Good morning to Spring buying;
Residential Lending
Let’s begin:
1) Interest rates: Rates are again trending upward to the high water marks. Rates for the 10-year Treasury – the one we closely watch – rests about 4.5 %
Good News: Federal Reserve is minimizing discussions regards future rate hikes. With this, they are paring back from their current 100 B monthly reduction of their balance sheet. This will add liquidity and ease pressure on rates. Further, the inflation target of 2 % is not an absolute target for a future rate reduction, giving more emphasis on actual employment numbers. All in all a good Federal Reserve meeting for interest rates and the economy.
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: Total value of American property, excluding farmland, is $66 trillion. Of that 25% is commercial, and of that office space is probably $4 trillion. Between 2007 and 2009 US residential real estate lost a third of its value. Which today would mean a decline of $16 trillion. Note: Even if office values fall by half, that would be just $2 trillion in losses. That is enough to be painful, but not more. And even here, we can help.
5) Jobs: As to jobs, one has challenging, even conflicting data. From the private sector: ADP report utilizes 20 M records, so their conclusions are from hard reports. In contrast, the BLS report comes from our government and is built on assumptions, algorithms, and seasonal adjustments. Note: The ADP does not report government jobs.
Viewed together, Job numbers continue to show resilience. By itself, ADP numbers show some growth in Small Businesses. Yet, add to this: 1) the earnings of undocumented workers, who spend what they earn, and 2) benefits from governmental debt spending – healthcare, police etc, – and you do have GDP growth. A resistance to near-term rate cuts.
Good News:
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.
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!