Real estate investing has gained popularity in recent years — perhaps because the asset is a well-known hedge against inflation. But according to Moody’s Analytics, it’s not all sunshine and rainbows.

Data from Moody’s Analytics reported by Bloomberg revealed that commercial real estate prices in the U.S. fell in the first quarter of 2023, marking the first decline since 2011.

Courthouse records of transactions analyzed by Moody’s showed a drop of less than 1% in the commercial real estate market during the quarter. Multifamily residences and office buildings were the key sectors driving this decline, according to the report.

And this could be just the beginning. Moody’s Analytics Chief Economist Mark Zandi warned that “lots more price declines are coming.”

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Delinquencies And Defaults

Zandi explained the reasoning behind his bearish outlook on Twitter.

The economist pointed out that demand for commercial real estate is weak because of more people working remotely and shopping online. A substantial number of multifamily units are under construction. Meanwhile, it’s challenging to obtain credit for refinancing and purchasing properties.

As a result, Zandi said commercial real estate prices are “expected to be off 10% peak-to-trough by mid-decade.”

And borrowers will likely face difficulties in meeting payment obligations.

“CRE loan delinquencies and defaults are sure to increase, causing agita for the banking system,” Zandi said in a tweet.

Zandi also mentioned that rising delinquencies and defaults “shouldn’t be the catalyst for a revival of the banking crisis” because property owners have built up “ample equity” as a result of the substantial price gains during the pandemic.

Office Vs. Housing

Zandi isn’t the only expert to sound the alarm.

During an interview with former Fox News personality Tucker Carlson, Tesla Inc. CEO Elon Musk issued a bleak warning regarding commercial real estate.

“We really haven’t seen the commercial real estate shoe drop. That’s more like an anvil, not a shoe,” Musk said. “So the stuff we’ve seen thus far actually hasn’t even — it’s only slightly real estate portfolio degradation. But that will become a very serious thing later this year, in my view.”

He argued that the work-from-home trend has substantially reduced the use of office buildings around the world. And that does not bode well for the segment.

“Almost all cities at this point have record vacancies of commercial real estate,” Musk said.

Billionaire investor Stanley Druckenmiller also highlighted the challenges facing office buildings at the 2023 Sohn Investment Conference.

When discussing how the median regional bank has 43% of its loans in commercial real estate, Druckenmiller pointed out that “around 40% of that is in office.”

And because of the Great Resignation and more people working from home, he said, “We have a higher vacancy rate than we had in 2008.”

But it’s a different story for housing.

“Housing has obviously gone down dramatically given the 500 basis-point increase in interest rates,” Druckenmiller said.

“But unlike [2007 and 2008], we actually have a structural shortage in single-family homes going into this. So if things got bad enough, I could actually see housing — which is about the last thing you would think of intuitively — could be a big beneficiary on the way out.”

The reality is, elevated home prices and high mortgage rates mean owning a home is less feasible. And when people can’t afford to buy a home, renting becomes the only option. This creates a stable rental income stream for landlords.

The best part? It’s easy for retail investors to invest in housing — and you don’t actually need to buy a house to do it. There are publicly traded real estate investment trusts that own income-producing properties and pay dividends to shareholders. And if you don’t like the stock market’s volatility, there are crowdfunding platforms that allow retail investors to invest directly in residential real estate with as little as $100 through the private market.

Read next:

• While REITs Are Struggling, Private Market Real Estate Pulls In Huge Returns
• ‘People-First’ Real Estate Fund Shares Rent With Tenants While Generating Strong Returns For Investors

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This article ‘Lots More Price Declines Are Coming’: Moody’s Chief Economist Sounds Alarm On Commercial Real Estate, Warns That Loan Defaults Are ‘Sure To Increase’ originally appeared on Benzinga.com

Jericho Project was awarded $8,906,646 by the U.S. Department of Housing and Urban Development (HUD) as part of a nationwide effort to address street homelessness among unsheltered people in cities and rural communities. Jericho is a nationally-acclaimed nonprofit that for 40 years has combatted the root causes of homelessness and improved the lives of thousands of New Yorkers annually with supportive housing and the vital services to sustain it.

Jericho will serve 90 unsheltered homeless participants per year over a three-year grant period. This is part of the total $60-million that HUD distributed in funding to the New York City Continuum of Care (CoC) for the Unsheltered Homeless Initiative. Overseen by the Department of Homeless Services, the funds were applied for by the Department of Social Services. 

“As a longstanding advocate for permanent supportive housing, Jericho is thrilled to be able to move unsheltered New Yorkers into stable housing and provide ongoing counseling to support them. We applaud HUD and our local Continuum of Care for their leadership in helping some of our most vulnerable neighbors in their time of need,” said Tori Lyon, CEO of Jericho Project.

Jericho will execute the program using its Rapid Rehousing Program, which helps speed individuals and families into affordable apartments through Jericho’s network of landlords who are sympathetic with the plight of homelessness. In addition to helping secure the housing, Jericho provides tenants with ongoing counseling in managing finances and maintaining housing stability to ensure a good experience for both the tenants and the landlords.

The program will provide Temporary Financial assistance (TFA) and HUD is providing long-term vouchers for each participant at the conclusion of the TFA period to ensure long-term housing stability. 

To facilitate this program, Jericho will hire 15 staff members to provide intensive case management services, clinical therapy, housing, and other supportive services. The project is slated to begin July 15th.

Jericho has a positive track record in Rapid Rehousing. In 2022, it served 450 veteran families, moving 170 into permanent housing, and moved 91 other households into permanent housing, on average in less than 30 days.

Overall, Jericho currently provides more than 600 units of housing in the Bronx and Harlem in eight residential buildings which are upgraded for sustainability. With 24/7 staff and onsite counselors, the residences are designed to cultivate a community of camaraderie and wellness. 

Jericho also enables families to achieve stable, safe housing in apartments throughout the city, including 80 studio and one-bedroom units for adults and 35 one-, two-, and three-bedroom apartments for families. 

About Jericho Project: Jericho Project empowers individuals and families experiencing homelessness or housing insecurity by providing housing and person-centered services to address social inequities. For 40 years, Jericho has provided supportive housing and counseling services to thousands of individuals experiencing chronic homelessness, mental illness and substance abuse. 

Jericho Project employs rigorous fiscal discipline and works with valued public-private partnerships and a foundation of dedicated donors, to advance its mission. Jericho’s housing and extended services cost $18,000 per person annually, compared to $50,000 for a single adult shelter, $74,000 for a room in a family shelter, $115,000 for a city jail cell and $1000+ per day for a hospital bed.

http://www.prweb.com/releases/hud_grants_nearly_9_million_to_jericho_project_to_house_unsheltered_new_yorkers/prweb19355708.htm

Spring’s Housing Market Is About To Reach a Peak With ‘Outsized Impact’ Buyers Really Need Right Now

As strange as the housing market has gotten lately, certain seasonal rhythms still prevail. And despite being somewhat dampened by stubbornly high home prices, roller-coaster mortgage rates, and an unpredictable economy, the spring homebuying season is about to reach an apex that’s well worth taking advantage of.

“We’re moving into the period of the year when the number of newly listed homes tends to peak—usually in May or June,” notes Danielle Hale, chief economist for Realtor.com®, in her weekly analysis.

Granted, this seasonal pinnacle might not seem all that noticeable, since the number of new sellers listings their homes is still lower than it was at this time last year. For the week ending May 6, 16% fewer new homeowners listed their homes for sale. Still, this annual decline has been steadily shrinking week by week.

Even though there is still a gap, it’s smaller than what was typical in most of March and April,” explains Hale.

And although new listings are down from last year, total inventory (of both new and old listings) is up 31% for the week ending May 6. In other words, there are plenty of homes for sale, although buyers might need to give stale listings a second look. This portends a potential boost to the overall housing market and offers hope to both buyers and sellers.

In short, the housing inventory is “evolving,” according to Hale. “While further moderation is needed, this is a welcome improvement that comes as new listings near their seasonal high point. Improvement now could have an outsized impact.”

We’ll break down what this all means for both homebuyers and sellers in our latest installment of “How’s the Housing Market This Week?”

The latest mortgage rates and home prices

What’s not so rosy? High mortgage rates are generally holding steady. The interest rate on a 30-year fixed-rate mortgage averaged 6.35% in the week ending May 11, according to Freddie Mac. That’s a bit lower than last week’s 6.39%, but still high enough to make many buyers uncomfortable.

Further compounding buyers’ problems is that housing prices are still inching upward.

The national median list price came in at $430,000 in April, up from $424,000 in March. But for the week ending May 6, home prices grew at a rate of just 2.4% compared with last year. That’s its slowest growth rate since May 2020, when the COVID-19 pandemic was raging across the country.

While tapering home prices is a glimmer of positivity for homebuyers, it’s not enough to really temper their bottom lines quite yet.

“For potential first-time homebuyers, this means that affordability will continue to be a top concern,” explains Hale. “For potential sellers, this means equity is still relatively high.”

What the spring market’s peak means for home sellers

While sellers are understandably thrilled by higher home values, they might have to drop prices soon, since many homes have been sluggishly stuck on the market with no takers.

Home sales have slowed for the past 40 weeks, with homes spending an average of 16 days longer on the market for the week ending May 6 compared with the same week one year ago.

And home sellers might struggle as more properties hit the market in the coming weeks.

“As market competitiveness wanes, sellers may become more flexible,” says Hale. However, the “degree of slowing observed depends on your local market. For example, homes are spending a little over a week longer on the market compared to a year ago in the Midwest and Northeast, where we know housing markets have fared better as affordability keeps demand high.”

Yet in the South and West, homes spent two more weeks on the market for the week ending May 6 compared with a year ago.

The key takeaway here is that while it’s important to understand national context, what really matters are the trends in your local market,” says Hale.

Spring’s Housing Market Is About To Reach a Peak With ‘Outsized Impact’ Buyers Really Need Right Now

Real estate investing has become increasingly popular in recent years. One of the reasons for this is the ability to generate passive income. Passive income streams are a great way to create long-term wealth with minimum effort and involvement.

As someone who has invested in real estate for passive income, I can attest to the benefits of this investment strategy. I remember purchasing my first rental property and feeling both excited and nervous about the prospect of being a landlord. However, as time went on, I found that the passive income generated from my rental property allowed me to achieve financial stability and freedom. I was able to use the rental income to pay off the mortgage on the property and generate a steady stream of passive income each month. It was a great feeling to see my investment grow over time and know that I was securing my financial future.

In this article, we’ll explore how you can build passive income streams as a real estate investor.

Understanding Passive Income

Before we dive into the different ways you can generate passive income as a real estate investor, it’s important to understand what passive income is. Passive income is money that you earn without actively working for it. In other words, it’s income that you earn passively with minimal effort and involvement.

Strategies To Generate Passive Income

1. Rental Properties

Rental properties can provide a steady stream of passive income through rent payments from tenants. To generate passive income from rental properties, investors should aim to purchase properties with positive cash flow, meaning the rent income exceeds the expenses associated with the property. Additionally, investors can hire a property manager to handle day-to-day operations, freeing up their time and allowing for truly passive income.

2. Real Estate Investment Trusts (REITs)

REITs are a passive investment option that allows investors to purchase shares in a company that owns and manages a portfolio of income-producing real estate properties. The income generated from these properties is then distributed to shareholders in the form of dividends. To earn passive income through REITs, investors can purchase shares through a broker or online investment platform.

3. Crowdfunding

Crowdfunding platforms allow investors to pool their money with others to invest in real estate projects, typically with lower investment minimums than traditional real estate investments. Investors can earn passive income through crowdfunding by receiving a portion of the income generated by the property, such as rental income or profits from a property sale.

4. House Hacking

House hacking involves living in a property and renting out a portion of it to generate passive income. This strategy can be particularly effective for those looking to purchase their own home, as the rental income can offset the cost of the mortgage. To earn passive income through house hacking, investors should ensure the rental income exceeds the expenses associated with the property.

5. Short-Term Rentals

Short-term rentals such as Airbnb can be a lucrative way to generate passive income, particularly for those with properties in desirable locations. To earn passive income through short-term rentals, investors should ensure their rental rates are competitive, provide excellent customer service, and maintain a well-appointed and well-maintained property.

6. Flipping Houses

Flipping houses involves buying a property, fixing it up, and selling it for a profit. While flipping houses requires more work than some other strategies, it can still generate passive income if investors hire a team to handle the renovations and sale. To earn passive income through flipping houses, investors should aim to purchase properties with high potential resale value and minimize their time spent on the renovation and sale process.

7. Commercial Real Estate

Commercial real estate investments can provide passive income through leasing the property to tenants. To earn passive income through commercial real estate, investors should aim to purchase properties with desirable locations and solid tenant bases and hire a property management company to handle day-to-day operations.

8. Private Lending

Private lending involves lending money to other real estate investors for their projects. To earn passive income through private lending, investors should ensure the borrower has a solid track record, and the loan is secured by the property, and agree on a competitive interest rate and repayment terms.

9. Real Estate Notes

Real estate notes involve purchasing the debt on a property and earning passive income through interest payments. To earn passive income through real estate notes, investors should ensure the borrower has a solid track record, the property has a desirable location, and agree on a competitive interest rate and repayment terms.

How to Choose the Right Passive Income Stream

Now that you have an understanding of the different ways you can generate passive income as a real estate investor, it’s important to choose the right passive income stream for you. Here are a few factors to consider:

1. Time Commitment

When choosing a passive income stream in real estate, it’s essential to consider the amount of time you’re willing to commit to it. Rental properties and flipping houses require a significant amount of time commitment, as they involve managing tenants, maintenance, and renovations. On the other hand, REITs and real estate notes require very little time commitment, as they involve investing in a company or debt instrument. Consider your lifestyle and how much time you have available to devote to your passive income stream.

2. Upfront Investment 

Another factor to consider when choosing a passive income stream in real estate is the upfront investment required. Rental properties and flipping houses require a significant upfront investment in the form of a down payment and renovations. On the other hand, REITs and crowdfunding require a much smaller upfront investment. Consider your financial situation and how much money you’re willing to invest upfront.

3. Risk Tolerance 

It’s important to consider your risk tolerance when choosing a passive income stream in real estate. Rental properties and flipping houses come with a higher level of risk as they are directly tied to the real estate market and require a significant amount of investment. REITs and real estate notes, on the other hand, come with a lower level of risk as they offer a more diversified portfolio. Consider your risk tolerance and willingness to take on more significant risks for potentially higher returns.

4. Personal Goals

Finally, consider your personal goals when choosing a passive income stream in real estate. Do you want to generate a lot of passive income quickly, or are you willing to take a slower approach? Do you want to be hands-on with your passive income stream, or would you prefer a more hands-off approach? Consider your goals and how your chosen passive income stream can help you achieve them. For example, if you’re looking to generate a lot of passive income (relatively) quickly, flipping houses may be a better option than REITs, which offer more stable returns over time.

Summary

Building passive income streams as a real estate investor can be a great way to create long-term wealth. Whether you choose to invest in rental properties, REITs, crowdfunding, house hacking, short-term rentals, flipping houses, commercial real estate, private lending, or real estate notes, there are many ways to generate passive income as a real estate investor. Consider your personal goals, risk tolerance, and time commitment when choosing a passive income stream, and remember to educate yourself, diversify your portfolio, build a strong team, and be patient.

As I experienced, and while risky, building up passive income streams can be exceptionally rewarding in the long run allowing you to enhance your lifestyle and provide you with financial freedom and flexibility. 

If you find yourself ready to invest in your passive income dreams, you’ll likely need some funding to turn those dreams into a reality. Well, the good news is you are already in the right place! Our team at REI News specializes in finding the most trusted and affordable lenders for real estate investors. Discover your financing optionsby speaking to us today!