Election Musings 2016

November 8, 2016

Election Day 2016. Thank goodness it is finally here. No, not because I am a political wonk, but because I am tired of hearing about it.  Regardless of your candidate of choice, I think we all agree that it will  be a bit more enjoyable to not be inundated with “coverage” from the 24/7 news outlets or rantings on social media from our “friends”.   While I admire people’s passions and advocacy, I will somewhat enjoy returning to hearing only about what a great dinner a friend had or seeing pictures of pets and children.


While I don’t pontificate on election preferences, I do wonder what the next few years will have instore regardless of the winner. Here are a few thoughts along those lines.


Where will interest rates head? After bottoming in the summer, post Brexit, at an all-time low, the 10-year treasury note yield has risen recently to about 1.83%.  Still rather low but headed upward and would seem to continue on that trajectory in the foreseeable future.  Mortgage rates are sitting around 3.50 % for a 30 year fixed and 2.77% on a 15 year, per Bankrate.com’s averages.


Recession or not? I heard at a conference not too long ago that it is about 75% likely that we will experience a recession in the first 2 years of the next President’s term, regardless of the winner, based on historical patterns.  The good news is that the expectation is that the next recession will not be as severe and broad as the last.  It may be focused in regions where high growth has been occurring over the last few years.  For areas like ours, where we have recovered but not too rapidly, we may not be as significantly affected.


What is the next wave in housing? Urban, downtown living has been the trend and continues to carry momentum.  But as with everything, how will it evolve?  Will apartment dwellers decide they would rather own?  Will they want to stay in the city or move out for more affordable space?  Are millenniums ready to become first time home buyers?  Do we have affordable housing stock to sell to first-time buyers?  I keep hearing that new construction is steady but there is a shortage of qualified, skilled labor that is making it difficult to build affordable, first time homes.


Will Amtrak bring a wave of new tourists into Virginia’s Blue Ridge? The new station is slated to open in downtown Roanoke next year.  Will the train help us continue to become a destination?  I think with a good marketing effort we will see more folks from DC, the northeast and European countries coming to visit.


How will unmanned vehicles (think drones and driverless cars) change the way we live? Did you know that the Ridge and Valley Chapter of the Association for Unmanned Vehicle Systems International (AUVSI) has a significant membership in our region? There are many local companies working with Google, Amazon, the Department of Defense and many other interested entities to define and establish how Unmanned Vehicles are introduced and used going forward. Burritos are being delivered by drones as part of a study at Virginia Tech and  Liberty University is starting a major program in unmanned vehicle repair next semester. There is great opportunity for our region to be a leader in this sector.  How can you be part of it?


And what will our region look like 10 years from now? In my opinion. We need to think bigger geographically and cooperatively.   It is great that Roanoke(Carilion) and Blacksburg(Tech) are working together on many new endeavors, but as the future develops, we should consider the benefits of joining forces as a mega-region.  Think beyond political boundaries to perception.  Imagine if the area from Wytheville to Lynchburg to Martinsville to Lexington became perceived as a region.  What could we get accomplished without giving up autonomy but leveraging each areas’ strength and understanding that the success of one will benefit the whole?  Jobs created in Pulaski indirectly benefit Roanoke City because workers in Pulaski will come to Valley View to shop and grab dinner.  Don’t believe me?  Go to dinner on a Friday night at one of the restaurants near the Mall.   We are all integrated as citizens of this region. Welcome the successes of each other and develop partnerships to benefit everyone.  Consider the recent formation of the Western Virginia Regional Industrial Facilities Authority(WVRIFA) and it’s acquiring of land for a new industrial park as a forerunner of mega-region opportunities.  Maybe I-73 will be next.


I hope you all have a great election day.


Thieves, Scammers, and Scaliwags- Oh My!

Thieves have hit the real estate transaction market. Yeah, no surprise there, is it? Given that we are all exposed to some degree in today’s “e”-world, every online interaction we participate in is at risk of being spammed, phished, trolled or spoofed.
But, it is easy to not realize how prevalent the risk of identity theft is during a real estate transaction. So buyer, seller, REALTOR, lender, attorney, settlement agent, appraiser, home inspector, title examiner BEWARE.
If you are buying, selling, or refinancing real estate or helping the transaction to occur, you are being targeted for fraud. Scaliwags are watching both online and for yard signs for listings, announcements of the sale of a property, and collecting information via the internet and in-person to determine when a property is being sold or financed. When they find one, they are then spamming, phishing, trolling or spoofing all parties involved in the transaction to try and gain access to personal account information in hopes of being able to steal the monies that are changing hands, be them from the lender to the borrower, or from the buyer to the seller. And if they get their grubby hands on your information they will use it to try and steal you funds.
One recent example. A settlement closing officer was contacted just prior to closing via email by a person pretending to be the seller with “new” wiring instructions. Those instructions were to have the seller’s proceeds wired to a different bank account than what had been part of the original instructions from the seller. The diligent and observant escrow officer questioned the new e-mailed instructions as she had not previously corresponded with the seller via email and the email was poorly written. To confirm the change, the escrow officer called the seller and the seller confirmed that they had not sent “new” wiring instructions. In fact, they were insistent on receiving a check for their proceeds. It was an attempt by the crook to have the funds wired to a fraudulent account. The question you probably are asking is how did the criminal know that the seller was due to receive funds just days later. As I mentioned when I started, everybody has everything online now and unfortunately the criminal element is very adept and informed on how to gain access to information that they can use to get your funds.
So, what can we do to limit the chance of fraud.
1. Be suspicious of requests(especially via email) for secrecy or pressure to take action quickly.
a. Out of Band Communication: Establish other communication channels, such as telephone calls, to verify significant transactions. Arrange this second–factor authentication early in the relationship and outside the email environment to avoid interception by a hacker.
b. Digital Signatures: Both entities on either side of transactions should use digital signatures. However, this will not work with Web–based email accounts. Additionally, some countries ban or limit the use of encryption.
c. Delete Spam: Immediately delete unsolicited email (spam) from unknown parties. Do NOT open spam email, click on links in the email or open attachments. These often contain malware that will give subjects access to your computer system.
d. Forward vs. Reply: Do not use the “Reply” option to respond to any business emails. Instead, use the “Forward” option and either type in the correct email address or select it from the email address book to ensure the intended recipient’s correct email address is used.
Significant Changes: Beware of sudden changes in business practices. For example, if a current business contact suddenly asks to be contacted via their personal email address when all previous official correspondence has been on a Company email, the request could be fraudulent. Always verify via other channels that you are still communicating with your legitimate business partner.

So, beware of the crooks. Thanks to Fidelity National Financials Fraud Insights Newsletter for providing details for the example above and for the helpful ways to avoid a scammer.

Tax Day Fraud

Tax Day Fraud

Good afternoon all,

Happy Tax Day……well not exactly. As I am sure you are all aware, Federal taxes are not due this year until Monday, April 18th. Why was the due date moved this year you ask? Well, today is a holiday for public employees in Washington DC. They celebrate Emancipation Day on April 16th each year which is the day that Abraham Lincoln signed the Compensated Emancipation Act, which effectively ended slavery in Washington DC by compensating slaveholders for freeing their slaves in 1862. Since the 16th falls on a weekend this year, the public employees, including the IRS, get today off. So, thanks to a DC holiday, you get until Monday to file your Federal return. http://ktla.com/2016/04/14/why-tax-day-was-moved-to-april-18-this-year/

BUT, also…..

Having those extra days, apparently provides scammers and criminals with the opportunity to try and defraud many unsuspecting citizens using the IRS as a guise. I heard a warning this morning on WFIR about the risk of getting emails and phone calls from scammers pretending to be the IRS to get your personal information. To protect you and your clients, keep in mind that the IRS only uses traditional, certified mail to contact you about important information. http://wfirnews.com/local-news/beware-of-phone-scams-says-irs

And Sellers beware……

Please let your clients know that real estate transactions are being targeted as easy prey for scammers as well. There are many instances where criminals are cyber-invading emails or other information of the parties involved with a real estate transaction, be it a purchase or refinance, residential or commercial. The scammer will find details about the transaction, then a few days before closing, under the guise of the seller or borrower or their representative, they will attempt to have the funds wired to a fake account. Some have been successful, costing millions of dollars across the country. A best practice, we often employ when there is a question regarding the validity of the instructions we receive is to verify any changes to wiring instructions or to where funds are to be delivered via phone or in person.

And to end on a happier note. We are thankful it’s going to be a beautiful weekend. Go out and support the Blue Ridge Marathon or the Down by Downtown Music Festival. There are lots of exciting things happening in this wonderful Region in which we all live.

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Rising Rates

Rising Rates 2016

Rising interest rates have already occurred, starting with the Federal Reserve’s 25 basis point increase in December. Conventional wisdom says that another increase will likely happen early this year. Certainly, this tightening by the Fed could put a dampening on the lending business, since, banks will pass along those higher rates to its borrowers. And yes, that sequence of events has already started, as banks increased their prime lending rate just after the Fed’s increase happened. But, the relatively slight movement in the lenders’ cost of funds, in my opinion, will serve as the proverbial “stick” to prod more lenders to aggressively seek new commercial loan business. As a result, I expect commercial lending activity to remain strong throughout the coming year.

Why do I believe that higher rates will lead to more lending in 2016?
The rising rate environment starts to put pressure on the banks’ Net Interest Margin(NIM) as their short-term borrowing costs from the Fed are now increasing. Coupled with the fact that the national (NIM) average has already decreased from 3.8% in 2010 to under 3% in 2014, banks will want to turn the tide, or at least preserve their current level of Net Interest Income(NII) as rates rise. As a result, I believe that lenders will be more aggressively looking for quality commercial loans. Commercial relationships are valuable to lenders as they understand that lending to businesses can lead to other relationships with the business customer. Further, commercial loans tend to re-price much more quickly than the typical consumer mortgage or car loan. In the anticipated rising rate environment, lenders will want to have the flexibility to re-price loans more regularly in an attempt to improve their NII and the corresponding NIM. Seeking out more commercial loans will provide them with this opportunity going forward.

But haven’t lenders already been pursing commercial relationships?
The answer is generally yes. But the rising rate environment will stimulate their appetite for these assets. In order to compete for quality relationships, bankers will become more aggressive in pursuing those relationships. Also, the banks are in a stronger capital position as we enter 2016 and are in a better position to take on additional quality loan risk.

What other factors support commercial loan growth in a rising rate environment?
The rising rate environment is predicated on the belief that the U.S. economy is growing and jobs are being added. If this is true, commercial borrowers should be seeking viable ways to expand. With aggressive lenders offering still historically low rates and potentially better terms, then the business owner may be willing to take on the additional leverage being offered. Further, it’s an election year. Do you really think the Fed would be increasing rates if it thought that their actions would lead to a decline economically during this year? A majority of the Fed governors must believe that an increase in rates will have a positive or neutral effect during the upcoming year while enabling them to address any perceived inflationary pressures. It also restores their greatest tool to combat an economy that will inevitably slow at some point in the future; the rate cut. Lastly, the recent stock market volatility can serve as an impetus to commercial real estate as investors rotate their capital into an asset class that they deem more predictable and stable.

So thanks to rising rates, I expect 2016 to be a good year for commercial real estate lenders, borrowers, and all of us associated with that important part of the economy.

I hope you are having a great start to this new year.


Real Estate Trends

Greetings all;

I recently attended the 25th annual Real Estate Trends conference organized and hosted by the VCU School of Business in Richmond. This was my first time attending and I found that the speakers were informative and provided useful information regarding national real estate trends, government sponsored programs to support housing initiatives, and the movement towards using social media in real estate.

I thought I would share with you the top takeaways from the best of the presenters. She is Mary Ludgin and is a partner and Director of Global Research at Heitman. Heitman is a Chicago-based, global investment firm focused solely on real estate.

Email me back if you would like to see the full version Ms. Ludgin’s presentation and I’ll get it to you.

Here are the highlights of Ms. Ludgins comments:

National Trends

-Economic Recovery has only been OK, but US Real Estate has had a strong performance with unleveraged real estate returns over the last 4 years exceeding 11%.

-We are closer to the end of the expansion than the beginning. Average post-WWII period between recessions is 61 months, we are now in month 75 since the bottom of the last recession.
Average recession begins 5 years after FED starts to tighten, which hasn’t happened yet and 5 years after housing starts reach 1 million units which occurred in January 2015.
Other factors were discussed but they all point to it being closer to the end of the expansion than the beginning. Mary’s “guess” was that we still have about 1 to 3 years left in this expansion.

-Offshore buyers are representing a greater percentage of cross-border investors growing from 7.6% to over 10.7%. European and Australian investors are moving into the US.

-Strong growth is dependent on strong job growth. While the US has been relatively flat, certain metro areas like Austin, San Jose and Charlotte have been thriving.

-Industrial RE market hasn’t peaked yet but is trending up. Apartments are still hot everywhere. Office space has been a slow recovery due to slow job growth, redesign of space, and shrinking square foot per worker. Retail-Top end is doing well, older less attractive space needs to be repurposed.

Forward-looking Investment Advice (screen shots taken from Ms. Ludgin’s presentation)

real estate trends 1

real estate trends 2

I hope you find the informational interesting and useful.

Let me know your thoughts about these emails. If you’d like to be taken off the distribution list, I’ll be glad to do so.

Enjoy your weekend,