June 28, 2019 REsimpli’s Real Estate News and Market Update
REsimpli’s Real Estate News and Market Update
Mortgage Applications Fluctuating after Rate Drop
Falling mortgage rates has led to a flurry of refinances but mortgage applications actually fell 1% for the week, but are still 9% higher compared to a year ago when rates were significantly higher. Interest rates are at the lowest level since September 2017 with the average contract interest rate for a 30-year fixed mortgage with a conforming loan balance dropping to 4.06% from 4.14% and points decreasing from .38 to 0.35 (including origination fee).
Refinance activity rose with applications rising 3% for the week compared to a 92% increase from the prior year. Another strange sign is that sales of newly built homes fell dramatically and unexpectedly in May despite these lower rates. The housing market is sending mixed signals that rates matter a lot – but somethings else is also happening. This data was from the Mortgage Bankers Association.
More Competition for Real Estate Investing from Big Players
The build-to-rent housing market is currently growing in a very heated fashion in many parts of the country. For example, ERCX Homebuilders launched a soft IPO hoping to raise $100 million to build more than 1000 new rental homes in Florida. Toll Brothers announced a $60 million joint venture with BB Living, a built-to-rent company in Phoenix.
Single family home rentals are growing faster than ever with foreclosures and distressed sales decreasing dramatically. Distressed properties are only 2% of home sales as compared to 49% in March of 2009 according to data from the National association of Realtors. In 2017, 37,000 homes were built as rentals and grew to 43,000 in 2018. Those were homes build and held by builders to rent, and does not include those sold to investors who rent out which are predicted to be a larger part of the market. This is a large shift from buying old homes and renovating to rent out which used to be the traditional strategy for investors.
Bye Bye Foreign Money
US property sales to Chinese buyers saw a 4% drop from 2017 to 2018 with inquires down 27.5% in the first quarter of 2019 compared to 2018. China has been tightening capital outflows and small investments and large scale property investments all across the United States. The worsening trade relationship and potential trade war is creating a lot of uncertainty in foreign investors as well. This has led to all foreign spending on US Homes falling by 25% in 2018. Outbound capital from China has fell 83% in 12 months which shows that the Chinese government is clamping down hard on capital flight.
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 June 19 and they’ve decided to maintain the same rate.
Federal Reserve Outlook: The last meeting was June 19 and they are still holding steady. They think that although economic outlook is still generally positive (low unemployment, solid consumer spending), there are negative factors that they are keeping a close eye on. These include a slowdown in manufacturing, declining business investment, and trade tensions.
St. Louis Fed President James Bullard actually voted to cut the Federal Funds rate immediately which is a dramatic change from the policy which was to potentially continue raising rates. The fact that the Fed is now talking about potentially cutting or lowering rates is a dramatic change and has Wall Street and real estate investors excited as all asset bubbles inflate further.
Other Key Data:
Data is backward looking and takes time to compile. The data for May just was released On June 21st. 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 >>