REI INK

Casting a Wider Net

Technology Has Made It Easier to Surface Auction Properties By Kathleen Lappe When you hear the term real estate auction, it is not surprising that your thoughts likely turn to desperate sellers or bank-owned properties, and rightfully so. During the 2007 housing crisis, auctions were an effective way to unload thousands of foreclosed properties, and real estate investors were able to snap them up at a significant discount. Today, as property values soar and technology has enabled people to shop for homes online and in a growing number of instances purchase them sight unseen, more sellers are turning to auctions as an efficient way to sell their home for the best price. Outside the U.S., auctions are a very common and accepted way to sell a home. Auctions create competition, they attract serious buyers and they provide certainty that the transaction will close on a specific date. With more owner-occupants choosing to go the auction route, auctions should be given the same attention in competitive markets as they are during a slow market. The difference is that rather than bidding on a distressed or bank-owned property, you are likely to see a wide variety of homes that fit your investment criteria. Many of the homes for sale via auction today are “conventional product” in the price range of $300,000 to $600,000, typically three- or four-bedroom homes in good school districts that would be easy to rent — i.e., the types of homes desirable to first-time home buyers or single-family home renters. Until now, auction listings were not easily accessible. Surfacing them required visiting multiple auction websites, connecting with industry professionals and searching real estate classified listings or county courthouses records. Today, they are available on DirectOffer.com, a real estate search website where you can find the broadest selection of traditional for sale listings along with listings from AuctionLook.com, the nation’s largest aggregator of auction properties, as well as a growing number of leading auction companies, such as Williams & Williams. The DirectOffer app is available to download in the App Store or Google Play so you can see new listings as they come available. How to compete in today’s auction market Just as technology is making it easier to surface properties being sold at auction, it also has influenced how auctions are conducted. Although live auctions still take place, virtual auctions have been growing in popularity for several years and accelerated after COVID-19’s stay at home and social distancing mandates put a halt to live auctions. Hybrid auctions, which combine a live auction with online participation, also are becoming more common. Online auctions take place in real-time like a live auction or span over a period of days or even weeks and start with a minimum price. In these multi-day auctions, participants have the opportunity to bid 24 hours a day, seven days a week, until the auction listing closes. Real-time auctions operate on a bidding countdown clock. When the clock expires, the property is sold to the highest bidder. But often, it is not that cut and dried. If no one bids after the time on the clock expires, the seller can then decide to take the traditional route to sell. This also gives the seller an indication that the price point of sale might be too high. However, if there are multiple bids within the last few minutes, often the sale will go into extended bidding. Extended bidding can be done in a timeframe that the seller picks, so if one person clicks to bid and another one does it within a minute, the auction remains open and bidding continues. For example, if an auction is set to end at 10 a.m., it actually might not end until 10:30 a.m., if many people are still bidding. The time schedule of one minute between bids before closing the sale needs to stay open until there is only one bidder within that time frame. This allows for a clear and defined winner. Whether you are buying in a real-time or multi-day online auction, the majority of the bids often come in the last two hours and sometimes down to the last 10 minutes, so being very diligent on watching the sale is important when participating online or via simulcast. You must have your finger on the button (think eBay). One way to avoid competition and losing a property in the final seconds at auction is to make a direct pre-offer. At the end of the day, the seller is looking for a certain price. The selling agent/auctioneer is required to present direct offers to the seller as part of their fiduciary responsibility as an agent of the seller. If you pursue this strategy, keep in mind sellers will not take pre-offers that are less than what a comparable market pricing analysis is suggesting. Read the fine print and go in prepared A real estate auction listing contains information on the property and starting or reserve bid price as well as important details about the auction itself, including required deposit, registration requirements, date of auction, appraisal, and more. Live, virtual and hybrid auctions require that all potential buyers register for the auction, and many will require a deposit prior to being allowed to bid and or a prequalification from the bank. Auctions require the buyer to do their own due diligence. Most auctions allow potential buyers to tour the property during a designated time period before bidding starts. Plan to arrive early if you are attending in person. It also is critical to talk with planning and zoning and do discovery on HOA rules in accordance with what is allowed before bidding, especially if the plan is to rent the property or to build. Most auction properties have ironclad contracts and when you start bidding you are agreeing to this contract. Therefore, doing your diligence upfront becomes extremely important. This is also the case when it comes to determining the value of the property. The bidding process generally quantifies the

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Creating Confidence in Data & Valuation

HouseCanary Forges Ahead in the World of Automated Real Estate Data and Valuation By Carole VanSickle Ellis Real estate investors know all about waiting, but Jeremy Sicklick and Christopher Stroud, co-founders of valuation-focused real estate brokerage HouseCanary, really do not like to wait. That is particularly the case when it comes to waiting on information that could help determine the value of a potential property acquisition in a competitive market. “As early as 2008, when I was still working with Boston Consulting Group helping real estate investors buy large land banks and deploy capital to buy real estate during the downturn, I knew there had to be a better way to value and underwrite investments,” Sicklick, CEO of HouseCanary, recalled. He knew that data and the ability to engineer effective, accurate data science would be the key to creating this type of product, and he also knew exactly who could help him design that sort of system. By 2013, Sicklick and Christopher Stroud, present-day chief of research at HouseCanary, had founded the company and begun making waves in the world of automated real estate data and valuations. “When I met Chris [Stroud], he was a doctoral student studying economics,” Sicklick said. Stroud’s doctoral research revolved around dynamic models of financial risk and much of his research involved studying how financial market predictions might be improved using modern technology.  “I assumed at the time that all industries were already highly automated and being driven in some part by engineered data science,” Stroud said. “That was not the case in real estate. It was exciting to realize there was an opportunity to use my particular skillset to make an impact on what was at the time already a $30 trillion market.” Just a few years later, the company was making headlines as one of the industry’s most interesting and successful technology and data-forward real estate brokerage startups, adding in data from Google Cloud in 2017 and establishing itself as a clear contrast to data providers like Case-Schiller, which, at that time, was using about 20 indices to estimate home pricing compared to HouseCanary’s 20,000. “What we set out to do – and what we do today – is make an automated valuation model [AVM] available to our clients that is constantly updated, benchmarked, and adjusted to reflect the hundreds of thousands of real estate transactions that happen in the industry every month,” Stroud said. “We not only are able to provide investor clients with the best information available, but we are also able to provide metrics indicating how certain we are of that AVM so that clients can factor certainty and uncertainty into their investment decisions.” Naturally, another big “selling point” for investors is the speed at which these AVMs are delivered. While certain real estate-data behemoths have been providing branded estimates of home value on demand for years, those estimates are notorious in the industry for being less than reliable. A consistently reliable, industry-agreed-upon standard like an appraisal can take weeks or months to obtain. For investors competing in hot markets or deploying large volumes of capital on tight deadlines, sometimes there simply is not time to wait. At times like these, an AVM can help bridge the gap in the decision-making process and get acquisitions and underwriting underway. “We highlight to our clients that we identify how confident we feel in a valuation as well as how accurate we believe a valuation to be,” said Sicklick. “This is one of the main reasons many industry leaders are using HouseCanary’s brokerage services and valuation tools to do everything from underwrite properties to fully value them.” He explained that many investor clients have incorporated HouseCanary into their buying process to the extent that they can now “identify a property in a few seconds, fully underwrite that property, and be in a position to make an offer in 10 minutes or less.” “That is where having trust, the right tools, and the right processes creates huge advantages,” Stroud added, noting seven of the top 10 single-family institutional buyers are using HouseCanary for “part or all” of their process. “We are constantly innovating to continue to improve speed and accuracy,” he said. Knowing When to Pull the Trigger on Investment Strategies HouseCanary prides itself on the volume, accuracy, and timeliness of its data, and one thing that both co-founders emphasize when discussing the company is how many of their investor clients use the platform not just to acquire properties but also to monitor their portfolios on an ongoing basis. “Our clients prioritize their ability to make good decisions about whether to keep capital where they have it or make alternative investment decisions,” said Sicklick. “They use our ongoing information stream to get a real-time view of what the markets are doing and identify the right time to ‘pull the trigger’ on changes in investment strategies.” Clients typically use HouseCanary’s rental evaluation tools, which help investors determine current values of rentals and what they might expect in terms of appreciation and rental rate increases in the near term. “A lot of our clients have portfolios with thousands of properties,” said Stroud. “They come back to us on a regular basis and monitor that entire portfolio by looking at comparables for rents as well as values.” At the same time, clients can receive information about new properties that have become available, evaluate those properties, and even explore their financing options using HouseCanary’s desktop underwriting system, Property Explorer. “This service provides a contextual property valuation that lets users choose their own comps and valuation methods based on their unique investment strategies,” Stroud said. The companion tool, Rental Explorer, operates in a similar manner, providing in-depth analysis and neighborhood-level market data on rental properties. These tools not only help HouseCanary clients make good decisions for their portfolios; they are influencing valuation on a broader level as well. “There have been a number of ongoing issues around racial bias in housing valuation for a long time, and Fannie

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Real Estate Technology Today

Using the Power of Technology from Acquisition Through Disposition By Adam Stern There is a widely accepted principle called Moore’s law that states the speed of technology will double every two years, so to say technology is advancing at a meteoric pace is cliché. Technology is the backbone of turning a small business into a scalable enterprise and making processes and access to data easier and quicker. When talking about real estate and technology, it almost sounds like an oxymoron. Real estate by its very nature is slow. The development of real estate, whether you are talking about commercial, residential, industrial, or agricultural, is time intensive. Even as you move further up the value chain to building and transacting, real estate is an asset that does not move, literally and figuratively. Real estate technology, however, is an extremely interesting and captivating idea. It is in our DNA to want the pace and ease of the things that we do today to be faster and easier tomorrow. Think about the first computer. It was 50 ft long, weighed 5 tons, and required a team of engineers to operate. Today, we carry one in our pocket that is easy enough for a toddler to use and exponentially more powerful. Looking at real estate technology from a historical perspective helps us to better understand how both real estate and the utility of various asset classes have evolved over time. In lieu of making this short article a 10-volume dissertation, I will focus on technology in the residential housing sector. It is a substantial area that has seen tremendous innovation over the last decade, both on the retail “homeownership” side and even more so on the investment side. I can bifurcate this analysis across two segments; viewing a home as a place to live or as a vehicle to put capital to work. The Evolution of Technology Tech platforms have been around for a long time, and as peoples’ need to gain access to real estate information increased, so have their choices. Not too long ago, to get access to real estate data that was localized to a town or city, you would have to go to a real estate agent who had a book where the information resided. With the proliferation of the internet in the late 90s, websites such as Zillow, Trulia, Yahoo! Real Estate, Redfin and Realtor.com took the power of data and put it into the hands of consumers. This allowed anyone with internet access to search for real estate with ever increasing specificity. While real estate investing is not a new phenomenon, the popularity and accessibility of real estate investing platforms has allowed a larger swath of US investors to gain access to the asset class. In 2018, 6.7% of individual tax filers (about 10.3 million) reported owning rental properties. Platforms such as LoopNet, Crexi and Ten-X provide access to commercial real estate opportunities and deliver data in a more consumable way. The launch of these platforms has allowed investors to search for and find opportunities. Previously, locating investment opportunities took more time and research, and required having a network of connections to find off-market opportunities. Investing in larger, more complex real estate deals was relegated to professional investors and investment firms. Technology Lowers the Barriers to Entry As an off shoot from real estate search sites that democratized access to real estate data, co-investment sites have furthered the investability of real estate to investors with smaller sums of available capital. Websites like Propstream make it possible for private residential investors with comparatively small capital reserves to have access to extremely high-quality data which helps in both finding and analyzing potential investment properties. Websites such as Roofstock provide access to individual investment properties while also offering operational services beyond just the locating and transacting of homes. Other platforms such as Fundrise solve the capital constraint roadblock by allowing multiple investors to invest in a single property which is managed by a 3rd party. Along with services for the largest segment of investors in the residential housing market, which are individual investors that own just one property, tech solutions are being developed in higher numbers and in more nuanced ways, thus lowering the barrier of entry for many investors. Technology in Property Management In terms of property management, firms like Renters Warehouse and HomeRiver allow investors to manage properties through one firm across multiple markets, enabling investors to scale their real estate portfolios. New-age property management solutions such as Mynd have integrated mobile technology into property management solutions, making it possible to manage the marketing of a rental property, the scheduling of property visits and even the analysis of potential rental income available through a mobile application. More than any other facet of rental and investment property ownership, new tech addresses the “time and headache” factor of finding and implementing property management solutions, making it faster and more streamlined. Tech services such as Latchel are a bit different and more centered around tenant experience, allowing tenants to order services such as maintenance requests from their landlord, house cleaning and even furniture assembly services. Transactional solutions for the logistical challenges of closing on real estate have come a long way as well. Applications such as Spruce, which is a neutral third party that helps coordinate transactions between homeowners and their lender or real estate institution, have gained steam as the number of investors selling investment properties to institutional investors have become more commonplace. Document signing solutions such as Docusign and Dotloop are now a mainstay in current real estate closings, enabling investors and homeowners to sign documents from the comfort of their smartphones. Technology has enabled more people to intelligently choose markets, locate property, and close on homes in less time. Homeowners moving into their first or move-up home can now use sites to solve lifestyle-focused concerns such as school quality, proximity to restaurants, and availability of day care. Smaller real estate investors are now leveraging tech to gain access

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Tech Platforms

Technology is No Longer Effective When It Stands Alone By Peter A. Gudmundsson Parents of elementary age children will remember well the experience of sitting in a teacher conference and hearing that their child “plays well with others.” This early indicator of interpersonal behavior is a key predictor of later-in-life social skills that will determine career placement and success and emotional happiness with friends and family. Technology adoptions in real estate are similar. Systems and platforms that are designed to “play well with other” hardware, software, and people teams predict and predetermine successful outcomes and favorable metrics like return on investment, efficiency, and resident experience satisfaction. Hardware Most know that smart home automation devices can improve the asset performance of any real estate property. Locks, thermostats, controls, and sensors of various sorts can be networked to software in such a way to reduce costs, generate incremental revenue, and achieve better resident satisfaction. Since most real estate properties are developed, redeveloped, or refurbished in phased increments, smart devices may be sourced from different manufacturers, models, and technologies. An open API software platform should be able to work with most modern devices if properly architected. Of course, no software can make a dumb lock smart, but effective modern unified property management platforms should be backward and forward compatible with various devices. Ask questions from your vendors and make sure you are not going into a commitment to one source of locks, thermostats, or sensors for the life of the product. The lack of openness will not only restrict operating and financial flexibility, but it might also cause supply disruptions in these times of unsteady supply chains. One key element of smart device networking is using a technology that “speaks” many wireless languages. We all know the Bluetooth protocol because of our cars, ear buds, and smart phones, but there are standards like Zigbee, Z-Wave, 802, and others. Current devices and future innovations are likely to use one or more of these protocols so make sure your property management platform software “plays well” with multiple wireless technologies from disparate manufacturers. Software It is a fact of the current operating climate that most property managers and owners know that they should be thinking systemically about software platforms rather than discretely about point solutions. A point solution is a technology that solves only one isolated challenge rather than achieving the network effects of scale by integrating multiple solutions. For example, a property manager may decide on a new parking or gate entry management system to “solve” the problem of garage or parking lot access. Then, having purchased such a point solution, the property manager may discover that the access control is not synced with unit, common area, or property access. Another scenario is a maintenance management program may not interface with self-guided touring approval and access solutions. So, a potential resident may walk into a for-rent unit only to discover disheveled paint tarps and haphazard toolboxes rather than the home of their dreams. Thinking ahead is easier said than done, but with an open and dynamic property management platform that is known for its API flexibility and experience working with other solutions, you are less likely to find yourself stranded without connections to the rest of the workflow. Incidentally, API stands for application programming interface. It is code that joins and integrates different programs to work with one another. Many software vendors will claim that their APIs will connect to almost any other technology, but the savvy client will insist on the proof of experience and will test references. Sophisticated property managers will think through which vestigial point solutions should be maintained and which should be replaced. A series of tradeoffs must be navigated along a spectrum ranging from a “rip the band aid” approach (and go through the immediate but passing pain of replacing all at once with a unified property management system like BeHome247) to utilizing a “hedged” transition where some solutions are replaced, and others maintained either for a medium-term transition or indefinitely. A key criterion for selecting a unified property management platform provider will be that vendor’s ability to let you choose which systems to replace and which to retain. Of course, you must also completely seek to understand the interoperability of the vestigial point solutions with the new software. Like a fresh painting of an interior space, sometimes the newly painted rooms will make the unpainted old spaces look shabbier by comparison. So it is with technology, that you may not realize what value you were missing until you “take the plunge” with a modern replacement. People Pride is the first of the traditional seven deadly sins for a reason. Always be skeptical of a technology vendor that promises to work with every hardware or software. Unpretentiousness and intellectual curiosity are the virtues that must be evident for the best providers. Look for phrases like “that should work but let me verify” or “we did something similar for XYZ company, let’s make sure that will work for you too.” If a technology provider is willing to signal a bit of humility, take that as a good sign. That said, these deployments are increasingly common, and an experienced technology provider can be trusted if they have the experience, brand reputation, and quality personnel. Conclusion Playing well with others is more than a matter of the application of social graces. Today’s technology is no longer effective when it stands alone like a tree in an open field. The most effective deployments will integrate and operate with a diverse set of software programs, hardware items, and operating workflows. At times, you will have to adapt to a new reality, but a good technology solution will also do its best to fit to you and your unique circumstances.

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Uncharted Territory in Digital Transformation

Ready or Not, Be Prepared to Change and Adapt to New and Evolving Ideas By Mark Wai For years, prognosticators have been saying that virtually every aspect of the residential real estate industry, including real estate investment, is poised to be dramatically reshaped by emerging technologies. You’ve heard the buzzwords a million times: Artificial Intelligence (AI), Machine Learning (ML), Blockchain. What you’ve probably heard less of is an answer to a basic question: How much of this talk is hype, and how much is reality?  As you might imagine, the truth is a bit of both. What follows is a brief overview of which promising technologies every real estate investor should be keeping an eye on and what you can expect to see on the real estate technology horizon in the years to come. Let’s talk about the failures, the successes, and the uncharted territory we are approaching in the digital transformation of our industry. The Failures First and foremost, let’s be honest: they’re called buzzwords for a reason. It sounds snazzy to say “AI” or “Blockchain” in a press release—but doing so doesn’t necessarily mean you’re putting those technologies to good use. And too many companies have exaggerated what they say about their tech in order to create buzz and good PR. You can understand why that has happened, because these technologies are easy to get going, and appealing to talk about, but incredibly hard to get right. That’s true for everyone in the industry, from sole-practitioner property investors to the biggest players in the game. There are plenty of AI, ML, and Blockchain vendors and off-the-shelves packages in the market today that are eager to help companies start their AI projects — for a fee, of course. One of the biggest tech companies in the real estate space recently disbanded its AI/ML-based home buying business because its algorithms could not accurately predict the right price-points of a property — both in buying and selling. Despite investing millions of dollars and hiring the best and brightest data scientists, the reality simply didn’t match up with the buzz. Millions of dollars were wasted, and huge opportunity costs were lost. Examples like this demonstrate that despite what you might have heard from the hype machine, the industry is still learning how to implement these technologies effectively and efficiently. If one looks at the history, each major technology takes time to mature, especially in the real estate industry which involves so many different use cases and participants, coupled with a high level of complexity and a lack of existing technology standards. The Successes Make no mistake, though: extremely useful applications of emerging technologies are already being deployed throughout the industry. Below is a snapshot of some of the more interesting and relevant tech innovations to enter the market in recent years. Investors who stay on top of developments like these will have a major competitive advantage in the years to come. Artificial Intelligence to determine the condition of a house. A discipline of AI called computer vision, which underpins technologies like driverless cars and your phone’s facial recognition functionality, is driving major change throughout the real estate industry. By analyzing and gleaning insights from real estate listing photos on a massive scale, computer vision can help a wide variety of real estate market participants save time and make better, more informed decisions. The applications of this technology are numerous, from facilitating faster and more accurate valuations, to better home search experience, and to providing investors with actionable intelligence on the state of their portfolios. Blockchain to secure highly sensitive financial data. Blockchains are permanent digital records that cannot be deleted or changed, which makes them incredibly useful for storing and transmitting data without third-party involvement. For real estate investors, that means removing intermediaries between contracting parties, establishing reliable records of ownership, reducing turn-time, and substantially reducing transaction risks. Blockchain can also expedite the contracting process and reduce costs. Innovative solutions to reduce home-buying friction points. Creative new applications have greatly enhanced the efficiency of many elements of the home buying process, from scheduling showings to notarizing documents. These may seem like minor advancements, but when you reduce the time and friction involved in something that happens millions of times per year, the entire industry benefits. The Uncharted Future Looking towards the future of what is possible, technological developments in the real estate industry will fall into either of two major categories: atomic innovations and holistic innovations. Atomic innovations refer to standalone products or applications that are designed to solve a specific problem, like notarization, showing a listing, underwriting, decisioning, document digitization, e-closing, e-signing, computer vision, biometric authentication, and so on. Holistic innovations are changes that affect the entire end-to-end user experience as a starting point of design. In the next few years, we will likely continue to see many atomic-level innovations, especially because that is what the structure of the venture capital industry most readily supports. This will typically mean individual startups creating discrete new products, rather than wholesale transformations. Holistic innovations, on the other hand, will be much harder, further off, and mostly reserved for larger companies that can support major long-term investments. These are difficult and costly—but when they happen, they will be transformational. The bottom line is, we must be prepared to change and adapt to new and evolving new ideas, because they are on their way to disrupt our industry whether we are ready or not. The past two years have showed us that a once-in-a-lifetime event like the COVID-19 pandemic can also play a very big role in changing and accelerating the use of technologies in real estate. Those who are ready and willing to embrace new innovations will benefit from them the most.

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Russian Invasion of Ukraine

What’s Going On and What It Might Mean for Real Estate in 2022 By Carole VanSickle Ellis On February 24, 2022, Russia invaded Ukraine. The invasion was a continuation and escalation of conflict initiated in 2014 when Russia invaded and ultimately annexed Crimea, a peninsular country bordered by the Black Sea, the Sea of Azov, and Ukraine. Russian marine access has been a point of contention in this region since the time of Peter the Great, the Russian tsar who ruled Russia from 1682 to 1725. Considered one of the country’s greatest statemen and reformers, Peter the Great took the first steps toward transforming Russia from a landlocked state into a significant power in the Baltic and Black Sea regions during his reign. Serhii Plokhy, Harvard professor of Ukrainian and Eastern European history, described the situation earlier this year in an interview with the New Yorker, as “a return to a pre-revolutionary understanding of what Russians are. It is a very imperial idea of the Russian nation, consisting of Russians, Ukrainians, and Belarusians. The last two groups [according to this ideology] do not have the right to exist as separate nations.” In response to the invasion, Ukrainian president Volodymyr Zelenskyy enacted martial law, mobilized the Ukrainian military and all Ukrainian men between the ages of 18 and 60, and publicly declared he would remain in Ukraine despite multiple assassination attempts. The United States and other countries have imposed a variety of economic sanctions on Russia, including banning Russian imports, crude oil, petroleum products, natural gas, and coal. Western companies across the spectrum from McDonalds to Goldman Sachs have closed Russian locations. The results have been far-reaching both in Russia and abroad. Understanding this history and background is essential. It sets the stage for how long this conflict might continue, why it was initiated in the first place, what types of weapons and strategies might come into play, and how the economic fallout might ultimately shape the next decade (or longer) of the American economy and the U.S. real estate sector. What does it all mean for real estate? In 2020, COVID-19 acted as an accelerant for trends that had been taking shape over the previous decade. The Russia-Ukraine conflict has already begun to have similar effects, albeit on different facets of the national and global economy. The conflict will likely accelerate (and exacerbate) issues with inflation, supply chains, stock market volatility, and renewable energy/oil and gas. Issue by issue, we will break down how this will affect real estate and real estate investors in this report. Inflation Historically, inflation has affected real estate in relatively predictable ways:  » Housing costs rise  » Rents rise  » Mortgage payments become relatively lower compared to “going rates”  » Real property assets are increasingly attractive as a “hedge” against inflation What We Hear from the Experts “About 88 percent of investors surveyed [in the Winter 2021 RealtyTrac Investor Sentiment Survey] were concerned about inflation having an impact on their business, whether due to higher material and labor costs, higher interest rates, or rising consumer prices that might weaken demand from potential home buyers and renters.” Rick Sharga, executive vice president, RealtyTrac “I think it is fair to say that this war has changed the risk profile a little bit with respect to inflation…. There is already a lot of upward inflation pressure.” Jerome Powell, Chairman, Federal Reserve “I’ve been trying to tell fellow investors, ‘Be cautious. Invest in something you can afford to hold through whatever type of cycle comes next.’ Some of the traditional fundamentals you usually see in front of a recession are not there right now, but we are hitting inflation numbers we have not seen in 40 years [and] the inflation numbers are now even more out of control because of the Russia-Ukraine conflict.” Dennis Cisterna, co-founder & CIO, Sentinel Net Lease Supply Chain In 2021, the National Association of Home Builders (NAHB) reported more than 90 percent of builders were reporting delays and materials shortages. The Russian invasion of Ukraine further complicates these matters by driving up gas prices in the midst of historically low employment numbers for truck drivers, new tariffs on Canadian soft lumber producers, and ongoing issues getting ships into port and products into distribution. What We Hear from the Experts “With building material pricing, the challenge for builders in 2022 will be to deal with higher input costs while making sure home prices remain within reach for American home buyers.” Danushka Nanyakkara-Skillington, assistant vice president of forecasting and analysis, NAHB “The Russian invasion of Ukraine poses a new threat to commodity supplies and pricing and will have a ripple effect across global manufacturing and supply chains in 2022…. Supply disruptions will trigger price increases for manufacturers and will impact various sectors…. Operators also face labor market constraints and upward pressures on wages.” Claire Williams, Knight Frank Global Headquarters Stock Market Volatility Although the Russian invasion of Ukraine did briefly send the market into a tailspin, by the start of March investors seemed to think the outlook might be a little brighter than they had originally thought. The market solidified and the massive sell-offs pessimists predicted in early 2022 did not happen. Historically, real estate tends to see acceleration in price appreciation when the S&P 500 corrects by between 10 and 15 percent and does not lose that acceleration until the S&P 500 loses more than 20 percent. Because real estate is considered a “safe haven asset,” when stocks start to fall or volatility affects investor confidence, investors tend to veer into physical property assets. However, 2022 is unusual because the housing market is already white-hot and investors face fierce competition in nearly all markets. What We Hear from the Experts “Given real estate is a hard asset that provides utility and produces income, real estate generally outperforms [the stock market] during times of uncertainty. The issue today is that real estate demand is high and stocks are at all-time highs.” Sam Dogen, Financial Samurai

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