Falling Oil Prices and Housing Value, All About ‘Location, Location, Location’
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January 21, 2016
Falling Oil Prices and Housing Value, All About ‘Location, Location, Location’
Oil prices have slipped nd are now at a 13-year low, as a result stock markets are off to their worst start for a year, ever, with the Dow down as much as 565 points yesterday, before recovering to close down about 250 points.
But, as for what falling oil means to housing, the real estate agents’ mantra: ’Location, Location, Location’ is perhaps the best way to look at it.
“There will be pockets where the impacts are very negative such as in oil producing states like Oklahoma,” says the Collingwood Group President Brian O’Reilly, “but there will also be pockets where the impacts will be much more positive, in states like Virginia where oil is a cost contributor rather than an economic contributor.”
The most trusted sources on the subject seem to believe that the precipitous fall in energy prices is a function of both oversupply, with fracking – U.S. oil and natural gas production has reached never before seen levels, as well as a decrease in global demand. Decreasing demand is generally viewed as a “negative” forward indicator for future economic activity and growth.
“But, here’s where it starts to get convoluted,” says O’Reilly, “others will argue that falling energy and gas prices amount to an immediate tax cut for all consumers that either drive or use oil and gas to heat their homes. That is true, and the benefits of lower prices should be manifesting themselves in a more confident consumer.” However, he adds,” that reaction by consumers does not seem as apparent in this cycle. Some have suggested this is the case because consumers are not in as good condition as folks have thought a view supported by somewhat tepid Christmas spending.”
“At the micro level, there likely will be geographic areas where these lower energy prices will have very negative implications,” says O’Reilly. “For example, in the traditional energy states like Texas, Louisiana, Oklahoma, falling prices will be bad. Housing prices should be expected to fall and employment will soften. The negative impacts will also be severe in the “new energy” economies – those areas where fracking has been dominant – PA is perhaps tops on this list and also ND and SD.”
Meantime, David Crowe, chief economist with the National Association of Homebuilders told builders meeting in Las Vegas that he’s optimistic Texas Dallas and Austin housing won’t suffer from the oil price slide. “Dallas has the advantage of being a stronger economy,” he said. “But you can’t deny energy is a part of it and the pullback in the production will have some impact.”
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Housing Starts Up 10.8% For Year; Unexpectedly Decline 2.5% last Month
New-home construction in unexpectedly fell in December, indicating the industry lost some momentum entering 2016. For all of 2015, housing starts climbed 10.8 percent to 1.11 million, the strongest year for construction since 2007.
Residential starts declined 2.5 percent last month to a 1.15 million annualized rate, from the prior month’s revised 1.18 million pace, a Commerce Department report showed Wednesday. But, the report showed a pickup last month in applications to build single-family homes, indicating construction will gradually advance in coming months.
Mortgage Applications Surge Again
Mortgage application volume jumped 9 percent on a seasonally adjusted basis for the week ending January 15th,versus the previous week, according to the Mortgage Bankers Association.
Refinance applications were the driver of total volume. These applications surged 19 percent from the previous week, seasonally adjusted, but are 40 percent below where they were a year ago, when rates were even lower. Applications to purchase a home fell 2 percent week-to-week, although they are 17 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 59.1 percent of total applications from 55.8 percent the previous week.
Bloomberg: Atlantic City Explores Bankruptcy
Atlantic City, the struggling casino resort in New Jersey, is considering a bankruptcy filing, Mayor Don Guardian and Council President Marty Small told reporters in Trenton.
Guardian said he expects to call an emergency meeting for next week to discuss the city’s options. While a filing would be good for city finances, it would be a bad precedent for the state, he told reporters after meeting with lawmakers.
read more: http://www.bloomberg.com/news/articles/2016-01-20/atlantic-city-exploring-bankruptcy-filing-local-officials-say?cmpid=twtr1
Wash Post: Trump’s bad bet: How too much debt drove his biggest casino aground
For months in 1987, Donald Trump maneuvered to take control of the hulking, unfinished Taj Mahal casino in Atlantic City. He snapped up stock in the parent company after its owner died and then made a surprise bid to take the company private.
With the Taj, along with two casinos he already owned in the city, Trump could dominate gambling on the East Coast. But first he needed to convince state gambling regulators that he was financially stable and could raise enough cash to complete the $1 billion project.
On Feb. 8, 1988, at a licensing hearing in front of the state Casino Control Commission, Trump said he could pull it off for one main reason: He was Donald Trump. Because of his reputation as a dealmaker, he said, bankers were lining up to lend him money at prime rates. That meant he could avoid the risky, high-interest loans known as junk bonds.
“I’m talking about banking institutions, not these junk bonds, which are ridiculous,” Trump testified, according to transcripts of the hearing. “The funny thing with junk bonds is that junk bonds [are] what really made the companies junk.”
Trump received the approvals he needed for the Taj, but the prime-rate loans never materialized. Determined to move forward, he turned to the very junk bonds he had derided in the hearing. He agreed to pay the bond lenders 14 percent interest, roughly 50 percent more than he had projected, to raise $675 million. It was the biggest gamble of his career.In April 1990, the Taj opened as the world’s largest casino-hotel complex, joining Trump’s other holdings already operating in Atlantic City, the Trump Plaza and Trump’s Castle. But Trump could not keep pace with his debts on the three casinos. Six months later, the Taj defaulted on interest payments to bondholders as his finances went into a tailspin. In July 1991, Trump’s Taj Mahal filed for bankruptcy, the first and most significant of the four that his companies have experienced.
read more: https://www.washingtonpost.com/investigations/trumps-bad-bet-how-too-much-debt-drove-his-biggest-casino-aground/2016/01/18/f67cedc2-9ac8-11e5-8917-653b65c809eb_story.html?hpid=hp_rhp-top-table-main_trumptajmahal716pm%3Ahomepage%2Fstory
IMF News: A Secondary Market Develops for Loans With TRID Errors
With investors rejecting mortgages because of TRID-related errors, a secondary market has developed with some buyers paying well below par for product, according to interviews conducted by IMFnews.Were seeing a lot of TRID flow right now, said Rob Smialek, senior vice president of capital markets for Rincon Mortgage Trading. Some of the loans are being bid in the 90s.
Smialek noted that hes seeing at least 10 to 15 TRID-error loans trade per day. Another trader confirmed that he too is seeing such activity, but did not put a loan count on the volume.
read more: http://www.insidemortgagefinance.com/imfnews/1_772/daily/secondary-market-develops-for-mortgages-with-trid-errors-1000035220-1.html?ET=imfpubs:e7308:63041a:&st=email&s=imfnews
Real Deal: 15 NYC real estate properties assessed at over $1B
Related Companies and Oxford Properties saw 10 Hudson Yards’ “market value” – assessed for tax purposes – grow by nearly $250 million year-over-year according to city assessments released Friday, the largest increase of any property in the city. The city valued the property at $332.8 million, up from $84 million the previous year. Vornado Realty Trust’s 1.8 million-square-foot hotel and retail building at 1375 Broadway saw its city-assessed market value climb by just over $200 million, to just over $1 billion. In total, 15 city properties crossed the $1 billion threshold this year, including the Bank of America Tower at One Bryant Park; Boston Properties, Safra Group and Zhang Xin’s GM Building; and Stuyvesant Town, recently purchased for $5.3 billion by the Blackstone Group and Ivanhoe Cambridge, along with city landmarks like John F. Kennedy and LaGuardia airports, Yankee Stadium and Citi Field.
read more: http://therealdeal.com/2016/01/19/15-nyc-real-estate-properties-assessed-at-over-1b/?utm_source=feedly&utm_medium=rss&utm_campaign=15-nyc-real-estate-properties-assessed-at-over-1b#sthash.9TIOCUnL.dpuf
DS News: Freddie Mac Drops Suit Against Deloitte
Freddie Mac has dropped its $1.3 billion lawsuit against Deloitte & Touche that accused the accounting firm of negligence regarding the auditing of certain mortgage loans the GSE purchased from now-defunct mortgage lender Taylor Bean & Whitaker, according to media reports.
Both parties agreed to dismiss the suit without prejudice. The case was scheduled to go to trial on February 22.
Freddie Mac did not immediately respond to a request for a comment. A spokesperson from Deloitte said in an email that the firm did not have a comment on the suit being dropped.
Freddie Mac sued Deloitte for $1.3 billion in a Florida court in September 2014 with regards to fraudulent mortgage loans the GSE purchased from Taylor Bean & Whitaker, according to reports. Freddie Mac says it would not have purchased those mortgage loans from Taylor Bean if Deloitte, which audited Freddie Mac from 2002 to 2009, had paid attention to red flags which indicated fraud.
Freddie Mac claims that Deloitte’s negligence cost the GSE $1.3 billion. Both Freddie Mac and Fannie Mae were taken over by the government in September 2008 at the height of the financial crisis. At that time, the GSEs needed a combined $188 billion bailout from the government to stay afloat.
read more: http://www.dsnews.com/news/01-20-2016/freddie-mac-drops-suit-against-deloitte
Real Deal: Moinian Group is now a tech investor
The Moinian Group made its first investment through a newly formed tech investment arm, becoming the latest New York developer to join the venture-funding craze.
Dubbed Currency M, the investment arm will fund and form “strategic partnerships” with tech startups. In its first funding deal, Currency M invested an undisclosed sum in Paintzen, a startup that offers on-demand painting services.
As part of the deal, the Moinian Group will offer Paintzen’s services at a discount to tenants in its vast rental portfolio.
“We have great faith that Paintzen is the future of the painting industry, which is why we were inspired to make an investment in the company,” the Moinian Group’s Mitchell Moinian said in a statement.
Currency M has been active since 2015 but didn’t sign its first partnership deal until now, explained Mitchell Moinian.
read more: http://therealdeal.com/2016/01/19/moinian-group-is-now-a-tech-investor/?utm_source=feedly&utm_medium=rss&utm_campaign=moinian-group-is-now-a-tech-investor#sthash.4ukrDS2b.dpuf
NY Post: Judy Garland’s former NYC home can now be yours
Die-hard Judy Garland fans may be able to recite her lines and lyrics from “The Wizard of Oz” by heart. But only a deep-pocketed aficionado can follow the yellow brick road to the legendary star’s former Manhattan pad in the tony Dakota co-op, which reports say is listed for $16.75 million.
This 4,700-square-foot spread, with three bedrooms and three bathrooms, most recently belonged to Jacqueline Bikoff — “a pianist and ballerina of Iranian descent who was a fixture on the Studio 54 scene,” who died in September, according to the Observer. Bikoff snagged the unit, located at 1 W. 72nd St., in 2010 for $13 million.
read more: http://nypost.com/2016/01/19/judy-garlands-former-nyc-home-can-now-be-yours/
Still to come this week:
Existing Home Sales for December will be reported at 10am ET. The National Association of Realtors is forecasting that total existing-homes sales in 2015 increased 6.5% compared with 2014. As of December, existing-home sales were at an annual rate of around 5.26 million – the highest since 2006, but roughly 25% below the prior peak set in 2005 (7.08 million), NAR says in its 2016 forecast.
Have a prosperous day!