Good morning to the 248th year of the USA;
Residential Lending
Where do we go from here ?
1) Interest rates: Our mortgage rates remain in the upper half of the range we have experienced the past year. News takes them up, then news takes them down. A lot of emotion underlying it all. No substantial changes in interest rates expected any time soon.
Good News: Federal Reserve continues the shift towards talk of interest rate cuts. Unemployment breaking above the 4 % to 4.1 %. Market conversations suggest this should bring about future rate cuts. Looking forward to comments regarding the EU and others cutting rates before us. Note: Recent bond auctions – around the world – saw increased yields based on debt to GDP issues. Such concerns can spook the bond market.
2) Residential Real Estate: Overall, business continues brisk. Buyers are actively seeking, but the low inventory of available supply, 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 expected.
Recent Supreme Court ruled against efforts by the County of Elk Dorado to hold building permits hostage for 20K + junk fee. Supreme Court said NO. Why? The fees for ‘development fees’ was both excessive and without basis for service rendered.
Question: How will this battle play out in the cash grab localities throughout CA, where the conversation is: ‘We want more housing, as the hand is out waiting for a payoff.’
3) Commercial Real Estate: Like residential, investors are shopping and sellers are selling. Sadly, far off the volume seen pre Co-Vid. Over all, Cap rates are trending up, but slim volumes are helping keep increases modest at best. Note: Most of the post Co-vid damage in property valuations and loan quality are located in the larger, central-business core areas.
Good News: In response, most outer-lying areas are trending pretty good. The demand is there – as retail traffic, consumer spending is holding up – now supply is moving to a better price point – location matters. Such is the fundamentals of business at work. But it takes time and often with struggles. The steady jobs market – even with a small uptick in unemployment – underpins the market.
4) Jobs: The topic of most financial circles and MSM. Not a surprise, MSM seeks lead stories and doom scrolling, while the financial circles are about reading the tea leaves to guess what the next turn is to work the market. No surprises, and really not good or bad in this.
Perspective around Inflation: Perhaps the key reason consumer sentiment is lousy, is the lasting impact of inflation – the cumulative rise in prices from 2021. What gets lost is even though real wages fell behind inflation in 2021 and 2022, for almost two years average wages have been gaining on inflation. Real wages are now higher, on average, than pre-pandemic.
CA Fun Facts: CA fun facts: 1.8 M less in the labor force, vacancy rates at lowest levels as a good economy creates more households with less people per house, shifting population towards higher education, CA poverty rate at lowest level, all-time low levels of unemployment.
Good News:
Even with all the craziness I write about with higher level information and perspectives, our successes continue. Why? Our deep pool of lending partners to help find workable solutions. 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 experience and necessary know how!
Side-Light: We are part of an investment group representing high-end properties (on the water, sea-front, lake and more) providing “fractional” investment. Have a property fitting this description, one you no longer need 365 days a year? Or are you seeking this kind of get-a-way, one you don’t have to support 365 days a year? We have solutions. Call Today.
Side-Light Two: Investors. For those seeking the ‘easier’ lending path. We have lending options covering 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. Curious to know, give me a call.
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, today
You have heard me say:
It starts with a first conversation.
Let’s talk today.
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!
