Jack Harty is a Boise based commercial mortgage broker that every once in a while, shares his wit and humor by sending out market updates. This month he timely ties it into the football bowl selection process and Boise State's selection for the Cactus Bowl.
While this is the season when bowls are the topic of interest among football fans, the words “interest” and “bowls” are also linked in matters that have nothing to do with football bowls. The trend of interest rates suggests that at this holiday season, the cheap money punch bowl has been cancelled, i.e., it is being yanked off the table.
November 2016 was the worst month for Treasury bonds since December 2009. December 2016 is starting off with the same upward momentum in 10 Yr T Yield. As of mid-day 12/1/16 the 10 Yr T Yield traded as high as 2.49% and closed at 2.44%.
In comparison, on Election Day (11/8/16) the 10 yr T was at 1.88%.
The historic low point for 10 Yr T Yield (by historic I mean the lowest yield ever offered since the First US Congress authorized issuance of bonds in 1790 to pay for the Revolutionary War) occurred recently (7/5/16) when the 10 yr T Yield dropped to 1.37%.
The following chart tells it all:
10 Yr T Yield - Past 6 Months
Anyone who locked [their] rate on any day prior to today is better off than had they locked [their] rate today. Currently the 10 Yr T Yield is >100 basis points higher than its historic low point in July. It is 56 basis points higher than where it stood on Election Day - a mere three weeks ago.
For those who long for a return to historically low interest rates, the best strategy is to pray for economic problems to be perceived by market participants as threatening in Europe, China or the rest of Asia. If that occurs, then the US Treasury bond can re-assume its traditional role as the perceived “safe haven” to perceived economic problems elsewhere. Pray for bad economic news if you intend to lock [your] rate in the near term.
HARTY MORTGAGE ADVISORS
121 N. 9th St. - Ste 402
Boise ID 83702
Direct: 208 514 4766
Main: 208 344 4141
Below is the most recent copy of the Swope Investment Properties newsletter. Their newsletter is all informative and full of good information regarding the residential investment market. This month's newsletter included an article from First Rate Property Management's Maintenance Coordinator, Tara Pecora. In sales, realtors put a lot of emphasis on the appearance of the front door. In Tara's article, she too focuses on the front door, but in a tenant and property safety viewpoint.
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I have attached two articles related to multifamily housing. The first article is from the Idaho Business Review. That article confirms that the current demand to rent is high, but will the demand meet the supply? I tend to agree that we are at least a year from knowing.
The second article, "Tipping Point: Are apartments racing toward a peak or will the boom continue?" is from CCIM that addresses the concern on the national level. Within the article, they provide some great data and charts. One chart shows actual cap rates as well very low projected cap rates for 2016-2018.
Bottom line, I advise my clients to evaluate projects based on a conservative rents and vacancy. I don't recommend buying based on "pie-in-the sky" numbers. I suspect at some point, we will see a correction in rents when our record low vacancies start to climb. I just don't know when. Because of the length of time during the planning and construction, I do believe builders will continue to push through the tipping point. The data that I analyze on a monthly and quarterly basis should help identify any changing data trends. Meanwhile, the data continues to show strong rents and low vacancy.
Last week I attended a meeting where Arla A Kester, CPA with B.A. Harris, LLP was the speaker. Below are links to the handouts which include: The CPA Client Tax Letter, a Tax briefing outlining Trumps plans on tax law changes, and the 2016 tax rates, schedules, and contribution limits. I found all of these to be very interesting and helpful.
Some of Trump's tax plan include changes to: individual income taxes, estate and gift tax, and childcare tax benefits. Again, I found all of it to very interesting.
Stacy McBain who is an agent with Swope Investment Properties, sent us a link to this inforgraphic that was produced by Appfolio, who is a leader in cloud based property management software. The infographic can help Landlords decide whether they should consider hiring a professional property manager to manage their rental property. They state that it really depends on the property owner’s needs and expectations. They admit, some Landlords manage their own properties without any stress, while others find it to be quite a headache. Appfolio states, “One thing is for sure: to successfully manage [rental] properties efficiently, time and energy are essential. Do you have what it takes, or should you hire a pro?"
In a recent article that was recently written, The Z report by Zelman & Associates, it talks about the rental market trend and where they see the future of rental income housing. They forecast an increase of market rentals due to the fact that young adults are leaving the rental market and going towards new homes. They say there will be an increase of real estate investment properties almost triple from last year’s growth. This new demand in rental housing will also drive a market rent that is higher than normal. Those renewing their leases will have the decision of paying rent or buying and moving to the newer homes that are being built.
They predict that over all there will be a steady growth in the availability of urban housing since the younger adults are leaving for single family housing. The housing that is on the market is selling quick, creating a void for the rental market pushing the urban living lifestyle to be more viable. If you are interested in owning or have rentals read this article and decide what the best option is for you.
Below is a link from a blog posting from Mike Hambright with Flipnerd.com. I found the first few paragraphs to be very good for those investing or looking to invest into rental properties. After that, the article moves away from what I see with my clients and my own investment portfolio.
The author lists some pros and cons of owning rental properties. He lists self-managing as a con and I got a chuckle when he stated, "I know some really good property managers, and even THEY don't like the management side". It's true, even professional property managers have discouraging days. Another con listed was the influence on changing laws and taxation relative to rental properties.
He also got into financing, but again, what he is describing doesn't fit my clientele as most have under ten rental homes and the others are using cash or commercial financing, which has completely different guidelines.
In a news release dated October 21, 20146, The Idaho Department of Labor states that Idaho's seasonally adjusted unemployment rate held at 3.8 percent in September. Nationally the unemployment rate increased from 4.9 to 5 percent.
As the current business cycle's economic expansion matures, Idaho continued to produce large over-the-year job growth in September, ranking third nationally. Total nonfarm jobs had a net gain of 21,500, or 3.2 percent, with all sectors except natural resources experiencing over-the-year job growth. 3.8% for Third Month.
We received the below from a concerned Landlord. Additionally we have since learned that the WA State AG has offered a Consent Decree with a $15,000 fine. Some may think $15K is outrageous, while others are saying it is nothing in comparison to the actual fees to fight this and therefore will likely be paid and therefore set a legal precedence for the future.
A recent court filing indicates that the Washington State Attorney General’s Office believes that denying a prospective tenant with a felony conviction is racially discriminatory.
A member of the Attorney General’s Civil Rights Unit served a Consent Decree on Dobler Management Company, a property management firm in Tacoma, after conducting a simulated test on whether the landlord was illegally discriminating against potential tenants.
According to the briefing sent to KTTH’s Todd Herman, in May, the state asked a tester to follow up on a rental property advertisement on Craigslist, which said the apartment complex would automatically deny renters with a felony record. The state’s tester confirmed that the unit was still available and asked if he could apply for the unit despite having a felony conviction. The leasing consultant responded via email that a “felony would be an automatic denial.”
“In denying the tester, the leasing consultant did not consider when the conviction occurred, what the underlying conduct entailed or what the tester had done since the conviction,” the state wrote in a consent decree filed in Pierce County Superior Court.
The state explains that there is a discriminatory link between criminal history and restriction of housing:
“In Washington, racial disparities exist in the criminal justice system. African Americans are arrested, convicted, and incarcerated at higher rates than non-African Americans. As a result, criminal history restrictions on housing justified by a legitimate nondiscriminatory interest and is tailored … a housing provider’s blanket policy prohibiting tenants based on criminal history discriminates based on race or color.”
According to a draft from the AG’s office and a briefing from the attorney representing the property owners, this explanation is based on a new theory called Disparate Impact, which was recently enshrined into law by the Supreme Court. He says that this leads to the assumption that if there are unequal outcomes between races, that tacit racism exists, even without any intent.
The AG’s decree comes on the heels of the Seattle City Council’s renter protection ordinance in August that made it so landlords can no longer choose which tenants they believe will be best. Seattle landlords instead have to choose the first applicant who qualifies. The goal is to prohibit discrimination against people with different forms of payment, such as vouchers and subsidies.
In the case of the State of Washington’s vs. the Pierce County property owner, the AG’s office seeks financial penalties and wants to force property owners into sensitivity training on the issue.
The attorney’s office representing the management company told Herman that there was “absolutely no engagement or outreach” by the AG or any housing regulator on this “novel” theory of liability, adding that the AG Ferguson’s office “began actively and aggressively ‘shopping’ for apartments under the guise that they had felony convictions.”
The defense says that the amended Washington RCW directs that a background check, including a prospective tenant’s “criminal history” is authorized.
Herman likened Ferguson’s standard as a form of blackmail. He says the logic is backward: “You can’t ban felons because there are more African-Americans who are felons. Therefore, if you don’t want felons living in your building, you are a stone-cold racist.”
Herman says the AG is using a “web of dictates” rather than looking to change the standards and deal with the real issues: Getting families back together, increasing graduation rates, etc.
“Is there any concern here in this state at all about why — Why more African-Americans are arrested and charged?” Herman asked. “Or is this the way we’re going to solve the problem, by not letting landlords screen out felons? Which one will solve the problem?”
Below are the results of the SW Idaho NARPM Vacancy Report Q3 2016. We identified two main points.
1. Single family vacancy:
The overall vacancy rate within Ada County remains about the same at 2.6%. The big difference is that single family home rental vacancies increased from 2.8% to 3.7% in Ada County and that they over doubled in Canyon County to 5.2%. These numbers support what we have always said, which is that "once school starts, rentals, especially single family homes, become harder to rent". Rent for single family homes dropped very slightly and it is our prediction they will continue to drop until after winter.
Although single family rents decreased, multi-family rents continued to improve in both counties. Everything indicates that rents will continue to climb, but we think these rents will stabilize for the winter.
See Full Report: SW Idaho NARPM Vacancy Report Q3 2016
- Boise Area Rental Market
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- Boise and Idaho in the News
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- We're Calling it: Rental Market Softens
- Procedures for Inherited Tenants
- Swope Investment Properties Investor Newsletter
- FRPM 1st Quarter Vacancy
- 1st Quarter Vacancy Results
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