Good morning to the heat of the Summer;
Residential Lending
Let’s begin: This month our deeper dive is into the interesting and exacerbating challenge with jobs and employment numbers. But first..
1) Interest rates: Our mortgage rates are remaining 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.
Good News: Federal Reserve is minimizing discussions regards future rate hikes. Next weeks Federal Reserve Board meeting is not expected to do much beyond repeat the past comments. Unemployment increasing to 4 % continues us on the path towards future ratet cuts. It will be interesting to see if there are any comments regarding the EU and others beginning cuts before us.
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.
3) Commercial Real Estate: Like residential, investors are shopping, sellers are selling, but far off the volume seen pre Co-Vid. Over all, Cap rates trending up, but slim volumes are helping keep increases modest at best. 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 strong jobs market – even with a small uptick in unemployment – underpins the market.
4) Helpful Perspective: Nationally home values continue to increase, yet at more reasonable levels.. mid single digits.. Defaults continue to be extremely low, as the vaalue increases the past decade allow those in problems to sell and move on.. Generally with some cash in hand.
5) Jobs: Here we do our deep dive into the numbers: A picture window into the challenges we have to live with regarding jobs. Latest jobs number.. the baloney gets deeper.
The birth-death model for small businesses showed an increase of 231 K jobs. (FYI ADP guessed we lost 10 K on this same line item) the data from QCEW (quarterly census data) showed we created 800 K LESS jobs last year than the BLS reports the market is following.
Let’s go a bit deeper. Leisure and Hospitality sector. The BLS jobs report stated and increase of 89K positions last month. ADP reported 12 K increase and the JOLTS report was Minus 109 K.. (JOLT is for March where BLS was + 93 K).
Even worse, the household survey from BLS, which is actual phone calls and where we get the unemployment rate a total of 408 K jobs lost of which 250K were those leaving the labor force.
In case we don’t think there is a slowdown in effect, the same household survey results are a loss of 625K full time jobs and an increase of 286K jobs.
This is about high level trend lines. Walmart is doing exceptional, a nice bellweather indicator of recession. I have not dug into alcohol and cigarette sales, they too increase during times of economic slowdown.
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, give 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!