In this week’s Real Estate News Brief, home builders show signs of pessimism in the midst of plenty, Facebook is getting into the real estate business, and landlords trying to do the right thing, are getting slapped with fines.
We begin with economic news from Market Watch
The National Association of Home Builders said on Tuesday that home builder confidence slid in July. The Home Builders’ Index fell two points to a reading of 64. It’s now at the lowest level since the presidential election. The association reports that many of the president’s policies have been disappointing, especially one that imposes new tariffs on Canadian lumber.
A report on housing starts tells a different story. The Commerce Department reported on Wednesday that housing starts jumped to a seasonally adjusted annual rate of 1.22 million. That’s an 8.3% increase from a reading in May and a sign of strength in the housing industry. Housing permits were also up 7.4% for the month, to a seasonally adjusted annual rate of 1.25 million so we can expect more construction activity in the months ahead.
On Thursday, the Conference Board reported a surge in U.S. economic growth for June. It said the leading economic index was up .6% and points to strong GDP growth for the second half of the year. Board members say that increased home construction and permits for future construction are leading that increase.
Interest Rates are Down Again
Freddie Mac says the 30-year fixed-rate mortgage dipped back below 4 percent. Mortgage rates follow Treasury yields, and they fell 5 basis points last week. That brought the 30-year fixed-rate down to 3.96%. Last year at this time, the 30-year fixed-rate was averaging 3.45%.
Other Real Estate News Making Headlines:
Fortress Acquires Colony American Finance to form CoreVest
The Fortress Investment Group out of New York is acquiring one the nation’s biggest lenders for the single-family rental market. Fortress announced it is buying Colony American Finance for $3.3 billion dollars. The new entity will operate under the name CoreVest as a specialty loan company for residential investors.
There are two kinds of loans offered. One for long-term financing on rental properties, and one for investors who need short-term financing on fix and flips. Colony American Finance claims to have made more than $2.8 billion in loans for more than 20,000 properties.
Facebook to Build a Village
Facebook is getting into real estate development. The social networking giant has built an enormous online community and is now planning to build a real world community across from its Menlo Park headquarters.
The new “Willow Campus” would be located on a 56-acre site that it bought in 2015 for about $400 million. It would be a “mixed use” site with about 1,500 units of housing, a grocery store, a pharmacy, a hotel, other stores, and improved transportation services. Many of the units would house Facebook employees, but would also be available to other members of the public. 15% of the units would be offered at below-market rates.
Facebook hopes this new village will help boost much-needed housing in the area but it’s far from a done deal. The approval process is expected to take about two years. The project would then be completed in phases, over a span of up to ten years.
The company is filing its plan with the city this month and expects the approval process to take about two years. The first phase would consist of housing and the grocery store that Facebook hopes to have completed in 2021. Each subsequent phase would take about two years, according to a blog post on Facebook.
South Miami Requires Rooftop Solar on New Homes
South Miami will become the fifth U.S. city to require rooftop solar systems on new homes. Some renovations would also be required to add rooftop solar. City officials voted in favor of the ordinance this last week.
The other four cities that currently require rooftop solar on new homes are all in California. They include Lancaster, Sebastopol, Santa Monica, and San Francisco. Fremont is also expected to adopt this requirement for new single- and multi-family homes, along with wiring for electric-vehicle charging. California cities are working toward a statewide-effort to reach net-zero energy by 2020.
These kinds of rules will help revive the solar market which is experiencing its first pullback in 16 years. I will be talking about the solar slump in an upcoming podcast, and how this slump isn’t expected to last very long.
New York Fines Airbnb Landlords Who Tattle
New York City landlords are getting slapped with fines if they tattle on tenants who are violating the city’s Airbnb restrictions, and they are not happy about it.
Crain’s reports in a blog post that landlords often learn about illegal operations and are willing to share the information with city officials as they attempt to get troublesome tenants out of their buildings. However, it says city officials are alienating landlords with fines instead of partnering with them to enforce Airbnb restrictions.
Landlord attorney, Jeffrey Goldman, told Crain’s that the city’s position on this issue doesn’t make sense. He said: “We have doormen. We have computers, video cameras. We can tell you where illegal behavior is occurring.” But he says: “Every time city inspectors find a tenant engaging in illegal behavior, they immediately issue three or four violations against the building owner.”
Crain’s cites a spokesman for the city as saying: “We urge all New Yorkers to report violations of the law… but reporting violations by others does not mean landlords are shielded from their own legal duty of providing safe homes to paying tenants.”
So, that’s another heads up… for landlords… especially if you own property in New York City.