Another Catalyst for the Banks
Investors and Colleagues,
If the banks and the FDIC weren’t scared before last week, they certainly are now.
On Friday, the non-farm payroll report for June was released, indicating that the economy added a mere 18,000 jobs during the last month. This was in comparison to expectations for an addition of 80,000 jobs.
As if this news wasn’t bad enough, the figures for last month were revised lower… a LOT lower. For the month of May, the economy added only 25,000 jobs, less than half of the previously reported gain of 54,000 jobs.
As it now stands, the unemployment rate is now 9.2% and rising. This is bad news for the majority of US banks with real estate exposure. If the employment picture is not recovering as quickly as expected, then the banks’ portfolios of foreclosed real estate likely holds more risk than they expected.
This means that major US banks are once again sitting down at the negotiating table, and willing to take almost ANY offer – just to reduce the amount of risk on their balance sheets.
This is a great development for us at Ashford Capital. Not only are we able to buy these properties at an extreme discount from the financial institutions, we’re also seeing an improving environment for builders who will be BUYING our properties in the next several months.
The Silver Lining for Housing
In addition to the non-farm payroll report, there was another news report that caught my attention last week…
The Wall Street Journal published an article noting that apartment rents were rising, while vacancy rates were ticking lower. The piece made a bullish case for owning the stocks of apartment companies – but it also has an interesting application for the residential housing market.
If rents are going up, consumers actually have a stronger incentive to own their own homes. Interest rates are still at historically low levels, and credit-worthy buyers can get a great deal when purchasing a new home.
The other benefit of higher rents is that existing homeowners who bought investment properties are more likely to be able to rent out these homes and be cash-flow positive. This also applies to new investors purchasing distressed houses and in-turn renting these houses out.
A Thawing Real Estate Market
As the economics for residential real estate improve, our investment opportunities become even more attractive. Expectations for the amount of time it will take for our developments to sell are declining, while the actual profit margins are remaining stable or even increasing in some cases.
Ashford Capital continues to close transactions at incredible valuations, which is a benefit to our investors. We continue to be in the sweet spot of this economic cycle (at a point where banks are selling cheap, but select areas of the market are still recovering nicely).
Considering the volatility on Wall Street and the uncertainty in the financial markets, it’s important to have a diversified and balanced approach to your investments.
At Ashford Capital, we have the flexibility to tailor a real estate investment directly to your needs. We offer plans that are compatible with your IRA, and we will work directly with you to make sure understand exactly what you are investing in.
Don’t you owe it to yourself to protect your capital and grow your investments (regardless of the market environment?)
Please give me a call today so that we can discuss the best plan for you and create a wealth-building strategy that fits your investment objectives. I look forward to the conversation.
Wishing you every success,
Matt