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Greater Washington’s commuters continue to choose gridlock

Over the past two years, the COVID-19 pandemic has disrupted real estate markets and urban spaces in new and profound ways. Increased work-from-home has…

By Jaclene Begley, Leah Brooks, Brian J. McCabe, Jenny Schuetz, Stan Veuger

Over the past two years, the COVID-19 pandemic has disrupted real estate markets and urban spaces in new and profound ways. Increased work-from-home has boosted demand for larger homes in suburban markets, vacancy rates in downtown offices and retail have spiked, and fewer daily commuters and more flexible work schedules have changed transportation patterns. While there is still considerable uncertainty about how many employers will stick with remote or hybrid work in the long run, policymakers who oversee transportation systems are faced with a number of challenges on how to provide safe, reliable, and affordable options that connect people to jobs, schools, shopping, and entertainment.

This year’s State of the Capital Region report examines commuting patterns and transportation infrastructure and asks: How do residents of the Washington, D.C. metro area get to work? How has this changed over time? And how should policymakers plan for future investments? (Note: Our report does not study travel for non-work trips, which constitute more than half of all trips.)

Four in five Washington-area commuters drive to work—and that number hasn’t changed in half a century

Over the past 50 years, the Washington, D.C. metro area has more than doubled in population, and with that increase has come substantial investment in transportation infrastructure. Construction on the region’s Metrorail system began in 1969, service began in 1976, and the vast majority of its 91 stations were open by the late 1990s. Yet the share of commuters who take public transportation versus those who drive to work has barely budged over this time: Around 80% of commuters still drive alone or carpool, compared to around 15% who ride public transit (Figure 1). Even so, the Capital Region has much higher transit ridership than most U.S. cities; only New York has more transit rides per capita.

COVID-19 has devastated public transit ridership

Public transit ridership in most U.S. cities has suffered a gut punch over the past two years, as more downtown office workers shifted to work-from-home or hybrid models.

Prior to the pandemic, employment in the Washington, D.C. region was highly centralized, with a large share of the region’s jobs—especially those in government and professional services—located near the downtown core. Metrorail’s hub-and-spoke system was designed to carry workers from their suburban homes to that downtown core, as well as to supporting businesses like coffeeshops, restaurants, and bars. Tourists relied on Metrorail to access centrally located hotels, museums, and entertainment venues. The federal government—a major downtown office tenant—still has not recalled most of its workforce to the office, while many businesses in the urban core have shuttered.

The loss of economic activity is reflected in continuing low ridership. Rail trips are at approximately 40% of January 2020 levels, while bus ridership is around 65% (Figure 2). Notably, bus riders have lower average incomes and are less likely to own cars than commuters who take rail, making them more dependent on transit services. Many lower-paid essential workers—including staff at health care facilities, pharmacies, and grocery stores—depended on public transit throughout the pandemic. Ridership has recovered some from the trough in July 2020, and may rise further as public health concerns recede.

Total Capital Region monthly transit rides, January 2019-January 2021

Transit ridership was declining for a decade before COVID-19

Taking a longer view, Metrorail ridership had been declining gradually for a decade before the pandemic hit. Annual trips peaked in 2010 around 350 million and had fallen to about 300 million by 2019. Riders and transit observers cite a number of problems with the agency during this period, including unreliable and infrequent service and safety hazards. Another notable development during these years was the rapid expansion of ride-sharing services such as Lyft and Uber; these companies can act both as substitutes for public transit and as complements, fixing the so-called “last-mile problem,” or the gap between riders’ home and transit stations.

Metrorail Annual trips, 2005-2021

There are several ways to interpret the decade-long decline in transit ridership. On one hand, we could view it as consumers voting with their feet in the transportation marketplace and moving away from public transit toward more preferred options. But there are broader regional economic, social, and environmental consequences to commuters’ individual choices.

Moving commuters in individual cars (especially sole-occupant vehicles) requires much more physical space compared to shared buses or trains. Smaller shares of transit riders mean more traffic congestion and longer commute times for everyone. The transportation sector is one of the largest contributors to greenhouse gas emissions and localized air pollution; more drivers and fewer transit riders leads to worse air quality and more negative health outcomes in the region. Owning and maintaining a car is expensive; these costs are especially onerous for low- and moderate-income households. And finally, not everyone is legally or physically able to drive; children, people with disabilities, and older adults are among the groups who are most reliant on non-car transportation.

The costs of poorly functioning transit systems fall hardest on low-income households

The critical challenge for policymakers in the Capital Region and other large cities is how to provide reliable, climate-friendly transportation options for all residents—including people who cannot afford to own cars or cannot drive—within the existing fiscal framework.

Maintaining fixed-infrastructure transit systems (notably, subway and commuter rail) with declining ridership will be increasingly expensive. Reducing service frequency and reliability to cut costs will push more commuters away from transit—as the recent experience with removing Metrorail’s 7000-series cars has demonstrated. The counties and cities that make up the Capital Region face limits on their fiscal capacity (and taxpayers’ willingness to pay), yet federal support is politically uncertain.

The burdens of bad public transit fall hardest on low-income households, who have more difficulty carrying the costs of car ownership, tend to live far from major job centers, and are less likely to have remote work options. Therefore, policy decisions on transit service have important equity implications.

This report focuses only on home-to-work commuting patterns; non-work trips are an important area for further study. Expanded work-from-home may drive more demand for locally serving retail and food service in residential areas throughout the Capital Region. If so, local governments should consider how to make it easier and safer for people to access these services by non-car means, such as walking and biking.

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Morgan Stanley: SPX could return to its pre-pandemic 3,400 level

The S&P 500 index could return to its pre-pandemic 3,400 level in the coming months that translates to another 15% downside from here, warned a Morgan…



The S&P 500 index could return to its pre-pandemic 3,400 level in the coming months that translates to another 15% downside from here, warned a Morgan Stanley analyst on Monday.

Don’t be fooled by the bear market rally

Michael Wilson dubs the recent bounce (about 4.0%) in U.S. equities a “bear market rally” and says investors should brace for more pain ahead as inflation and supply constraints remain a significant headwind. In his note, the analyst said:

With valuations now more attractive, equity markets so oversold an rates potentially stabilizing below 3.0%, stocks appear to have begun another material bear market rally. After that, we remain confident that lower prices are still ahead.

Last week, the U.S. Bureau of Labour Statistics said inflation stood at 8.30% in April – a marginal decline versus the prior month but still ahead of the Dow Jones estimate.

How to navigate the current environment?

Wilson continues to see a recession as unlikely, but agrees that the risk of such an economic downturn has certainly gone up. The U.S. economy unexpectedly shrank 1.40% in the first quarter of 2022.

That is just another reason why equity risk premium is too low, and stocks are still overpriced. The bear market won’t be over until valuations fall to levels (14 – 15x) that discount the kind of earnings cuts we envision, or earnings estimates get cut.

He recommends increasing exposure to real estate, health care, and utilities stocks to navigate the current environment, while tech and consumer discretionary stocks remain a big “no” for him.

The post Morgan Stanley: SPX could return to its pre-pandemic 3,400 level appeared first on Invezz.

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Real Estate

Is investor appetite for non-QM changing?

HousingWire chats with Steven Schwalb, Managing Partner of Angel Oak Lending about the changes investor appetite for non-QM products.
The post Is investor…



In 2022’s changing market, non-QM has been a hot topic for many. HousingWire recently caught up with Steven Schwalb, managing partner of Angel Oak Lending, about the changes investor appetite has gone though for non-QM.

HousingWire: What is the investor appetite for non-QM and how has that changed over the past few years?

Steven Schwalb: The investor appetite continues to be strong even in today’s volatile market. Non-QM securitizations had their biggest supply year on record in 2021 and we are still hitting records today. In fact, in the first quarter of 2022, non-QM securitizations totaled $11 billion. Of that volume, $6.2 was in March. March just so happened to be a record month for Angel Oak as well.

As a leader in bringing back this asset class, we have continued to see more and more investors look to non-QM. One common criticism of these loans in the past was that they were not stress-tested and no one knew how they would perform under those conditions. Well, the COVID pandemic brought about economic conditions that tested the performance of non-QM and they came out quite well. Since then, we have seen more and more insurance companies and money managers become interested in investing with Angel Oak and the non-QM space. This bodes especially well for the future and non-QM’s anticipated growth.

HousingWire: With so many new lenders getting into non-QM, why is it more important than ever to work with the right non-QM lender?

Steven Schwalb: Non-QM is where we play, and we have laid a solid foundation as the leaders in non-QM. Angel Oak Mortgage Solutions focuses exclusively on non-QM and we have been setting records in volume. As an organization, Angel Oak has originated over $12B in non-QM. Recently we have seen an increased focus on non-QM, which has led a number of Agency lenders attempt to get into the space.

Since there are so many more options, it is more important than ever to work with the right firm. As we always say, wouldn’t you rather work with someone who has done 10,000 non-QM loans rather than 10? The key is to understand the important questions to ask. How long have they been doing non-QM? What percentage of their overall business is non-QM? What is their origination model? Do they need a pre-closing investor review? Those are but a few important ones.

Choosing the wrong lender puts not only your reputation at risk, but the relationship with your referral partner as well! What happens when the lender tells you they can do the loan with 20% down and then at the last minute, their end investor says no? They come back saying the borrower needs to put down 30%. We’ve heard many stories of that happening. How does that impact your relationship with that referral source? These examples do not happen at Angel Oak. Our vertical integration means our affiliate, Angel Oak Capital Advisors is the end investor. We know what they’re looking for when we issue a pre-qual, and we stand behind that. This relationship allows us to write our own guidelines and quickly update them based on market conditions. Our model is to originate to retain, not to sell. As well, we do not have to seek third party approval to do a loan – we are the end investor. Surety of execution, consistently enhancing guidelines and offering flexibility through our non-QM products sets us apart. Make sure to ask lenders you are considering these types of questions.

HousingWire: Non-QM is expected to grow significantly in 2022, where is that growth going to come from?

Steven Schwalb: A couple of areas. First, with increased education and awareness, more originators are beginning to offer non-QM. That means more opportunities for these underserved borrowers to qualify for a loan.

Second is from the significant growth in the number of borrowers who need it. Increased fees from the GSEs for second homes and high balance loans have borrowers looking for more affordable options. There is also a large population of self-employed in the U.S. today. Self-employed borrowers often need Bank Statement loans because they can’t qualify using tax returns. The Department of Labor estimates 30% of the U.S. workforce is self-employed. That is around 59 million people including gig economy workers. And this demographic continues to grow at a rapid rate. We also work with originators who close deals for real estate investors who own many properties and need options outside of Agency.

HousingWire: How have the changes in the agency space (GSEs/FHFA) impacted non-QM?

Steven Schwalb: A couple of changes have impacted the non-QM space. First, stricter guidelines including condos have caused more borrowers to fall out of Agency. We are seeing more condos deemed non-warrantable and we are helping originators with these fall-out scenarios. As well, Agency has increased fees for second homes and high-balance loans. As a result, our non-QM volume is increasing with originators looking for alternative solutions to get their deals closed. After all, this is what we do – helping borrowers left outside of Fannie Mae and Freddie Mac and giving them another chance. At the moment, the population of borrowers in this situation is increasing.

The bottom line is that our originator partners are telling us that Angel Oak and non-QM is providing them an opportunity in today’s market to capture more purchase volume. Investors see the growth and they feel more confident investing in our non-QM borrowers. There is ample growth ahead of us!

The post Is investor appetite for non-QM changing? appeared first on HousingWire.

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Spread & Containment

A Slowdown in Showings

Today, in the Calculated Risk Real Estate Newsletter: A Slowdown in ShowingsA brief excerpt: The following data is courtesy of David Arbit, Director of Research at the Minneapolis Area REALTORS® and NorthstarMLS (posted with permission). Here is a lin…



Today, in the Calculated Risk Real Estate Newsletter: A Slowdown in Showings

A brief excerpt:
The following data is courtesy of David Arbit, Director of Research at the Minneapolis Area REALTORS® and NorthstarMLS (posted with permission). Here is a link to their data.

The first graph shows the 7-day average showings for the Twin Cities area for 2019, 2020, 2021, and 2022.

There was a huge dip in showings in 2020 (black) at the start of the pandemic, and then showing were well above 2019 (blue) levels for the rest of the year. And showings in 2021 (gold) were very strong in the first half of the year, and then were closer to 2019 in the 2nd half.

Click on graph for larger image.

Note that there were dips in showings during holidays (July 4th, Memorial Day, Thanksgiving and Christmas), and also dips related to protests and curfews related to the deaths of George Floyd and Daunte Wright.

2022 (red) started off solid but is now below the previous three years.
There is much more in the article. You can subscribe at

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