Real Estate - Acumen Wealth Advisors

We are happy to announce Jill Green has partnered with Acumen Wealth Advisors as a Real Estate Strategist! She serves as a resource for inquiries and questions for clients who have complex real estate and mortgage transactions.

Born and raised in Tennessee, Jill witnessed the opportunity and growth transforming the state into a sought-after real estate market. She has taken the knowledge gained in a mortgage banking career of production and management to transition into real estate investment. Jill’s understanding of the market, combined with her seasoned experience in building, renovating, and acquiring her own personal portfolio of long- and short-term rental properties makes her a sound resource for real estate.

For seven years, Jill served as Senior Vice President and Managing Director of Mortgage for Atlantic Capital Bank. In this role, she was responsible for all aspects of sales, operations, and underwriting in residential mortgage. Jill managed and developed correspondent relationships, product development, and analyzed and originated new residential mortgage loans. Previously, Jill was a top-producing mortgage banker for 16 years at Regions Bank and earned the bank’s “Chairman’s Club” award seven times. This award honors the top ten percent of associates across 16 states and is the company’s top annual performance recognition. Jill has a proven track record of success building and leading a results-oriented team with knowledge of compliance and regulations. Jill was responsible for due diligence, vendor management, regulatory exams, and ensuring employees and processes were compliant with established policies, procedures, and regulations. Jill was proactive in driving consistency and efficiency by developing and refining operating workflows to meet rapid-lending timelines and implementing new technology to provide a better customer experience. Jill developed and managed a portfolio of residential mortgages in addition to selling loans in the Secondary Market. Through Jill’s exposure to real estate within the banking sector, she developed a keen aptitude stemming from her sincere interest, knowledge, and experience in the industry. One of Jill’s favorite facets of the real estate sector is the collaboration and ability to form trusted partnerships with clients, employees, and industry partners.

Jill was named to the 2018 Gold Club by City Scope Magazine and recognized as one of Chattanooga’s 30 Most Influential Business Leaders in Chattanooga. She is a multiple time Gold or Platinum Production award recipient endowed by the Chattanooga Mortgage Bankers Association. Jill is a member of the Nashville Short Term Rental Association (NASTRA) and a Lee University graduate with a degree in Business. She enjoys reading, purchasing and renovating real estate, entertaining, and traveling domestically and internationally. Most important to Jill are honor, integrity, and relationships built on trust.

Welcome to the team, Jill!

When considering real estate as an investment, there are two predominant questions to consider. What is the best TYPE of real estate to own and is NOW a good time to invest? We believe single-family residential rentals represent a growth opportunity for now and the future. According to a Gallup Poll, real estate remains one of the most favored investment to Americans and has ranked in the top spot every year since 2013.^[1] However, it can be a barrier for most investors because it can be considerable work. We believe residential single-family housing is an ideal real estate investment and an important method to diversify an asset portfolio.

Inventory at All-time Lows – The availability of single-family “for-sale” homes has dwindled as the Coronavirus pandemic fueled demand for single-family homes. The average 2020 for-sale inventory is 63% of the 1982 level.^[2] According to the World Bank, the United States population in 1982 was around 231 million compared to 2019 with a population of 328 million. With almost an additional 100 million people in America, the for-sale inventory is considerably less than nearly 40 years ago. Dr. Frank Nothaft, Chief Economist for CoreLogic says, “The demographic tailwind has arrived as Generation X and Millennials drive housing demand. Lower-priced home values increased about one and a half times faster than higher-priced home values in November, as first-time buyers tend to seek out homes within the lower price ranges.”² Housing demand should continue to be fueled by a large generational move into prime home buying age and low mortgage rates. We anticipate continued supply constraints as both building materials and labor experience Coronavirus-related tension. Builders worked to provide new housing starts, particularly the latter half of 2020, but volatile material prices (extremely high lumber prices in August) and lack of available land kept homebuilders from meeting much of the demand. Additionally, based on the National Home Builders Association, home construction has yet to return to levels seen prior to the 2008 Great Recession.[3]

Income is Scarcer than Ever – Bonds have long been a favored investment because they paid income and mitigated risk over equities. The United States 10-year Treasury currently sits around 1.5% and remains at historic lows. Compare this rate to 15% in 1981 when the baby boomers were in accumulation phase. Fixed income does not offer the preservation of capital it once did. We believe residential real estate meets a long-term need and the single-family “type” of real estate meets a changing-need list to provide consistent rental income. Could single-family real estate be the new proxy for bonds?

Residential Real Estate Meets a Need – People will always need a place to live. Residential real estate benefits from a large pool of potential tenants compared to commercial which relies on businesses. As businesses and consumers acclimate to virtual marketplaces and remote work opportunities, we believe the demand for single-family homes will increase. The pandemic has created a change in housing needs. The time spent at home has placed an emphasis on additional space – indoors and out. Remote work has unlocked new home considerations outside of typical criteria such as commute ranges or city specific cost-of-living. One of the most searched Zillow words of 2020 was “pool” and a dedicated home office space remains at the top of surveys.[4] A Zillow survey shows 31% of respondents wish to live in a home with a dedicated office space, 30% desire to live in a larger home, 29% to live in a home with more rooms, and 25% to live in a less-dense area with fewer neighbors.^[5] In a Freddie Mac survey, respondents listed the top factors influencing single-family housing as their preferred rental choice. The top three factors were laundry, privacy, and parking.^[6] These factors make a compelling case for why single-family home demand will continue and shift away from large multi-housing buildings.

Value – Multifamily housing has long been a hot sector for large hedge funds as they can acquire 100+ units in a single transaction. While multifamily housing has performed well, there might be an abundance of capital chasing a small pool of opportunities and creating a “priced-to-perfection” scenario. Conversely, by purchasing a single-family residence, the buyer can capitalize on the undervalued anomalies in the market as a “one off” transaction. The rise in remote work has sparked a suburban boom creating buying opportunity further away from the urban core. What was previously considered too far of a commute is now on the search radar. According to Corelogic, the United States single-family rents increased 2.9% year over year, which is more than double the rate of inflation over the same time period.^[7] There is immense demand for single-family rentals with general occupancy rates at just over 95%, indicating the highest rate since 1994.^[8] Some industry experts believe the single-family rental home sector will outpace multifamily housing in terms of rent and revenue. Additionally, institutional owners are estimated to own less than 2% of the total SFR housing stock.^[9]

Location, Location, Location – The best real estate opportunities may exist in smaller markets as affordability becomes more of a driver. Many workers no longer report to the office, so there is increased mobility in the workforce. Business-friendly states with low taxes will likely continue to experience growth. Increasingly, densely populated cities and states are becoming “move out” markets. For the seventh straight year, more people left California than moved in. In a recent UC Berkeley poll, 52% of registered voters say they have considered leaving the state.^[10] The top reasons are high cost of housing, high taxes, and political culture. A recent United Van Lines migration study listed metros with the highest move out/move in for 2020. New York, New Jersey, and Illinois were the top three spots on the outbound list in 2020. Tennessee was seventh on the inbound states with South Carolina, North Carolina, Alabama, and Florida also making the list. Understandably, Tennessee presents a continued opportunity to invest in residential real estate because of the increased desire to live in our great state.^[11]

It is our opinion there will be continued demand for single-family homes, particularly in a strong market like Tennessee. Opportunity exists to capitalize on price and location in a time when Tennessee cities are projected to attract more business and generate employment opportunities. While the future is bright for Tennessee real estate, there are also numerous barriers to entry. Unlike other investments, real estate is not a passive investment. From tenant relations to rent collection to maintenance requests, real estate can be very time consuming. Procuring the right real estate investment requires knowledge and contacts in individual markets, particularly in high growth markets. These investments also require a strong overview of industry knowledge relative to local zoning and ordinances, boundary and surveys, covenants, restrictions, HOAs, and property maintenance. Many good opportunities require some cosmetic updates and remodeling and can also require improvements after tenants vacate. The many factors and complexities to successful real estate investing serve to eliminate many would be investors from entering. Conversely, having the knowledge and resources needed to navigate those same complexities and barriers can set the stage for a great investment with the potential to generate great returns and appreciation.

To learn more about how Acumen can help you Invest Intentionally®, please contact us.

The opinions expressed in this commentary should not be considered as fact. All opinions expressed are as of the published date and are subject to change. Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investments in securities involves risk, will fluctuate in price, and may result in losses. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

[1] “Stock Investments Lose Some Luster After Covid-19 Sell Off”, Gallup, April 2020

[2] “US Home Price Insights: Through Nov 2020 with Forecasts from Dec 2020 and November 2021”, Corelogic, Jan 2020

[3] A Decade of Home Building: The Long Recovery of the 2010s | Eye On Housing

[4] From ‘Zoom Rooms’ to Chef Kitchens: Zillow’s Top 10 Home Trends for 2021 – Dec 10, 2020 (mediaroom.com)

[5] “More Remote Work Opportunities May Make Suburbs More Desirable”, Zillow Research, May 13, 2020

[6] “Single Family Rental: An Evolving Market”, Freddie Mac Multifamily, October 2018

[7] “Single-Family Rents Increasing Twice As Fast As Inflation”, Corelogic, March 2020

[8] “Q3 02 Single -Family Rental Investment Trends Report”, Arbor Research, Q3 2020

[9] “Where Is The New Class Of Investors Buying Single-Family Rentals?”, Forbes, Nov 2019

[10] “For 7^th Year in A Row, More People Left CA than Moved In”, nbcbayarea.com, Nov 2019

[11] “United Van Lines’ National Migration Study Reveals Where and Why Americans Moved in 2020”, Unitedvanlines.com, January 2021

06/05/20 – During the first half of 2020, Acumen has spent a large amount of time assessing economic and financial market data – largely altered by the COVID-19 pandemic. During this time, we have remained active to both decrease the risk within portfolios as well as remain opportunistic. Throughout our efforts to minimize risk exposure, we divested from one of our primary core bond components. After taking a detailed look into the fund holdings, it became clear close to 90% of the exposure was through the mortgage economy. More specifically, over 8% of the fund holdings were through commercial mortgage-backed securities. We divested of the fund, not because the fund’s performance was bad, but because we began to fundamentally disagree with the thesis presented by its primary holdings. Commercial mortgage-backed securities are a type of fixed income investment backed by mortgages on commercial properties rather than residential real estate. The amount of exposure to commercial real estate is where we fundamentally disagreed with the strategy behind the core bond fund.

Rather than a typical lag, commercial real estate may be impacted earlier as businesses were closed and/or have higher operational costs due to occupancy limitations, enhanced focus on sanitation, security, etc. These costs will result in many permanent business closures and subsequent vacancies. The remaining businesses will likely seek rent renegotiations at lease expiration and pressure rental rates. Numerous factors affect valuations of commercial real estate such as location, use, length of leases, etc. One standard metric is the capitalized net income of rents. The decline of market rents will create a downward pressure on property value. Many retail bankruptcies and store closures have been announced such as J Crew, Neiman Marcus, JCPenney, and Pier 1. Other retailers may have difficulty paying or go on a “rent strike”, as announced by The Cheesecake Factory in April. The large vacancies will create a continued cycle of rent renegotiations.

Even before the onset of COVID-19, a monumental shift was taking place in the percentage of Americans who wanted to live in the city. In a study performed by Gallup, presented above, 8% more Americans lived in big cities compared to the percentage of Americans who desire to live in a big city. We believe this already trending change will be exacerbated by the outbreak of the Coronavirus, and the American businesses’ effort to blunt the financial and humanitarian effects by sending employees home to work. Among the large corporations allowing employees to work from home remotely through the end of the year are: Visa, MasterCard, Alphabet, Twitter, Square, and Spotify. These are some of the largest tech names in the world, and we believe our ever-growing reliance on products supplied by these companies will create a greater trend of de-urbanization. Many employees have adapted to the work-at-home model and enjoy the additional time and flexibility and will not desire to resume their long commutes.

According to the U.S. Census, 5.2% of workers in the United States worked at home in 2017. Kate Lister, President of Global Workplace Analytics, says, “Our best estimate is that 25%-30% of the workforce will be working from home multiple days a week by the end of 2021”. Employees and employers both stand to gain from this model and the pandemic has pushed technology investments forward. For this reason, we expect less demand for traditional office space.

Specifically, the COVID-19 implications on commercial real estate are massive. The pace of the pandemic and the shutdown it created will have an impact on the way we live and do business in many ways. Acumen believes the largest of these changes will come in the form of more American families moving out of the city.

To learn more about how Acumen can help you Invest Intentionally®, please contact us.

The Acumen Team

The opinions expressed in this commentary should not be considered as fact. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Diversification does not protect against loss of principal.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.