The Economy, Housing & Commercial Real Estate for the week Ending April 17, 2020

There has been no shortage of news this week as the coronavirus continues to wreak havoc on our daily lives. Following are several articles relating to the economy, housing and commercial real estate which we found to be most significant in highlighting where things stand.

Nearly 4% Of All Mortgage Loans Now In Forbearance

Forbes – by Aly J. Yale

“According to the latest stats, nearly 4% of all mortgage loans are now in forbearance—a form of mortgage relief that allows homeowners to temporarily suspend their payments due to economic hardship. That share is up from 2.74% last week and a mere 0.25% in early March.

Loans serviced by independent mortgage banks are seeing the highest share of loans in forbearance at 4.17%. “

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How will the Coronavirus Impact the National Mortgage Market and Housing

For the past couple weeks we have been hearing from the National Association of Realtors and other media outlets about how the coronavirus will have a limited to moderate impact on housing as homeowners and their lenders are in a much better financial position than during the last economic downturn.

During that time our firm was a very active participant in the distressed real estate market representing lenders and servicers including Freddie Mac, JP Morgan Chase, Nationstar Mortgage, Bank of America and CitiMortgage so we saw first hand how these institutions were dealing with the vast number of mortgage defaults.  While a significant number of properties were foreclosed and resold, there was still a large number of mortgages that were modified or sold to a non-bank investor like private equity or a hedge fund.

Since there is virtually no regulation of these non-bank entities, there is a gap in the overall data about the number of possible loans that could be at risk for default. 

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How Home Sellers in Palm Beach County are Reacting to the Coronavirus

The coronavirus continues to wreak havoc on the real estate market as a large number of buyers of both residential and commercial properties continue not to move forward with their existing transactions. Beyond just buyers of real estate, residential sellers are also reconsidering and removing their property from the market.

Locally in Palm Beach County there has been a sudden spike in residential property listings that have been cancelled or temporarily removed from the market.

According to the Multiple Listings Service (MLS) from March 1st to March 30, 2020 there has been more than 1,500 residential property listings in Palm Beach County that have been changed to a “Cancelled” or “Temporarily Off Market”.  This represents more than a 50% increase based on similar cancellations from February 2020.

The following chart below outlines the sudden increase in cancellations / temporary off the market as compared to prior month and prior year levels.

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How the Coronavirus is Impacting Commercial & Business Real Estate

After years of robust growth in commercial property rental rates, occupancy levels and price appreciation, the landscape in South Florida has plunged into widespread uncertainty due to the impact from the coronavirus.

Property owners face significant challenges with respect to receiving monthly rental payments as commercial tenants with “non-essential” businesses have ceased operations without knowing when, or if, they will reopen. This has affected not only local-based small businesses but also national companies as evidenced by the Cheesecake Factory putting landlords on notice that they will not be able to make rent payments as of April 1st.

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The Current State of the Housing Market

Nationwide Housing

According to the National Association of Realtors, existing home sale transactions on a nationwide basis rose in October by 1.9% to a seasonally-adjusted annual rate of 5.46 units. Year-over-year sales were up by 4.6% from 5.22 million units in October 2018.  The nationwide median existing home price across all housing types for October was $270,900, up 6.2% from October 2018.  Prices rose in all regions and this month’s price increase marks 92 straight months of year-over-year gains.

Total housing inventory was down approximately 2.7% from September 2019 to 1.77 million units.  Unsold inventory equates to a 3.9-month supply at the current sales rate which is down from 4.1 months as reported for the month of September.
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Real Estate Market Update for October 2019

Due to a combination of low interest rates, low unemployment and increasing wages, the real estate market continues to show strong buyer demand and consistent price growth.  On a nationwide basis as well as within Palm Beach County, foreclosures and other distressed properties continue to decline indicating a strong and healthy real estate market.

Commercial Real Estate

The national commercial real estate market also remains strong with low vacancy rates, increasing rent growth and declining capitalization rates.  According to Real Capital Analytics, cap rates averaged 6.1% in July and August 2019 (properties above $2.5 million).

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Inherited Property Real Estate Services – Case Study

Three Property Residential Portfolio – Delray Beach, Florida

This case consisted of a portfolio of three residential properties that was left in trust to two individual heirs, both of which were not local to the South Florida area.  Quantum Realty Advisors, Inc. (“Quantum”) was referred to the heirs by the estate’s elder law attorney as well as a real estate attorney who assisted with the case.  Quantum provided full service management and assisted the estate with the marketing & sale of all three properties.

At the commencement of this assignment, our team did a comprehensive assessment of the condition and marketability of all three properties. Each property was evaluated on an individual basis to determine its strengths and weaknesses how best to position the home to be sold for the maximum value possible. A written report of our findings was provided to the heirs along with a our opinion of value as well as recommendations on how best to proceed with the marketing and sale of the properties.

Prior to beginning any marketing efforts, our team coordinated cleaning and staging of the single family home as well as spoke with the individual tenants for the investment property in an effort to determine how best to show the property to prospective purchasers.

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