According to YIMBY’s Q1 Report, permit activity in Q1 and Q2 were very similar, with only 5 more filings in the first quarter compared to the second. So far, monthly construction permit filings this year are almost twice as high as monthly levels from 2021. It’s also worth noting that a strong Q2 performance proves that positive outcomes in Q1 weren’t a short-lived trend. 

The first six months of 2022 signal a strong uptick in future construction in the Big Apple, and a broader resurgence in a city that was walloped by a declining population, shuttering businesses, and reduced tourism during the Covid Pandemic. 

Q2 Data by Borough

In Q2, Queens led the pack with 309 permits, while Brooklyn came in second with 238. Staten Island was third with 161, followed by The Bronx with 117. Manhattan was in last place by far, with only 32 permits. 

Manhattan had a low number of permit filings in comparison to other boroughs because of its high density. In fact, the average floor area per permit filing in Manhattan was 55,862 square feet, almost three times as high as the Bronx, which was second place at 19,077 square feet. Not surprisingly, Staten Island had the smallest average floor area per permit filing at 4,490 square feet, since most new construction in the borough consists of single-family homes or small multifamily buildings. 

Some of the most enlightening data from YIMBY’s Q2 report are the total residential and hotel units filed per borough. As the most populous Borough, it’s not surprising that Brooklyn came in first with 3,162 units. However, on a surprising note, The Bronx was just behind at 3,115, beating out more populous boroughs Queens (2,303) and Manhattan (1,016). Staten Island was in last place with 401 units filed. 

The Bronx and Manhattan have similar populations, but the former had three times as many residential and hotel units filed during Q2. With the expiration of the 421a affordable housing tax credit, developers may be more reluctant to build new housing in more expensive areas of the city like Manhattan. Developers are likely more keen on The Bronx because the land is cheaper there, which offers potentially greater returns on investment.

New Residential and Hotel Units Fall Significantly in Q2

While the total number of permit filings held steady between Q1 and Q2, there were significantly fewer new residential and hotel units included in those filings during the latest quarter. The decline was steep, falling from 19,337 to 9,997. The only borough to hold steady in the category was The Bronx, with 3,115 units compared to 3,160 units in Q1. Every other borough experienced a substantial decline. 

The Bronx really punched above its weight in this category, recording around a third of Q2’s new residential and hotel unit filings despite only having about 17% of the city’s population. 

Unfortunately, residential development in NYC as a whole isn’t keeping up with demand — and demand for housing in the city is very strong. The apartment vacancy rate in Manhattan declined from 7.59% in May 2021 to 1.55% in May 2022. Additionally, between May 2021 and May 2022, median rents in Manhattan grew 25%, while Brooklyn and Manhattan rents grew by close to 20%.

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This guide will help you figure out the best way to get started in real estate investing, depending on your goals and your capacities.

Establish Your Real Estate Investment Portfolio Goals

Have you decided to invest in real estate? Excellent news. However, real estate investing can mean very different things to different people. There is no right or wrong way to invest in real estate – as long as the type of investment you choose to make matches your abilities and expectations. Here are some of the elements you should take into consideration when you decide to invest in real estate and some of the options you may choose depending on your priorities.

Gain Real Estate Knowledge

Real estate is a very complex subject, with many ramifications demanding specialized expertise. If you are just getting started in real estate investing and do not have any previous experience in the matter, it can be intimidating. Reality TV shows can make real estate investing seem easy and straightforward, but in real life, that is rarely the case. This does not mean that you need to become an expert before dipping your toes in the real estate investing business, but you may need to hone your skills and stay informed as you build your portfolio.

If you have little time, energy, and interest to dedicate to your quest for knowledge but still want to take advantage of the benefits of real estate investing, your best bet may be to start with managed funds, such as Real Estate Investment Trusts (REITs) for example, where you provide the funds but have limited decisions to make on a daily basis. On the other hand, if you want to dive into a real estate investment career, you will need to educate yourself on the local market, real estate laws, and any related fields so you can start more involved forms of real estate investments – such as flipping houses, renting properties, and so on.

Time Commitment For A Real Estate Investment Portfolio

Real estate is often presented as a form of passive income. Although it can, in some cases, provide predictable revenues with little input, it is not necessarily true. Any landlord can testify that renting one or multiple units is an involved job, even with the help of a property manager. Flipping properties also require a significant time commitment, although it can be alleviated with the help of a trusted local contractor and real estate agent to handle many of the daily decisions. Renting properties is typically a long-term commitment while flipping houses is more sporadic. For example, you may decide to buy, renovate, and sell a home during the slowest season in your regular job.

If you would rather take the back seat to real estate investing, the best course of action is to invest in a mutual fund, participate in a limited partnership, or join an investment group or investment trust. These forms of real estate investments require little involvement on behalf of the investors, freeing their time for their full-time jobs or other occupations.

Cost of Real Estate Investment Portfolio

Real estate is expensive: it is the main entrance barrier for many would-be investors. Besides, most forms of real estate investments are not liquid. If you are just getting started in real estate investing, the chances are that you are hesitating to freeze a significant amount of capital for several years. The good news is that most forms of investment provide regular returns, such as rental income or dividends. In addition, you can use the equity you build in a property over time by contracting a home equity loan or line of credit.

Nevertheless, you will still have to examine your finances and make sure that you have enough cash or liquid assets to cover emergencies. REITs have the advantage of being more liquid than other forms of real estate investments. They may be a good option if you are looking to build or diversify your portfolio without committing fully. You can also start building your real estate portfolio by flipping a house for a relatively rapid return on investment.

Another consideration is the amount of money you are willing to invest in this venture. If you are investing in real estate alone, buying a property – to rent and/or flip, for example – represents a significant expense. Commercial assets, in particular, are extremely expensive, and financing options are limited for investors who do not have a tracking record. If you have limited funds, you may want to look into sharing expenses with other investors. However, beware that some investing platforms are only open to accredited investors.

How To Finance Your Real Estate Portfolio

If you are wondering how to build a real estate portfolio, you are probably unsure about how to find the funds necessary to get started since real estate is one of the most expensive forms of assets. Here are some options you may want to investigate.

Leverage your primary residence

Many real estate investors start building their portfolios by using their primary residence as a steppingstone. In some cases, they may use their property to produce extra rental income. Depending on the setup and lifestyle, would-be investors could rent part of their home, either to roommates or by using short-term rental platforms like VRBO or AirBnB. If they can find other living arrangements, they can also rent out the totality of their home.

However, renting your home is not the only option for building a real estate portfolio. Since a primary residence is often the most important financial asset of a beginner investor, you can use the equity you have built in your home to finance the rest of your portfolio by contracting a second mortgage such as a cash-out refinance, home equity loan, or a home equity line of credit (HELOC). The process of buying, rehabbing, renting, refinancing, and starting again (a.k.a. BRRRR method) has become a popular form of starting and growing a real estate portfolio.

Obtain an Investor Loan

Unless you purchased your primary residence cash, you probably contracted a mortgage. However, being approved for a mortgage as an investor is a different ballgame.

Mortgage lenders consider that investment properties are riskier than houses to be used as primary residences since a homeowner encountering financial difficulties is more likely to prioritize their mortgage on their roof over their head than an income property. Therefore, you can expect more stringent requirements, including higher down payments (20% or more), higher credit score expectations, cash reserves, and so on. In addition, many mortgages with advantageous terms (government-backed loans such as FHA, USDA, or VA, for example) are not available for rental properties.

Suppose you do not qualify for investor loans through traditional lending institutions. In that case, you may also seek out hard-money lenders who, unlike banks and credit unions, take the profitability of the property to be purchased into account. It can be particularly advantageous for would-be investors interested in flipping properties since you can repay the loan a lot faster than conventional loans without penalties. On the downside, hard-money loans have significantly higher interest rates than traditional mortgages, and they also have higher origination fees and closing costs.

Find Private Money Partners

When it comes to real estate, the best way to build a portfolio is sometimes to divide and conquer. Bringing in partners also helps alleviate the risks and financial burden. Beginner investors can join a local real estate investment club to network and find other individual investors willing to pool their funds before joining a venture. The terms of the loans, repayment, and so on will vary depending on the type of deal and each party’s input.

Private money lenders do not have to be other real estate professionals: you can also present this opportunity to friends and family members. However, beware that it is best to set up a contract in case the deal goes sour, regardless of your relationship with the other party.

Defining Your Real Estate Portfolio

Seasoned investors know that it is best not to put all your eggs in the same basket. The same goes for real estate investments. When gearing up toward starting a real estate investment portfolio, it is best to establish your long- and short-term goals to protect yourself and select a strategy from the get-go.

Choosing the Best Form of Real Estate Investment

In the first two parts of this guide, we discussed establishing your priorities as a real estate investor and finding the necessary funds. It is often best to start small to avoid unnecessary risks and learn as you go, especially if you are not familiar with the industry. Here are some of the most common forms of real estate investments for beginners and their pros and cons.

• REITs: REITs are publicly traded companies that own and manage commercial properties (hotels, malls, etc.) Investors can purchase shares on a stock exchange and receive yearly dividends. It allows them to diversify their portfolio and invest in commercial real estate without the high entry costs and expertise this type of investment typically requires. In addition, REITs are relatively liquid since investors can sell their shares on the stock exchange if needed.
• House flip: Investors purchase a property in need of repair and resell them within a short time (typically a couple of months.) They may choose to update them to resell them for a profit or simply hold them if the market is increasing rapidly. Investors need to have an excellent knowledge of the local market and construction industry to stay within budget.
• Rental properties: Rental properties come in many different forms, from vacation to long-term rentals, ranging from single-family homes to large apartment communities. Rental properties allow landlords to perceive a predictable income and hold the building until it increases in value. However, being a landlord – even with the assistance of a property management company – can be very stressful and time-consuming, especially if you own multiple units.
• Commercial real estate: Commercial real estate includes any form of space rented or leased by a business. It comprises industries as varied as office buildings, malls, retail spaces, gas stations, restaurants, etc. This type of investment provides predictable incomes since the leases are typically long-term. However, they also have high entrance barriers, including higher down payments and property management expenses.
• Raw land: Investing in raw land requires an excellent knowledge of the area you are considering, including the local residential and commercial rental markets, but also the local regulations such as building codes, zoning regulations, and flood plains. Raw land gives investors a wide range of exit strategies: dividing the plot for resale, leasing it to renters, developing new construction, and even holding on to it while it appreciates. However, it can be very speculative in nature.
• Mutual funds: Real estate mutual funds are managed funds that invest primarily in REITs but also real-estate stocks and indices. They give investors access to a wider variety of assets than individual REITs and allow them to diversify their portfolios for a relatively small amount of capital.

Diversifying Your Real Estate Portfolio

You have successfully started your real estate investment portfolio – now what? It may be time to consider diversifying your investments to take full advantage of the industry’s numerous benefits, such as tax benefits.

Diversification may include other types of assets but also investing in other areas of the country. As you expand your portfolio, you may also need to learn more about additional industries related to real estate – such as law or construction, for example. You will also build a team that can guide and support you so you can take your portfolio to the next level. Good luck on your real estate investment journey!

The post How To Start A Real Estate Investment Portfolio appeared first on CitySignal.

Pedestrian traffic fell sharply from over 350,000 visitors daily pre-pandemic to a mere 33,000 in April 2020. The numbers are slowly increasing again with the arrival of widespread vaccines and the relaxation of rules pertaining to businesses and entertainment places. However, they are still a far cry from what they used to be. Approximately 244,000 pedestrians entered the “Bowtie” every day in December 2021, almost 100,000 less than in December 2019.  

Long-lasting consequences

With tourism and retail at the heart of the neighborhood’s economy, Times Square suffered more from the consequences of Covid than any other area in NYC. Many stores and restaurants have indefinitely put the key under the door, including long-standing retailers such as Walgreen’s at One Times Square. Six hotels are still closed, including the 44-floor, 478-room Hilton Hotel Times Square on 42nd Street closed and the Roosevelt Hotel on East 45th Street, which have fallen victim to the pandemic. Nevertheless, things are looking up for the hotel industry in NYC. Occupancy rates are up, with a strong spring and summer ahead, and 48 new hotels are poised to open throughout the city, adding an estimated 6,500 rooms to the New York City market in 2022.

Although tourists are making their way back to New York City and Broadway attendance is almost back to its pre-pandemic levels, business travelers and office workers are still largely missing as office occupancy across Manhattan is hovering at just 37% of pre-pandemic levels as of mid-April, according to Kastle Systems. The return of employees full-time into the office also remains a major question mark as workers have become strongly attached to the flexibility that working from home or a hybrid model can afford. In other words: despite undeniable signs of hope, the future of Times Square as one of the most productive economic centers of the city remains in the balance.

Ensuring Times Square’s economic survival

The question of Times Square’s economic survival is more than a simple matter of pride for New York City. Although the bustling neighborhood is one of the city’s most famous touristic attractions, it is also a powerful business generator. According to the Times Square Alliance, over 66,000 people were employed in the neighborhoods’ businesses and restaurants pre-pandemic, and its economic output represented 15% of New York’s economy.

Besides, the increasing crime rate in NYC in general and in Times Square, in particular, is becoming a growing concern. Stores are being robbed, drug deals are becoming a more common occurrence, and murders have made the headlines. Keeping the neighborhood busy and thriving is key to avoiding bursts of violence. Developers and investors are betting on a new attraction to replace the absent office workers and bring new money and energy into the area: casinos.

New York state has a ban on new casinos until 2023 – and yet, New York State approved the issuance of three new casino licenses intended for the area in April. One of the rumored locations is Times Square itself. “I think that the single best location for a license is Manhattan, and within Manhattan I feel the absolute best, most obvious, least impactful and most globally accepted area will be Times Square,” said Chief Executive Marc Holliday from SL Green Realty Corp. said during an earnings call last week. Keeping gamblers and their streams of money closer to home instead of Atlantic City or Connecticut could attract new visitors to Times Square. However, the proposal is not without its detractors.

Negotiating the “new normal” in a post-pandemic world is still a work in progress. Many of the determining factors, from the longevity of the widespread work-from-home model to the ability of tourism to withstand new coronavirus variants, remain to be determined and, with it, what some of the city’s most famous landmarks will look like in a few years.

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Enters Roofstock. The prop-tech company, founded in 2015, is an online platform claiming to significantly simplify the buying and selling process and make it more affordable for would-be investors. The platform focuses on single-family homes, which are often more accessible in terms of price range and requirements for new investors than large multifamily properties. Besides, many of them are already rented so that buyers can rely on a cash flow immediately.

How does Roofstock function, and what are the pros and cons of using the company to buy or sell an investment property?

How Does Roofstock Work?

Roofstock is an online real estate marketing platform that brings together buyers and sellers of investment properties – primarily tenant-occupied single-family homes. Roofstock certifies the listed properties according to specific requirements, giving buyers the confidence to purchase sight unseen, potentially in faraway locations. Each potential listing is subject to a home inspection and includes a list of estimates for long- and short-term repairs, a title report, a review of the lease terms, and a complete overview of the property, including a floor plan, a virtual property tour, and interior and exterior photos. Besides, the company also offers the services of vetted property management companies, simplifying the process further.

In addition, Roofstock advances several securities for potential buyers, such as the promise to buy back the property for 30 days after the purchase if it is not satisfactory and a “lease-up guarantee” covering your rent for up to a year if a lease hasn’t been signed on your “rent-ready” home within 45 days. Roofstock offers other services, including investing in actively managed Roofstock portfolios of real estate (a.k.a. Roofstock One), which requires a minimum investment of $5000 and investing classes at Roofstock Academy.

What Are The Pros of Roofstock?

Roofstock offers a streamlined approach to the investment property buying and selling process. They have in-house certifications for all their listing and provide services ranging from financing to property management. The process is similarly handled exclusively online for sellers after the property is accepted, and owners can expect a rapid closing.

In addition, Roofstock is relatively affordable. Buyers pay a marketplace fee of 0.5% or $500 (whichever is greater), and sellers pay a 3% listing fee or $2,500 (which is greater), which is significantly lower than the typical real estate agent commission of 5 to 6% of the sale price.

Roofstock can be an exciting tool for first-time investors since it does not require the users to be accredited and offers a wide range of potential properties with thorough information at their fingertips.

What Are The Cons of Roofstock?

Although Roofstock makes real estate investing more straightforward and accessible, it does not erase many of the caveats of this form of investment.

By nature, real estate is not liquid. Buying an investment property requires accepting that the capital will be largely immobilized for years if you want good returns. Besides, it is also expensive. Lowering the real estate fees may make Roofstock an attractive option for buyers and sellers compared to the traditional market route. However, would-be investors will still need a down payment equivalent to 20% or more of the purchase price to be approved for financing.

In addition, owning rental properties – even with the help of a property manager – is still an involved process. The landlord will need to make multiple informed decisions regarding funds allocations, repairs, and so on, for the venture to be successful. Investing in real estate far away from home presents additional challenges since the investor may not be familiar with the intricacies of the local market.

Finally, although Roofstock is actively marketing toward individual investors, the company is effectively feeding into the wave of institutional investors who have taken an interest in single-family homes across the country. Would-be bidders can expect to compete with well-funded cash buyers bringing property prices up.

The past couple of years have seen an influx of tech companies catering to the needs of the real estate industry, with mitigated success – the misadventures of Zillow, Better.com, Opendoor, or Homie certainly stand out. The ups and downs experienced by these companies show that real estate can be adverse to change and that the use of new technologies does not guarantee success. Instead of claiming the use of revolutionary technologies, Roofstock relies heavily on the human factor, including a network of trusted home inspectors and property managers. Technology is used as a tool rather than facilitating the connection between buyers and sellers as a deciding factor. In a world that showed the disconnect between AI and the reality of the real estate market, this may be a good move on Roofstock’s part.

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Natural decrease in most U.S. counties

A natural decrease occurs when a county’s population experiences more deaths than births over a given period.

During uncertain times, such as a war – or a pandemic – couples tend to postpone their project of having children. Therefore, it is no surprise that the birth rate dropped during the pandemic. Although the number of daily births has been slowing down consistently since 2008, the annual average births per day declined by 4.06% between 2019 and 2020, compared to 1% or less in previous years.

Besides, the mortality rate increased significantly in 2021. During the pandemic, the United States suffered over 1 million excess deaths (the difference between the observed numbers of deaths in specific time periods and expected numbers of deaths in the same time periods). This number includes deaths directly related to the COVID-19 virus. However, it also shows numbers higher than usual for fatalities related to other ailments, including heart disease, hypertension, and dementia, among others.

As a result, over 73% of U.S. counties experienced a natural decrease in 2021, up from 45.5% in 2019 and 55.5% in 2020, according to the U.S. Census Bureau’s Vintage 2021 estimates of population and components of change. The Northeast is particularly afflicted, with all counties in Delaware, Maine, New Hampshire, and Rhode Island having experienced a natural decrease in the past year.

New migration patterns

The pandemic and related lockdowns caused many to rethink their life plans. More employees than ever are now working from home for the foreseeable future, either full-time or on a hybrid schedule. This shift in lifestyle led many to change their living arrangements permanently. They were driven in strides to leave overcrowded and expensive urban centers for more affordable locals, offering more room to install a home office and living space as well as outdoor areas.

Los Angeles County, California, experienced the most significant net domestic migration loss (179,757 residents), followed by New York County, New York (113,642), with people moving from one area to another within the United States. For the first time, micropolitan regions are growing at a faster rate than metropolitan counties.

Unsurprisingly, the cities with the highest positive net domestic migration are going through some growing pains. Fueled by increased demand, low inventory, and historically low-interest rates, the real estate market is reaching new highs. Property prices have increased dramatically nationwide, but the most attractive urban centers are also the ones where home values have soared the most, such as Dallas (24.97% increase in year-over-year median sale price) or Texas, which is also home to four of the top 10 largest-gaining metro areas. Additionally, a large migration to Miami caused the housing market to skyrocket and push Miami to the least affordable housing market in the nation. Meanwhile, cities that lost the most inhabitants are among the few to see their property prices decrease, including Chicago (-2.69% in year-over-year median sale price) and Oakland, CA (-2.52%), which experienced some of the most considerable metropolitan net domestic migration losses.

Even with the unrolling of vaccines and medical treatment for those affected by the virus, COVID-19 will likely have a lasting impact on our lives and demographics.

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The announcement comes in the wake of the recent publication from the National Association of Realtors (NAR), which reported that existing homes sales had declined by 7.2% in the past month. Anyone who has been following the evolution of the real estate market in the past two years is aware that properties are in short supply, and the input of new homes would bring welcome relief in a tight market. However, new houses do not always constitute an appropriate alternative to move-in-ready properties.

Newly built homes are typically more expensive than existing properties. The median sales price of new houses sold in February 2022 was $400,600 (a 10.7% increase compared to a year prior), compared to the median existing-home sales price at $357,300. The difference could be exacerbated by increasing interest rates, putting new homes out of reach for buyers who do not benefit from the equity built into a previously owned property.

Besides, new homes face an additional challenge: they are subject to other pressures that would contribute to additional expenses, such as labor shortages, high material prices – including aluminum and lumber – and ongoing supply chain issues. These three concerns have been a recurring headache for home builders since the beginning of the pandemic. However, the invasion of Ukraine by Russia adds another stress factor to an already struggling industry. The U.S. homebuilder sentiment fell to a six-month low in March. It may keep declining depending on the effects of the tightening monetary policy and overall inflation on the prospective home buyers, some of whom may end up priced out of the market since the rising costs will likely be passed on to the consumer.

The inventory for new homes is significantly more important than existing homes, with a supply of 6.3 months at the current sales rate compared to 1.7 months for existing homes. Because of the tumultuous supply chain, builders prefer to focus their efforts on completing already started homes and working on homes that have already received the necessary permits. Therefore, a higher-than-normal percentage of to-be-built homes for sale has not been started yet. However, completed homes sell fast, with an average of 2.5 months on the market.

The United States is facing a housing crisis, with a neat lack of affordable housing accessible to workers in many cities and regions across the country. The increasing property prices fueled by the lack of inventory and the arrival of institutional buyers and investors purchasing properties at bumped-up prices are turning homeownership into a pipe dream for many. Although increasing the pool of available properties could help alleviate some of the pressures on would-be home buyers, the building industry faces its own crisis.

The post New Home Sales Dropped 2% in February appeared first on CitySignal.

The median existing-home sales price increased by 15% in year-over-year comparisons, reaching $357,300. House hunters have come to expect the soaring property prices, as this ratio has been on a 120 consecutive months hike, the longest-running streak on record. Property prices in the South have been increasing the most rapidly for the sixth straight month, with an 18.1% jump in the year-over-year comparison.

Available inventory increased slightly by 2.4% in the past month. However, it is down 15.5% from the year prior and only represents 1.7 months’ supply at the current sales pace, a far cry from the four to six months’ supply needed for a balanced market. Properties on the market tend to sell fast, with an average number of days on the market of 18 in February. Besides, 84% of homes sold in February 2022 were on the market for less than a month.

In addition to the limited inventory and rising property prices, would-be homebuyers are dealing with another factor: increasing interest rates. The Fed has already announced seven standard hikes for 2022 in an effort to cool down the increasing concern for inflation, including global commodity prices in the wake of Russia’s invasion of Ukraine.

While higher interest rates could help temperate the white-hot real estate market, they may not constitute the ideal solution for property hunters. Homebuyers who previously qualified for mortgages with a lower interest rate may not be able to purchase the same property at the increased rates, especially if their budget is already under pressure due to prices rising over the board.

One of the main factors for increasing property prices is the lack of inventory. However, if property owners on the verge of selling worry about how far their dollars may stretch and their ability to find a new home within their budget, they also become less likely to put their house on the market. Instead, they may choose to make do until the situation goes back to more normal conditions. Therefore, the lack of inventory is likely to stay a concern, increasing the likelihood of multiple offers, bidding wars, and rising property prices. House hunters worried about dodging the next interest rate hike are also more likely to drive property prices higher by wanting to buy sooner rather than later.

Despite what desperate house hunters may hope for, the housing market is unlikely to crash in 2022. The policies adopted during the pandemic prevented evictions and foreclosure, with multiple federal and local programs to assist distressed homeowners with mortgage payments. Currently, distressed sales (including foreclosures and short sales) represent less than 1% of transactions for February, a pattern similar to what it was the month and the year prior. Decreasing home prices will eventually come as offer and demand even out. However, the circumstances of this change in situation remain to be determined. 

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Mixed performances in 2021

2021 was a milestone year for real estate, with a white-hot housing market and record-breaking property prices increases. Companies in related sectors have been taking advantage of the tailwinds to seek new investment opportunities, for better and for worse. Several major companies have gone public, and 2021 was a record year for IPOs. However, another major player has surged during the pandemic as an alternative, especially in the tech sector: special-purpose acquisition companies, or SPAC.

Many households’ names, including WeWork, OpenDoor, Offerpad, Porch, AppHarvest, View, Open Lending, Latch, Matterport, United Wholesale Mortgage, and Vivint, have opted for this route as a means to raise funds in the past two years. SPACs, also known as blank-check companies, function as shell companies that raise money in an IPO and then acquire one or several businesses, often targeting a specific sector such as real estate. For proptech companies, they have the advantage of offering more flexibility than a traditional IPO, with rapid access to significant funds and affording a more specialized approach for an industry fragmented by local rules and regulations.

Nevertheless, 2022 has been marked by a rocky start on the stock market, especially for more speculative stocks – including technology. Companies such as Netflix, Amazon, Microsoft, Apple, and Google’s owner Alphabet have accessed some significant losses within the first few weeks of the new year. With January being considered an indicator of how markets will fare in months to come, coupled with the ongoing COVID-19 pandemic and concerns about rising inflation and interest rates, investors are understandably wary.

Companies in the proptech sector that recently went public have not been spared by the turbulences in the market. Zillow’s ups and downs have made the headlines for quite some time, including their failed venture in the home-flipping business. Online real estate stocks, including OpenDoor and Redfin, and old-school brokerage Compass, have accused losses of approximately 58% on average since last April. With an S&P 500 which raised more than 8% over the same period, it is difficult to ignore the struggles of this sector. Meanwhile, Better.com, a digital mortgage lending company that went public via a merger with a SPAC in May 2021, recently laid off 900 employees during a Zoom call.

SPACs have also taken a step back regarding their plans for initial public offerings in light of the stock market’s performance. Murphy Canyon Acquisition Corporation, formed by Presidio Property Trust, went back and forth, withdrawing their initial registration statement and withdrawing the withdrawal before moving ahead earlier this month.

What is in store in 2022?

The stock market is a long cry from being out of the woodwork. The threat of a Russian invasion in Ukraine contributes to investors prioritizing safe investments over speculative ones like technology. Besides, inflation is likely to impact the real estate market significantly. The Federal Reserve is taking steps towards increasing the interest rates several times in the coming months to slow down the fast-rising housing prices. These measures are likely to slow down the demand for innovative technologies in real estate as the market slows down and new projects might get on hold.

Investing in proptech companies may seem like a bad move in the short term. However, the demand for new platforms and tools remains. Tech-savvy generations are coming of age, and their expectations for user-friendly solutions are bound to increase. Real estate remains one of the most secure asset classes in the long term, with opportunities for innovations in sectors as diverse as transaction management, property data and appraisal, mortgage and loan management, construction management, and so on. By taking advantage of the current low prices and holding on in the long term, investors have a chance at working with companies that will contribute to further digitizing real estate.

The post Are Proptech Companies Good Investments in 2022? appeared first on CitySignal.

However, did you know that the house’s purchase price is far from the only expense you will need to consider when becoming a first-time homeowner?

Here is an exhaustive breakdown of the costs you will need to include in your calculations to avoid sticker shock and prepare yourself financially as you get ready to sign the purchase and sale contract for your first property.

Spoiler alert: this article, just like real life, will get increasingly more interesting after you pass the down payment, mortgage selection, and closing costs parts. Ah, to be an adult.

Down Payment

Saving for a sizable down payment is always a major concern for would-be first-time home buyers. While previous property owners can count on the proceeds of the sale of their current home, it is a lot harder to start from scratch. It can take years of hard work and careful budgeting to put enough money aside while paying for living expenses, especially if you contemplate buying a house in a hot real estate market (like the current market).

Most down payments for a conventional mortgage start at 20% of the total purchase price. The good news is that you may qualify for loans with lower down payment requirements, such as government-backed loans like FHA, VA, or USDA loans. In some cases, you may not need a down payment at all!

However, keep in mind that low or no down payment mortgages programs come with additional long-term expenses, including mortgage insurance. In some cases, it may be worth putting the extra effort of saving for a more sizeable down payment to save some money in the long run. You can also look into local and federal down payment assistance programs to see if you qualify.

Mortgage Payments

Your monthly mortgage payments will depend on several factors: the size of your loan, your mortgage interest rate, and if you have any additional costs such as mortgage insurance.

Part of your monthly payment goes toward repaying the debt you contracted when purchasing the property (the principal), and another is allocated towards paying the interest. Although your monthly payments typically do not change throughout the life of the loan, the share that goes towards the principal gets more significant over time.

You can keep your payments lower by reducing the amount of money you need to borrow – either by buying a cheaper house or increasing your down payment. You can also shop around when choosing a mortgage lender to see who offers a lower interest rate – although the difference can appear small, it can represent thousands of dollars over the years. Besides, you will qualify for a lower interest rate to increase your credit score and improve your financial situation.

Worried you aren’t quite sure how that all translates to cold hard cash? Maybe a mortgage calculator is your best bet to wrapping your head around things.

Closing Costs

Closing costs often come as a surprise for first-time buyers. They are typically equivalent to 2% to 6% of the property’s total price and include the lenders and third-party fees for the actors involved in the sale of the house.

You will need to pay them on the day of the closing, and you will receive an itemized list disclosing all the expenses included. They typically comprise the following items:

• Appraiser
• Attorney fees
• Transfer taxes
• Application fees
• Loan origination fee
• Title search
• Recording
• Prorated property taxes, HOA, and homeowner insurance
• Home inspection
• Discount points

As a first-time homebuyer, you may qualify for some federal closing cost assistance programs.

But what about hidden fees down the line…?

Costs associated with buying a home don’t just end during the closing process, there are other fees and hidden costs you’ll have to factor into paying in the future.

Property Maintenance

First-time homeowners are often surprised by the costs incurred by maintaining their home. Unlike a rental – where landlords are typically in charge of most big items – you will be responsible for any yard work and snow removal. You will also need to plan for expenses such as appliances repairs, regular maintenance, and replacement if required.

During the home inspection, you should get a better idea of the remaining life span and condition for most big-ticket items, from the HVAC systems to the roof. However, you can never be sure of how much effort the previous owners put into regular maintenance, especially if you are purchasing an older home or a house that has not been occupied for a while (foreclosure or estate sale, for example.)

The best policy is to set aside an emergency fund from the get-go to cover any expenses, planned or not. After all, pipes tend to freeze, and furnaces break at the worst possible time! Set some money aside each month to cover items you know you will eventually need to replace, but also add an extra sum for unexpected damages.

You will also need to decide whether you want to take care of tasks such as mowing the lawn and snow removal yourself or hire a property maintenance company. While the DIY route may save you money in the long run, you will need to purchase any necessary equipment.

House Repairs

If you are lucky, your new home will be perfect from the get-go. However, in many cases, you may want to proceed to some repairs before or just after moving so your new property is up to your standards. If a listing uses phrases such as “bring your contractor” or “bring your imagination and your architect”, you can probably be that some repairs will be needed.

Some repairs may be purely cosmetic and easy to do yourself, such as changing dated wallpapers, removing tired carpets, or repainting a room. However, others can be significantly more time-consuming and expensive – for example, a complete remodel, including changing the floor plan.

When buying your first home, you will need to budget for any upgrades you plan to do early on. You may also want to contact contractors in your area for an estimate. Depending on the costs and feasibility, it is a good idea to decide what must go vs. items you can live with for the time being. Owning a house is expensive, and it is best to take a conservative approach in the first few months to get the hang of the costs associated with being a property owner.

Depending on the local real estate market, you may ask that the property owners repair some items before closing or ask for concessions.

Moving Costs

If you are moving from a small one-bedroom apartment to a new place across town, you may be able to handle most of the moving or with the help of some friends and family.

However, if the DIY route will not cut it – if you are moving far away, and do not have the manpower, for example – you will need to consider the cost of renting a truck or hiring professional movers.

Utilities

If your landlord used to include the cost of standard utilities – such as heating, cooling, water, sewer, or electricity – in your rent, you should research how much you can expect to pay each month. Depending on the age and condition of your new home, these costs could add up to hundreds of dollars monthly.

You may need to contact several providers servicing your area to find the best deal or decide to invest in some upgrades that could save you money in the long run. For example, geothermic heating and cooling or installing solar panels could be a profitable investment, depending on your situation. Some areas may offer incentives for eco-friendly upgrades as well.

Furniture

Furnishing your first home is an exciting time, especially if you have been living in a cramped apartment filled with hand-me-down furniture. You are probably eager to affirm your decorating style and find items that fit your tastes and your new house’s floorplan.

Try to make a list of items you will need when you move into your home, but do not rush into buying everything right away. The first few months after buying a house can be overwhelming as you add up the expenses of being a first-time homeowner, including adjusting to the costs of utilities, repairs, and any nasty surprises you may encounter along the way. You may also find out that your needs are different than what you anticipated. You may need to find cheaper alternatives – such as second-hand finds or reusing what you already have – before splurging on the perfect couch or dining set.

HOA, Condo and Co-Op Fees

Living in a homeowner’s or condo association has its advantages: for example, you may have access to common areas, and the association handles the lion’s share of property maintenance. However, you will also need to pay monthly fees to cover these expenses. The cost depends vastly based on your location and the amenities and services provided, so make sure to read carefully through your purchase and sale agreement before signing the dotted line.

Property Taxes

Nothing is certain but death and taxes.

Property taxes depend on the municipality where the house you are buying is located and the property assessment. They contribute to financing services such as public schools, road maintenance, law enforcement, garbage collection, and so on. They are typically paid in one or two annual increments.

To avoid getting caught unaware, you may opt to have your mortgage lender collect the amount as part of your monthly mortgage payments and place the money on an escrow account until taxes are due. Since both the taxable amount and the house assessment can change periodically, keep an eye on the local policies since they will affect your monthly payments.

Homeowner Insurance

Your homeowner insurance protects your house and your belongings against theft and destruction, as well as personal liability in case someone gets hurt on your property. Depending on the property’s location, you may need to add special hazard insurance (against flood, for example.) Most mortgage companies require the homebuyers to contract an insurance policy that covers the total value of the property before approving the loan.

The insurance cost depends on multiple factors, including the property’s location, its condition, and the past claim history associated with the home. Do not hesitate to shop around to see which company will give you the best value for your money, including your current insurer.

Emergency Fund

As a homeowner, you should be ready to expect the unexpected and prepare for it. The best way to do so is to set some funds aside to cover your mortgage payments and any unplanned expenses as soon as you buy a home.

It is the best way to avoid foreclosure in case you get hurt or lose your job or if you must suddenly repair the roof or any other big-ticket items.

Owning a house is a major responsibility that also comes with great rewards. Not only will you be able to build a home you can be proud of, but you will build equity over time.

The post The Real Cost of What Goes into Buying Your First Home appeared first on CitySignal.

Another nerve-wracking cycle

Some believe that markets’ behavior in January sets the pace for the months ahead, a notion supported by historical data. If it proves to be the case in 2022, we are in for another nerve-wracking cycle.

Despite the turbulent context, U.S. stocks fared better than most in 2021, with the average domestic stock rising by 21.9% over the course of the last year, according to Morningstar. Meanwhile, home prices went up across the nation as Americans craved larger homes and moved farther away from city centers. The markets have successfully withstood the consequences of multiple waves of COVID-19. But the continued uncertainties and the possibility of some rough times ahead could jeopardize this growth.

The Fed is gearing up towards taking measures to keep inflation under control. A change in policies forces investors to re-evaluate their speculative strategy. Despite their initial claims, recent reports show that the price increases may not be transitory after all and could put the economy at risk of a recession if left to its own devices.

Rate hikes could be good for the markets

The Central Bank has already announced multiple rate hikes to take place in March, June, September, and December and a more aggressive approach than initially planned. That said, tightening periods are not necessarily bad news for the markets. According to historical data, U.S. stocks actually tend to provide higher returns as the Fed increases interest rates, with an average annualized rate of 9% during the 12 Fed rate hike cycles since the 1950s and delivered positive returns in 11 of those instances.

Nevertheless, the markets have been in turmoil these past couple of weeks. The tech sector, in particular, has been victim to investors shying away from higher-risk stocks since higher interest rates tend to affect high-growth companies the most.

Worst start of the year since ’08

The Nasdaq composite, which includes a significant share of tech companies, has been particularly volatile and has taken a substantial tumble since the beginning of the year. The index was down by 11% since its November 19 record high closing as of Friday. This loss makes 2022 its worst start of the year since the financial crisis of 2008 and possibly its worst January performance since it was incepted in 1971. The Nasdaq is in the midst of a correction for the fourth time since the beginning of the COVID-19 pandemic – the latest dating back to early 2021, when the tech-heavy index fell more than 10% from February 12 to March 8.

However, hawkish monetary policies and speculative behavior corrections are not the only things that will affect the stock market in the months ahead.

Political instability raises concerns among investors

Investors are keeping a close eye on the current political instability in Ukraine. In the event of a Russian invasion, the European energy sector is likely to be sorely affected. Over the weekend, the State Department requested that the families of all American personnel at the U.S. Embassy in Ukraine leave the territory for the time being. Besides, President Joe Biden is considering sending troops to Eastern Europe and the Balkan region to prevent Russian territorial ambitions. Although diplomatic discussions are still ongoing, these move signals that the situation is dire.

Last but not least, the U.S. midterm elections in November 2022 could add another layer of uncertainty in later months.

The post Stock Markets Off To A Rocky Start appeared first on CitySignal.