Since many on this site may be buying or selling a home at any given time, own investment properties, or commercial real estate I'm posting this weekly update to stay current.
The data is well researched from multiple sources concerning the real estate & mortgage market.
Thus, it is fact based and only analyzing the data/trends without regard to government policy.
As I stated previously let's keep the thread informational for those that might be in the market and leave policy discussions in "The Corral".
Items Driving Rates This Week -
The Fed & Rate Cuts -
The Fed Rate Cut as we mentioned last week is already priced into the market, that's how markets work. So how much will they cut. Here is what our secondary market or pricing desk sent to us yesterday:
PPI showed producer prices were running a little hot in August, coming in at +.2% month-over-month vs +.1% forecasted. The uptick was also much higher than last month’s print of 0.0%, bringing the annualized pace to 1.7%, matching economists’ expectations. Removing volatile components of food and energy, PPI still came in hotter than expected at +.3% vs +.2%, higher than last month’s print, which was negative, at -.2%. We believe the reading is consistent with our expectations of a 25bps rate cut at this month’s Fed meeting, failing to make the case for a supersized adjustment.
With this data and the market already accounting for the price cut I feel rates will stabilize where we are now for the time being. And that's a lot better than where we were a year ago.
In October of 2023 rates were at +/- 8.00% today at my company all of our rates are in the 5's including jumbo - the conventional 15 is in the 4's.
As stated above if you are in the 3.2 million to 4.7 million of people with a higher rate - now is a good time to refinance.
Rising Mortgage Delinquencies & Foreclosures -
While not at the levels of the "Meltdown Years" of circa 2008-2010 these levels are rising. While this does not bode well for the economy it may present the opportunity for lower-priced homes for those that can qualify or have the cash to purchase them. Regardless we need to watch this trend.
Remember in "Chaos" there is always opportunity!
What's likely more troubling is the rise in commercial foreclosures as seen here -
Here is an example in our state -
The Daily Mail reported that the largest office building in Fort Worth, Texas sold at a foreclosure auction for $12.3M just three years after it was sold for more than $137.5M. The report said alongside “Texas, other states have also seen an increase in commercial foreclosures.”
Highest Commercial Foreclosures by State -
One of the things driving commercial foreclosures has been rising rates. Remember that unlike residential loans, the vast majority of commercial real estate loans are financed on 5/7/10 Year Adjustable Rate Mortgages or Balloon loans.
With thousands of commercial loans up for renewal or adjustment these properties do not have the cash-flow to make the higher payments or qualify for a new loan.
Obviously much of this issue is pandemic driven. The pandemic created an absurd low-rate environment and severely reduced the need for commercial space particularly in the office and retail markets.
Another reason for reduced demand are the problems that small-businesses are having, and they are the largest driver of new jobs for our economy.
Lower Earnings
Artificially Increased Labor Costs
And of Course Inflation
This "Triple Threat" to Small Business adds up and you see the results in this chart -
These Numbers Are Showing Up In Housing Now - Not Good As Housing Drives the Economy
Real Estate Tip - Even If Paying Cash Always Get a Survey & Title Insurance - Don't Be Like These People
Hani Levy and her husband, who owns a construction company, thought they were making an investment in their Fort Lauderdale, Florida neighborhood. But after spending $350,000 on an empty lot, they are now facing a real estate nightmare.
Initially advertised as suitable for new residential construction, the couple bought the lot with plans to build two or three houses — something they shared with the real estate agent.
However, shortly after the purchase, they discovered a significant challenge — the lot was landlocked. The only road that led to their property was owned by the existing homes that surround it and not available for public use — a detail that was never disclosed by the seller or real estate agent. This left them with no legal access to their lot.
The unforeseen obstacle not only stalled their dreams of development, but also resulted in a legal battle against the seller and their real estate agent.
Finally, buyers should always consider purchasing title insurance. While most mortgage companies require this, the Levy's purchased the land outright and may not have considered the option. Title insurance protects against any limitation in the title, including liens and sometimes easement challenges, depending on the context.
As always happy to answer any questions ITT or via DM
Have an Amazing Weekend!
Hook 'Em!
MH
The data is well researched from multiple sources concerning the real estate & mortgage market.
Thus, it is fact based and only analyzing the data/trends without regard to government policy.
As I stated previously let's keep the thread informational for those that might be in the market and leave policy discussions in "The Corral".
Items Driving Rates This Week -
- 30-year fixed mortgage rates dropped to 6.11%, their lowest level since February 2, 2023.
- Between 3.2M and 4.7M mortgages are ‘in-the-money’ for a refinance today.
- Headline CPI dropped to 2.59% in August, down from 2.92% in July, which was below expectations and the lowest annual rate in 3.5 years. However, core CPI largely remained unchanged at 3.2% due to shelter inflation, which climbed 0.5% in August to 5.2%.
- The U.S. economy added 142,000 jobs in August, 28,000 more than July, but the report also came with downward revisions of 89,000 jobs over the prior two months.
- The unemployment rate ticked down a tenth of a percent to 4.2% from 4.3%, driven by a reversal in temporary layoffs from the prior month.
- Wage growth increased to 3.8%, which was slightly above expectations but not significant enough to raise concerns over inflation.
- According to the Mortgage Bankers Association, at the end of 2Q2024, the delinquency rate for mortgages on one-to-four-unit residential properties stood at 3.97%. That's an increase of 3 bps from 1Q2024 and a 60 bps increase from last year.
- According to the ICE Mortgage Monitor, as of July 2024 month end the status of mortgage loans breakdown like this: active = 53,820,000 loans, 30 days delinquent = 1,043,000 (1.94%), 60 days delinquent = 333,000 (0.62%), 90+ days delinquent = 435,000 (0.81%), foreclosure = 188,000 (0.35%), total delinquent excluding foreclosure = 1,811,000 (3.36%), and total non-current = 1,999,000 (3.71%).
- According to Inside Mortgage Finance, at the end of 2Q2024 the total delinquency rate by agency stood at these levels: all agencies = 3.11%, Fannie Mae = 1.41%, Freddie Mac = 1.21%, Ginnie Mae = 7.79%, FHA = 9.54%, and VA = 4.16%. Delinquency rates were up across the board on a quarter-over-quarter and year-over-year basis.
- According to ATTOM, the July 2024 U.S. Foreclosure Market Report shows us that there was a total of 31,929 U.S. properties with foreclosure filings - default notices, scheduled auctions or bank repossessions. That was up 15% from a month ago and up slightly by 0.2% from a year ago.
The Fed & Rate Cuts -
The Fed Rate Cut as we mentioned last week is already priced into the market, that's how markets work. So how much will they cut. Here is what our secondary market or pricing desk sent to us yesterday:
PPI showed producer prices were running a little hot in August, coming in at +.2% month-over-month vs +.1% forecasted. The uptick was also much higher than last month’s print of 0.0%, bringing the annualized pace to 1.7%, matching economists’ expectations. Removing volatile components of food and energy, PPI still came in hotter than expected at +.3% vs +.2%, higher than last month’s print, which was negative, at -.2%. We believe the reading is consistent with our expectations of a 25bps rate cut at this month’s Fed meeting, failing to make the case for a supersized adjustment.
With this data and the market already accounting for the price cut I feel rates will stabilize where we are now for the time being. And that's a lot better than where we were a year ago.
In October of 2023 rates were at +/- 8.00% today at my company all of our rates are in the 5's including jumbo - the conventional 15 is in the 4's.
As stated above if you are in the 3.2 million to 4.7 million of people with a higher rate - now is a good time to refinance.
Rising Mortgage Delinquencies & Foreclosures -
While not at the levels of the "Meltdown Years" of circa 2008-2010 these levels are rising. While this does not bode well for the economy it may present the opportunity for lower-priced homes for those that can qualify or have the cash to purchase them. Regardless we need to watch this trend.
Remember in "Chaos" there is always opportunity!
What's likely more troubling is the rise in commercial foreclosures as seen here -
Here is an example in our state -
The Daily Mail reported that the largest office building in Fort Worth, Texas sold at a foreclosure auction for $12.3M just three years after it was sold for more than $137.5M. The report said alongside “Texas, other states have also seen an increase in commercial foreclosures.”
Highest Commercial Foreclosures by State -
One of the things driving commercial foreclosures has been rising rates. Remember that unlike residential loans, the vast majority of commercial real estate loans are financed on 5/7/10 Year Adjustable Rate Mortgages or Balloon loans.
With thousands of commercial loans up for renewal or adjustment these properties do not have the cash-flow to make the higher payments or qualify for a new loan.
Obviously much of this issue is pandemic driven. The pandemic created an absurd low-rate environment and severely reduced the need for commercial space particularly in the office and retail markets.
Another reason for reduced demand are the problems that small-businesses are having, and they are the largest driver of new jobs for our economy.
Lower Earnings
Artificially Increased Labor Costs
And of Course Inflation
This "Triple Threat" to Small Business adds up and you see the results in this chart -
These Numbers Are Showing Up In Housing Now - Not Good As Housing Drives the Economy
Real Estate Tip - Even If Paying Cash Always Get a Survey & Title Insurance - Don't Be Like These People
'‘All our dreams are out of the window’' -This Florida couple paid $350K for an empty lot to build 3 houses on — only to discover their land was ‘unbuildable’ due to 1 undisclosed problem:
Hani Levy and her husband, who owns a construction company, thought they were making an investment in their Fort Lauderdale, Florida neighborhood. But after spending $350,000 on an empty lot, they are now facing a real estate nightmare.
Initially advertised as suitable for new residential construction, the couple bought the lot with plans to build two or three houses — something they shared with the real estate agent.
However, shortly after the purchase, they discovered a significant challenge — the lot was landlocked. The only road that led to their property was owned by the existing homes that surround it and not available for public use — a detail that was never disclosed by the seller or real estate agent. This left them with no legal access to their lot.
The unforeseen obstacle not only stalled their dreams of development, but also resulted in a legal battle against the seller and their real estate agent.
How to avoid similar issues when purchasing a property
Hiring professionals before the purchase can make a huge difference. While the Levy's did ask about the development potential, it's not clear if they hired a real estate attorney or land surveyor before closing. These professionals help ensure you understand exactly what you're purchasing and uncover any potential challenges, such as lack of access and construction permissions.Finally, buyers should always consider purchasing title insurance. While most mortgage companies require this, the Levy's purchased the land outright and may not have considered the option. Title insurance protects against any limitation in the title, including liens and sometimes easement challenges, depending on the context.
As always happy to answer any questions ITT or via DM
Have an Amazing Weekend!
Hook 'Em!
MH
