July 2023: The Final Stretch
Matheson Capital announces Summers Run's August 17th closing. Seeking distressed properties with price drops due to financing issues. Inflation at 3.2%, impacting Fed rate hikes. Job market stabilizing with wage increases.
LATEST NEWS
Upcoming Closing - Summers Run - Asheboro, NC
We're thrilled to say that we finally have a closing date scheduled (August 17th), so you should be seeing a closing update from us soon!
In the Media
We had a very busy month in media, appearing on four different podcasts. You can listen to them here, here, here, and here.
WHAT WE ARE LOOKING FOR
Simply put, we're looking for distressed properties. We've now seen three separate properties being marketed for less than the previous owner paid for them, including one that last sold in 2014! For all of these properties, the distress was a function of the existing owner's financing. As we continue to see more and more assets in a similar situation, we'll have the ability to acquire performing assets at a discount.
WHAT WE ARE FINDING
As mentioned above, we are seeing properties being offered at discounts to their prior sales price. However, this is still a minority of opportunities. We still see a lot of assets on the market, but if the seller is not motivated (aka forced to sell by the lender), the numbers typically don't pencil.
MARKET INSIGHTS
Inflation Update!
If you haven't seen already, inflation ticked up slightly in July, moving from 3.0% to 3.2%. While overall inflation went up slightly, core inflation also went down slightly. It moved from 4.8% to 4.7%. The hopes are that this will lead to The Fed pausing rate hikes.
When this hiking cycle started nearly 18 months ago, Jerome Powell emphasized that it could take 12-18 months for rate hikes to make an impact. We're that far in, and inflation has fallen sharply, so we're optimistic we'll start seeing the cuts soon. Simultaneously, some believe the last mile will be the hardest, so we could be in this position for a while.
The Changing Job Market
Ever since the start of COVID, there have been a lot of stories about people constantly finding new jobs, labor shortages, etc. While those stories have calmed a bit, it appears we are returning to a pre-pandemic normal. Americans have quit quitting their jobs, which we believe shows that people are uncertain about the overall economic outlook (you don't want to quit your job if you think it would be hard to find a new one).
At the same time, wage increases are beating inflation for the first time in two years. We view this as a good sign since it might help The Fed justify an end to the rate hikes.
The Wave is Coming (Eventually)
We mention this every month, and it gets closer every month. A wave of distressed assets will be hitting the market in the coming months. With so much sales volume taking place in 2021, and many of those loans having 2 to 3 year interest rate caps, we could see a surge of properties hitting the market. More specifically, $8 billion of multifamily commercial mortgage-backed securities are hitting the market in what is being called "Red October" (clever).
While this sounds like it could lead to a lot of opportunity, we remain somewhat skeptical because every buyer we speak to is waiting for the wave, and if everybody is waiting for it, the demand will likely bid up the prices.