Good morning to Springtime, and may the helpful rains continue;
Residential Lending
Let’s begin:
1) Interest rates: Rates are trending back up to the high water marks. Rates for the 10-year Treasury, the rate will carefully watch, rests solidly above 4.25 %
The latest Federal Reserve meeting, as to rates, has set the tone for the next couple of months. Though most indexes and tracking points show better numbers; housing remains strong and resilient; and manufacturers reports are stronger than expected, our markets are reading the Federal Reserve tea leaves and becoming more reserved as to their decision making.
Todays’s expectations are shifting to one of little to no change in rates. Fed belief is that a couple of small cuts may leave a wrong impression. Concerns: Rates of inflation, levels of consumption, and perhaps most critical, continued increase in US deficit spending. Traders will enjoy the many contrasting discussions, yet they too, recognize that even small upward nudges in rates, will not amount to much. What is not yet clarified by the Fed, is the economic / political impacts coming due, via the severe border crisis – local, state and federal.
2) Residential Real Estate: Overall business is brisk. Buyers are actively seeking property, yet the low inventory continues to exacerbate the business. This in turn helps offset the sticky high interest rates. Market leaders and current data continue to point to strong price support with mild appreciation the expected.
Yet, due to the declining closings in this challenging market, a number of loan officers are walking away – up to near 50 % across the country. However, we are and remain 100% active and ready to take your call! Excellence endures and Buyers deserve it.
3) Commercial Real Estate: Like residential, investors are shopping, sellers are selling, but far off the volume seen post Co-Vid. Cap rates trending up, but with slim volumes helping to keep the increases modest at best. Most of the damage with property valuations and loans that are coming due are going to be in the larger central business core areas. Good News: Most outer-lying areas are trending pretty good. This, as the fundamentals of business needs, retail traffic, consumer spending are all holding up. The strong jobs market – not reacting to unemployment ratcheting up – underpins the market.
4) Federal Reserve: All the differing inflation reports continue, as expected. As funny as it sounds, there is not enough ‘bad news’ on the horizon for any dramatic reduction in interest rates. Manufacturing shows increases – it is Springtime; GDP is holding up; steady employment; and the big headwind against inflation coming down is housing. Regards housing, there are no models available to explain how the very low supply of available housing weighs on inflation. It is real, but perhaps to difficult to quantify.
Good News:
Our successes continue. Why? The depth of our lending partners. This allows us to work with a sense of certainty when it comes to closing the deal. Further, we are getting it done because we have the needed and necessary know how!
Interestingly, one area we receive the most calls, regards out-of-state properties. We notice the lower loan amounts – less than $ 500,000. It is clear people are seeking smaller loan amounts.
Good News: We have great lending partners. They respect our work and attention to detail. This is good news for you, as they trust our approach and loan packages. In response, we carefully strive to maintain the quality of their depository relationships. This is called team chemistry and is what makes our lending relationship, a winner. Join our team.
Sidebar: FBI confirms huge decline in crime across the United States: New comprehensive FBI data, shows a 13% decline in murder last year – largest one-year decline ever recorded; a 6% decline in violent crime, lowest in many decades, and a 4% decline in property crime. Fox News has been strangely silent. One area not so pretty: Vehicle theft is up in all cities with a population over 50 K. Not a help for our insurance rates. Jeff Asher
You have heard me say: It starts with a first conversation. Let’s talk.
Enjoy your family and friends this Spring Season. With all the financial talk, the most important part is who we have around us. Be well and be safe!