Sweeping tax reform and a changing economic landscape stand to impact mortgage lending in 2018 and beyond. Mortgage interest rates haven’t been this high since December 2016, while anticipated rate hikes from the Federal Reserve put upward pressure on interest rates. Freddie Mac reports that as of February 8, 30-year fixed mortgage rates were up 33 basis points since the start of 2018. And, The Mortgage Bankers Association (MBA) predicts the Federal Reserve will raise the federal funds rate four times in 2018 and twice more in 2019. Simply reaching 5-percent would mark the highest rates since 2011.
Thanks to our strategic partners at IPX1031 for the following insights. For more detail on tax reform and local market forecasts, please visit https://www.northeastpcg.com/register2018 to register for upcoming investor workshops with IPX1031 in New York, Connecticut & Massachusetts.
Today, a good location, well-maintained units, attractive common areas and the right amenities are no longer enough to keep occupancy rates high and the property value of an apartment building up. Instead, success in commercial real estate investing can often hinge on smart property management, which can ensure that a seemingly profitable investment doesn’t instead turn into a negative cash-flow mistake.
We recently blogged about the use of IRS 1031 as a preferred strategy for active real estate investors that wish to defer their capital gains liability. In its current form since 1986, a “1031 exchange” is a guideline for selling one qualified property and then buying another qualified property within a specific period of time. While a “1031 exchange” enables investors to reinvest funds which otherwise would have been paid to the IRS, the specific timeline for compliance with IRS 1031 is often problematic. It’s not often likely an investor can identify a suitable exchange property following the sale of an asset within the 45 days allowed by the IRS.
Northeast Private Client Group
It’s not surprising to see a surge of activity in December as investors rush to close property sales transactions by the end of the year. But this year was something special, with property sales across the nation much higher than usual after the Presidential Election and continuing right to year end. In fact, we were closing deals right up through the last weekend in December. These last two transactions for 2012 were a student housing property leased to Sacred Heart University in Fairfield, CT, and a 94-unit apartment property in Chicopee, MA.
We’ve closed the pages on 2012 and are looking forward to an even better 2013. In fact, we see the commercial real estate market in the Northeastern U.S. continuing its steady upward momentum this year as vacancies continue to decline and rents rise across all segments of the commercial real estate market — especially for retail and multifamily assets. Vacancy rates over the next four quarters are forecast to decline:
With our recent sale of a student housing property in Connecticut to a private investor from New Jersey, it’s clear that the student market offers an attractive alternative to other investment asset types. This is largely driven by a growing population of undergraduate students in the Northeastern U.S.
As we look to serve the needs of property owners and investors in the mid-market segment in the regional submarkets across the Northeast, we’re particularly excited to have a growing presence in the Boston market. Frankly, we believe it’s a great time to be in the Boston area because that commercial real estate market is one of the brightest spots in the entire country. This is according to a recent report by Moody’s Investors Service, which tracked commercial real estate prices in major markets across the U.S. during the 12-month period that ended September 30.
With a grocery-anchored shopping center recently sold and a new center just listed for sale, we’re starting to see renewed interest and activity in multi-tenant retail assets. As consumer spending starts to firm up, mid-market investors that are patient and willing to adapt to market realities can be expected to come out ahead in this sector as we look to 2013 and beyond. Simply put, with rent growth back on the agenda, the retail sector is expected to offer increased returns as other leased investments continue to lag.