This week brought about a myriad of real estate and mortgage news. Home sales remained strong but lower year over year due to inventory shortages, but similar in the amount of sales in May from April. The lack of inventory has the country in a juggernaut. Home builders in different parts of the country are capitalizing on the shortages yet cautious with the rates, affordability, land costs, labor, and material costs. They realize there is a huge void to fill.
The Fed, who has been inconsistent with the prognosis of the economy recently as they were on a “pause” mode until the Fed stated last week as they may raise rates in August. However, commercial mortgages will be coming due as many businesses, real estate investment trusts, and building owners refinanced at the low covid rates are now coming due very soon with rates in the sixes and up. According to JP Morgan Chase and Goldman Sachs, they believe the amount of commercial money losses may be in the one trillion arena. That being said, the Fed must be careful on their tightening agenda. I wouldn’t be surprised if the note holders are currently negotiating deals with the owners of the buildings as the banks did with mortgages in 2010. You have people working from home and places outside of the office.
When is this market going to “break” is anyone’s guess. I say once venture capital money and the investment from foreign countries are cut you will see people on the move much like the late 80s when the computer industry dried up. Boy, I just dated myself. We are still lending money up to 97% of the sales price so there is confidence in the market whereas in 2010, we had a minimum of 10% with 5% of declining value “fee” built into the down payment.
As a professional, every day will pose challenges and opportunities. Let’s stay positive and enjoy this beautiful weather. Any questions or suggestions, please call me at 508.380.5223.
Regards,
John Gouley