🤝 The deal of the century

Good morning & happy Friday. This is the Shake 🤝 : The wildly entertaining 5-minute newsletter you actually look forward to reading every week.

Here’s what we've got for you this week:

• The Deal Of The Century 🤑 

• The Housing Market Is … ¯\_(ツ)_/¯

• 40-Year-Old Vir *First-Time Homebuyer 👀 

MARKET RADAR

THE DEAL OF THE CENTURY 🤑 

There’s one word that comes to mind when we think about Lowell, Massachusetts: beautiful *gritty.

Traditionally known as a depressed mill town, Lowell had a reputation for being a blue-collar hub mixed with chaos from drug abuse. Deindustrialization devasted the city throughout the 1970s.

Then came the funky 80s 🕺. Lowell began to revitalize due to the efforts of Wang Laboratories and the Massachusetts Miracle - a period of economic growth where unemployment fell from 12% to 3%. By 1988, Wang Labs employed over 33K people and had an annual revenue of $3B.

Now, this was before WFH was a thing so a company of this size had to have a corporate HQ to fit all these employees. 

Wang Lab’s HQ was built in stages during the 80s at the cost of $50-60 million dollars. It was 15 acres and included three 12-story towers, two lower buildings, an auditorium that seats 500, two cafeterias, dining rooms, and a parking lot with spaces for 600 cars. Things seemed to be full steam ahead…

Then the 90s came and the funky music stopped. Wang Labs founder/CEO, An Wang, passed away in 1990. A vital strategist for the business, just two years later the company filed for chapter 11 bankruptcy.

With that came a shift in the business model. In short, Wang Labs went from manufacturing hardware to making software and dropped to ~6K employees by 1994. That big ol’ corporate HQ was no longer needed and there were literally no buyers willing to purchase a property of that size.

It eventually went to auction and sold for merely $525K! *Turns out this wasn’t the first time Wang Labs let a property go for almost nothing. In 1984, Wang Labs sold a site to UMass Lowell for one dollar after not finding any use for the buildings in ten years. That’s one motivated seller…

Anyways, who were these risky buyers? They were Eastern founders Dan Doherty and Brian Kelly. The entire investment community in Mass saw this deal as a white elephant but Brian and Dan had the conviction to pull the trigger on what would become one of the marquee office space deals of the 20th century.

Their strategy for the 1.2 million sqft towers was simple: reposition the three-building office complex as a multi-tenanted facility in order to get it fully leased. The hard part is in the execution - how will they make it attractive enough to lease out and fill vacancies?

There isn’t much coverage of what steps were taken to pull this off or how much money went into redevelopment & holding costs but we do know they received a property-tax break and a $4 million line of credit from the city of Lowell.

One crazy rumor we found was that they provided free space on the ground floor to the Lowell police department 🚨 because people were scared of the neighborhood back then.

You know who wasn’t scared? Our guys Dan and Brian. They were fighters willing to take on the challenge.

By 1998, the complex was transformed into fully leased, first-class, multi-tenant office towers. It housed tenants like JP Morgan, Verizon, MetLife, Cisco Systems, IBM, Eastman Kodak, and Motorola to name a few.

That same year they went on to sell the property for $101 million 💰️ Garnering national recognition for its highly successful acquisition, redevelopment, and sale of this property 🏆️ 

Dan/Brian - if you’re reading this, we’re always open to new sponsors 😉 

THE HOUSING MARKET IS… ¯\_(ツ)_/¯

The housing market is currently in a state of 'meh' according to the CEO of Rocket Mortgage, Jay Farner. It's not quite a buyers' market or a sellers' market, it's just a big ol' shrug of a market.

According to the National Association of Realtors, sales of existing homes, which make up the majority of transactions, have been steadily declining throughout 2022. In November, home sales were down 35.4% compared to the previous year, with steeper declines in the West, particularly for homes valued over $1 million.

Sellers, however, seem to be in denial and are still holding out for their lofty pandemic prices, despite the fact that transactions are tumbling faster than a house of cards in a hurricane.

Live look at Listing Agents who haven’t closed a deal in 2 months putting the hard press on their sellers who think it’s still the Spring 2021 market:

And let's not forget about the builders, who are facing similar challenges with a surplus of inventory, rising borrowing costs, and an increase in cancellations. KB home builders, the 6th largest builder in America, saw a 68% cancellation rate in Q4 2022. Buckle up as that's a higher rate than in 2008…

New home sales in November saw a small increase of 5.8%, but that's like getting a participation trophy in a race where you came in last place. 

Home prices have come down in most markets but that's like saying a kick to the face is better than a kick to the gut. It's still a kick, people.

But don't worry, if you're a current homeowner, you're probably sitting pretty with a sub-3% fixed mortgage rate, so you can just sit tight and wait for the market to sort itself out.

All in all, the housing market seems to be signaling more downside while economists are predicting a mild recession, so hang on to your wallets (and your sanity).

40-YEAR-OLD VIR *FIRST-TIME HOMEBUYER 👀 

It’s never too late to muster the courage and make the move 🤝 

The perks of homeownership are many and great - making it a risk worth taking. “First-time homebuyers” have access to special programs and features that allow them to buy with less and reap the benefits of owning a home.

What is a “First-time Homebuyer”?

Ask anyone off the street what they think a “First-Time Homebuyer” is and they’ll tell you it’s someone who has never bought a home before… WRONG.

Even if you’ve bought a home in the past, you may still be able to take advantage of the first-time buyer perks. How is this possible?

In the residential housing world, the legal definition of a first-time buyer according to HUD (U.S. Department of Housing & Urban Development) is:

“An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers). “

Let’s say you own your current place and by some miracle have convinced your girlfriend/boyfriend to marry you & now you’re buying a new place together!🏡 

Guess what? Even though you bought your home only a few years ago, your spouse is a first-time buyer so BAM - you both get the benefits of your new purchase.

What are the first-time buyer benefits?

First-time buyers can put as low as 3% down (with a 620+ credit score) or 3.5% down (with credit under a 620). A 3% down payment vs the traditionally required 5% down will save you money to renovate your new place or have an emergency nest egg saved after moving in.

That’s a savings of $8,000 for a $407,000 home purchase.

There are even local, state, and federal grants that you can apply for as a first-time buyer. These grants and assistance programs can give you thousands of dollars towards a down payment, closing costs, or both.

With the housing market trending towards more seller concessions being given, a buyer utilizing their first-time option can purchase their dream home with much less money saved up than they realize.

If you look hard enough, there are always reasons why NOT to buy a home right now.

Trying to “time the market” correctly, whether that’s waiting for rates to drop or home prices to decrease, to buy your first home will result in you spending your hard-earned money to pay somebody else’s mortgage while you could’ve been building equity in something you own.

Don’t wait around until you’re 41! Use your first-time buying power and earn the financial perks of homeownership; tax benefits, owning an appreciating asset, predictable monthly payments, and investing in your future.

Make sure you’re protected before you dive into your first time… purchase.

Guest author on this segment, Sam Romano, will make sure all your questions are answered so your confidence is at an all-time high.

And that’s a wrap! If you enjoyed this week's edition, don’t be selfish — tell a friend! 🤝