REsimpli’s Real Estate News and Market Update

February 25, 2019

Weekly Mortgage Applications Rise 3.6% but lower than last year

Data from the Mortgage Bankers Association shows that mortgage application volume rose by 3.6 percent last week from the previous week (seasonally adjusted). However, the important news is that it’s actually 2.3 percent lower compared to a year ago. For data, it’s important to compare across different periods of time and the week on week change doesn’t matter as much as the year on year change because there can be bad weeks due to weather and other factors, but year-on-year is better for comparing economic conditions. Another piece of news is that applications had a 2 percent increase, but it’s the first increase in 4 weeks. The numbers still point to a slow down.

Amazon Pulls out of HQ2 in Queens

Amazon was originally planning a second headquarters in Queens (NYC) but they’re pulling out. This has mean prices have dropped by over 20% in the surrounding areas already because people already started buying up the real estate on the rumor and drove up prices. How does this event affect your investing and what can be learned?

Lessons from the Amazon News

  1. Don’t place all bets in only one market. Diversification across markets can reduce risk because different markets are affected by different industries and if all investments are only in one market, a catastrophic event can wipe one out.
  2. No deal is a sure thing. Always plan on having many exit strategies. The people that were speculating on the Amazon news and went all in are seeing losses already and if they don’t have the capital to sustain or they bet on inflated numbers that didn’t become realized, they could soon be heavily running a negative cash flow.
  3. Don’t over-leverage! When things go south, it’s catastrophic and irrecoverable. Many investors are seeing 20%+ losses in the Queens market and if they bought with leverage (borrowed money), it means their losses are amplified and they would be in a precarious financial state.

Federal Reserve Key Information:

The Federal Reserve policy affects all asset prices – from housing to stocks. Thus knowing the outlook gives investors insight and better predictability of the future.

Interest Rate: On January 30, 2019 the Federal Reserve said that it would keep its target range for its benchmark interest rate at 2.25% to 2.5%

Federal Reserve Outlook: Currently there are two camps in the Fed. One camp that wants to further raise rates and another that wants to stop.

Source: https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20190130.pdf

Other Key Data:

Data is backward looking and takes time to compile. That’s why only the December data is out for home sales even though it’s February. Home sales data from the National Association of Realtors:

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

sources:
https://www.nar.realtor/sites/default/files/documents/ehs-12-2018-summary-2019-01-22.pdf
https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales

Unemployment Rate: 4% through January 2019
source: http://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx

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