Weekly News (March 4, 2020)
This week’s Interest Rate (10th Week)
30 Y Rate: 3.370%/ 15 Year Rate:2.875%/ 10 Y Treasury: 1.377%/ FHA:3.125%/ VA:2.875%
Prime Rate:4.25% / Ref IR: 1.00- 1.25%
Federal Reserve issues FOMC statement – The rate cut announcement by 0.5%
(The FOMC 3/3, The Record 3/4)
- FOMC made fast and big step to lower Ref IR. The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 0.5 percentage point, to 1 to 1.25 percent.
- Some experts say they will lower the rate soon again.
- Stock market responded positively in short period of time, but soon they fell afterwards. Dow fell 786 by 3% as well as S&P 500 by 3%.
Google will invest $10B to build Data Centers in 2020
(The Korea Times 2/28)
- Anti-trust Investigation of Google is over now and the company announced it’s interconnection system between local offices through Data Centers.
- Those cities to have data centers include Cal, Colorado, GA, MA, Nebraska, New York, Oklahoma, Ohio, PA, TX, Washington. This project will create thousands of jobs including engineers, construction workers, and co-work with local enterprises.
Amazon signed the lease for office spaces in Middle Village, Queens
(The Korea Times 2/28)
- Amazon will set up the 300,000 sf office space in Rentar Plaza which is 1.6M sf mixed use complex. Amazon will use the 190,000 sf vacant space and 109,000 sf former Metropolitan Museum space.
- Amazon did sign the 335,000 sf in Hudson Yard, Manhattan last December.
- Also Amazon is under negotiation for “WeWork” space in Midtown, which Lord’s Taylor used.
850 sf Commercial co-op sold at $800,000 to Korean Doctor ($941/sf)
( The NYT 3/4)
- The 850 sf office space, in a medical/dental co-op in Lenox Hill, was previously occupied a dental clinic : 121 East 60th St between Lexington and Park Ave.
- The 11-story building, which was built in 1924, has four offices on each floor.
- Buyer is Dr. Sookyung Kim and Dr. Byung K. Choi and the broker was Istvan Ritz of Elliman.
No house flippers allowed: East NY residents push for ban
(The Real Deal 3/2, C Land TWM 3/2)
- “East New York” residents and community leaders are pushing to ban house flippers from their neighborhood, trying to end the speculative investment play that has grown in popularity and led to rising prices.
- The New York DOS will hold a hearing on a cease-and-desist bid for the neighborhood on March 5, and if the designation is granted, East New York homeowners would be allowed to opt into a list restricting home flippers from getting in touch with them, according to The City. Those who break the law would face fines, criminal charges or the loss of their real estate licenses.
- The DOS has had the authority to grant cease-and-desist protections to neighborhoods since 1989 but has done it for just three zones in the city: two in northeastern Queens and one in the northeastern Bronx. A report in 2018 from the Center for New York City Neighborhoods found that East New York was the neighborhood where investors were flipping homes at higher rates and for higher profit margins than any other part of Brooklyn.
- Between 2016 and 2017, flippers bought and quickly resold 246 East New York homes, according to the Center for New York City Neighborhoods. The group found that speculators sold homes at prices up to 50 percent higher than comparable non-flip sales in the neighborhood.
Drive-by flipping: Companies hiring Uber drivers to spot homes ripe for sale
(The Real Deal 2/28, C Land TWM 3/3)
- Companies on the hunt for houses to flip in Chicago, Atlanta and Charlotte, North Carolina are getting help from an unexpected source — ride-share drivers. Uber and Lyft drivers cruise gentrifying neighborhoods to photograph houses with stacked up mail, abandoned cars in the yard or knee-high grass, all signs of distress that could mean a house is an attractive target for a flip.
- Some flipping companies pay the drivers up to $1,500 per referral, while others offer a percentage of the net profit on a successful flip.
- Uber and Lyft drivers may not be making immediate returns on their sleuthing. Some partially blame the practice for the 2008 housing crisis. House flippers typically upgrade a home to make it more valuable and then sell it within one or two years of purchase.
General RE residential market trend and future in US
(The Korea Daily 3/4 – HongJik Lee at HanGook Bank))
- Residential market moving is an important decision fact of US Government policy and US overall economic trend. Residential market sector take 15% of US GDP. About 65% of households are house owners. Owning house is 25% of average family assets.
- Owning homes is depending lower mortgage rates and household income growth. Unemployment rate is 3.6% which is lowest in 50 years. Income growth is 3% from a year ago. Household formation gains momentum – more younger generation are looking for house to settle in.
- Residential supply is short due to 1) not enough inventory (5 month) and 2) not enough new construction (lower than 50 year average), especially in low price range homes.
- Construction sector has experienced shortage of workers: experienced senior workers retired, not enough younger generation fill in.
- House price is recovered from 2012 and in increased average 6.1% per year till 2018. In 2019 price increase slowed down to 3.5%.
- Wall Street and some experts in residential market forecast market in 2020 looks fair in terms of demand, supply, price. And it will keep overall growing mode, even though we have COVID-19 situation.