Are you reading this while figuring out what you're going to do New Year's Eve? The latest research studies find it is nearly impossible for our brains, given the way they are designed, to handle 2 tasks at the same time. Doing so increases the error rate by up to 50% and doubles the length of time needed to complete the task. But that doesn't apply to me, since I regularly simultaneously talk on the phone, listen to the radio, take notes while driving & steer with my knees.

Of course anyone can sue anyone else at practically any time. Harking back to a root cause of the 2008 global financial meltdown, Commerzbank has filed a lawsuit against four US banks charging negligence over toxic mortgage-backed securities. The German lender maintains that Bank of New York Mellon and units of Deutsche Bank, Wells Fargo and HSBC Holdings failed to properly vet billions of dollars in the sketchy securities. Merry Christmas.

In other potential legal matters, an investigative report published by The Seattle Times with input by BuzzFeed News, the Buffett-owned Clayton Homes Inc. and its subsidiaries, Vanderbilt Mortgage and 21st Mortgage, were found engaging in predatory lending practices against people of color who purchased mobile homes. The report cited federal data that confirmed Clayton had a near-monopoly on this market. It appears that Vanderbilt typically charged black borrowers earning more $75,000 a year slightly more than Whites who earned only $35,000 a year. Among the 25 lenders that originated at least 500 such mobile-home loans over the past five years, Clayton Homes' Vanderbilt Mortgage "gave the highest rates to minority borrowers as compared to whites."

And the increased regulatory environment is certainly causing companies to look for partners and suitors. Mergers and acquisitions worldwide have reached a record high of $4.86 trillion this year, according to Dealogic. Goldman Sachs Group earned the most from M&A advisory, generating about $2.6 billion in revenue. JPMorgan Chase and Morgan Stanley round out the top three. And the depository bank M&A continues. In the last week we learned that in California Pacific Commerce Bank ($350mm) will acquire ProAmerica Bank ($211mm) for about $29.1mm in cash (50%) and stock (50%) or roughly 1.19x tangible book. In Tennessee Atlantic Capital Bank will sell 7 branches in TN to two different banks (3 branches to First Freedom Bank, 4 branches to Athens Federal Community Bank). Pennsylvania's Tristate Capital Bank ($3.1B) will acquire asset management company Killen Group (PA) for about $30mm in cash. As mentioned earlier this week Towne Bank ($6.2B, VA) will acquire Monarch Bank ($1.1B, VA) for about $221mm in stock. Down in the home of the Everglades Professional Bank ($306mm) will acquire FirstCity Bank of Commerce ($73mm) for about $6.8mm or roughly 1.09x tangible book. In Maryland Bay Bank ($474mm) will acquire Hopkins FSB ($240mm) for about $23.8mm in cash or roughly 1.05x tangible book.

What's been happening with multi-family and apartment-related news recently? The Fed indicates the apartment sector is robust with a national vacancy rate of 4% to 5%. And the FHFA is taking more steps to push lenders to provide financing to more multi-family properties.

Annual home price appreciation has increased in the last quarter of the year, compared to the first quarter when it was slowing down, and rental growth has also declined despite accelerating at the beginning of the year. During each month in the first quarter, annual home value growth declined, dropping lower each month. In April, home price appreciation began to see a consecutive increase each month, with an annual pace of rental appreciation slowing since July.  Home values have grown 4.3 percent YoY and single-family rents have appreciated 4.5 percent YoY, down from 5.3 percent in September 2015. Rents for single-family homes have increased at a faster pace than rents for more traditional apartments, which grew only 3.9 percent over the same period. Single-family rents grew faster than multifamily rents in 19 markets, while both multifamily and single-family rents grew more than 10 percent YoY in October in Portland, OR.

But let's take a step back - the rent trends were apparent earlier this year. When Zelman & Associates published its May Apartment Survey, it showed that rents accelerated 4.3 percent compared to 3.7 percent a year earlier, which is the strongest YoY improvement since April 2012. This strength was largely due to the new move-in growth of 4.5 percent and renewal growth of 4.1 percent, which have led to landlords increasing rent due to high demand. Buyer demand remained at 78.6, along with the seller supply score of 53.1. The acquisition financing environment slightly declined to 73.3 and investors have begun to slowly shift their interest toward core, defensive class-A assets from class-B assets but overall buyer demand for both asset classes is still strong. For more information regarding the May Apartment Survey, contact Ivy at ivy@zelmanassociates. com.

And in June the same survey reported a 4.5 percent rent growth, with new move-in rent growth of 4.7 percent and renewal increases averaging 4.3 percent.  The strength in new move in leases is attributed to the high rental demand and the second quarter revenue index reached 4.1 percent, up from 3.9 percent form the first quarter of the year. June had an occupancy rate of 95 percent, a slight increase from 94.8 percent a year earlier. Pricing power slightly improved to 69.7 from 69.5 in May, with the strongest markets in Portland, Sacramento and Atlanta. Buyer demand score remains robust but seller supply declined.

Moving to its August survey, Zelman and Associates reported that the leasing season has ended strongly. Renter demand remained steady while rent growth of 4.6 percent decelerated 20 basis points sequentially but is an improvement from 3.9 percent last August. The West Coast experienced the largest rent growth at 7 percent compared to the Southeast and Southwest at 5-6 percent and the Midwest and Mid-Atlantic at 2-3 percent. The markets where pricing power was the strongest included, Boston, San Antonio and Seattle, while pricing power fell in San Jose, Houston and Tampa. Buyer demand and seller supply both increased from July and the acquisition financing environment was rated above-average.

The initiative to promote homeownership was prompted by the 2009 homebuyer tax credits, where millions of eligible homebuyers were given a tax break. Zillow analyzed that if the Homebuyer Tax Credit did not exist, if a homebuyer bought a house at the nation's median-priced home in 2009 instead of renting and investing savings, by 2015 they would be $19,132 worse off as an owner than a renter. If homebuyers took the maximum available $8,000 tax credit when buying in 2009, they'd be worse off by $11,132. If homebuyers bought a home in 2009 and qualified for the maximum Homebuyer Tax Credit rather than renting and not investing, they would be $5,964 better off financially today.

Construction spending rose 1.0% in October. This is up 13% year over year. Residential construction rose 16.8% year over year, however the growth appears to be in multi-family construction, not SFR. 

Zelman and Associates published its November Apartment Survey indicating a solid year over year improvement in rent growth and pricing power, but both trends did drop more than the seasonal amount. Blended rent growth of 3.9 percent dropped from 4.2 percent in October but is still greater than the 3.5 percent growth for 2014. The West Coast experienced the strongest rent growth, up 5.8 percent and the weakest growth was evident in the Mid-Atlantic/Northeast region, up just 1.6 percent. Revenue growth index reached 4 percent, up from 3.8 percent last November, suggesting that the apartment REITS should translate into solid performance for the remainder of the year. New move in rent growth of 3.5 percent dropped from 4 percent in October, but is still up from 3.3 percent last year while renewal growth of 4.2 percent declined 25 basis points sequentially, the largest drop since February 2014. Move outs due to rent increases reached 9.3 percent in November, up from 7.2 percent last year, with an average of 8.3 percent over the past 12 months. Finally, buyer demand dropped to 73.4 in November and seller supply declined to 52.1, as survey respondents reported that the majority of buyers and sellers have hit their quota for the year, resulting in a drop in transaction activity.

All in all it is hard to beat New York when it comes to this type of activity. Michael Tucker with the MBA reports that, "Three of New York City's top five quarterly dollar volume totals ever occurred this year and the $55.4 billion year-to-date total already surpasses 2007's record high, Cushman & Wakefield reported. But last week's interest rate increase could slow down at least one of the city's sectors, said accounting firm Marks Paneth LLP, New York. '2014 was the best investment sales market I have seen in 32 years,' said C&W Chairman of New York Investment Sales Bob Knakal. 'Thus far, 2015 has been putting up a valiant challenge to that title...If we look at the dollar volume of sales in the New York City market, 2015 will undoubtedly set a new record,' he said."

Turning to interest rates...

If you're looking for fascinating, insightful bond market news here, you're wasting your time. U.S. Treasuries ended Monday's session much as they began it, and there was no news of substance to move rates. Of some note, however, was the $26 billion 2-year Treasury note auction that was met with a lower than average bid-to-cover ratio and 1 one-year low for indirect bidding. The direct bid, however, was the highest since December 2013 and the auction result should be taken with a grain of salt, given that many market participants will have closed the books for the year

Today we have, if you care about real estate values from two months ago, the October Case-Shiller 20-City Index. We'll also have December's Consumer Confidence figures and a 5-year Treasury note auction. We wrapped up Monday with the 10-year sitting at 2.22% and this morning it's at 2.25% with agency MBS prices are worse .125.


(I know this is a repeat, but it still funny.)

Two loan officers wanted to go hunting got a pilot to fly them into the Canadian wilderness, where they managed to bag two big bull moose.

As they were loading the plane to return, the pilot said the plane could take only the hunters, their gear and one moose.

The LOs objected strongly saying, "Last year we shot two, and the pilot let us take them both...and he had exactly the same airplane as yours."

Reluctantly the pilot, not wanting to be outdone by another bush pilot, gave in and everything was loaded.

However, even under full power, the little plane couldn't handle the load and went down, crashing in the wooded wilderness.

Somehow, surrounded by the moose, clothing and sleeping bags, both LOs survived the crash.

After climbing out of the wreckage one asked, "Any idea where we are?"

The other LO replied, "I think we're pretty close to where we crashed last year."

Jobs and Announcements

In job news Freedom Mortgage is expanding its Retail presence in the Central United States under the leadership of Marty Garrity. "Garrity has been a staple of leadership in large mortgage depositories across the Midwest and Central states over the past 25 years. His team is seeking both state Regional Managers and Branch Managers in OH, IL, MI, IN, WI, IA, MN, WV, NE, ND and SD. Founded in 1990, Freedom Mortgage is a privately held, full service residential mortgage lender. We are one of the largest and fastest-growing privately held mortgage companies in the country. This is a great time to join Freedom!" Contact Marty Garrity regarding this opportunity: (216)396-3214.

On the flip side, however, Citigroup said it will cut 2,000 jobs as it continues to restructure business lines and boost profitability. And Morgan Stanley said it will cut 1,200 jobs for similar reasons. (If any folks impacted would like to post their resumes, they can do so for free at And employers can view resumes as well.)