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Realogy Celebrates A Decade As One Of The World’s Most Ethical Companies

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Realogy, leading provider of residential real estate services in the U.S., was recognized for the tenth consecutive year as one of the 2021 World’s Most Ethical Companies by Ethisphere, a global leader in defining and advancing the standards of ethical business practices. Realogy is one of only four honorees in the real estate industry and amongst fewer than one-quarter of the 2021 honorees who have received the designation for ten or more years. “Celebrating 10 years as one of the World’s Most Ethical Companies is an incredible distinction and a milestone achievement for Realogy’s employees who demonstrate our commitment to ethics every day,” said Ryan Schneider, Realogy chief executive officer and president. “This designation is especially meaningful following such an extraordinary year, and I am so proud of how our employees continued to uphold our values as they supported our affiliated agents, franchise owners, consumers, and each other in helping keep America moving with integrity above all else.” Shacara Delgado, Realogy’s chief ethics and compliance officer, added: “Even as we navigated change and disruption in an unprecedented year, Realogy employees stayed true to our values and operated with the same unwavering commitment to ethics and integrity that we’ve demonstrated for ten consecutive years. This year’s acknowledgement honors the lasting and consistent commitment we’ve made over the years to ensure integrity is part of who we are at Realogy.” In addition to its robust Ethics and Compliance program, Realogy’s focus on ethics and integrity is demonstrated through its many community, diversity, and environmental sustainability initiatives and accolades, including: Certification as a Great Place to Work® for the last three consecutive years Named by Forbes as one of America’s Best Employers for Diversity, along with Realogy brands Century 21® and Coldwell Banker® Strong support of and collaborative partnerships with real estate associations that promote diversity and inclusion, including the National Association of Hispanic Real Estate Professionals (NAHREP), National Association of Real Estate Brokers (NAREB), the Asian Real Estate Association of America (AREAA), and The LGBTQ+ Alliance, of which Realogy was a founding sponsor Repeated honors for gender diversity on the Realogy Board of Directors from Executive Women of New Jersey (EWNJ) and the Women’s Forum of New York “Ten years of operating with integrity is no small feat, especially while addressing the tough challenges of 2020. Realogy reached this milestone in a year when earning trust was more important than ever and remained steadfast in its ongoing commitment to ethics and integrity,” said Ethisphere CEO, Timothy Erblich. “They continue to demonstrate their commitment to the highest values and positively impact the communities they serve. Congratulations to everyone at Realogy for earning the World’s Most Ethical Companies designation for a remarkable tenth year in a row.” About RealogyRealogy Holdings Corp. (NYSE: RLGY) is the leading and most integrated provider of U.S. residential real estate services, encompassing franchise, brokerage, relocation, and title and settlement businesses as well as a mortgage joint venture. Realogy’s diverse brand portfolio includes some of the most recognized names in real estate: Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, Corcoran®, ERA®, and Sotheby’s International Realty®. Using innovative technology, data and marketing products, high-quality lead-generation programs, and best-in-class learning and support services, Realogy fuels the productivity of independent sales agents, helping them build stronger businesses and best serve today’s consumers. Realogy’s affiliated brokerages operate around the world with approximately 190,700 independent sales agents in the United States and nearly 130,000 independent sales agents in 115 other countries and territories. Recognized for ten consecutive years as one of the World’s Most Ethical Companies, Realogy has also been designated a Great Place to Work three years in a row and one of Forbes’ Best Employers for Diversity. Realogy is headquartered in Madison, New Jersey.

DLP Lending Closes $21 Million Loan, Partners with Southern Impression Homes to Open Vacation RV Resort

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DLP Lending, part of the DLP REal Estate Capital family of companies, announced it closed a $21 Million loan with Southern Impression Homes on Island Oaks RV Resort, located in Glen St. Mary, FL, near Jacksonville. Additionally, DLP provided $6.5 M of equity capital to become partners with owners Carter Funk, Chris Funk, and Jim Shiels on the project. Don Wenner, DLP Founder and CEO, commented, “Our team worked diligently with Carter, Chris, and Jim in order to secure the type of capital they needed to move forward on this exciting venture. As we continued our own due diligence, we found the project to be very valuable and worthwhile as a DLP investment and we were thrilled when they agreed to partner with us.” Upon completion, the resort will include 700 RV sites spread across the 120-acre property. The resort will offer its guests a wide variety of activities and amenities to enjoy during their stay including a family dining restaurant, sports pub, tiki bar located on the beach of the 3- acre swimming lake, resort-style pool, 9000 sq.ft. clubhouse, pickleball and shuffleboard courts, along with a 9-hole mini golf course. Chris Funk commented, “It’s been an amazing experience working with DLP Lending! Their knowledge of the industry and speed of execution on this deal was impressive. I look forward to working with them on the next deal.”

Q4 2020 Single-Family Rental Investment Trends Report

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State of the Market The single-family rental (SFR) sector went into the pandemic atop a healthy wave of momentum. Since the onset of the pandemic, domestic migration patterns and shifts in housing demand have unilaterally added fuel to the SFR fire. The millennial cohort’s maturation, coupled with the obsolescence of cities during a pandemic, has meaningfully bumped up demand for suburban housing. According to John Burns Real Estate Consulting and National Rental Home Council, 59% of newly signed SFR leases are from households leaving cities. The long-term dwindling of starter homes and the growing tendency of householders to remain in their homes for longer make it exceedingly difficult for entry-level buyers to compete for a limited supply of inventory. This has resulted in an overflow of suburban housing demand, and SFR operators have proven more than ready to take advantage. The total market cap of the SFR sector is already within striking distance of multifamily, and there is a near consensus that SFR will continue to enjoy demographic tailwinds and increasing economies of scale for the foreseeable future. Performance Metrics Occupancy As measured by the U.S. Census Bureau, occupancy rates across all single-family rentals averaged 95.1% in the fourth quarter of 2020, ticking down by 20 basis points (bps) from the previous quarter (Chart 1). The latest estimate keeps occupancy levels near generational highs last seen in 1994. From 2007’s lows, occupancy rates for all SFR properties are up by 5.4%. The occupancy rate for single-family, owner-occupied units sat at 99.1% at the end of the fourth quarter, holding steady from the previous quarter. Together, these trends reflect a market where demand for single-family housing is outstripping supply. Rent Growth According to DBRS Morningstar, annualized rent growth on vacant-to-occupied (V2O) properties rose by 50 bps to 7.5% in October 2020, the latest month of data availability (Chart 2). The October reading is the second highest for V2O properties since tracking began in 2015, and it comes just two months after reaching its all-time high of 7.8% in August. Rent growth in vacant-to-occupied properties climbed steadily throughout 2020, despite pandemic-related headwinds during the initial shutdown. V2O rent tends to have a high degree of seasonality, reaching a bottom in the late fall and peaking in the spring. When pandemic-induced shutdowns began in the U.S. in March, the normal cycle of seasonal rent growth acceleration was interrupted. However, as time would prove, momentum was not thwarted but merely delayed. Since June, annualized rent growth has sat at 6% or higher, a level unseen since the spring of 2016. A tenant shift out of dense urban cities and a historically tight housing market are causing a bottleneck of demand for new SFR product, pushing rents higher. Year-over-year rent growth in lease renewals rose 62 bps in October to an annualized 4.1%, on par with its pre-pandemic mark in March. Rent growth on lease renewals, which tends to see far less seasonal variability, fell dramatically between April and June, dropping as low as 1.4% — a symptom of landlords prioritizing renter retention during the worst days of the recession. Since then, rents have risen considerably but remain below the 4.5% average growth rate between the start of 2019 and when the recession took hold in March 2020. Cap Rates & Prices Property-level yields for SFR assets continue to fall. In fourth-quarter 2020, SFR cap rates ticked down to 5.9% — their lowest level on record. Measured quarter over quarter, cap rates fell by a remarkable 61 bps (Chart 3). Moreover, since second-quarter 2020, SFR cap rates are down 79 bps. Continued cap rate compression reflects asset price appreciation, low benchmark interest rates and growing operational efficiencies. The yield spread between cap rates and the 10-year Treasury offers an estimate of the SFR risk premium (the amount of additional compensation needed to justify taking on the extra risk). In the fourth quarter, this spread fell by 82 bps to 5.0%, bringing it back near pre-pandemic levels (Chart 4). Spreads between SFR and multifamily cap rates settled at 0.93% to end 2020, falling by 53 bps from the prior quarter and marking the most substantial single-period drop since late 2015. These data trends offer support to what most market watchers already know to be true: While there remains a yield premium for holding SFR assets as opposed to the same number of units in a multifamily property, the premium is falling fast. The single-family rental sector’s institutionalization has meant that new purpose-built rentals are starting to contain differentiating characteristics from other single-family homes. However, the institutionally held slice of the SFR market is still dwarfed by individual investors, reflecting the sector’s infancy. As of the U.S. Census Bureau’s 2018 Rental Housing Finance Survey (released fall 2020), individual investors accounted for 72.5% of all SFR assets. The collection of LPs, LLCs and LLPs made up another 15.7%. Between real estate corporations and real estate investment trusts (REITs), the share of institutionally controlled SFR assets totaled just 2.3%. While the emerging trends may be for dedicated SFR communities and greater product heterogeneity, most SFR properties currently look just like any other single-family home. Across the U.S. housing market generally, prices are accelerating. According to the S&P Case-Shiller National Home Price Index, valuations are up by 9.5% year over year through November 2020, more than doubling the growth rate of 3.7% reported one year ago (Chart 5). According to CoreLogic, housing prices are getting squeezed by extremely tight inventory levels. The share of housing units selling in less than 30 days on the market soared to 33.9% through October, toppling the previous peak of 21.4% reached in 2004. LTVs Loan-to-value ratios (LTVs) on SFR mortgages fell by a weighty 5.4% in the fourth quarter of 2020, settling at 60.4% (Chart 6). LTVs tend to fall during a recession, reflecting more conservative underwriting. Here, the pandemic appears to be a double-edged sword. Not only is there evidence of fewer ultra-high LTV loans, but underlying asset values have accelerated during the pandemic — a unique feature of this particular downturn. Debt Yields Debt

Goodbye City Life: Rising Rents Match Homebuying Hotspots

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Renters, much like homeowners, are favoring smaller more affordable markets that offer highly rated schools, strong local economies and more space over expensive tech hubs, a trend that is pushing rents up in many of the same markets where home prices are rising the most, according to the realtor.com® Monthly Rental Report released today. “Although rents across the U.S. have been growing at a slower pace since the onset of COVID-19 and the major tech hubs continue to see declines, some markets are seeing rents grow by double digits,” said realtor.com® Chief Economist Danielle Hale. “Many of the same factors that attract homebuyers to an area — highly rated schools, job opportunities, affordability and quality of life — attract renters. Like homeowners, the pandemic has given many renters the freedom to work remotely, and the rental trends reflect that reality.” In January, the U.S. median rent, which is calculated by averaging the median rent of the 50 largest metros, was up 0.8% to $1,442, below its pre-COVID growth rate of 3.2%. Despite the continued slower growth, January marked the first month since July 2020 where rental growth didn’t slow further, indicating that rent growth may have reached a floor. Seven of the top 10 metros with the largest rent increases in January — New Orleans*; Sacramento, Calif.; Rochester, N.Y.; Cleveland; Riverside, Calif.; Cincinnati and St. Louis — were also among the metros where home prices grew more than 5% year-over-year. Renters typically have more flexibility to move, and with remote work allowing many people to live anywhere, markets that offer affordability are in hot demand. In California, Riverside and Sacramento have become desirable alternatives to the pricey Bay Area and Los Angeles housing markets. Despite a sizable 9.6% increase in the last year, the median rent in the Riverside metro was $1,858 in January, 25.4% lower than the median rent in neighboring Los Angeles. Likewise, the median rent in Sacramento was $1,649 in January, still 36.8% lower than the median rent in San Francisco despite its 11.0% rise in the last year. Four of the top 10 markets with the largest year-over-year rent increases in January are located in the Midwest, a region that in recent years has attracted affordability-minded homeseekers looking for an alternative to the pricer coastal markets. Editor’s Note: New Orleans’ exceptional year-over-year growth in median rent was driven by shifts in the underlying inventory of rental units. The number of studio units has declined by 17% year-over-year, while one-bedroom and two-bedroom unit inventory has increased by 50% and 31%, respectively. The larger space commands larger rents, therefore driving up the median rent in the area.

U.S. Economy Expected to Expand at 6.7 Percent Clip in 2021

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The U.S. economy is expected to grow 6.7 percent in 2021, an improvement not only from last year’s 2.5 percent contraction but up, too, compared to last month’s forecast of 5.3 percent, according to the February 2021 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. The latest forecast upgrade of full-year 2021 real GDP growth reflects greater-than-expected consumer spending in the winter months, slowing COVID-19 case rates and hospitalizations, and the likelihood of an impending fiscal stimulus package. However, the ESR Group notes that some of the expected growth quickening stems from a pull-forward of growth that was previously expected to take place in 2022; subsequently, its forecast of full-year growth in 2022 decreased 0.8 percentage points this month to 2.8 percent. The ESR Group’s updated forecast also highlights greater uncertainty and downside risks, including stronger inflation and higher interest rates, as well as potentially weaker growth if COVID-related restrictions persist beyond the spring. While housing is still expected to moderate in the new year from its unsustainably high pace in the second half of 2020, the ESR Group did upwardly revise its 2021 sales forecast on new data suggesting that the expected cooling will occur over a longer time frame than previously anticipated. Annual single-family starts were also upgraded to 18.6 percent growth in 2021, up from last month’s forecast of 12.5 percent. Combined with continued strength in refinances and an otherwise upgraded housing forecast, the ESR Group projects mortgage originations in 2021 to hit $4.1 trillion, a $0.2 trillion improvement from its prior forecast. “If 2020 was the year of the virus, then 2021 will more than likely be the year of the vaccine,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Whether the vaccines are effective, including with the new virus strains, and how broadly and timely they can be distributed remain key questions; our forecast assumes such efficacy and that they’ll be widely administered by summer. Further, the recent upward creep of Treasury rates suggests that financial markets currently expect the same.” “Consumer interest in locking-in historically low mortgage rates helped drive continued high volumes of refinancing and aggressive levels of homebuying,” Duncan continued. “We believe that this will continue in 2021. We assume that the proposed fiscal stimulus of around $1.7 trillion will be passed in mid-March, and that growth will accelerate sharply beginning in the second quarter.” “However, with the Fed committed to low rates for the foreseeable future, a recovering economy, and already the highest level of debt-funded stimulus in place since World War II, the proposed additional stimulus heightens the risk of rising inflation and interest rates, as well as a potential boom-and-bust scenario. Very strong growth in the second half of 2021 could push inflation, and thereby rates, up significantly in 2022, thus invoking a Fed response of tightening and a significant deceleration later in 2022. This is not our base case scenario, but we see it as a significant risk moving forward.” Visit the Economic & Strategic Research site at fanniemae.com to read the full February 2021 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

Biden’s delay on foreclosures ignores harm to marketplace as COVID-19 crisis wanes

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Gryphon USA president Richard Kruse said the Biden administration’s move this week to extend the 12-month moratorium on home mortgage foreclosures through June 30 undermines the vitality of the nation’s housing market as health and economic conditions that prompted the federal policy begin to subside. “The unprecedented federal interference into the private housing market due to the COVID-19 pandemic certainly stabilized the shelter of Americans in a healthcare emergency which is positive,” Kruse said. “However, extension of the foreclosure ban beyond the March 31 expiration fails to recognize the success of social distancing and vaccination programs against the initial emergency policy.” Federal agencies in late December extended the original moratorium to March 31 in recognition that the Biden administration might want to take another look at the situation. They did and have put forward an extreme policy not spending the effort to direct relief at those who truly need it. Kruse adds that the extension only addresses half of the problem and keeps landlords in the dark regarding how to seek the cash flow to pay their mortgages and maintenance costs. The new extension is silent on evictions leaving landlords questioning when they may retake possession of their properties that are currently not producing income. “Landlord complaints of tenants taking advantage of the system even if they could afford payments aren’t even addressed here continuing to show deference to the tenant but not provide recourse to those that provide housing,” says Kruse. That announcement of a coordinated extension of forbearance of loans backed by the Department of Housing and Urban Development (HUD) follows the Federal Housing Finance Agency’s announcement it would extend its moratoria on loans owned by Fannie Mae and Freddie Mac. An estimated 1 out of 5 renters are believed to be behind on their rent while 2.7 million homeowners are currently in foreclosure forbearance, according to the White House. Bubba Mills, a partner at Gryphon, stated “The move by our government is not providing a solution to the situation. It is actually causing more damage than good. Without allowing banks and investors to take a “Normal Course of Action” it is affecting more than renters and landlords. When mortgage payments are not being made, neither are taxes and HOA dues. In 2008 cities and counties ran out of money because no one was making payments. Continuing to kick this can down the road even longer continues to move this pandemic from a health problem into much more dire economic problem.” Kruse added that lifting of the foreclosure moratorium in July will not immediately mean relief for lenders and landlords as it will take several months for legal actions to commence. Still, Kruse expressed optimism that the June 30 date will solidify into a real expiration date so the market can begin working out the damage in a post-COVID environment. For more information on this topic, contact Richard Kruse at 614-774-4118 or rfk@gryphonusa.com.

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