Good morning to the Season of Lights and renewed hope;
Residential Lending
Where from here? Call us. Call today.
Great News: Preparing for a better tomorrow
Inflation numbers are improving and unemployment remains historically low.
GDP growth is near historical averages, the dollar is strong, and earnings are improving.
Let’s jump in:
1) Interest rates: Hanging in there is about all we can say.
Last week’s employment and economic numbers were an upside surprise – for the right reasons. Job gains: 50 % of the new jobs were in the 16-19 year old category. Unusual for a group of people we typically think are in school. Add to this: 4 of 5 of Job increases were full-time. Only offset: Average hourly work week continues to soften.
All told, the labor market is showing additional strength. Outcome: Next Fed interest rate cut will most likely be 1/4 %. Christmas season numbers will be important for the 1st quarter guestimates.
2) Economy:
A) Appreciation: As one considers home ownership, 38 % of all homes are free and clear, while the other 62 % continue to build equity – over 2.5 % of value this year. Homes underwater have dropped to 990,000. This is just 1 % of all SFR’s.
The top 150 US economists just released their crystal ball regards appreciation for single-family residences:
2025 Average: + 3.78% or $18,900 for $ 500,000 home value
Next 5 years: Average: + 27.16 or $135,800 for $ 500,000 home value.
B) Unemployment: The pattern continues. There is a divergence between two most regarded sources – Business and Household surveys. Over the last ‘2’ months this divergence – 1 Million jobs! Bottom line: We just cannot use jobs as an economic predictor, in my view.
3) Residential Real Estate: Hat tip Elliot Eisenberg: 61% of the price of a new home is construction, including labor. Of the 61%, 56% (or 34% of the total price) is wages/salaries and 44% (or 27% of the price) is material. 7.3% of materials (or 2% of the total price) are imported. A median new home price of $440,000 means $9,000 in imported materials. Assuming a 30% tariff, that means new home prices rise by, at most, $3,000.
4) Commercial Real Estate: Commercial Tenant Protection Act in CA starts /1/2025:
https://www.jdsupra.com/legalnews/commercial-leasing-changes-you-need-to-2374818/
Note: This is a call, even an alarm, to the importance of being better in your communication with your lease-tenants. My goal is for you not to be found unaware. Now is a good time to call. Knowledge of the changes coming to be pro-active instead of reactionary with your tenants.
Inflation Perspective: A couple of great views:
From Andy Kessler: “There are so many mixed signals. Stocks are up, signaling an economic boom. Oil is down as if we’re headed toward a recession. Home prices are up as if rate cuts will continue. Gold is up, suggesting inflation is back. The dollar is strong as if Europe, Canada and China are ailing (spoiler alert: They are.) Still, something’s got to give. “Core inflation is rising and has been over 3% since April of 2021. Long bonds are signaling that the Fed needs to stop cutting rates.”
From Ed Yardeni: “With economic growth robust and the stock market at a record high, we’re living the Roaring 2020s’ now. The economy’s resilience has been remarkable considering the headwinds it has faced. While the outlook under Trump 2.0 involves lots of moving parts, we don’t see the net effects of his policies jeopardizing the Roaring 2020s’ continuation. In this scenario (with our 55% subjective probability), Trump 2.0 might boost productivity and economic growth, keep inflation subdued, shrink the federal government, slow the growth of government spending, and narrow the federal deficit. Among the biggest of the many challenges ahead: not inciting the Bond Vigilantes...”
Good News
Even with the ups and downs, our successes continue. Why? Our deep pool of lending partners. They work with us to help find workable solutions for near any scenario. This allows us to move forward with a sense of certainty in closing the deal. Such is the benefit of proven experience and know how!
Side-Light 1: The Good News: We are more than just mortgages. You can turn to us of for: 1) Reverse 1031 Exchange – lower bank rates and private money, 2) Bridge loans – buy before you sell, 3) Cross Collateral loans – qualify on a replacement property loan, not the entire cross loan, 4) Irrevocable trusts – lower bank rates and private money, 5) have RSU’s with a private company – bank rate loans, 6) new residence loan qualification – without counting the departing residence debt, 7) Asset utilization loan – both depletion – as if income – and a no income, no debt service big bank account covers it all for owner-occupied and non-owner occupied and cash out, 8) 1-year profit and loss income-expense statement to income qualify.
Side-Light 2: We are part of an investment group representing high-end properties – on the water, sea-front, lake and more. We do this by providing “fractional” investment possibilities. With this, we are seeking those having a property that fits this description – one you no longer need 365 days a year. Sound interesting? Perhaps, instead, you are seeking this kind of get-a-way, with the benefit of not having to support 365 days a year? We have solutions. Call Today.
Side-Light 3: For investors seeking an ‘easier’ lending path, we have alternative lending options. Benefit: We cover most States, whereby we use only the subject properties income stream to qualify for the loan. Take your good credit and document assets – no tax returns or P&L’s – and purchase 1 – 9 unit properties. Want to know more, let’s talk. Give me a call.
Good News: What’s unique about our team of great lending partners: They respect our work and appreciate our 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, today.
You have heard me say:
It starts with a first conversation.
Let’s talk. Preparing for better tomorrow, today.
With all the financial talk, the most important part is those we have around us. Be well and be safe! Most important: Enjoy your family and friends. Happy Holidays.
