Field Guide to the Federal Gov. for Housing & Housing Finance
SitusAMC Analysis Finds Historic Surge in Apartment Returns, Rent Growth in 3Q 2021
How Can Lenders Drive Profitability in a Booming Purchase Market?
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It was the best of times for many sectors and markets. Though not the worst of times, by any means, for the other markets, the third quarter was much about A Tale of Two Segments – an acceleration of the bifurcation that has been occurring for the past couple of years. On the one hand is industrial, the prized possession of investors today. The industrial sector shattered records for nearly every metric in the third quarter, with annualized returns of 32% and occupancy rates, net absorption and effective rents at all-time highs. On the other hand, hotel was grappling with declining occupancy and RevPAR even before the omicron variant was discovered. Hotel returns, though improving, have a long way to go before they can claw their way back from pandemic-induced losses. Access your free Report by filling out the form.
SitusAMC Insights asked institutional commercial real estate firms and regional companies to rank what they believe will be the best-performing and worst-performing property sectors over the next year. Click through our 3Q 2021 slide show to see their expectations for office, apartment, industrial, retail and hotel properties, and the trends driving investor interest.
In this episode of On the Hill, Tim Rood, Head of Industry Relations, talks with Pete Mills, Senior Vice President of Residential Policy & Member Engagement at the Mortgage Bankers Association (MBA). Rood and Mills discuss what mortgage industry participants seeking to influence policy must know to successfully navigate the federal landscape. “Success really starts with finding a good policy solution that addresses your issue, but also legitimately speaks to the concerns of your other audiences,” noted Mills, an experienced financial services industry executive with more than 30 years of expertise in public affairs, government relations, public policy and research, all in the housing and mortgage finance arena. Mills and Rood discuss how the housing finance ecosystem, frequently driven by financial crises, evolved over the decades to include so many different agencies, policymakers, and supervisory and enforcement bodies. They look at why it’s so challenging to target the right audience on Capitol Hill, and why industry participants must look at the macro environment and policymakers’ constituencies to ensure messaging is positioned correctly. SitusAMC recently published the Field Guide to the Federal Government for Housing & Housing Finance, a first-of-its-kind digital experience providing an in-depth perspective on key influencers in Washington, D.C. and their impact on the single-family and multifamily real estate industries. The experience includes a white paper and an interactive map of the ecosystem, with an explanation of important players. “Housing is 16 to 18 percent of GDP, so it's a critical driver for the broader economy,” Mills said. “It's this extraordinarily important part of our social fabric; it's the American dream; it's the primary source of household wealth. Few industries score that high on both economic and social importance and impact. Our issues can sometimes be very complex and narrow … and very few policymakers are going to be able to wrap their heads around the complexities of your business. But if you can tie your issues to the broader macro trends, I think you can get policymakers to pay attention.” For example, the Biden Administration laid out broad policy themes when the president took office: COVID-19 as a national health emergency and economic threat; climate change as an existential threat; and racial equity and inclusion as a moral imperative. “To the extent that you can hook your issue to one or more of those themes, you're able to get attention,” Mills explained. “Understanding the environment you're operating in is really important.” Prior to joining MBA, Mills served as Managing Director and co-founder of the Community Mortgage Banking Project, a public policy organization that represented the interests of companies and coalitions involved in the housing and mortgage finance industries. Mills previously led corporate public affairs for Countrywide Financial, managed trade association policy advocacy for the California Mortgage Bankers Association and the California Association of Realtors, and conducted housing policy research at the Federal Reserve Board. He has a bachelor’s degree in Economics from the University of California at Berkeley, where he graduated with distinction in 1982.
Many homeowners will not be shocked if their insurance premiums go up this year. A slew of natural disasters – and the collapse of the condo in Surfside, FL – have increased public awareness about inherent vulnerabilities in the real estate and the insurance markets. Real estate investors, however, may be underestimating how much insurance costs will rise in the near future. SitusAMC Insights explores the risks in a new white paper, “Burgeoning Insurance Cost for Real Estate,” which can be downloaded here. The U.S. is seeing an increase in the number and severity of natural disasters such as hurricanes, tornadoes, and wildfires, which has greatly increased the short- and long-term risk for insurers and led to increases in insurance costs and reductions in coverage for property owners. Some of the states with the largest population inflows over the past several years are also mired in a drought – much of the Mountain West and Northwest – and are likely to face ongoing fire threats from a drying climate. The growth in population also increases risk. Demographic data from California suggests that as the population grows, residents will push farther and farther from the metro core in search of affordable space. The sprawl abuts development with vegetation and fire-prone areas, increasing the likelihood of fire. Soon, about 35 million people spread over four states – California, Texas, Arizona and Nevada – will live in fire-prone areas from this exurban push. Property damage stemming from natural disasters is not the only risk factor. Others include regulatory burdens and property or portfolio considerations. Another consideration is the condition of the property itself and its ability to withstand weather-related disasters. In a 2020 study conducted by the Federal Emergency Management Agency (FEMA) estimating the savings associated with building properties that conform to International Codes (I-Codes), the agency found significant positive benefits from switching buildings to improved codes. Nationally, the average annualized losses avoided (AALA) were $1.6 billion from implementing these building codes in post-2000 construction and could lead to $132 billion in cumulative savings by 2040. Because commercial real estate is a long-term investment strategy and is capital intensive, even small differences between anticipated and realized insurance cost increases can lead to a significant overestimation of net operating income. Valuers are modeling a 10 percent to 15 percent insurance growth rate in year one and inflationary increases (typically 3 percent) for the duration of the holding period. According to the USI Mid-Year Market Update for 2021, premiums on properties outside of catastrophe-prone zones should be expected to rise 5 percent to 10 percent, while properties inside catastrophe zones may see premiums rise between 10 percent and 15 percent each year. SitusAMC proprietary valuation modeling resulted in no discernable difference in property values for a retail portfolio, when annual insurance price growth was set to three times the inflationary rate that is typically used in valuation models. But an underestimation of insurance rate increases would be particularly acute in a flat or increasing cap rate environment, or in situations where space market conditions do not allow for rent increases to fully offset the increase in expenses. Some investors will be able to command lower rates from the size of their portfolio, but overall it will be difficult to reduce premiums through reduced coverage because of strict lender requirements. With uncertainty, more up-to-date and accurate valuations are needed to properly assess replacement costs. Real estate investors will be better prepared and able to model insurance cost increases more accurately if they understand the multitude of risk factors to which a property is exposed. How can investors be prepared for the brewing storm of insurance costs? Learn more in the SitusAMC Insights white paper, “Burgeoning Insurance Cost for Real Estate,” available here.
From California to Georgia, the apartment sector saw record-breaking returns in the third quarter of 2021, according to the latest SitusAMC Insights’ Top 5 Bottom 5 Metro ranking. Rocketing rent growth and appreciation bolstered these markets, along with continued strength in industrial properties -- which shows no sign of waning. Our proprietary analysis is based on the weighted average of NPI-NCREIF total returns across commercial real estate sectors (apartment, industrial, retail, office) in the third quarter, compared to the previous quarter. Explore all of the top performers and laggards in our slideshow below. To learn more about SitusAMC’s research and data offerings, click here.
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NEW YORK – Nov. 30, 2021 – Homeowners and residential real estate investors can expect property insurance rates to rise following the growing number of natural disasters nationwide, according to SitusAMC, the mortgage industry’s leading provider of innovative, trusted solutions supporting the entire lifecycle of commercial and residential real estate finance.
Securent, a SitusAMC Insurance Services Branch, Launches Comprehensive Risk Management and Insurance Programs
NEW YORK – Nov. 16, 2021 – Securent [www.SecurentRisk.com], a newly-formed provider of comprehensive risk management and insurance programs for mortgage and mortgage-backed securities (MBS) stakeholders, today announced the launch of its operations. A subsidiary of SitusAMC, Securent’s loan defect insurance protects primary and secondary mortgage participants against risk associated with defects introduced in the loan manufacturing process, including underwriting defects, compliance violation
NEW YORK – Nov. 15, 2021 – SitusAMC, the leading provider of innovative, trusted solutions supporting the entire lifecycle of real estate finance, has published a first-of-its-kind Field Guide for mortgage industry participants looking to understand and navigate the federal landscape.