Blackstone Loses (The “big bet” hedge fund that didn’t pan out)

Blackstone Group is winding down its “big bet” hedge fund Senfina Advisors LLC after it faced mounting double-digit losses on its investments this year, a spokeswoman confirmed on Tuesday. It is a rare setback for the private equity titan, which invests roughly $70 billion in hedge funds, and launched Senfina, which means “everlasting” in Esperanto, to great fanfare in 2014.

http://www.businessinsider.com/blackstone-group-senfina-hedge-fund-2016-12

 

The fund was one of last year’s top performers, gaining 20 percent, but is down 24 percent this year through November after wrong-way bets in its so-called center book where declines were most pronounced.

Other “multi-manager” hedge funds, which make leveraged concentrated bets on a range of securities, have also suffered this year after being wrong-footed by the pace of U.S. interest rate hikes and the post-election rally in the United States.

“The market environment in 2016 for long/short hedge funds was unprecedented. We did what was in the best interest of our investors to preserve their capital,” said Paula Chirhart, a Blackstone spokeswoman.

The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. REUTERS/Brendan McDermid - RTSDKHE

The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange. Thomson Reuters

A number of Senfina’s nearly one dozen portfolio managers, including Parag Pande, who joined Blackstone in 2014 and now heads Senfina, will be leaving the firm, said a source familiar with the decision who asked not to be named because the discussions are private.

Pande ran Senfina’s so-called center book, featuring fund managers’ best ideas.

Some Senfina managers are expected to stay on at Blackstone and much of the $1.8 billion that Senfina invests for large clients, including state pension funds, is expected to stay at Blackstone, the source said.

Blackstone’s Alternative Asset Management arm (BAAM), headed by J. Tomilson Hill, saw inflows of $1.65 billion this year and overall performance for BAAM has been positive, Chirhart said.

BAAM began laying the groundwork for Senfina years ago as demand for multi-manager funds picked up. Blackstone started hiring fund managers, including Pande, who came from Ziff Brothers, in 2014.

By the end of last year, Senfina was one of Blackstone’s crown jewels. But after 2015’s strong gains, some Senfina managers struggled early in 2016 as worries about slower growth in China and the pace of U.S. rate hikes sent stocks spiraling lower. Losses at the start of the year were deepest in the center book.

blackstone schwarzmanStephen Schwarzman, chairman and CEO of the Blackstone Group. REUTERS/China Daily

In the January-June period, Senfina lost 15 percent after a 12 percent gain in the second half of 2015. Things appeared to stabilize some in the second quarter with a 2 percent gain. Adjustments were made in the center book.

Losses mounted anew in November with a 6 percent drop. Again the majority of losses were seen in the center book which was caught off guard by Donald Trump’s unexpected White House victory and the ensuing stock market rally. Some managers betting on industrial and consumer companies were also hurt as markets repositioned.

Since its launch Senfina’s performance has slightly negative but redemption requests have been minimal, the spokeswoman said.

Senfina isn’t the only multi-manager hedge fund to struggle this year. Folger Hill Asset Management, founded by former SAC Capital Advisors chief operating officer Sol Kumin, is off 15.3 percent through November.

Managers like Senfina use large numbers of small investment teams and centralized risk oversight to keep bets on securities increasing in value, or long positions, roughly in balance with those on them declining, or shorts.

The strategy also uses leverage, or borrowed money, which can exacerbate losses if risks are not properly controlled. The so-called market-neutral approach is supposed to preserve client money in any market environment.

(Editing by Carmel Crimmins and James Dalgleish) Read the original article on Reuters. Copyright 2016.

 

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Home Flipping Decreases In Third Quarter 2016 (New Report)

ATTOM Data Solutions, curator of the nation’s largest fused property database, today released its Q3 2016 U.S. Home Flipping Report, which shows a total of 45,718 single family home and condo sales were flips in the third quarter of 2016, representing 5.1 percent of all single family and condo sales during the quarter. The 5.1 percent Q3 2016 home flipping rate was down from a 5.6 percent rate in the previous quarter and unchanged from Q3 2015.

http://www.realtytrac.com/news/home-prices-and-sales/q3-2016-u-s-home-flipping-report/

 

The number of homes flipped decreased from a six-year high of 53,892 in the previous quarter and was down from 49,305 homes flipped in the third quarter of 2015. A total of 35,764 entities flipped properties in the third quarter, down 14 percent from a nine-year high in the previous quarter and down 7 percent from a year ago.

shutterstock_179346260-2For the report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80 percent of the U.S. population (see full methodology below).

“While the macro trends of low housing inventory and rising home prices are favorable for flippers, they are also a double-edged sword, attracting more competition and reducing the availability of deals — particularly in the most fundamentally sound local markets,” said Daren Blomquist. “This is chasing some investors into markets and neighborhoods that may be less fundamentally sound but also offer more value-add opportunities for flippers in the form of aging housing inventory.”

Share of flips purchased with cash at eight-year low

Of the 45,718 homes flipped in the third quarter, 67.9 percent were purchased with cash, down from 68.2 percent in the previous quarter and down from 69.0 percent in Q3 2015 to the lowest level since Q3 2008 — an eight-year low.

Among 92 metropolitan areas with at least 90 homes flipped in the third quarter, those with the lowest share purchased with cash were Colorado Springs (35.6 percent); Harrisburg, Pennsylvania (39.1 percent); Denver (44.6 percent); Seattle (52.4 percent); and Providence, Rhode Island (52.8 percent).

“Home flipping is currently on the decline in the Seattle area due to inventory constraints and climbing home prices, which limit the profit potential and make these purchases inherently more risky,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “The fact that over half of homes that are bought for flipping are financed rather than cash purchases signifies that prices are getting to levels that are out of reach for flippers. Rising mortgage rates will be a further inhibitor to home flipping and will likely cause these numbers to contract even further.”

Markets with highest home flipping rate

perder-un-clienteAmong 92 metropolitan statistical areas with at least 90 homes flipped in Q3 2016, those with the highest flipping rate were Memphis (11.0 percent); Clarksville, Tennessee (9.5 percent): Deltona-Daytona Beach-Ormond Beach, Florida (9.3 percent);  Tampa-St. Petersburg, Florida (9.3 percent); and Visalia-Porterville, California (9.3 percent).

Other markets in the top 10 for highest flipping rate were York-Hanover, Pennsylvania (9.2 percent); Lakeland-Winter Haven, Florida (9.0 percent); Fresno, California (8.7 percent); Miami (8.6 percent); and Las Vegas (8.2 percent).

Gross flipping profit decreases from all-time high in Q2 2016

Homes flipped in Q3 2016 sold on average for $190,000, an average gross flipping profit of $60,800 more than the average purchase price of $129,200. That was down from an average gross flipping profit of $62,424 in the previous quarter — the highest going back to Q1 2000, the earliest historical data available in the report.

The average gross flipping profit represented an average gross flipping return on investment of 47.1 percent of the purchase price, down from an average gross flipping ROI of 49.5 percent in the previous quarter and down from 47.9 percent a year ago.

“While the high-level gross flipping profits are impressive, it’s important to note that they do not include all the costs incurred by flippers, including rehab, financing, property taxes and other carrying costs,” Blomquist noted. “It’s also important to note that the overall averages mask the fact that not every flip ends profitably for the investor. About 8 percent of the homes flipped in the third quarter actually sold for less than what the flipper purchased them for, and about 21 percent of the flips yielded a gross flipping ROI below 10 percent — likely meaning the flipper walked away with a net loss on the deal.”

Markets with highest gross flipping profits

shutterstock_78123298Among the 92 metropolitan statistical areas with at least 90 home flips in Q3 2016, those with the highest average gross flipping ROI for homes flipped during the quarter were Cleveland (155.3 percent); Pittsburgh (146.9 percent); Reading, Pennsylvania (116.0 percent); Philadelphia (114.8 percent); and Clarksville, Tennessee (107.4 percent).

Other markets among the top 10 for highest average gross flipping ROI in Q3 2016 were Baltimore (100.9 percent); Dayton, Ohio (100.2 percent); New Orleans (93.7 percent); Cincinnati (90.1 percent); and Harrisburg, Pennsylvania (87.5 percent).

Flippers buying at a 25 percent discount, selling at a 7 percent premium

Homes that were flipped in Q3 2016 were purchased by the flipper at a 25.2 percent discount below full “after repair” market value on average and sold by the flipper for a 6.7 percent premium above market value on average.

Markets where flippers purchased at the biggest discount on average in Q3 2016 were Pittsburgh (53.5 percent); Reading, Pennsylvania (51.6 percent); Cleveland (51.3 percent); Clarksville, Tennessee (46.6 percent); and Philadelphia (46.3 percent).

Markets where flippers purchased at the smallest discount in Q3 2016 were Oxnard-Thousand Oaks-Ventura, California (10.2 percent); San Jose, California (12.4 percent); Denver (12.8 percent); San Diego (13.0 percent); and Los Angeles (14.3 percent).

Other high-level takeaways

  • Homes flipped in Q3 2016 took an average of 180 days to flip, down from a 10-year high of 185 days in the previous quarter, but still up from an average 176 days a year ago.
  • More than half (53 percent) of all homes flipped in Q3 2016 were sold by the flipper for $200,000 or less, while 33 percent of all homes flipped during the quarter were sold by the flipper for between $200,000 and $400,000. Homes flipped for $500,000 or more accounted for less than 9 percent of all flips during the quarter, and homes flipped for $1 million or more accounted for less than 2 percent of all flips during the quarter.
  • Flipped homes sold by the flipper for between $50,000 and $200,000 yielded an average gross flipping ROI of 58 percent, the highest among price ranges in the third quarter. Homes flipped for between $2 million and $5 million yielded an average gross flipping ROI of 26 percent, the lowest among price ranges for the quarter.
http://www.realtytrac.com/news/home-prices-and-sales/q3-2016-u-s-home-flipping-report/

 

 

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Housing Starts Drop A Whopping 20% In November (and what that means for investors)

Housing starts took a nose-dive in November as they dropped from October’s 10-year high, according to the new report from the U.S. Census Bureau and the Department of Housing and Urban Development. Privately owned housing starts decreased 18.7% in November to 1.09 million, down from 1.34 million in October. This is down 6.9% from last year’s 1.17 million.

However, one expert pointed out that while the sudden drop was due to last month’s high in part, there were still other factors.

“Housing starts dropped in November, and the drop was due to more than October’s big increase,” Trulia Chief Economist Ralph McLaughlin said. “For context, housing starts in November were the second lowest since October of last year.”

shutterstock_269104652“While starts fell in November, they continue to provide an important release valve for solid demand in the housing market, but still have much more room for growth,” McLaughlin said. “Starts in November were only 55% of their long-run average, but year-to-date they are up 4.8%.”

McLaughlin stated that he expected housing starts to increase throughout 2017, but not everyone was so positive. In fact, one expert said this is not only bad news for housing, but also for the economy overall.

“There’s little to cheer about regarding residential construction in November,” said Lawrence Yun, chief economist for the National Association of Realtors. “The fall in single-family housing starts offers zero relief to the housing inventory shortage throughout the country.”

“Moreover, the collapse in multifamily starts assures continued robust growth in rents next year,” Yun said. “Housing costs are rising and this trend will nudge up the broad consumer price inflation enough to surpass 3% next year, which is easily above the Federal Reserve’s desired inflation target. The soft housing starts also assures continued sluggish expansion in the overall economy.”

Privately owned housing units authorized by building permits also dropped by 4.7% from October’s 1.26 million to 1.2 million in November. This is also down 6.6% from last year’s 1.29 million.

shutterstock_232089301Of those, single-family authorizations in November increased slightly by 0.5% from October’s 774,000 to this month’s 778,000.

The slight rise in building authorizations was enough to give one expert hope that new home construction could see an increase.

“This month’s report is a prime example of the volatile nature of this data,” Quicken Loans Vice President Bill Banfield said. “Looking at the big picture we have seen improvement, albeit choppy.”

“While demand continues to rise, a recent surge in home builder sentiment coupled with a rise in single family permits are encouraging steps forward to help ease the shortage for housing,” Banfield said.

Contrary to housing starts, privately owned housing completions increased in November to 1.22 million. This is up 15.4% from October’s 1.05 million and up 25% from last year’s 973,000.

http://www.housingwire.com/articles/38775-housing-starts-drop-nearly-20-in-november

 

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Creating a Sense of Accountability in your Team (Matt Andrews walks through his latest Rehab)

Accountability and Personal Responsibility are in short supply in our world. In this new video, Matt Andrews visits his latest rehab project and talks about how he keeps his contractors and property managers accountable. Watch below…

 

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Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

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How To Determine Cash Flow {New Infographic}

“What gets measured, get’s results”. All real estate investors talk about establishing strong Cash Flow, but how many really know how to define, determine, and measure it?  This handy info-graph created by our team here at Real Estate Freedom is a great resource to help you determine what investments to target based on a true cashflow analysis. 

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View the Infographic below, and feel free to share!

(Right click to download and save)

Cash Flow

 

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Trumps Housing Team (What we know so far)

 

The deadline for President-elect Donald Trump to fill more than 4,000 political appointees is approaching fast. When Trump became the next official president to move to D.C., from a Democratic-run system to a Republican-run system to boot, a whole lot of jobs opened up too.

An article in Reuters by Peter Van Buren explains what happens when it comes to the actual work of filling jobs.

Trump was well aware if he won he would need to hire, and if he was not keeping lists of potential candidates, you can be sure others around him were. Far from some kind of unanticipated chore, political organizations stretching back to Tammany Hall if not ancient Rome live for this task – handing out jobs is one of the prizes every election winner, Republican or Democrat, takes home.

Here’s what we know so far about which political officials the President-elect selected for housing. Let’s start with the biggest name when it comes to housing, the Secretary of Housing and Urban Development.

In what’s turned into one of the most covered selections, Trump announced he selected Ben Carson to lead HUD on Dec. 5. For HousingWire readers, the news wasn’t too surprising since we exclusively reported Carson’s intention to accept the nomination an entire week prior.

“I am honored to accept the opportunity to serve our country in the Trump administration,” Carson said. “I feel that I can make a significant contribution particularly by strengthening communities that are most in need. We have much work to do in enhancing every aspect of our nation and ensuring that our nation’s housing needs are met.”

trumpThe selection of Carson then opens the door to the next key role and possibly an even more pivotal one, the deputy secretary. Even though HUD secretary gets to sit at the helm of the top housing agency, most of the day-to-day operations are handled by the deputy secretary, currently Nani Coloretti, who essentially serves as COO.

It’s those people inside the housing market that are closely watching for who will fill this position. Here’s the short list for deputy secretary: Pam Patenaude, president of the J. Ronald Terwilliger Foundation for Housing America’s Families and former director of the Bipartisan Policy Center, Rick Lazio, former New York Congressman and national housing attorney, and Brian Montgomery, former assistant secretary for housing and federal housing commissioner at HUD.

Future Treasury Secretary Steve Mnuchin is the other top position that Trump already announced.

Mnuchin is a former executive at Goldman Sachs and former chairman of OneWest Bank. He also previously served as the finance director of Trump’s campaign and has a long history of working in finance and mortgages.

He’s had the role for less than two weeks and in that period has already touched on GSE reform and reforming Dodd-Frank.

After these top positions, you get into the transition-team announcement.

So far, in housing, Trump announced he selected Paul Atkins, a former Republican member of the Securities and Exchange Commission, to be on the landing team for the Consumer Financial Protection Bureau and Quicken Loans executive vice president Shawn Krause to the HUD transition team. Check here for other transition team announcements.

Van Buren noted in the article that the big jobs will then fill in below them, the deputy and assistant secretaries, attorneys and special advisors.

Given the number of people he knows and trusts from his business, Trump himself may seed in some mid-level appointees, particularly in agencies like Treasury and Commerce. 

These positions amount to about one-fourth of the jobs that need to be staffed. And of those, maybe fewer than 100 are critical for Day One.

On the other side, we have the people electing to step down from their positions.

Mary Jo White, the chair of the Securities and Exchange Commission, announced she planned to step down at the end of the year, clearing the way for Trump to choose new leadership for the financial regulator. Andrew Ceresney, the SEC’s enforcement director, announced he plans to step down at the end of the year as well.

(First published here: http://www.housingwire.com/blogs/1-rewired/post/38729-monday-morning-cup-of-coffee-heres-what-we-know-about-trumps-housing-team)

 

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Most Expensive US ZIP Codes of 2016 (See the Full List)

Our annual list of America’s Most Expensive ZIP Codes is compiled by Altos Research, which looks at median home price data for more than 29,500 ZIPs covering 95% of the U.S. population. Here we highlight the 500 priciest postal codes.

(First published here: http://www.forbes.com/sites/samanthasharf/2016/12/08/full-list-americas-most-expensive-zip-codes-2016/#436d0e231b63)

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4. 11962 – SAGAPONACK NY

Median Price: $7,008,269

Average Days on Market: 104

Inventory: 72

2015 Rank: 2

 

 

5. 10065 – NEW YORK NY

Median Price: $6,935,111

Average Days on Market: 103

Inventory: 110

2015 Rank: 15

 

 

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7. 10012 – NEW YORK NY

Median Price: $6,278,398

Average Days on Market: 107

Inventory: 77

2015 Rank: 3

 

 

8. 94022 – LOS ALTOS HILLS CA

Median Price: $6,081,192

Average Days on Market: 81

Inventory: 23

2015 Rank: 11

 

 

9. 10014 – NEW YORK NY

Median Price: $5,758,763

Average Days on Market: 92

Inventory: 133

2015 Rank: 31

 

 

10. 91302 – HIDDEN HILLS CA

Median Price: $5,701,150

Average Days on Market: 254

Inventory: 27

2015 Rank: 8

 

 

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12. 10013 – NEW YORK NY

Median Price: $5,653,239

Average Days on Market: 92

Inventory: 259

2015 Rank: 5

 

 

13. 10024 – NEW YORK NY

Median Price: $5,650,990

Average Days on Market: 94

Inventory: 114

2015 Rank: 34

 

 

14. 10021 – NEW YORK NY

Median Price: $5,645,386

Average Days on Market: 111

Inventory: 193

2015 Rank: 48

 

 

15. 90210 – BEVERLY HILLS CA

Median Price: $5,562,399

Average Days on Market: 137

Inventory: 188

2015 Rank: 14

 

 

16. 94010 – HILLSBOROUGH CA

Median Price: $5,087,596

Average Days on Market: 133

Inventory: 30

2015 Rank: 10

 

 

17. 81611 – ASPEN CO

Median Price: $4,999,111

Average Days on Market: 287

Inventory: 364

2015 Rank: 9

 

 

18. 07620 – ALPINE NJ

Median Price: $4,860,299

Average Days on Market: 211

Inventory: 82

2015 Rank: 12

 

 

19. 11932 – BRIDGEHAMPTON NY

Median Price: $4,857,429

Average Days on Market: 110

Inventory: 187

2015 Rank: 26

 

 

20. 94062 – WOODSIDE CA

Median Price: $4,780,656

Average Days on Market: 156

Inventory: 23

2015 Rank: 7

 

 

21. 10023 – NEW YORK NY

Median Price: $4,777,228

Average Days on Market: 125

Inventory: 176

2015 Rank: 56

 

 

22. 81656 – WOODY CREEK CO

Median Price: $4,722,692

Average Days on Market: 464

Inventory: 21

2015 Rank: 4

 

 

23. 10011 – NEW YORK NY

Median Price: $4,676,989

Average Days on Market: 91

Inventory: 288

2015 Rank: 27

 

 

24. 33109 – FISHER ISLAND FL

Median Price: $4,611,350

Average Days on Market: 167

Inventory: 92

2015 Rank: 6

 

 

25. 93108 – SANTA BARBARA CA

Median Price: $4,597,545

Average Days on Market: 191

Inventory: 150

2015 Rank: 23

(First published here: http://www.forbes.com/sites/samanthasharf/2016/12/08/full-list-americas-most-expensive-zip-codes-2016/#436d0e231b63)

 

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Trump To Ax Mortgage Interest Deduction

For more than a century, homeownership has come with a small bonus: The mortgage interest deduction. It allows borrowers to deduct the interest paid on their home loans from their income taxes. Real estate agents, homebuilders and mortgage lenders have long used it as a selling point. Every so often it comes up in debate, but it is so popular that lawmakers are more than a little bit afraid to touch it. The future Trump administration apparently is not. 

“We’ll cap the mortgage interest, but we’ll allow some deductibility,” said Steve Mnuchin on CNBC Wednesday after confirming that has been asked by President-elect Donald Trump to head the Treasury Department.

The mortgage interest deduction is already capped at loans up to $1 million if you’re married and filing jointly, and at $500,000 if you file separately. That said, the median price of a home in the United States is just more than $200,000, so not a lot of people make it to that cap. The vast majority of those who do benefit earn more than $100,000 a year and are not the most cost-burdened homeowners.

ropeThe deduction is very popular, but it benefits far fewer taxpayers than one might think. The current homeownership rate is around 62 percent, but of those homeowners, one-third do not have a mortgage. They own their homes outright, so the deduction would not apply to them.

Some homeowners, mainly middle- and lower-income families either don’t pay federal income taxes or don’t itemize, so the deduction wouldn’t apply to them either. Only about 40 million (or 22.5 percent) of the 173 million households in the U.S. benefit from the mortgage interest deduction, according to the Tax Policy Center.

For those who do itemize, here’s how the math works: Let’s say you have a $500,000 30-year-fixed mortgage at 4.5 percent, and you’re in the 33 percent tax bracket. In the first year of your loan, the deduction saves you just more than $10,000 in taxes.

If the Trump administration caps deductions at even $100,000, as Mnuchin suggested, that would not hit most borrowers because on that $500,000 (which is more than most loans in general) the total annual interest payment was about $23,000. Granted, homeowners may have other deductions, medical expenses, charitable, religious or otherwise, but most would not make it to $100,000 even with the mortgage.

shutterstock_263847668Despite the small number of borrowers a cap would affect, real estate industry leaders oppose any changes, especially in an environment where they are trying to convince young millennials that a home is a good investment.

Millennials lived through the recession and the housing crash and saw what the crisis did to their parents’ savings. First-time buyers have been the missing link in the housing recovery, already cash strapped by low wages and high levels of student debt.

“We would strongly oppose any attempt to limit or eliminate the mortgage interest deduction. Realtors know that the MID is an important benefit not just for the millions of current homeowners who depend on it, but also for renters looking to make the transition into homeownership,” said William E. Brown, president of the National Association of Realtors.

“We’re living in a time of tight credit and low inventory, with homeownership rates hovering around a 50-year low. Doing anything that would make it harder for buyers to enter the market is a fundamental step in the wrong direction.”

Mortgage interest rates have been rising dramatically since the election in November, and that has already slowed demand among some homebuyers. Home prices also just crossed over to record highs in September, according to the S&P CoreLogic Case-Shiller Home Price Index.

Affordability is weakening, and while some claim that job and income growth will make up for it in 2017, the prospect of losing the deduction, meaningful or not, is another emotional barrier to entry for potential homebuyers on the edge of ownership.

http://www.cnbc.com/2016/12/01/heads-up-homeowners-mortgage-interest-deduction-on-trumps-chopping-block.html

 

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