5 Stats - Under-Performing Millennials & Volatile Rates

In case you missed it, here's this week's "5 Stat Monday" – the quick read from the Brian Eisendrath Finance Team with five (or so) interesting multifamily and capital market updates we discovered over the previous week.

In this week's 5 Stats, you'll find that long term rates will likely stay low, data on household formation & home ownership rates, and the 50 best bars in the world.

US TREASURY FALSE ALARM?

The UST increased last week, as investors fear the pull-back for central back stimulus. The yield on the U.S. 10-year Treasury note is at 1.72%, compared with 1.683% last Tuesday, and 1.36% in July. While the Fed will likely raise rates in December, the recent treasury spike is likely an over response by investors long on bond yields – it's not a regime change. Regardless, the Fannie & Freddie Green Programs will save you up to 30 bps.

REITs LOST GROUND IN OCT

REIT prices lost ground in September as investors are concerned about valuations, new supply, and interest rates. This is likely due to some general caution in the market, but these reports are based on commercial properties – the article doesn't even mention multifamily! Of note, net lease retail REITs had the best performance year-to-date, posting returns of 34.5 percent for the year to Sept. 30. Returns for industrial REITs totaled 31.1 percent in the same nine-month period. Single-family home REITs saw returns of 29.1 percent in the year up to Sept.30, while data center REITs recorded returns of 25.4 percent.

INVESTMENT SALES TRENDING UP

On a year-to-date basis, investment remains ahead of 2015 by 5%. Total investment for 2016 YTD is $92.5 billion. Individual sales activity, the best measure for momentum, reached $9.0 billion, a 19% gain year-over-year. Hopefully, this is an indicator for a strong end to 2016.

CHART OF THE WEEK

The total number of rental households jumped to 43.9 million in the second quarter, an increase of 1.0 million over one year ago (below chart-blue bars). Moreover, the home ownership rate declined further to a record low. And millennials continue to disappoint America – the home ownership rate for those under 35 slipped to a low of 34% this year, compared with around 40% for young adults in the prior three decades.

SAUDI ARABIA LOOKS FOR LOANS

As we mentioned last week, Saudi Arabia has strained financials due to their policy to oversupply the oil market in order to hurt shale production. Today, it was announced that they are issuing $10 billion to $17 billion in bonds, which would be the largest issuance ever in emerging markets. This is on top of the $10 billion international loan they received earlier this year. Combined with other Gulf states, this year's debt issuance is expected to double the previous high set in 2009. This may be an early indicator of continued economic upheaval in the region, as nations there adjust to prolonged low oil prices.

WORLD'S BEST BARS

As I'm watching the Dodgers drop 2 in a row today, it was timely to read where the best bars in the world are. High-end craft cocktail bars at least – Sonny McLean's is on a different list. Of note, there is only one listed for Los Angeles, but this list is based mainly on reviews & media mentions. For those of you who went to Old Lightning, they don't advertise or allow reporters in. However, I can also vouch for Nomad Bar & PDT in New York. What's your favorite?

Thank you for reading! As always, please let us know your requests and suggestions. Which bullet above is your favorite? What do you want more or less of? Let us know!

Brandon D. Smith

CBRE | Capital Markets | Debt & Structured Finance | Institutional Group

1840 Century Park East, Suite 900 | Los Angeles, CA 90067