Market Update as of June 21, 2019

Housing Starts Slip
Wall Street giants and individual retirees alike have pumped billions into financing home flips in recent years. Now, a slowdown in the flipping business threatens to rain on the party. So-called "hard money,” which come from sources other than banks and which carries higher interest rates, is hard to track because it’s fragmented and littered with thousands of small players doing one or two deals a year. However, a for-profit trade group called the American Association of Private Lenders estimates the number of hard money lenders and related “private money” lenders at 8,300, or up almost 40% since 2016. Most of that money is bound for real estate investors. The volume of loans to people who are buying homes to renovate and resell rose to about $20 billion last year, ac- cording to real estate tracker Attom Data Solutions. That’s up 37% from 2016 and al- most double the figure from five years ago. Attom can’t be sure how much of that comes from hard money sources versus banks, but industry players believe they make up a majority of such loans. “There’s a lot of activity. Every time I turn around there’s new entrants,” said Glen Weinberg of Fairview Commercial Lending in Evergreen, Colorado. While he will only loan up to 60% of a property’s value, some of the newer lenders will go up to 90%, Weinberg said.

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Door Open For Rate Cut
Federal Reserve officials held their benchmark interest rate steady on Wednesday, but hinted they would cut rates in the months ahead if the economic outlook weakens. While the central bank’s rate-setting committee expected the economy’s expansion to continue, “uncertainties about this outlook have increased,” it said in a statement. “In light of these uncertainties and muted inflation pressures, the committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.” Nine of 10 members of the rate-setting committee voted to maintain the federal-funds rate in a range between 2.25% and 2.5%. St. Louis Fed President James Bullard dissented in favor of lowering rates, the first dissent since Fed Chairman Jerome Powell took lead of the central bank in February 2018.

Existing Home Sales Pop
Sales of previously owned homes rose strongly in May, a sign that demand for housing picked up as mortgage rates continued to ease last month. Sales rose 2.5% in May from the prior month to a seasonally adjusted annual rate of 5.34 million, the National Association of Realtors said Friday. Economists surveyed by The Wall Street Journal had expected sales would rise 1.2% to a rate of 5.25 million in May. Compared with a year earlier, sales in May declined 1.1%. Existing-home sales were revised higher for April, to a rate of 5.21 million, the same pace as in March. May’s gain and April’s upward revision suggest the spring selling season got off to a stronger start than initially expected. Lawrence Yun, the association’s chief economist, said lower mort- gage rates were “clearly a bonus” for consumers, which combined with strong job growth should lead to stronger home sales in the second half of the year.. “The only risk to the recovery is lack of new home construction,” he said.

Courtesy of Sotheby's International Realty's in-house Lender Simon Atik, 310.880.8414, Simon.Atik@grarate.com, Vice President of Mortgage Lending, Guaranteed Rate Affinity.

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