Norada Real Estate Investments

  • Home
  • Markets
  • Properties
  • Notes
  • Membership
  • Podcast
  • Learn
  • About
  • Contact

Archives for June 2023

Fed Chair Powell Expects More Interest Rate Hikes in 2023

June 22, 2023 by Marco Santarelli

Fed Chair Powell Expects More Interest Rate Hikes

Federal Reserve Chairman Jerome Powell recently reiterated that the fight against inflation is far from over and that more interest rate increases are likely in the near future. Speaking before the House Financial Services Committee, Powell indicated that the decision to hold off on rate hikes during the recent Federal Open Market Committee (FOMC) meeting was just a temporary pause and not a signal that the Fed is done raising rates.

Fed Chair Powell Expects More Interest Rate Hikes

Despite some moderation, inflation remains a concern, with pressures still running high. The Fed's focus on core inflation highlights the persistent upward pressure on prices. Powell's remarks underscored the importance of a gradual and cautious approach to policy adjustments, given the progress made and the need for a balanced economic landscape.

Inflation Concerns Persist

Powell acknowledged that while inflation has moderated somewhat since last year, it remains well above the Federal Reserve's target of 2%. He emphasized that inflation pressures continue to run high, and there is a long way to go before inflation can be brought down to the desired level. Despite recent cooling, inflationary pressures persist, and the central bank is committed to taking further action to address the issue.

Anticipated Rate Hikes

Following the recent FOMC meeting, officials signaled that they foresee an increase in interest rates totaling 0.5 percentage points by the end of 2023. This projection implies two additional rate hikes, assuming quarter-point increments. The current benchmark borrowing rate set by the Fed is in the range of 5% to 5.25%. Powell's remarks align with the consensus view among FOMC participants that further rate increases will be necessary in the coming months.

Assessing Core Inflation

When evaluating inflation, the Fed focuses on core inflation, which excludes food and energy prices. According to the central bank's preferred measure of personal consumption expenditures prices, core inflation was at a rate of 4.7% year-over-year through April. The core consumer price index for May stood at 5.3%. These figures demonstrate that core inflation remains elevated, emphasizing the need for continued vigilance and monetary policy adjustments.

Lagging Effects of Monetary Policy

Monetary policy measures, including rate hikes and the reduction of bond holdings on the Fed's balance sheet, often have delayed effects on the economy. As a result, the decision to abstain from raising rates during the most recent meeting was influenced by the need to observe the impact of previous tightening measures. Powell highlighted that the economy continues to feel the effects of monetary restraint, particularly in interest rate-sensitive sectors. The full consequences of this policy tightening will take time to materialize, especially with regard to inflation.

Adjusting Policy Pace

Powell acknowledged that the Fed has adjusted its approach to the policy after implementing aggressive rate hikes comparable to the early 1980s. Previously, the Fed had raised rates by 0.75 percentage points consecutively four times. However, Powell now believes that a more moderate pace is appropriate. He emphasized that given the progress made thus far, raising rates is still a viable option but should be done gradually and cautiously. The adjustment in policy pace reflects the evolving economic landscape and the need for a balanced approach.

Inflation Expectations and Economic Growth

Powell addressed the importance of well-anchored inflation expectations for predicting future price trends. He cited the University of Michigan consumer confidence survey, which showed a dip in inflation expectations for the next year to 3.3%, the lowest level since March 2021. While this indicates some positive developments, Powell cautioned that reducing inflation to the desired level would require slowing down economic growth below its trend rate. He also stressed that future rate decisions would be based on incoming data and evaluated on a meeting-by-meeting basis, rather than adhering to a predetermined course.

Regulatory Practices and Banking Turmoil

In his remarks, Powell briefly touched upon the banking turmoil experienced earlier in the year. He emphasized that the episode served as a reminder of the importance of appropriate supervisory and regulatory practices. The Fed is committed to ensuring the stability of the financial system and will continue to evaluate and adjust its regulatory framework as needed. Powell's acknowledgment of the banking turmoil highlights the Fed's dedication to maintaining a resilient financial sector and underscores the interconnectedness between monetary policy and financial stability.


Source:

  • https://www.cnbc.com/2023/06/21/powell-expects-more-fed-rate-hikes-ahead-as-inflation-fight-has-a-long-way-to-go.html

Filed Under: Economy, Financing, Mortgage, Trending News Tagged With: Fed Chair, Fed Rate, Fed Rate Hike, Federal Reserve, Interest Rate Hikes

Housing Foreclosure Rates and Statistics 2023

June 15, 2023 by Marco Santarelli

Housing Foreclosure Rates

Housing Foreclosure Rates

In 2010, foreclosure rates peaked amid what became known as the “foreclosure crisis.” The housing bubble, foreclosures, and mortgage-backed assets devalued due to subprime mortgage delinquencies. Since then, U.S. foreclosure rates have fallen. After the COVID-19 pandemic, thousands of individuals lost their jobs and couldn't pay their mortgages, threatening another foreclosure wave.

The government instituted a foreclosure moratorium, a mortgage forbearance program for federally backed loans, and new mortgage servicing legislation. 2020 and 2021 foreclosures were modest. In 2022, foreclosure rates increased and are predicted to rise further in 2023. High-interest rates could bring more foreclosures in 2023. As some homeowners default on their mortgages, housing inventory will rise in 2023. Homes will also spend more time on the market, resulting in an increase in overall housing inventory.

ATTOM, a leading curator of real estate data nationwide for land and property data, released its Year-End 2022 U.S. Foreclosure Market Report, which shows foreclosure filings— default notices, scheduled auctions, and bank repossessions — were reported on 324,237 U.S. properties in 2022, up 115 percent from 2021 but down 34 percent from 2019 before the pandemic shook up the market. Foreclosure filings in 2022 were also down 89 percent from a peak of nearly 2.9 million in 2010.

Those 324,237 properties with foreclosure filings in 2022 represented 0.23 percent of all U.S. housing units, up slightly from 0.11 percent in 2021, but down from 0.36 percent in 2019 and down from a peak of 2.23 percent in 2010.

“Eighteen months after the end of the government’s foreclosure moratorium, and with less than five percent of the 8.4 million borrowers who entered the CARES Act forbearance program remaining, foreclosure activity remains significantly lower than it was prior to the COVID-19 pandemic,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “It seems clear that government and mortgage industry efforts during the pandemic, coupled with a strong economy, have helped prevent millions of unnecessary foreclosures.”

ATTOM’s year-end foreclosure report also includes new data for December 2022, showing there were 30,822 U.S. properties with foreclosure filings, up less than 1 percent from the previous month but up 72 percent from a year ago.

  • Lenders repossessed 42,854 properties through foreclosures (REO) in 2022, up 67 percent from 2021.
  • It was down 70 percent from 2019 (143,955) and down 96 percent from a peak of 1,050,500 in 2010.
  • States that saw the greatest number of REOs in 2022 included Illinois (5,518 REOs); Michigan (3,669 REOs); Pennsylvania (2,741 REOs); New York (2,405 REOs); and California (2,223 REOs).

Housing Foreclosure Stats in the United States for 2023

The housing market is a critical component of the US economy, and foreclosure statistics play a crucial role in determining its health. ATTOM, a leading curator of real estate data nationwide, recently released its April 2023 U.S. Foreclosure Market Report. The report analyzes foreclosure filings, default notices, scheduled auctions, and bank repossessions for the month of April 2023, comparing them with previous years.

Housing Foreclosure Stats in the United States

The April 2023 U.S. Foreclosure Market Report released by ATTOM, a prominent curator of land, property, and real estate data, reveals some interesting insights into the foreclosure activity nationwide. In this report, we'll explore the key findings and trends related to foreclosure starts and completed foreclosures in the United States.

Foreclosure Activity Shows a Slight Decline

According to the report, there were a total of 32,977 U.S. properties with foreclosure filings in April 2023. This figure represents a 10 percent decrease from the previous month but an 8 percent increase compared to the same period last year. While the overall numbers have risen slightly on an annual basis, the recent decline indicates a positive trend in foreclosure activity.

States with Highest Foreclosure Rates

In April 2023, several states experienced higher foreclosure rates than the national average. The top five states with the highest foreclosure rates per housing unit were:

  • Illinois: 1 in every 2,221 housing units
  • Maryland: 1 in every 2,283 housing units
  • New Jersey: 1 in every 2,334 housing units
  • South Carolina: 1 in every 2,495 housing units
  • Delaware: 1 in every 2,603 housing units

These numbers highlight the regions where homeowners face a relatively higher risk of foreclosure.

Metropolitan Areas with High Foreclosure Rates

Among the 223 metropolitan statistical areas (MSAs) with a population of at least 200,000, several locations stood out with the highest foreclosure rates in April 2023. These included:

  • Atlantic City, NJ: 1 in every 1,356 housing units
  • Cleveland, OH: 1 in every 1,580 housing units
  • Lakeland, FL: 1 in every 1,649 housing units
  • Columbia, SC: 1 in every 1,651 housing units
  • Chicago, IL: 1 in every 1,950 housing units

These MSAs demonstrate the localized impact of foreclosure activity on housing markets.

Foreclosure Starts Experience a Decline

Foreclosure starts, which mark the beginning of the foreclosure process, decreased by 7 percent in April 2023 compared to the previous month. Lenders initiated foreclosure proceedings on 22,455 U.S. properties during this period, indicating a positive trend in foreclosure prevention efforts.

However, it's worth noting that some states witnessed an increase in foreclosure starts. Maryland, New Mexico, Iowa, Utah, and Florida experienced the most significant monthly increases in foreclosure starts, ranging from 12 percent to 55 percent.

Major Metropolitan Areas with High Foreclosure Starts

In metropolitan areas with a population greater than 1 million, the following cities reported the highest number of foreclosure starts in April 2023:

  • New York, NY: 1,711 foreclosure starts
  • Chicago, IL: 1,153 foreclosure starts
  • Miami, FL: 846 foreclosure starts
  • Los Angeles, CA: 829 foreclosure starts
  • Philadelphia, PA: 747 foreclosure starts

These figures underline the challenges faced by homeowners in densely populated areas.

Decline in Foreclosure Completions

Completed foreclosures, also known as Real Estate Owned (REO) properties, saw a 39 percent decrease in April 2023 compared to the previous month. Lenders repossessed 2,919 properties during this period. While this represents a positive trend in preventing foreclosures, there was a 3 percent increase in completed foreclosures compared to the same period last year.

States with the Most Completed Foreclosures

In April 2023, several states stood out for having the highest number of completed foreclosures or REOs. The states with the most completed foreclosures during this period were:

  • Illinois: 334 REOs
  • Pennsylvania: 218 REOs
  • New York: 199 REOs
  • Texas: 184 REOs
  • California: 171 REOs

These figures shed light on the states where completed foreclosures have had a significant impact on the real estate market.

In summary, the April 2023 U.S. Foreclosure Market Report indicates a slight decline in foreclosure activity compared to the previous month. While the overall numbers have seen a slight increase on an annual basis, the recent decrease in foreclosure starts and completed foreclosures suggests a positive trend in foreclosure prevention efforts.

Certain states, such as Illinois, Maryland, New Jersey, South Carolina, and Delaware, continue to face relatively higher foreclosure rates per housing unit. Additionally, metropolitan areas like Atlantic City, Cleveland, Lakeland, Columbia, and Chicago experience localized impacts with high foreclosure rates.

It's crucial for homeowners, lenders, and policymakers to monitor foreclosure rates and identify any potential shifts or trends in the market. Efforts to prevent foreclosures and support struggling homeowners should remain a priority to ensure housing stability and minimize the negative impact on individuals and communities.

Top 10 ZIPs with Highest Foreclosure Rates in April 2023

Top 10 ZIPs with Highest Foreclosure Rates
Source: ATTOM

The foreclosure market in the United States has seen fluctuations in recent years, with varying rates across different states and metro areas. According to ATTOM's April 2023 U.S. Foreclosure Market Report, there were a total of 32,977 properties with foreclosure filings in April 2023. While this number was down 10 percent from March 2023, it was up 8 percent from April 2022. This report provides valuable insights into the top 10 ZIP codes with the highest foreclosure rates during this period. Let's dive deep into the data and explore the foreclosure landscape in April 2023.

Foreclosure Rates by State

ATTOM's analysis revealed that several states had higher foreclosure rates compared to the national average of one in every 4,234 housing units. The top five states with the highest foreclosure rates in April 2023 were:

  • Illinois: One in every 2,221 housing units
  • Maryland: One in every 2,283 housing units
  • New Jersey: One in every 2,334 housing units
  • South Carolina: One in every 2,495 housing units
  • Delaware: One in every 2,603 housing units

These states faced significant challenges in terms of foreclosure activity, indicating potential economic and housing market struggles in those areas.

Foreclosure Rates by Metro Areas

Among metro areas with a population of at least 200,000, the following locations experienced the highest foreclosure rates in April 2023:

  • Atlantic City, NJ: One in every 1,356 housing units
  • Cleveland, OH: One in every 1,580 housing units
  • Lakeland, FL: One in every 1,649 housing units
  • Columbia, SC: One in every 1,651 housing units
  • Chicago, IL: One in every 1,950 housing units

These metro areas faced significant challenges in terms of foreclosure rates, which can impact local housing markets and communities.

Foreclosure Rates in Major Metro Areas

For metro areas with a population greater than 1 million, the following locations had the worst foreclosure rates in addition to those mentioned earlier:

  • Riverside, CA: One in every 2,046 housing units
  • Philadelphia, PA: One in every 2,079 housing units
  • Jacksonville, FL: One in every 2,091 housing units

These cities, along with Cleveland and Chicago, experienced substantial foreclosure rates, indicating potential economic distress in these regions.

Top 10 ZIP Codes with Highest Foreclosure Rates

Within the larger context of the foreclosure market, specific ZIP codes stood out for having the highest foreclosure rates in April 2023. The top 10 ZIP codes were:

  • 77303 – Conroe, TX: One in every 243 housing units
  • 19438 – Harleysville, PA: One in every 293 housing units
  • 33035 – Homestead, FL: One in every 324 housing units
  • 60428 – Markham, IL: One in every 363 housing units
  • 89143 – Las Vegas, NV: One in every 393 housing units
  • 08004 – Atco, NJ: One in every 405 housing units
  • 44105 – Cleveland, OH: One in every 437 housing units
  • 60478 – Country Club Hills, IL: One in every 441 housing units
  • 60466 – Park Forest, IL: One in every 450 housing units
  • 11575 – Roosevelt, NY: One in every 457 housing units

Sources:

  • https://www.attomdata.com/news/most-recent/attom-april-2023-u-s-foreclosure-market-report/
  • https://www.attomdata.com/news/market-trends/foreclosures/attom-year-end-2022-u-s-foreclosure-market-report/
  • https://www.attomdata.com/news/market-trends/figuresfriday/top-10-zips-with-highest-foreclosure-rates-in-april-2023/

Filed Under: Foreclosures, Housing Market Tagged With: Housing Foreclosure Rates, Housing Foreclosures

Donald Trump’s Arraignment: He Pleads Not Guilty

June 13, 2023 by Marco Santarelli

Donald Trump's Arraignment

On June 13, 2023, former President Donald Trump arrived at a federal courthouse in Miami to face charges related to the alleged retention of classified documents at his Mar-a-Lago estate. This historic event marks the first time a former president has been indicted on federal charges. As Trump pleads not guilty, the legal proceedings and implications surrounding his arraignment have captured national attention.

I. Charges and Indictment:

Trump faces 37 charges relating to his failure to return classified documents when demanded by the federal government. The indictment alleges that he concealed these documents and obstructed federal officials during their attempts to retrieve them. These charges hold serious consequences and carry the potential for several years of imprisonment. The full text of the indictment can be accessed for further reference.

II. Court Proceedings and Security:

Federal criminal court proceedings are not televised, but members of the public, including journalists, are allowed to attend and report on the proceedings afterward. The court appearance in Miami has prompted increased security preparations due to Trump's high-profile status and the presence of his supporters demonstrating outside the courthouse.

III. Co-Defendant and Additional Legal Troubles:

Waltine “Walt” Nauta, Trump's longtime valet, has been listed as a co-defendant in the indictment. He appeared in court alongside Trump on Tuesday. Moreover, Trump also faces separate indictments by a state-level grand jury in New York City for allegedly falsifying business records related to hush money payments and legal exposure related to the January 6, 2021, attack on the Capitol and the 2020 election in Georgia.

IV. Trump's Arraignment Process:

During the arraignment, Trump's lawyers entered a plea of not guilty on his behalf. The former president was booked by deputy marshals and his fingerprints were taken, but no mugshot was taken due to his recognizability. The arraignment involved procedural discussions, including the conditions of Trump's pretrial release and potential restrictions on his conduct as the case progresses.

V. Judicial Process and Possible Outcomes:

The arraignment signifies the beginning of a lengthy judicial process that may include criminal and appeal proceedings lasting for years. Trump's case has been assigned to US District Judge Aileen Cannon, who was nominated by Trump. The case will undergo pretrial proceedings, including disputes over evidence and potential challenges to the case's legitimacy. The Trump legal team may aim to prolong the proceedings, possibly extending beyond the 2024 election.


Sources:

  • https://edition.cnn.com/2023/06/13/politics/trump-indictment-federal-court-appearance/index.html

Filed Under: Trending News

What Causes Red Tide on Florida Beaches 2023?

June 13, 2023 by Marco Santarelli

Red Tide Florida Beaches

Red Tide on Florida Beaches in 2023

As the warm, tropical sun beats down on the sandy shores of Florida, it's easy to understand why the state's beachfront real estate is so desirable. However, in recent years, an unwelcome visitor has cast a shadow over the once-pristine beaches: Red Tide. Red Tide is a naturally occurring phenomenon caused by an overgrowth of algae in the water. In Florida, the red tide in 2023 has been caused by the toxic algae Karenia brevis.

It grows out of control and produces harmful toxins. It has come earlier and in higher concentrations than usual, causing harm to marine life and posing health problems for humans. It kills fish by producing a potent toxin called brevetoxin that affects the central nervous system of the fish. The toxin can also affect birds and other marine animals. The red tide has been documented in Florida's Gulf Coast as far back as the 1840s, and scientists cannot predict when it will occur.

The cause of red tide is still being studied, but nutrient-laden runoff from farms and developments may play a role. The toxins produced by red tide can cause respiratory problems in humans and animals, as well as harm marine life. The state of Florida has been experiencing a red tide event in recent weeks, with concentrations detected in multiple counties along the coast. In this article, we will explore the causes of red tide, the impact on Florida's beaches, and what measures are being taken to mitigate the effects.

What is Red Tide on Florida Beaches?

Red tide is caused by an algae bloom, specifically Karenia brevis. When the conditions are right, such as warm water temperatures, calm winds, and nutrients in the water, Karenia brevis can reproduce rapidly, creating a dense concentration of cells, or a “bloom.” The toxins produced by Karenia brevis can harm marine life and humans who come into contact with the water or breathe in the airborne toxins.

Will it be a concern for those looking to invest in Florida beach real estate? The impact of red tide on Florida beaches can also have a significant impact on the real estate industry in the area. In the past, red tide outbreaks have caused a decrease in tourism, which can ultimately affect property values and rental income. Homebuyers may also be hesitant to purchase property near areas affected by red tide, causing a potential drop in demand and property prices.

Additionally, homeowners may face difficulty selling their properties during a red tide outbreak. While the long-term effects of red tide on Florida's real estate market are still unclear, it is clear that red tide outbreaks can have significant economic and environmental impacts on the state.

Red Tide in Florida Beaches: Current Status Update

The latest Red Tide Status Update for March 29, 2023, provides a comprehensive overview of the current conditions of red tide in the waters off the coast of Florida. The update reports that the red tide organism Karenia brevis was detected in 83 samples in and offshore of Southwest Florida, three samples from Northwest Florida, and one sample from Florida’s East Coast. The bloom concentrations were present in three samples, and they were in Manatee County and Lee County. The report also highlights the use of satellite imagery from the USF and NOAA NCCOS to track this patchy event.

In terms of concentrations, the report states that K. brevis was observed at background to low concentrations in Pinellas County, background to low concentrations offshore of Hillsborough County, background to medium concentrations in Manatee County, background to low concentrations in Sarasota County, background concentrations in Charlotte County, background to medium concentrations in Lee County, and background to low concentrations in and offshore of Collier County in Southwest Florida.

In Northwest Florida, K. brevis was observed at background concentrations in one sample collected from Bay County, and at background concentrations in two samples collected from Gulf County. Along the Florida East Coast, K. brevis was observed at background concentrations in one sample collected from Palm Beach County.

Fish kills suspected to be related to red tide were reported from Pinellas, Manatee, Sarasota, Lee, and Collier counties. Additionally, respiratory irritation suspected to be related to red tide was reported in Pinellas, Manatee, Sarasota, and Collier counties via the Beach Conditions Reporting System and/or the Fish Kill Hotline.

Finally, the report includes a forecast by the USF-FWC Collaboration for Prediction of Red Tides. The forecast predicts variable movement of surface waters and net southeastern transport of subsurface waters in most areas over the next 3.5 days for Pinellas County to northern Monroe County. This information is critical to help protect the health and well-being of the residents and tourists in Florida, as well as the state's natural resources.

Measures Taken to Mitigate the Effects

The Florida Fish and Wildlife Conservation Commission (FWC) is closely monitoring the red tide event and providing updates on its website. The FWC is also collaborating with other agencies, such as the University of South Florida and the National Oceanic and Atmospheric Administration, to track the event using satellite imagery. In addition, local governments and organizations are taking measures to mitigate the effects of red tide. For example, some beaches have been closed to the public, and cleanup efforts are underway to remove dead marine life and other debris from the beaches.

Causes & Impact of Red Tide on Florida's Beaches

The current red tide event in Florida has been detected in multiple counties along the coast. Concentrations of over 100,000 cells/liter have been detected in Pinellas and Manatee counties. The toxins produced by red tide can cause respiratory problems in humans, such as coughing, sneezing, and irritation of the eyes, nose, and throat. They can also cause skin irritation and gastrointestinal problems if ingested. Marine life, such as fish and sea turtles, can also be affected by the toxins, leading to fish kills and other environmental impacts.

The red tide algae bloom has been causing significant impacts on Florida’s beaches. The bloom, which started in October, has led to burning eyes and respiratory problems among the residents of the state's southwest coast. Dead fish have been washing up on beaches, leading to the cancellation of the annual BeachFest in Indian Rocks Beach, Florida.

The homeowners' association, with help from the city and Pinellas County Health Department, made the decision to cancel the festival due to concerns that the red tide could continue to stick around for a while. The red tide is expected to remain in the area in the coming weeks, and public health was deemed a top priority.

Nearly two tons of debris, primarily composed of dead fish, have been removed from Pinellas County beaches and brought to the landfill. Additionally, about 1,000 pounds of fish have been cleared from beaches in St. Pete Beach since the start of the month.

Red tide is a naturally occurring toxic algae bloom in the Gulf of Mexico that is worsened by the presence of nutrients, such as nitrogen, in the water. The Florida Fish and Wildlife Conservation Commission warns people to avoid swimming in or around red tide waters due to the possibility of skin irritation, rashes, burning, and sore eyes. Individuals with asthma or lung disease should avoid beaches affected by the toxic algae.

According to the Florida Fish and Wildlife Conservation Commission, red tide has been detected in 157 samples along Florida’s Gulf Coast, with the strongest concentrations found along Pinellas and Sarasota counties. The impact of the red tide algae bloom on Florida's beaches is a reminder of the importance of protecting the environment and reducing the presence of pollutants in the water.

In conclusion, the red tide phenomenon, caused by the Karenia brevis algae bloom, has been detected in multiple counties along the coast of Florida. The toxins produced by red tide can cause respiratory problems in humans and animals and harm marine life. Florida's beaches have been significantly impacted, with concentrations of over 100,000 cells/liter detected in Pinellas and Manatee counties.

The Florida Fish and Wildlife Conservation Commission and other organizations are closely monitoring the event and taking measures to mitigate its effects. It is essential for individuals to avoid swimming in or around red tide waters to prevent skin irritation, rashes, burning, and sore eyes. This event is a reminder of the importance of preserving natural resources and taking measures to reduce nutrient pollution in waterways to prevent harmful algae blooms from occurring.


References:

  • https://myfwc.com/research/redtide/statewide/
  • https://apnews.com/article/red-tide-florida-beach-health-risk-842c0576451b2a007d57abd44448e03e

Filed Under: Trending News Tagged With: Florida News, Florida News Today, Florida Red Tide, Red Tide Florida Beaches, What Causes Red Tide on Florida Beaches?

Signature Bank Failure 2023: FDIC Plans to Sell its Housing Loans

June 13, 2023 by Marco Santarelli

The Signature Bank Collapse 2023

The Signature Bank Collapse 2023

Signature Bank Failure Update: What's Next? The Federal Deposit Insurance Corporation (FDIC) has announced its plans to sell the commercial real estate holdings left over from Signature Bank. FDIC has announced a framework for selling off approximately $60 billion in the loan portfolio of Signature Bank following its failure. The failed New York firm's loans include rent-stabilized multifamily housing loans and commercial real estate loans, which will be sold as-is and without warranties to qualified buyers.

The portfolio is primarily made up of commercial real estate and commercial loans, with a smaller pool of single-family residential loans. The FDIC is reviewing the CRE loans secured by multifamily residences in New York City that are rent stabilized or rent controlled, as they serve as an important source of affordable housing.

To ensure the preservation of affordable housing, the FDIC plans to collaborate with state and local government agencies and community-based organizations. The marketing process is expected to begin later this summer, with Newmark & Company Real Estate, Inc. acting as an advisor on the sale.

Why Did Signature Bank Fail?

Signature Bank was seized by the FDIC under some suspicious circumstances, but it never actually failed. In mid-March, there was a deal to offload some of Signature's resources into New York Community Bank, but a large chunk of their assets, mostly commercial real estate, was left out of the deal. FDIC has now announced its plans to unload that material. The portfolios compromised primarily commercial real estate loans, including a concentration of multi-family properties primarily located in New York City.

Signature Bank, one of the largest US banks, was shut down on March 12, 2023, by regulators. Its collapse was a result of depositors withdrawing large sums of money after the failure of Silicon Valley Bank (SVB), which raised concerns about contagion in the banking sector. Signature Bank was the second-biggest bank failure since Washington Mutual closed in 2008, and its closure has raised policy questions around FDIC insurance and bank and cryptocurrency oversight. In this article, we delve into Signature’s history, the events that led up to its demise, and how it impacts buyers, sellers, and the broader economy.

Signature Bank was an FDIC-insured, New York state-chartered commercial bank, primarily serving privately owned businesses. It was listed as the 19th largest bank in the United States by S&P Global, with assets worth $110.36 billion and $88.59 billion in deposits in December 2022. It was also the third-largest commercial real estate bank in New York City.

The bank had clients in middle-market companies but was especially known for catering to law offices, real estate buyers, and cryptocurrency companies. Notably, it was the first FDIC-insured bank to create a blockchain-based digital payments platform approved by the New York State Department of Financial Services (DFS). Its platform, Signet, required a minimum account balance of $250,000; FDIC insurance caps out at $250,000.

Signature Bank began in 2001 with $50 million in assets and a network of private client banking teams. By 2023, it had grown to become the 29th largest U.S.-based commercial bank. The bank continued to expand and by 2018 had ventured into digital banking, eventually launching its blockchain payments platform in 2019.

By the end of 2021, total digital-related deposits reached $28.7 billion—almost 30% of the bank’s deposit portfolio. Signature Bank was added to the S&P 500 Index in 2021, and its shareholder return ranked top among all financial institutions in the index. The bank affirmed a commitment to creating a positive social impact, including diversity awareness events and time donated to charitable causes.

However, the failure of Silicon Valley Bank led to a Signature bank run on March 10, 2023. Depositors panicked after SVB failed because Signature had high amounts of uninsured deposits and was exposed to the crypto sector. New York state and U.S. federal regulators were also concerned, and the run was continuing over the weekend. On March 12, 2023, the New York State DFS took possession of the bank “to protect depositors and the public interest.

Challenges the FDIC is Facing

The FDIC is already running into problems with the sale of Signature Bank's commercial real estate holdings. The majority of the properties in Signature's book are rent-controlled multi-family housing, which is subject to strict rent control laws in New York. In 2019, a law was passed that made it impossible for landlords to raise rents above a certain threshold, even if the apartments become vacant. This has led to a decrease in the value of these properties, making it difficult for the FDIC to sell them at a price that recovers the maximum amount of the bank's assets.

Another challenge the FDIC is facing is the current market conditions. The COVID-19 pandemic has disrupted the real estate market, with many tenants struggling to pay rent and many landlords struggling to maintain their properties. This has led to a decrease in demand for commercial real estate, including multi-family housing. As a result, the FDIC may have to lower the price of these properties to attract buyers, which could result in a lower recovery rate for Signature Bank's assets.

The $60 Billion Portfolio

The portfolio is primarily comprised of commercial real estate (CRE) loans, commercial loans, and a smaller pool of single-family residential loans. The CRE loans include a concentration of multifamily properties, primarily located in New York City. Industry experts have noted that commercial real estate loans have been viewed with increasing skepticism by banks and regulators amid concerns that sluggish return-to-work practices could lead to delinquencies on loans for office space and retail. This explains in part why the agency and Flagstar left out the now up-for-sale $60 billion loan portfolio and other such assets that presented heightened liability or loss risks to an acquiring institution during the initial sale.

Affordable Housing in New York City

The FDIC has a statutory obligation, among other factors, to maximize the preservation of the availability and affordability of residential real property for low- and moderate-income individuals. Therefore, the agency is paying particular attention to commercial real estate loans secured by rent-stabilized or rent-controlled multifamily residences as they are an important source of affordable housing in New York City. The FDIC plans to reach out to state and local government entities, as well as community-based organizations, to inform them of their efforts and to seek local input as the agency establishes a marketing and disposition strategy.

Selling Process and Qualified Buyers

The FDIC says it plans to begin its sale process this summer and has tapped Newmark & Company Real Estate, Inc. to advise on the sale. The loans will be sold exclusively to qualified buyers, and information concerning the loans will be furnished only to persons who demonstrate that they have a level of financial sophistication and resources sufficient to evaluate and bear the risks of an investment in the loans. This means that only buyers who are deemed to have the necessary expertise and financial resources to handle the loans' risks will be eligible to purchase them.

Potential Impact on the Market

The sale of Signature Bank's commercial real estate holdings could have a significant impact on the market, particularly in New York City where a large portion of the properties is located. If the FDIC is unable to sell the properties at a price that recovers the maximum amount of assets, it could lead to a decrease in the value of similar properties in the area.

On the other hand, if the properties are sold at a reasonable price, it could attract more buyers and potentially increase the value of similar properties. It's worth noting that the FDIC has successfully sold commercial real estate holdings in the past, such as the assets of Colonial Bank in 2009. However, the current market conditions and the unique circumstances surrounding Signature Bank's assets present a significant challenge.

For potential buyers, this presents an opportunity to acquire a large portfolio of loans, including commercial real estate and multifamily housing loans. However, they will have to demonstrate their financial and operational capabilities to handle the risk involved. On the other hand, for sellers, it presents a chance to dispose of a significant amount of assets while ensuring that they end up in capable hands. The FDIC's emphasis on affordable housing and reaching out to community-based organizations also indicates a commitment to maximizing the benefit to the broader public.

Conclusion

In conclusion, the FDIC's plan to sell Signature Bank's commercial real estate holdings is a complex situation with potential implications for the real estate market. While it remains to be seen how the sale will play out, it's clear that the FDIC will have to navigate several challenges to recover the maximum amount of assets for Signature Bank's creditors and ultimately resolve this situation.

FDIC's framework for selling off Signature's remaining loans provides insight into the agency's disposition strategy and priorities. The loans will be sold exclusively to qualified buyers, and the FDIC will pay particular attention to the commercial real estate loans secured by rent-stabilized or rent-controlled multifamily residences.

The agency plans to begin the sale process this summer and has tapped Newmark & Company Real Estate, Inc. to advise on the sale. For potential buyers, this presents an opportunity to acquire a significant amount of loans, but they will have to demonstrate their financial and operational capabilities to handle the risk involved. The FDIC's commitment to affordable housing and reaching out to community-based organizations also indicate a desire to maximize the benefit to the broader public.


Source:

  • https://www.fdic.gov/news/press-releases/2023/pr23026.html
  • https://www.investopedia.com/what-happened-to-signature-bank-7370710

Filed Under: Banking, Economy, Financing, Mortgage, Real Estate Tagged With: Bank Failure, FDIC, Signature Bank Collapse, Signature Bank Failure

  • 1
  • 2
  • Next Page »

Real Estate

  • Baltimore
  • Birmingham
  • Cape Coral
  • Charlotte
  • Chicago

Quick Links

  • Markets
  • Membership
  • Notes
  • Contact Us

Blog Posts

  • Frisco Housing Market: Prices, Trends, Forecast 2023
    September 27, 2023Marco Santarelli
  • Atlanta Housing Market: Prices, Trends, Forecasts 2023
    September 27, 2023Marco Santarelli
  • Mortgage Rates Next 90 Days: Will Rates Decline?
    September 27, 2023Marco Santarelli

Contact

Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
BBB
  • Terms of Use
  • |
  • Privacy Policy
  • |
  • Testimonials
  • |
  • Suggestions?
  • |
  • Home

Copyright 2018 Norada Real Estate Investments