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Disclosures at www.adrmortgage.com.
In October of 2022 I wrote about what's going on in the stock market, bond market and the war (Geo-Politics). This is the first update to that piece which nearly received more reads than I have followers (1,150 followers).Markets:1) Oil prices have gone from $87.55/barrel to $73.28 (down 16%); Expect further decline, despite summer months approaching.2) Russian GDP has fallen every month at an annualized rate of 3-5%;3) Since the war started a little over a year ago, Russia has lost nearly 400% more young men and prisoners than the USA lost over 8 years in Vietnam (approaching 200,000 dead and untold wounded);4) The US Dollar has weakened by about 15% from October 2022 (a variant given that the Fed has been raising rates). Inflation in the US dropped from 7.7% to 5% over this period;5) Overnight rates (short term) have risen by about 30 bps since 10/22 (not nearly as high as the press would have you believe). This number is important as the Fed will raise rates again on May 3, 2023. I think by 3/8ths.Conclusions:The war will rage on as Russia attempts to influence US Politics (remember, 2024 is a Presidential Election year - 11/5/24). This will keep gas prices in the $75-80 range. But the US won't replenish the strategic oil reserve until prices drop into the $60 range (which may happen shortly after the election).Short term interest rates will march higher, as no one is talking about anything worse than a mild recession. The Fed usually likes to have some fear in the markets so look for more rate increases.I suggest staying in short term instruments (80-90%) and defensive stocks (maybe 10-20%). This should all play out after 11/5/24 and why risk a 20+% decline when you can make 5% tax free in short term instruments.Disclosures may be found at www.adrmortgage.com. This is one person's opinion.
It's incredible to think that people actually believe we'll see housing prices get trashed. The only people that say that are people that rent, people that teach and people that make money by selling research.
All data sources I've checked show housing supply levels at the lowest in 60 years (growth rates).
Who, what, why, how and when? To start: WHO?
Charlotte and Raleigh are ranked 19th and 20th for shortest days on market (Avg 1 month supply).
Virginia Beach is ranked 8th (.8 months supply).
Tampa is ranked 13th (.9 months supply).
Arlington Tx and Ft. Worth Tx have less than 1 month supply and are ranked 14th and 17th respectively.
I don't see much difference between 1/2 month supply (two of the three lowest supply levels are in CO) and the markets we operate in above (NC, VA, TX and FL). I'm coining a new housing market phrase:
If you ain't buying, you're dying (financially that is).
Demand is being shifted into the future. A huge demand is sitting on the sidelines as investors continue to scoop up 1 in 20 homes. Since home prices continue to go up in these top markets and we have less than 2 months supply of housing nationwide - what's a renter to do? Pay more and get less. Ten years ago the supply of housing was balancing at 7 months and our country was emerging from a political and financial disaster. To get back to that balance will take many years.
It's obvious. We closed a ton of clients at rates as low as 2.25% in 2021. They are not moving. They may like to rent to you - since rents are sky-rocketing. 2/3s of home owners are below 3% or own their home out-right. What will it take for them to move? A renter willing to pay a ton.
With the Pandemic housing starts cratered. Remember if you were considered ESSENTIAL? Well building a house wasn't considered essential. Builders couldn't build. Supply cratered. And the incentive to build now? With interest rates rising to 10%? Or Beyond? ZERO. Most builders are keeping their powder dry and sitting on the sidelines. Lumber represents the largest cost of most homes (30%+). (2022 - 92% of new built homes were wood framed). Here's what lumber prices did over the last several decades (per thousand board feet):
1970s and 1980s - $100-250
1990s and 2000s - $200-$425
2010s and 2020s - $180-$1600
The good news is that lumber prices are back under $400 in March and I expect that to fall back down under $300 per thousand board feet in the next year of two. Why? Because the cost of financing has gone up 300% in the last year (based on Coupons) and that's way more important than the cost to build. Based on the 10 year Treasury rates are up 500%+ over the last year. (Remember, invest in laddered CDs).
So with so much great data, when should I buy? Well taking the geo-political issues out (which are tough to predict - such as war) my belief is now is the perfect time to buy. Yes, someday rates will come down. But my number one strategy when it comes to interest rates is this:
A BALL IN MOTION STAYS IN MOTION.
Take a look at interest rates over any time you want. They don't go up - then down - then up - then down over a month or a year. They are in cycles. On 4/1/2020 the 10 year treasury (which mortgages are based) was .64%. Today? It's at 3.74%. It will go a lot higher. These are still low rates compared to historical patterns. In fact, Fed Chairman Powell recently stated they have to go a lot higher! There it is. They are going up up up. And the cost to purchase a home will only continue to rise. Until it turns, and we aren't anywhere near a turning point.
While the housing market is super strong the weak spots are in the mortgage and real estate sales associate area. In 1908 there were 1608 Real Estate Sales people. Today? Well in 2022 it peaked at 1.581 million. How about mortgage loan officers? 340,000 in 2022. Of which 37,000 are located in California. So how many mortgage loan officers were there in 1908? Zero. Insurance companies started the mortgage industry in the 1930s, with the help of the Federal Government. The numbers combine to about 1.9 million people. By 2025 I think that number will be around 1.5M or less.
If you are looking for a buydown option, ADRMortgage.com has rates that will impress you. We have the largest investor in the country providing a unique rate matrix for buydown 30 year fixed rates.
Call us to find out more. 919-771-3379. www.adrmortgage.com for disclosures. Lastly, we do mortgages in Texas and Florida (the top two fastest growing markets). As well as North Carolina and Virginia.
ADR offers substantial savings to all Purchase and Refinance Clients. Call Andy May for a rate quote and see how much you will save with our special finance rates. It only takes 5 minutes to fill out a loan application at www.adrmortgage.com.
919 771 3379
This is not an offer. Relevant disclosures and licensing found at:
As everyone knows rates have pretty much doubled in the last 6 months to a normal range in the low 5s. We expect rates to continue into the 8s over the next 6 months. What this means is we are unlikely to see the over-bidding of the past (white-hot prices). However, that hasn't slowed down as of May 2022. We're seeing a lot of clients over-bid. What is over-bidding? Well, it's paying more today than it's worth for your home. Appraisals are starting to come in way-under purchase prices in some instances. Some people don't mind that, as it can be frustrating spending years looking for a home. In fact, if it does take you a year you are likely to be over-bidding anyway since home price appreciation was 25% last year and is likely to be 10+% in 2022. Therefore, over-bidding is a time oriented situation. No one wants to pay more for something, but when it comes to your home the facts are friendly. People will always over-bid to get the home of their dreams. What can you do about it? Answer:
Make your Realtor work harder!
Realtors are your eyes and ears for bidding on a home. I once put in 3 offers in one day. Unheard of? No. I qualified to buy all 3 and therefore, it was fine. We purchased the home that we wanted and it worked out. Make sure you speak with a licensed mortgage loan officer about over-bidding. What's your back up plan if you find you've overbid? Your bank only has a requirement to hire an 18 year old. Don't fall victim to believing what someone says who has never purchased a home before. Get a licensed professional that you trust involved in what will likely be the largest financial transaction of your life.
We treat you with respect and operate in Florida, Virginia and North Carolina. If you are looking for an honest, hard-working mortgage company that doesn't take advantage of the rate situation please give us a call. 919 771 3379. Thank you. Andy May
Job Growth = Home Price Appreciation. Simple fact. Highly correlated to an 18 month window into the future. Here's another fact. North Carolina won all kinds of awards including State of The Year (last week by Business Facilities Magazine) and continues on a fast path to more job growth. According to the NC Dept of Commerce, in 2021 NC added over 24,000 jobs; and another 28,000+ in 2002. 2023 is supposed to really grow as the Toyota Plant (near Greensboro) and larger projects come alive. We just closed someone that works at the Toyota project.If you are sitting on the fence and afraid to enter the market. Remember, Wake County home prices are expected to climb by around 5% in 2023. That's enough for more than a down payment. Time is money.And over 60 people a day are moving to Wake County. They need housing. The state added an estimated 133,088 residents in the year ending last July 1, according to the latest population estimates from the U.S. Census Bureau. That's the third highest numerical growth in the country, after Texas (470,708) and Florida (416,754).Jan 3, 2023. That's about 365 people a day moving to North Carolina.If you are looking for a buydown option, ADRMortgage.com has rates that will impress you. We have the largest investor in the country providing a unique rate matrix for buydown 30 year fixed rates. Call us to find out more. 919 771 3379. www.adrmortgage.com for disclosures. Lastly, we do mortgages in Texas and Florida (the top two fastest growing markets). As well as Virginia and California.
What's really going on with the housing, stock, and bond markets worldwide? We know housing is cyclical - but stocks and bonds move much faster (variability). I get asked all the time my thoughts on what's really going on. Yesterday I realized, or at least theorized, that the geo-political landscape is really driving FED decisions. Here's some data to wet your appetite: 1. From Q2-22 to Q3-22 USA Stocks down $9+ Trillion (just the change, not the base); 2. Russian GDP (the entire country's total goods produced and sold) is about $1.5 Trillion per year (a little envy there as the USA GDP is $20 Trillion per yr). 3. Russian per capita income per year is $11k (China is $9k) and USA is $60k. Income distribution favors the few - but suffice is to say many in the USA are making many multiples of the average workers in communist countries above. Enough data - what's it mean. My thinking is that if the USA wants to stop the Russian invasion and potential WW3 scenario the best way to do that is to: 1. Bring oil prices back to $50 a barrel; 2. Lower raw materials and natural resource prices; 3. Continue to send arms to Ukraine and expose Russian weaknesses so the Russian's don't attempt to take over another several Russian speaking countries (Russia has about 140M people and shrinking). No one is taking Russian speaking classes, and they're in danger of shrinking a lot further (not a winning hand). Enter the Fed. 1. Raise the value of the dollar (Done! Ex: The British Pound is down 20% and almost at parity with the dollar). 2. Increase interest rates to crater worldwide asset values and cause depression in Russia. This is, in my opinion, a great way to end the war in Ukraine (and potentially all of Europe). The pain is on all of us. But our sons and daughters aren't fighting and this proxy war should end once the Russian depression unfolds due to lower prices in raw materials (26% of Russian GDP). 1. Russia's GDP is 26% Oil/Mining (majority of their exports); 68% Services (McDonald's and others are closing up shop); 6% Agriculture. Can the Russian population hang on making $8k per year instead of $10k when the income concentration is at the top percentile? What should you do in this market? 1. Housing takes time to feel the pain - and you need a place to live. If you want to wait 5 years to find out you can. Or I'll tell you the answer now. Housing costs are up (to build) and housing isn't going to appreciate at 25% a year for a while. But is it going to decline? Probably not. It's a good place to store wealth so I'd continue to invest in housing. 2. Stocks? They react very quickly and with the FED ending Quantitative Easing and selling $10T in balance sheet assets (on the USA Bal Sh), I'm thinking now is a good time to be 50%+ in cash. Yes, inflation is bad. But so is losing your principal. 3. Bonds? They are starting to look good for the first time since 2013. I'd stay very cautious and stay in cash or housing and wait out the war.
The Future of Housing - Everyone's an Expert but here are the facts:#1 - Housing starts are down 25+% from April to July 2022. Seasonally adjusted this is still down 10% since June 2020.#2 - Just about every month over the last 66 months, housing prices nationally have gone up; including every month this year that data is available. Home prices are inflating still.#3 - Home sales are down 38% from Jan 2022 to June 2022 nationally.#4 - Inventory nationally is 10.9 months. This is a normal market, but your market will vary. In the Triangle we are all the way up to 1.5 months (this is still very tight). Of course, the headlines read inventory up 87%. That's just to scare you. 1.5 months of inventory is a sellers dream.#5 - Mortgage rates are up from last year, when some country's rates were actually negative (they'd pay you to take their money). That was last year. This year, they are up and right now they are around 5.375% with 1% origination point (this is not an offer). This is better than when rates were at 9+% back in the inflation 1980s.The above are facts. Where does this take us? First, there is a nationwide housing shortage for materials, workers, houses. Second the economy is super strong in areas like Oil, Tech (certain tech), Chips, EV cars, etc. With the fall off in new construction the multiplier effect should hit full throttle in Q123 - just in time for the new housing purchase market.I have said that home prices will start to recede in 2022 (they are still positive), and in 2023 we're in for some markets to shrink in terms of pricing. Then, in 2024 we will see a significant shift to higher spending to prop up the economy as it's an election year.We all know in election years, the Feds pump money to keep the economy looking rosy. We have next year, 2023, to worry about with certain housing markets that don't have job growth. Other than that, it's 2025 that I'm worried about for home price declines - if they come.ADRMortgage.com. Andy May #103418. Andy May Group, LLC #88010. 919 771 3379. Equal Housing Opportunity. 8522 Six Forks Road, Suite 201, Raleigh NC 27615. Of course, disclosures may be found at the website at the beginning of this paragraph.
Nearly 1 in 4 American homeowners have an interest rate below 3%. Another 33% paid cash for their home. That's close to 60% of Americans pretty much unaffected by rising mortgage rates.
That tells me, only 1 out of 3 homes might be sold for purposes of rates rising too quickly. There's nearly 80 million homes in the US. 24 million represent the 1 out of 3 that aren't mortgage free or mortgage insulated (less than a 3% rate). By 2013 nearly 15 million homes had gone into foreclosure or received a loan-mod. through our last recession (2009-2013).
We are to believe that this price run up we've experienced over the last 5 years is going to pop. Slow, yes. But pop? No. Not even close. Past blog/newsletters have spoken to the lack of new home construction (about 5 million short of demand).
Bottom line is that this Pundit (credentialed out) says, home prices will rise for at least the next two years. I think we'll see 15% home price increases (in total) in the next 2-3 years. Remember the supply chain issues will increase pricing too, along with labor shortages. Those Ivory Tower Pundits don't see what it's like in the trenches and rely on back-testing data. Try predicting the future, not testing the past. Home Prices are heading higher in the hot job market areas of the country. That's not to say that country-folk in the boonies won't suffer - they almost always do. But Single Family (not condos) housing will continue to crush it through 2024 on price alone (HIGHER).
Another great month and another great year. Why? Simple. We offer better rates, faster and superior service. What's superior? A team that is made up of Mortgage Loan Officers that have experience, are educated and tested. Why risk your biggest asset to a bank 18 year old? That's all it takes to start talking the talk - 18 years old. No test, no education, no experience required by NMLS, CFPB, etc. Go to where the knowledge is. Call ADRMortgage.com 919 771 3379 and reach one of our seasoned/educated professionals. We'll know the park out of the ball compared to banks (yes, I meant to say that). www.adrmortgage.com
Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced the conforming loan limits (CLLs) for mortgages to be acquired by Fannie Mae and Freddie Mac (the Enterprises) in 2022. In most of the U.S., the 2022 CLL for one-unit properties will be $647,200, an increase of $98,950 from $548,250 in 2021.
$647,200 is basically the max loan size; high cost areas going well into the $800,000+ range.
Contact ADRMortgage.com - 919 771 3379 Andy May