in PACE, it can’t help but have a large impact on the country and further accelerate growth that has been occurring in other parts of the country, he says.

New York City passed PACE legislation in April 2019 around the same time it passed its Climate Mobilization Act, which requires buildings owners to spend substantial capital on retrofits to reduce carbon emissions to meet certain standards which begin to go into effect in 2024. “Knowing that building owners would have to spend money to comply with the Climate Mobilization Act, the city passed PACE as a way to try to help them,” says O’Connor. Since officially passing its PACE legislation in April 2019, New York City has been working to put its operating framework in place. The program is expected to go live sometime in the coming weeks.

Although New York City is getting a lot of attention, it is worth noting that Massachusetts, Philadelphia, Chicago (Cook County) and Anchorage all have opened for C-PACE financing in the past year. Atlanta also is close to launching. In addition, enabling legislation was passed within the last two months in both Tennessee and Montana.

C-PACE loans are frequently used for retrofit projects and energy efficient renovations. However, developers also are using C-PACE on ground up construction. For example, New York State's program administrator, Energy Improvement Corporation, recent facilitated the first new construction loan. C-PACE lender CleanFund provided a $21.6 million loan for the development of Wildflower Farms, Auberge Resorts Collection, a new 65-room luxury boutique hotel being developed in the Hudson Valley by SY Holdings.

“What we’re seeing is that PACE is a really effective financing tool in the commercial sector,” says Bishopp. “So, I think folks are going to keep looking for ways to use it to reduce carbon emissions and get more projects done.”

Source: Wealth Management

April’s year-over-year price jump, up from a 13.3% increase in March, marked the 11th straight month of annual growth throughout the country, continuing the persistent rise of residential prices as supply shortages and high demand drive the market. Price growth in the nation’s largest cities was also strong, with the 10-City and 20-City Composite Indices posting annual growth of 14.4% and 14.9%, respectively (up from 12.9% and 13.4% in the previous month).

“April’s performance was truly extraordinary,” remarked Craig J. Lazzara, managing director and global head of index investment strategy at S&P DJI. “The 14.6% gain in the National Composite is literally the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data.

“Housing prices in all 20 cities rose; price gains in all 20 cities accelerated; price gains in all 20 cities were in the top quartile of historical performance. In 15 cities, price gains were in top decile.”

Five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – joined the National Composite in posting their all-time highest 12-month gains.

Phoenix continues to lead the cities tracked by the index in year-over-year price growth, with a whopping 22.3% price increase from April 2020. San Diego followed at 21.6%, with Seattle next at 20.2%.

And while slowing price growth has been anticipated, the upward pressures on home prices showing little risk of subsiding in the near-future. Because of this, it’s probable that prices are going to continue escalating rapidly over the next few months, said Selma Hepp, CoreLogic’s deputy chief economist.

“Although home price growth is reaching new highs, the risk of price declines has fallen far below pre-pandemic and summer 2006 levels, when homes prices last peaked,” Hepp said. “This is likely because favorable mortgage rates and income growth continue to keep the ratio of mortgage payments to monthly household income much lower today. Consequently, elevated buyer demand, coupled with lacking for-sale inventories, will continue putting pressure on prices — which are likely to remain at double-digit increases through the third quarter of 2021.”

Rocketing price acceleration has been met with concerns, especially as many first-time buyers have found themselves squeezed out of entry-level housing due to affordability issues. All three price tiers continued increasing by double-digit rates in April, though prices in the lower third of the market jumped 16.5% on average in April — highest among the three price tiers, consistent since home price recovery began in 2012.

The average growth among medium-tier priced homes followed at 15.8%, while prices in the highest-tier were up 15.1% on average.

But according to Hepp, housing “remains substantially more affordable than 15 years ago.”

“The reason is that while home price levels relative to household incomes are similar to 2006 levels, current mortgage interest rates are more than 50% lower, resulting in notably lower ratios of mortgage payments to monthly household income, and to monthly rent payments, compared to today,” she said.

Source: Scotsmanguide

Blackstone Group Inc.’s head of private equity, Joe Baratta, said the lack of investment in building single-family homes in the U.S. since the 2008 financial crisis is poised to reverse during the next 10 years.

“There’s been a structural underinvestment in the construction of single-family homes,” Baratta said Thursday in an interview on Bloomberg Television. “We are at the beginning of a potentially decade-long increase in construction activity in single-family homes.”

Blackstone, the world’s biggest private-equity firm, is looking to gain from that trend “through derivative plays,” such as providing services to single-family homebuilders and investing in utility services, Baratta said. Earlier this week, the firm agreed to buy Home Partners of America Inc., a rental company that owns more than 17,000 houses.

Baratta said Blackstone doesn’t have enough capital to address the opportunities in the market and could deploy as much as $5 billion per investment.

“I’m optimistic about our ability to continue to deploy capital at scale,” he said.

Source: Bloomberg

But it’s clear rates won’t stay near rock-bottom forever. Recent data showing higher consumer prices and lower unemployment will pave the way for unwinding last year’s bond buying and near-zero interest rates. Fed officials did indicate that rate hikes could come as soon as 2023, after saying in March that it saw no increases until at least 2024.

The Federal Open Market Committee raised its inflation expectation to 3.4%, although the central bank said it expects to “maintain an accommodative stance of monetary policy” for now.

“Being 7.8 million jobs short of pre-pandemic levels and with 9.3 million workers counted as unemployed gives the Fed air cover to maintain stimulus and hold off any outward discussions of tapering their bond purchases,” said Greg McBride, chief financial analyst at Bankrate.com.

“Even without talking about it publicly, behind closed doors it is bound to be a hot topic of discussion.”

Although the federal funds rate, which is what banks charge one another for short-term borrowing, is not the rate that consumers pay, the Fed’s moves still affect the borrowing and saving rates they see every day.

The Fed’s historically low borrowing rates makes it easier to borrow money — while also making it less desirable to hoard cash.

Here’s how consumers can still take advantage of these policies while they last.

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