As the new year picks up steam, we want to make a bold statement that we hope the people of Iran can overcome the current despotic rule and embark on a new age of democracy that not only lifts the quality of life for all Iranians, but to everyone in the world!! The interest rate complex has seen a few interesting events transpire in the last few days. One of the most interesting elements is President Trump’s announcement that he will be instructing Fannie Mae and Freddie Mac to purchase up to $200 billion of mortgage-backed securities. This announcement had an immediate effect of lowering conforming mortgage rates by 0.125% to 0.25%. Time will tell whether positive results continue to gain momentum or if we remain in the trading range we have seen for the past few months. Rates are currently in the high 5% area for generic 30 yr fixed loans.
Jumbo loan programs are inching down to the low 5% range for 7- or 10-year arms. These are very attractive products if you feel your time horizon is within this range or feel rates will be lower in the next couple of years to refinance. Obviously, no one knows for sure, but saving a few hundred dollars a month adds up over 5 to 7 years.
Business bank statement programs have kept pace with the overall decline in mortgage rates. We are not seeing rates in the low to mid 6% range for these programs. In addition, we have programs that allow us to use assets as an alternative form of income. This is a powerful tool for qualifying for a mortgage.
Real Estate Market
On the real estate front, we continue to see a form of equilibrium on the supply / demand side. Aggressively priced properties still see a lot of activity, with overpriced properties sitting on the market for extended periods of time. The takeaway is if you are a seller, make sure your agent has you dialed in on what the comps reflect as a realistic price. If you are a buyer, an approach is to look at properties that have been on the market for 30-60 days. The seller might be more flexible in their sales price.
Last week’s employment numbers were benign, with the economy adding 50,000 jobs. Time will tell if the economy adds more jobs or if technology is reducing the number of job openings. Tomorrow’s inflation report (CPI) should provide insight into the overall cost of living. We think the big challenge is with the overall cost of housing. Large metropolitan areas have not seen much abatement with housing costs. Maybe lower interest rates can be a positive force on this front.
Notable Recent Transactions:
- Mammoth Condo Hotel: $2,600,000 sales price. Loan of $2,000,000. Challenge – sourcing a lender that would lend on condo/hotels. We were one of the first 3 condos to close in the project.
- Owner-Occupied Industrial Property: $5,250,000 sales price. Loan of $3,937,000. Challenge – Borrowers had multiple owner-occupied loans for their business. The subject was near their corporate office. We were able to explain that the new property was going to be an ancillary facility to their existing warehouse. The bank provided owner-occupied rates, as well as having the first year of the loan being interest-only. In addition to these, we closed several loans with various sources with 85% and 90% loan to values.
As always, we welcome your feedback and look forward to speaking with you soon.
Best regards,
Gloria, Curtis, Ted, Ben & Coby
Centek Capital Group | gloria@centek.com | centek.com
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