June 13, 2019 REsimpli’s Real Estate News and Market Update
REsimpli’s Real Estate News and Market Update
Rates Dropping Leading to Massive Surge
Mortgage rates have fallen to the lowest level in nearly two years resulting in a tremendous amount of mortgage application increases. In just one week, applications increased by 26.8% with volume increasing by 41% compared to the same week a year ago, according to data from the Mortgage Bankers Association. Furthermore, refinances jumped 47% week to week and 97% compared to a year ago. The Fed’s surprise rate cut has led to a huge surge in demand and will lead this to be one of the longest expansions in housing prices in recent history.
The average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance ($484,350 or less) decreased to 4.12% from 4.23% with 0.33 points for a loan with a 20% down payment. This is a dramatic decrease from a year ago where rates were 4.83%.
Supply is rising in the higher end luxury range for most metropolitan markets and cheaper starter homes remain scarce because builders have been building mainly luxury homes. Housing starts have been falling because demand was slow in 2019 until this rate cut.
Economic and Federal Reserve Update
There has been a big change in economic growth. It has slowed from an annual rate of 3.2% from the start of the year to March to about half that in the current quarter. Job gains were averaging 212,000 per month through April but dropped to 75,000 in May. The bond yield curve has inverted, which is usually a sign of an upcoming recession – the economy has always dipped into a recession in the past when this occurred. This points to a 42% chance of recession according to current economic data, and 60% based on the yield curve, according to analysis from JPMorgan Chase.
Other than the yield curve and slowing economic growth figures, the largest risk to the economy is the trade war with China that has been worsening with tariffs going up and no signs of progress. The Federal Reserve has acknowledged this and are watching closely and may cut rates further if the situation keeps worsening.
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%; they’ve kept this policy unchanged. The last release was on May 1st and they’ve decided to maintain the same rate.
Federal Reserve Outlook: The last meeting was May 1st and they are still holding steady. The most notable thing was that they said inflation was “running below” its stated target of 2%. Since the meeting there was a huge change with the Federal Reserve Chairman Powell said on Tuesday June 4th, that the Federal Reserve was ready to act (meaning rate cuts) if the trade war with China weakened the economy. Although he didn’t explicitly say “rate cut”, the stock markets rallied strong and that’s how Wall Street and the media has interpreted it.
“We do not know how or when these issues will be resolved,” Mr. Powell said of the United States’ trade disputes with Mexico, China and other nations. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”
Other Key Data:
Data is backward looking and takes time to compile. That’s why the April data is the latest data out for home sales even though it’s June now. Home sales data from the National Association of Realtors:
Unemployment Rate: 3.6 percent in May, unchanged since April
REsimpli is founded by Sharad Mehta, a very active real estate investor. Sharad has done over 400 deals in last 6 years since he became a full-time real estate investor and over the years he has developed systems to automate many parts of his real estate investing. Sharad is a very active investor i See more >>
REsimpli is founded by Sharad Mehta, a very active real estate investor. Sharad has done over 400 deals in last 6 years since he became a full-time real estate investor and over the years he has developed systems to automate many parts of his real estate investing. Sharad is a very active investor in Lake County, Indiana market and he manages his entire business from Carlsbad, California, where he lives. Using the systems that Sharad has developed, he is able to manage 3-4 rehabs a month from a distance.
At reSimpli, our mission is to ‘Simplify Real Estate Investing Through Technology.’ Our team is passionate about using technology to reduce the time and energy required to build and manage a successful real estate business. reSimpli is a cloud-based system that makes real estate investing more efficient by automating tasks and helping the investor manage their business more efficiently.
We are constantly building and improving features that aid in: creating accurate and detailed scope of work for rehab projects, creating contracts with digital signature support, deal analysis tools, etc. We are a team of very active real estate investors so everything we are developing is something we find useful in our day to day investing.
Our passion is to create the best software for your real estate investing business and aim to be the only software program that a real estate investor needs to run a successful, scalable business. See less >>