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Music students who are not pianists should achieve sufficient proficiency to play simple piano accompaniment with prospective students. Beginner piano is therefore a rite of passage for music majors who are not pianists.
One of the skills music students must demonstrate is transposition. That is, reading music in one key and playing it on the piano in another key. I am primarily a violinist, but he has also taken piano lessons for 12 years, so he can easily transpose simple piano pieces. However, for students who can barely play the piano, transposing is a difficult task.
When my child, a first-year music major, came home, I saw firsthand how difficult transposition can be for someone who has only been playing the piano for two months. It felt like I spent hours listening to Kumbaya played dozens of times on the piano, first in D major, then transposed a half step higher to E flat major. It probably took much less time than that, but it still got me thinking about the mental process involved in transposing.
Its transposition is more complex than the “semitone higher” sound. A piano has seven white keys and five black keys within an octave. For the most common key signatures, black keys play sharps and flats. The key signature of D major has two sharps, while E flat major has three flats.
To play all the notes in D major, a pianist plays five white keys and two black keys (F sharp and C sharp). In E flat major, the pianist plays four white keys and three black keys (B flat major, E flat major, and A flat major). In other words, D major and E flat major only overlap on his three piano keys, all of which are white keys. G, C, D.
Transposing requires active participation and requires musicians to be proactive. You need to remember which piano key the new key uses. Piano fingerings depend on the layout of the black and white keys in the passage, so transposing may require a change in fingerings to ensure that the hands are in the required position to play the written notes. You may need a plan to make sure.
Musicians learn solfege ( Doremi The Sound of Music) can be used to display notes based on the “role” of each key and how they relate to each other. Although solfege is sung, this brain teaser helps musicians transpose music as groups of interrelated pitches in a horizontal sequence and create melodies without having to transpose each note individually. Masu.
When it comes to real estate investing, it’s easy to think of market and economic conditions as important signals. Property owners may think they are powerless in the face of market-wide or national economic conditions. However, the owner still controls the management of the property and the acquisition/disposal strategy. This article describes how owners can proactively respond to market and economic developments.
History of real estate investment – 1970 to 2020
Real estate investing became popular in the 1970s, a time of high interest rates and inflation. Some people believe that real estate is an inflation-proof investment. As interest in real estate grew, real estate syndicates became popular.
Changes in depreciation in federal tax law have made real estate a more attractive investment. The “Accelerated Cost Recovery System” allowed investors to protect more of their real estate income from real estate taxes at the beginning of their investment. These tax changes encouraged real estate investment. Shorter investment holding periods have become more attractive as investors receive more depreciation deductions earlier. Real estate no longer needs to be a long-term investment.
Leverage also makes real estate investing attractive. With mortgage financing, an investor can invest only 20% of the funds needed to purchase a property for decades and receive 100% of the growth in property value (after mortgage payments). It’s done. Because the real estate market is driven by the belief that value will only increase over time, many investors add mezzanine debt on top of their mortgages, resulting in total leverage of 90% or more. I did. A similar arrangement using a second mortgage has made it possible for more people to purchase a home.
However, this high leverage came at a price. Mortgage fraud, especially for single-family homes, was rampant, and the recession and resulting drop in home prices led to foreclosures. Investors and mortgage lenders alike have learned that real estate prices are unlimited and can fall in value. In response to losses from the 2008 recession, mortgage lenders tightened their underwriting practices and replaced 80% limits on mortgage leverage with 60% or 70% limits.
The market has adapted to new underwriting standards. Once the recession ended, real estate values began to rise again, once again attracting investors.
Real estate during the pandemic
From 2020 to 2021, the COVID-19 pandemic sharply accelerated the real estate cycle, causing declines in many asset classes. As office buildings remained vacant, tenants either did not renew their leases or sought to renegotiate to lower their rents. Hospitality assets struggled due to declines in travel and tourism.
The closure turned a thriving retail center into a ghost town. Vacancy rates for apartment complexes in metropolitan areas have increased as work-from-home tenants have migrated to less populated (and cheaper) parts of the country. As a result, the value of many commercial real estate assets has declined as vacancy rates have increased and revenues have declined.
Real estate industry in 2023
By 2022, inflation had set in. The Federal Reserve raises interest rates, which translates into higher mortgage rates for real estate buyers. Rising interest rates will increase cap rates on commercial real estate investments. Real estate prices are primarily determined by applying market cap rates to real estate returns. Therefore, increases in cap rates without commensurate increases in returns have led to declines in real estate values in many markets and sectors.
Multifamily real estate continued to perform well in most markets. After all, people need a place to live, and government programs have helped many pay their rent during the pandemic. Supply chain challenges prevented new rental units from entering the market. Therefore, rents continued to rise until 2023.
The industrial sector, which gained popularity due to the rise in e-commerce during the pandemic, remained in demand. Although offices struggled, retail and hospitality assets began to recover in 2022.
In early 2023, small bank failures occurred as interest rates and mortgage defaults increased. According to the National Association of Realtors’ Commercial Real Estate Market Insights for September 2023, “Massive interest rate increases have hurt the commercial real estate market,” with 11 lump-sum interest rate hikes and local bank failures leading to He pointed out that a large financial company had gone bankrupt. Be more cautious about real estate financing. In 2023, commercial leasing and rent growth slowed, although vacancy rates remained unchanged.
Additionally, the vacancy rate in the multifamily housing sector increased as new construction started in response to the supply shortage was completed. Still, rent increases have led to the enactment of rent control legislation in several jurisdictions.
The office sector continued to struggle. With fewer people coming in and out of offices, tenants need less space, and office vacancy rates have hit record highs. Retailers continued to struggle as pandemic-era e-commerce took hold and industrial property growth slowed from record highs due to demand for warehouse space for online retailers in pandemic regions.
According to CBRE’s 2024 U.S. Real Estate Outlook, the volume of investment in commercial real estate decreased by 45% in 2023. CBRE predicts that prices will bottom out in the first half of 2024, with a 5-15% drop in value due to additional markets. Interest rates will rise.
A Dec. 22, 2023, HUD and Census Bureau report estimates that new single-family home sales from November 2022 to November 2023 will increase slightly year over year. However, after a post-pandemic surge, the seasonally adjusted annual sales rate has declined. The past year has been in the 2019-20 range.
CBRE expects office sector rentals to remain below pre-pandemic levels in 2024. Retail leasing is expected to continue to recover in 2024 due to a lack of new construction and resulting limited inventory. With an expected rise in e-commerce and an increase in U.S. industrial production, CBRE predicts the industrial sector will grow into the second half of 2024 after absorbing new construction post-pandemic. Additionally, data center property prices are predicted to rise in 2024 as new construction increases in response to demand.
According to a report from CBRE, the multifamily sector is expected to see a significant increase in inventory due to the completion of additional new construction post-pandemic. However, tenant demand is expected to remain strong in 2024 due to the high cost of buying a home, so rents will continue to rise, albeit at a slower pace.
On December 13, 2023, the Federal Reserve announced that it would not raise interest rates based on its 2% inflation target. According to the U.S. Bureau of Labor Statistics, consumer prices fell 0.2% year over year in November 2023, but rose 3.1% from November 2022 to November 2023. Therefore, many analysts expect interest rates to stabilize in early 2024, and rates could be cut as follows: Inflation continues to slow.
Preparing for 2024
Real estate is a long-term investment. It’s cyclical and most real estate investments have the same end goal. That means in addition to increasing real estate value, some assets also generate cash flow in the process.
Real estate investors can benefit from the concepts behind solfege training for musicians. The pitch remains the same in all major keys, even if the notes in that key are different. Similarly, although different economies may look different, the fundamentals of real estate remain the same.
Some owners will need to sell in the first half of 2024, even if it means selling for less than originally expected or the acquisition price. For example, owners whose mortgages are nearing maturity may not be able to refinance given rising interest rates and declining property values. Floating interest rates and rising interest rate caps may make business difficult for some owners, and some owners may need to sell to avoid foreclosure.
Early 2024 is also a good time to sell properties acquired pre-pandemic with below-market, fixed-rate, long-term, reserveable mortgages. Although cap rates remain high, the opportunity to profit from allocating arbitrage to long-term mortgages may offset the reduction in underlying asset values due to higher cap rates. However, this opportunity is likely to disappear if interest rates fall in the second half of 2024, as most expect.
Increased occupancy, rental growth and asset preservation should continue to be a central focus for all owners. Increased occupancy rates and rents will increase profits and help maintain asset value even as market capitalization increases.
Investors should avoid the temptation to cut maintenance or capital improvements to support short-term income. Instead, investors should focus on asset preservation and long-term growth, and make capital improvements to support that growth.
Owners who don’t need to sell should hold onto their investments until at least the last two quarters of 2024, or until interest rates fall. Lower interest rates should lead to lower cap rates and higher sales prices for real estate investments. If that happens, owners who have prioritized real estate fundamentals over short-term income will be in the best position to sell.
conclusion
Transposing music is most effective when musicians think in the new key, rather than reading notes in the old key and transposing them one by one. Similarly, property owners will find it difficult to adapt if they cling to old strategies and respond to market and economic changes one by one. Rather, just as musicians transpose music, property owners achieve the best results when they change their fundamental paradigm to fit current market and economic conditions and develop new management and investment strategies in that environment. can do.
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