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March 2021 Newsletter



Welcome back to the March Edition of our Monthly Newsletters! I've got some really exciting information to share with you today so stick with me along the journey and you'll get to see all of the juicy nuggets along the way!

This last month has been crazy for us, in an extremely exciting kind of way. We got over 800 units worth of LOI's submitted and still fighting for about 400 of those. We got a high end beach flip house under contract and an LOI signed on a 88 unit apartment complex. Our goal of 1,000 units in 2021 is coming along nicely and there's no end in sight! We've been getting some great deal flow & can't wait to share some of these awesome investment opportunities with you guys!

Where is the Real Estate Market Headed? Bust or Boom?

Here are the latesthousing market predictions for 2021 & 2022. The global pandemic shattered the world order and the US economy suffered its biggest blow since the Great Depression in the second quarter. It has been roughly one year when it put thehousing marketon hold for several months last spring. Back in March of last year, the real estate market looked to be headed into a steep decline due to widespread stay-home orders. Since then, homebuyers, supported by low-interest rates, have kept the US housing market afloat. The pandemic has certainly affected every sector but residential real estate has been very resilient. The real estate sector has also been highly supportive of the economic recovery of the country. It has emerged as a pillar of support for the economy. 2020 was a record-breaking year for the US housing market. The typical U.S. home was worth $266,104 in December, up 8.4% (or $20,587) from a year ago. A total of 5.64 million homes were sold in 2020, up 5.6% from 2019 and the most since before the Great Recession. Sales also rose 0.7% from November and 22.2% year over year. Existing home sales reached the highest level in 13 years. The housing market has been struggling to keep up with the demand for the past decade. In the middle of the pandemic, it has seen a boom in demand. Currently, there is an extremely tight supply of homes on the market, the lowest on record since the turn of the century. There are reasons to believe that housing supply will ramp up in the coming month. Realtors believe that the first vaccine roll-out is expected to ease seller apprehensions, which should improve the supply trends throughout the year. The housing demand trends will continue to put pressure on home prices. The millennials have aged into their prime homebuying years, and they are now thefastest-growing segment of home buyers. In 2018, millennial homeownership was at a record low but the situation has changed markedly. They are no longer holding back when it comes to homeownership. According to the National Association of REALTORS’ Home Buyers and Sellers Generational Trends Report, millennials make up the largest share of the homebuying population at 38 percent. The older millennials (aged 30 to 39) making up 25 percent of that and younger millennials (age 22 to 29 years old) making up 13 percent. These younger consumers are mostly buying first homes (86 percent of younger millennials and 52 percent older ones). According to Bloomberg, not only are millennials buying homes but their “starter homes” are multimillion-dollar homes rather than the traditional humble first property. Millennials are expected to continue to drive the market in 2021 and the participation of first-time homebuyers and older millennials is widely forecast to be elevated. Hence, the “2021 housing market” is looking to be super-competitive for home buyers. With homebuyers active and supply still lacking, the current pace of home price growth seems unlikely to change in the near term. Realtor.com's market data for the week ending February 27, 2021, shows that the median home price of all the listings increased by 14% over last year, notching the 29th consecutive week of double-digit price growth. In February of last year, before the outbreak of the pandemic, home prices were rising at the rate of 3.9% year-over-year. Clearly, today's rate appreciation is almost three and half times more than that. With the continued supply-demand imbalance, this upward pull on prices is expected to remain consistent in 2021. This pace of appreciation can decline only if either supply ramps up or demand softens. If mortgage rates increase later in the year, it will affect the affordability and will challenge buyer demand in the months ahead. Here's how the national housing market has been trending for the past couple of weeks and its comparison with the time when the shutdowns were imposed in the country. Homes are selling quickly and the total number available for sale at any point in time continues to drop lower and lower. More new listings are expected in March and April of 2021 as they traditionally do heading into spring. After sizzling winters, the housing demand rebound is much faster than the supply recovery. To deal with limited existing homes available for sale, homebuyers are turning to new construction homes, helping to fuel continued increases in new home sales so far this year. New construction, which has risen at a year-over-year pace of 20% or more for the last few months, will provide some additional relief with regards to short supply.

Housing Price Forecast 2021: The Pace of Appreciation is Steady The market trends in the first month of 2021 showed that home buyers will face a competitive spring season as inventory remains low. The exploding demand has led buyers to desperately bid up the prices of available properties, sending home prices soaring. House prices in all the major local real estate markets continue to rise. The housing market is becoming harder for home buyers. The demand is really high, and the supply and inventory are deficient. According to economists and market watchers, home values are growing at their fastest pace in a generation, and are showing no signs of slowing down in 2021. Buyers have to face more competition and act more quickly than usual to snag their dream home. Housing prices had already started rising before the pandemic arrived but the pandemic created a rapid acceleration in double-digits. In a new Urban Institute report, researchers found that if the country continues down the same road, over the next two decades the U.S. homeownership rate is set to decline to 62.1 percent. They project the overall homeownership rate will fall from 65 percent in 2020 to 62 percent by 2040. Household growth averaged 12.4 million per decade from 1990-2010, 7.3 million from 2010-2020. They estimate an average growth of 8.5 million from 2020-2030 and 7.6 million from 2030-2040. This decline is the result of slowing US population growth and lower headship rates for most age groups. Another key finding is that the renter growth will be more than twice the pace of homeowner growth from 2020 to 2040. Between 2020 and 2040, there will be 9.3 million net new renter households, a 21 percent increase. The main reason behind such an extreme pace of home price appreciation is the basic economic seesaw of supply and demand. The country needs far more units to meet demand but there has been a large and persistent shortfall in recent years. On top of that, the pandemic has really knocked down homebuilders' ability to fill the housing supply as they are running out of land. The housing market has already been running too short of previously owned homes. Buyers are scrambling to take advantage of plummeting mortgage rates that make the cost of buying a home much cheaper. The number of homes for sale has plummeted and remained down around 30 percent of what it has been in recent years — leaving the market with nearly twice the demand and two-thirds of the supply. Both the inventory of homes and mortgage rates are now at their historic lows. The months’ supply of existing homes for sale has fallen to 1.9 months, the lowest level since the series began in 1999. With inventories this tight, it is unlikely that existing home sales can continue to rise at last year's pace, which means there could be a little slowdown in existing sales throughout 2021. ESR Group expects home sales to rise 3.8 percent in 2021. The rise in remote work has also sparked a new suburban boom and the scarcity of developed land means that builders could be unable to meet the rising demand and home prices would continue to rise in 2021. One thing that has been talked about a lot is that suburban housing markets are booming because of outbound migration from cities. The pandemic has caused some homebuyers to search for homes in a different area than originally planned. Various surveys indicate that interest in rural areas and suburbs is up and interest in urban areas is down. However, Zillow published an exhaustive study examining every conceivable housing-market data point related to cities and suburbia to see if there are major divergences that suggest an urban-to-suburban migration trend. According to that study, suburban housing markets have not strengthened at a disproportionately rapid pace compared to urban markets. Both region types appear to be hot sellers’ markets right now – while many suburban areas have seen a strong improvement in housing activity in recent months, so, too, have many urban areas. Nevertheless, the pandemic has increased the desire for houses with a bit more space and a garden. Couple that with record-low interest rates, and prices are rising dramatically all over the country from urban-to-suburban markets. For now, there are no indications that price growth is going to slow. Zillow Economic Research predicts that annual home value growth will rise as high as 13.5% by mid-2021 and for home values to end 2021 up 10.5% from their current levels. Their forecast also calls for sales volume to remain elevated in the coming year, finishing 2021 at 6.9 million sales, the most since 2005. In previous forecasts, the company predicted a 4.8 percent increase in home values between August 2020 and August 2021. The current extreme demand that is reflected in sharply rising prices, can be attributed to the pent-up demand for home purchases from the March-July period when a great part of the country was in total lockdown. The housing sales and prices have stayed strong through the fall and winter months amid increasingly short inventory and high demand. Existing home sales also show the tightest housing market on record. The demand has not gotten significantly shorter since last May/June, and buyers and sellers are continuing to connect at a record pace. December existing-home sales rose 0.7% from November. This trend shows that the housing market is as strong as it was during the housing bubble. It is nowhere too close to a level where you can imagine the balance real estate market conditions. Speedy home sales continue in all regions of the country and the median sales price continues to have double-digit growth. The flow of buyers and sellers has remained abnormally high in the entire fall season. That's how hot the real estate market has been throughout the pandemic. Although millions were laid off or furloughed it didn’t prevent house hunters from buying homes across the nation. As a result, the housing market saw the highest pace of sales growth since the height of the unprecedented housing boom in 2005. That expansion was driven by negligent lending in the subprime mortgage market and the current housing boom is driven by the intense demand and record-low mortgage rates. Both of these factors were driven by the coronavirus pandemic. The housing market has seen record-breaking growth since June after briefly put on hold during the outbreak of the pandemic this spring. As prices keep climbing month-over-month, it just shows the resilience of the U.S. housing market in the face of an ongoing economic recession. Although sellers are listing more & more homes we need more new home supply to add to inventory and slow these sharp price increases. Housing Affordability Crisis in 2021 Housing Affordability is driven largely by the gap between household income and home value. It is influenced by the balance between housing supply and demand, the labor market, and mortgage rates by way of Federal monetary policy. Housing is affordable when the housing of an acceptable minimum standard can be obtained and retained leaving sufficient income to meet essential non-housing expenditure. The most commonly used indicator in the U.S. and many other countries is the ratio of house prices to incomes or earnings. A higher ratio indicates relatively more affordability. A ratio of 100 indicates that median-family income is just sufficient to purchase the median-priced home. Ratios above 100 indicate that the typical household has more income than necessary to purchase the typical house.Therefore, low-income households spending a high proportion of their income on housing may and vice versa. In 2020, mortgage rates were reduced due to the pandemic which helped offset the sting of higher prices. But as mortgage rates are expected to rise in 2021, affordability is likely to become a bigger challenge this year. The combination of intense demand and the low mortgage rates has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers. While we still face economic and health challenges ahead, it is no doubt that the nation will continue to recover from this pandemic and an improving economy will continue to prop up the housing market competition. Industry experts believe the housing market will remain strong and is set to break more records in 2021. Various national surveys show that consumers are eager to spend more on housing in 2021, as the economy continues to slowly recover from the pandemic. Strong growth is expected in 2021 for housing sales, rents, and home prices. A report from the Federal Reserve Bank of New York found that the median household expects to increase their spending by 3.7% in the next twelve months, the most optimistic outlook since 2016. This time the housing market is largely being driven by two factors: a shortage of available housing inventory and extremely low-interest rates. Double-digit annual growth in both list and sale prices show an extreme lack of inventory and incredible demand — A sign of a seller's real estate market. The housing market is still hot, but we may be starting to see rising home prices hurting affordability unless the mortgage rates continue to decline in 2021. Additionally, even if mortgage rates help blunt the effects of higher home prices on monthly payments, they don’t offset the need for larger down payments and other closing costs as home prices rise. Mortgage rates have risen slightly from the trough seen in early January, but they continue to be historically low, which should support mortgage demand. Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending February 5, 2021. The Refinance Index decreased 4 percent from the previous week and was 46 percent higher than the same week one year ago. Mortgage rates have increased in four of the first six weeks of 2021, with jumbo rates being the only loan type that saw a decline last week. Despite some weekly volatility, Treasury rates have been driven higher by expectations of faster economic growth as the COVID-19 vaccine rollout continues. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 2.97 percent from 2.94 percent, with points increasing to 0.36 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. Despite house mortgage rates being less than 3%, housing affordability has decreased because the effect of lower mortgage rates (for buyers) is being evened out by double-digit home price growth. In 2021, mortgage rates are expected to stop dropping. Rather, the National Association of Realtors expects rates to average 3.1% and the Mortgage Bankers Association says mortgage rates will average 3.3% in 2021. These rate estimates are both up from the 3.0% mortgage rate average in 2020 but lower than 2019 average rates. The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential home buyers during the spring home sales season. Mortgage rates have increased in four of the first six weeks of 2021. Expect mortgage rates to continue to hover around record lows. The Federal Reserve has reassured that it will keep interest rates and its bond-buying program unchanged — downplaying any urgency to bring borrowing costs back up from their lowest levels in history at near zero. According to Bankrate’s latest survey of the nation’s largest mortgage lenders, as of March 4, 2021, the average 30-year fixed-mortgage rate is 3.18%, 0.95 percentage points below the 2019 annual average rate. It is an increase of 4 basis points over the last seven days. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 2.84 percent. At the current average rate, you’ll pay principal and interest of $431.37 for every $100,000 you borrow. That’s an additional $2.18 per $100,000 compared to last week. A year ago, the 30-year fixed-rate, was 3.70 percent, so you would have paid $460 each month for the same amount. The average 15-year fixed-mortgage rate is 2.50 percent, up 2 basis points over the last week. Monthly payments on a 15-year fixed mortgage at that rate will cost around $667 per $100,000 borrowed. According to Realtor.com, the median listing prices grew at 13.7 percent over last year to reach $353,000 in February 2021, notching 26 consecutive weeks of double-digit price growth. This growth rate was a little lower than January's growth rate of 15.4%. However, at $353,000, February’s median listing price surpassed last year’s peak unseasonably early. With demand still high and supply still limited, this path seems unlikely to change in the coming months. 2021 real estate market is predicted to remain sizzling hot affecting housing affordability. So, for now, we have a median price of $353,000 and an average 30-year fixed mortgage rate of 3.18%. Assuming a buyer provided a 20% down payment, the principal and interest payments on the mortgage would have been $1,218 a month. Contrast that with Feb 2020, when the median price was $310,000 and the average interest rate on a 30-year mortgage was around 3.45%, according to Freddie Mac. A buyer faced a payment of $1,106, or $112 less a month than what he is paying now. Assume that builders and sellers had met buyer demand, keeping prices flat over the year. Lower mortgage rates would have resulted in a monthly payment of $1,069, or a savings of $37 a month as compared to a year before. As you can see, low mortgage rates help but don't eliminate the risk of affordability crunch that the housing market could still face if home prices continue to rise at a rapid pace. Buying a home in a seller’s market can feel like you’re losing money. You may just wait a few months or even a year so that prices will flatten (or come down). The problem is that prices could keep rising to the point where you’re priced out of the market. There’s no guarantee either way. Therefore, we feel this is the right time to buy your dream property or you can opt to refinance at today’s rates to at least cut your monthly mortgage payments. The present scenario makes it appealing to buyers who have been spending all this money on rent. Housing Market & Mortgage Delinquencies 2021 Record-low mortgage rates and shortage of inventory are keeping the US housing market strong concerning buyer demand. Prices have been surging month-over-month breaking new records. The government’s moratoria have effectively stopped foreclosure activity on everything but vacant and abandoned properties. 2020 ended the year with a near-record number of seriously delinquent loans, but historically low levels of foreclosure activity. There is a backlog of foreclosures building up due to this moratorium and no one knows how big that backlog is until after the government programs expire. The foreclosure backlog comprises three types of loans — loans that were in foreclosure before the government's moratoria; loans that would have defaulted under normal circumstances; and loans that would default due to job losses induced by the pandemic. To help borrowers at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will extend the moratoriums on single-family foreclosures and real estate owned (REO) evictions until February 28, 2021. It will give relief to more than 28 million homeowners with an Enterprise-backed mortgage. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire on January 31, 2021. Per the last three extensions, the FHFA said it will continue to monitor the effect of coronavirus on the mortgage industry and update its policies as needed. Currently, FHFA projects additional expenses of $1.4 to $2 billion will be borne by the Enterprises due to the existing COVID-19 foreclosure moratorium and its extension. Mortgage delinquencies improved in January 2021 but still, 2.1 million homeowners remain delinquent, according to the latest data released by Black Knight.

  • The national mortgage delinquency rate fell to 5.9% in January, dropping below 6% for the first time since March 2020.

  • January’s improvement among overall delinquencies as well as seriously past-due mortgages was nearly identical to the average improvement seen during the recovery to date.

  • While delinquencies continue to improve slowly and steadily, some 2.1 million homeowners remain 90 or more days past due but not yet in foreclosure – still five times pre-pandemic levels

  • Recent forbearance and foreclosure moratorium extensions have reduced near-term risk, but at the same time may have the effect of extending the length of the recovery period

  • At the current rate of improvement, 1.8 million mortgages will still be seriously delinquent at the end of June when foreclosure moratoriums on government-backed loans are currently slated to lift

  • With widespread moratoriums still in place, both foreclosure starts and sales (completions) remained near record lows in January Prepayment activity fell by 17% month-over-month in January but remains 86% above last year’s levels

U.S. Housing Foreclosure Statistics 2021 ATTOM Data Solutions, licensor of the nation's most comprehensive foreclosure data releasedits January 2021 U.S. Foreclosure Market Report. There were a total of 9,702 U.S. properties with foreclosure filings — default notices, scheduled auctions, or bank repossessions — down 11 percent from a month ago and 80 percent from a year ago. January foreclosure activity declined at least in part due to the Biden Administration’s decision to continue the foreclosure moratorium on government-backed loans through the end of March. The main reasons for this massive drop in foreclosure activity are the moratorium and “CARES Act” mortgage forbearance program, which have effectively prevented millions of seriously delinquent loans from entering the foreclosure process.

  • Nationwide 1 in every 14,164 housing units had a foreclosure filing in January 2021.

  • Lenders started the foreclosure process on 5,235 U.S. properties in January 2021, down 12 percent from last month and down 80 percent from a year ago.

  • Out of those only 1,428 U.S. properties were repossessed through completed foreclosures (REOs) in January 2021, down 28 percent from last month and down 86 percent from last year.

  • It is the 13th consecutive annual decline in completed foreclosures.

States that saw an annual decrease in REOs in January 2021 included:

  • Illinois (down 86 percent);

  • Florida (down 83 percent);

  • Maryland (down 83 percent);

  • California (down 82 percent);

  • Texas (down 82 percent).

States with the highest foreclosure rates were:

  • Delaware (one in every 4,923 housing units with a foreclosure filing);

  • Louisiana (one in every 6,581 housing units);

  • Florida (one in every 7,920 housing units);

  • Indiana (one in every 8,668 housing units);

  • Alabama (one in every 8,707 housing units).

Among the 220 metropolitan statistical areas with a population of at least 200,000 and at least 100 or more foreclosure starts in January 2021, those that saw double-digit annual declines, included:

  • Chicago, IL (down 87 percent);

  • New York, NY (down 85 percent);

  • Los Angeles, CA (down 80 percent);

  • Dallas, TX (down 77 percent);

  • Houston, TX (down 69 percent).

Mobile, AL Market Analysis Business: 1. In an update, and as reported previously in Lagniappe, ALDI U.S., a leader in the grocery retailing industry since 1976, held a small, socially distant groundbreaking ceremony for the beginning of build-out for its new regional headquarters and distribution center in Loxley on Wednesday at 10 a.m. The 564,000-square-foot planned office and warehouse space, located at 30800 County Rd. 49, sits on roughly 149 acres of land north of Exit 44 and represents upwards of $100 million in local capital investment poured into the area. The new site will support ALDI’s domestic growth throughout the central Gulf Coast region. Markets covered by the Loxley site will include South Alabama, Mississippi, the Florida Panhandle, Southern Georgia and new markets in Louisiana, the 38th and latest state where ALDI operates. According to a press release, and as part of an ongoing growth plan, ALDI intends to open around 100 new stores nationwide in 2021, including the company’s first two Gulf Coast stores in Tallahassee. By the end of 2022, ALDI expects to open 35 new stores in the Gulf Coast region. The new facility will also create more than 200 new jobs in Loxley. 2. Locally owned new package store Infinity Liquor has moved into the Vigouroux Marketplace located at 9948 Airport Blvd. in West Mobile. The business is leasing 2,400 square feet of retail space with expectations to open sometime this spring. 3. Last week, AM/NS Calvert held a groundbreaking for its $775 million steelmaking plant expansion. The investment in the Calvert-based site was initially announced in December 2020 by ArcelorMittal and Nippon Steel Corporation, the 50/50 joint venture partners for AM/NS Calvert. Once completed, the planned facility will be capable of producing 1.5 megatons of steel slabs for their hot-strip mill, producing a broad spectrum of steel grades required for Calvert’s end-user markets. Buildout is anticipated to wrap up midway through 2023, and the new site is expected to spin out 200 direct and 100 indirect jobs in the community. “When two of the leading steel companies — ArcelorMittal and Nippon Steel — make a significant investment such as this, the world takes notice,” Bill Sisson, president and CEO of the Mobile Area Chamber of Commerce, said. “This announcement shows great confidence in the Mobile area, and for that we are grateful. The capital investment and construction, along with the hundreds of permanent and indirect jobs will benefit area suppliers and local families for years to come.” City: 1. Last week Mayor Sandy Stimpson, Mobile Fire-Rescue Department (MFRD) Chief Jeremy Lami and Mobile City Councilwoman Gina Gregory cut the ribbon for Mobile’s newest fire station. Buildout for Fire Station 18 lasted about a year, but including planning and design, the entire process took around four years to complete. Located in the Spring Hill area near Langan Park on Museum Drive, the $2.5 million facility replaces the nearly 64-year-old structure that sat on the same footprint previously. The new station covers some 6,053 square feet and includes 3,798 square feet of co-ed living space to accommodate up to four MFRD male or female firefighters on a 24/7, 365-day personnel rotation. The new space will also feature bifold garage doors, designed to match the aesthetic characteristics of the neighborhood, and dedicated decontamination equipment to keep firefighters safe and their gear clean. “As you look around the station, it certainly is beautiful, but what we’re most proud of are the safety features for our firefighters who will live and work here,” Lami said. In 2018, MFRD achieved a noteworthy ISO-1 rating — the best in the country. Only 320 out of 44,000 departments in the U.S. have the designation, which can save homeowners on insurance costs because of the fire department’s recognized equipment, training and response times. Summary That concludes this month's newsletter! For anyone interested in learning more about Ferrari Capital, how to invest in our current offering, where you can find out more information about real estate investing, etc. Head on over to our website @ ferraricapital.com and check out our many free resources to keep you educated and informed on everything real estate related. Happy Spring Month!


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