Monthly Archives: January 2016

News – Housing Starts Rise 10.8 Percent in 2015

Source: RISMedia

Total housing starts were up in 2015, weighing in at 1.11 million—that’s 10.8 percent higher than 2014. This information is based on the Census Bureau’s recent December 2015 data release, which allows us to look at 2015’s starts as a whole. Despite December being slightly down—2.5 percent to 1.15 million—the yearly status overall was positive.

“The dip in December housing starts shows the month-to-month volatility we’ve experienced in this report,” says Quicken Loans
Vice President Bill Banfield. “All in all, we’ve made significant gains in 2015 as we closed out at the strongest calendar year
for housing starts since 2007 – up 1.00 million units from 2014.”

What’s In Store For Housing in 2016?

Source: RISMedia

The overall tone for housing in 2016 is positive, according to a recently released Clear Capital Home Data Index™ (HDI™), with projected home price appreciation in the range of 1 percent to 3 percent by January 2017. Although this range historically has represented a stable housing market, it’s significantly lower than the 5.1 percent rate during 2015 and the 6.6 percent growth
rate in 2014, demonstrating continued market instability and a trend of decreasing rates. While we would love to sugarcoat the
HDI data and declare that 2016 merely will be a normalization of the housing market to historical averages not seen since the
late 1990s, several factors indicate that it could be another volatile year leading to ongoing uncertainty about the future of
American housing.

Ultimately, overall national growth will be positive throughout 2016, but these rates are underwhelming and signal the end of
the explosive growth typical of the first half of this decade. The forecast is predicting an average of only 0.4 percent
quarter-over-quarter growth for each quarter during 2016. Growth in this range is rather lackluster when compared to the
previous two years, when home prices grew by an average of 1.5 percent quarterly over the period from January 2014 to January
2016.

Forecast:

Homes in the low tier (below $116,000) are forecasted to appreciate more significantly than other tiers during the next year,
averaging just under 1.0 percent quarterly growth throughout 2016. By definition, the low tier is affordable to the widest
range of potential homeowners and investors. This larger supply of buyers will likely cause continued higher appreciation
for what is the most affordable tier.

The overall trend of decreasing rates of growth during 2016 will primarily affect the middle price tier – representing the
middle 50 percent of all transactions, currently comprised of homes selling between $116,000 and $337,000 nationwide. While
growth in the middle price range is not projected to be the lowest of all the price tiers, the mid-tier shows a consistent
decrease in quarterly growth over the forecast period, falling from 0.5 percent QoQ growth in January 2016 to just under
0.2 percent QoQ by the end of the year.

Conversely, the top price tier (homes selling for over $337,000 nationwide) forecasts relatively consistent quarterly
growth, hovering around the 0.2 percent QoQ mark. Historically, pricing in this class of homes has moved slowly in the sense
that gains and losses both have been smaller by percentage due to higher initial prices. The contrast to the low tier
highlights the diversity in performance that remains in today’s real estate market.

2016 Forecasted to Bring Modest Increase in Home Sales

Source: RISMedia

Following the housing market’s best year in nearly a decade, existing-home sales are forecasted to expand
in 2016 at a more moderate pace as pent-up buyer demand combats affordability pressures and meager economic growth,
according to National Association of REALTORS® Chief Economist Lawrence Yun in a newly-released video on his 2016
housing market expectations.

In the NAR-published video, Yun discusses his expectations for the U.S. economy and housing market in 2016 and points
to pent-up demand, sustained job growth, and improving inventory conditions as his reasons for an expected gain (from 2015)
in new and existing home sales.

Despite his forecasted increase in sales, Yun cites rising mortgage rates, home prices still outpacing wages and shaky global
economic conditions as headwinds that will likely hold back a stronger pace of sales.

“This year the housing market may only squeak out 1 to 3 percent growth in sales because of slower economic expansion and rising
mortgage rates,” Yun says in the video. “Furthermore, the continued rise in home prices will occur due to the fact that we will
again encounter housing shortages in many markets because of the cunulative effect of homebuilders under producing for multiple
years. Once the spring buying season begins, we’ll begin to feel that again.”

Economic Week in Review

Source:

Michelle Wickett, Senior Loan Originator

Axia Home Loans – Phone: (360) 791-0513

michelle.wickett@axiahomeloans.com

www.mortgagesbymichellewickett.com

“I feel the sky tumbling down.” Carole King. Global stocks fell, and the Dow lost more than 1,000 points from December 29 to January 7 due to struggles in China, the world’s second largest economy. Job creation surged at the end of 2015 here at home, causing additional stir in the markets.

Employers added 292,000 jobs in December, the Labor Department reported Friday. This was well above the 200,000 expected and follows solid jobs creation in October and November. The end of 2015 marked the fifth straight year in which employment grew by 2 million. While month-over-month wage growth from November to December was stagnant at 0.0 percent, year-over-year wage growth was 2.5 percent. The Unemployment Rate remained at 5 percent, a seven-year low.

The Jobs Report is considered a market mover each month; however, continued news of China’s economic struggles was the real game changer last week as global markets fell. When Stocks plunge, Mortgage Backed Securities and other Bonds usually improve. Because home loan rates are directly tied to Bonds, home loan rates can improve in the process.

The good news for homebuyers and homeowners right now is that rates are currently hovering near all-time lows.

If you or someone you know has any questions about home loan options, market conditions or current rates, please don’t hesitate to contact me.

Guest Post: Interest Rates Likely Won’t Go Above 1% in 2016

By Dr. Steve Sjuggerud

 

The Federal Reserve says it will raise interest rates to 1.375% by the end of 2016…

DON’T BELIEVE IT!

As I’ll show you today, it would be absolutely foolish for the Fed to raise interest rates very much in 2016…

 

The rest of the world outside of the U.S. is struggling to grow. And the U.S. high-yield bond market is sending serious warning signs today.

The most recent bout of fear in high-yield bonds (also known as “junk” bonds) was strong.

I think of the junk-bond market as the “canary in the coal mine” for the stock market and the economy…

Visualize it with me… A group of old-time miners carries a caged canary into a mine tunnel with them. If lethal gases are present in the mine, the canary will die… the miners will realize there’s danger they can’t see… and the miners will get the heck out!

Junk bonds are just like the canary… When the junk-bond market starts to die, the Federal Reserve needs to pay attention… There’s danger ahead.

The junk-bond market has been a great “canary” over the past quarter-century… forecasting trouble and Federal Reserve rate CUTS.

You see, when interest rates on junk bonds start to rise (or more specifically, when the spread of the junk-bond interest rate over the risk-free interest rate starts to rise), it’s a signal that trouble is ahead. It’s a signal that the Fed should CUT interest rates. Take a look:

 


The message from the chart is simple: Junk bonds tell the Fed what to do. When the junk-bond-rate “spread” starts to rise quickly, the Federal Reserve starts to cut interest rates. The Fed doesn’t stop cutting interest rates until the bleeding in junk bonds has stopped.

The message from junk bonds today is that times are still dangerous out there… that conditions are unsafe… and that it’s time to hustle out of the mine. In normal times, the Federal Reserve would lower interest rates to ease the stress. Instead, the Fed is RAISING interest rates.

So why are the folks at the Fed raising rates? In short, because they said they would… The Fed might have lost credibility if it didn’t raise interest rates. It has been crying wolf about raising rates for years.

The Fed accomplished its one goal this month – it showed us it’s not crying wolf anymore. But with all the trouble in the world and in junk bonds, the Fed really shouldn’t dramatically raise interest rates in 2016. It should use a cautious approach.

So even though the Fed says it will raise interest rates to about 1.375% by the end of 2016, I seriously doubt it will raise them that much…

Good investing,

Steve

New Year’s Pledge: Automatic Wealth Through Rental Real Estate

By Mark Ford, founder,
The Palm Beach Research Group

Do you invest in real estate?

I’m not talking about your home. Owning a home has more to do with security (emotional and personal) than it has to do with
building wealth.

I’m talking about rental real estate.

I love real estate. It’s not without its problems, but it’s the best way I’ve found to accumulate a good deal of wealth on a part-
time basis.

In the many years I’ve been actively investing in real estate, it has given me returns much better than the stock market. In fact,
my average return has been between 5% and 8%, without leverage. When I use bank financing, those numbers are in the 12%-15% range.

I’ve tried all sorts of real estate investing. But I’ve gotten the best results by sticking to this plan: direct investments in
income-producing properties… either residential or commercial.

You receive something with rental properties you don’t get with many other real estate deals: guaranteed income. Sure, you get
appreciation, too. But I’ve come to see that as secondary to having dozens of extra, ongoing income streams. (And did I mention
it’s money cost of borrowing, the maintenance, and the theoretical loss of income by charging a modest rent.

I netted something like $10,000 per year on a condo I bought for $65,000. That was a return of roughly 15%, cash on cash. (Cash-on-
cash return = annual dollar income / total dollar investment.)

Had I used bank financing, I would’ve made more – without any significant increase in risk.

I own dozens of individual properties like this. They send me checks – usually thousands of dollars – on the first of every month.
That’s a nice way to begin your month.

Mark on his favorite day of the month: the first.

On the credenza are 24 small red binders. Each represents a separate real estate investment I’m involved in.

Some are individual properties I own myself. Some are properties I own with friends. Some are direct investments. Some are in
partnerships or corporations. Some are rental plays. Some are build-and-sells.

If you decide this is the year to begin a real estate portfolio, start slowly.

My first real estate investment was a bad one. I’ve written about it before. It was a rental unit in Washington, D.C. (It was
overpriced and occupied by a prostitute who would neither pay me rent nor do her business elsewhere.)

It took me years to dig myself out of that mistake. I emerged a smarter (but not-yet-smart-enough) real estate investor.

Take your time. Be selective. Educate yourself. Some of what’s on the bookshelves is full of misguided advice.

My best advice is to subscribe to our rental real estate program. It’s part of the Palm Beach Research Group’s Wealth Builders
Club. That, you can trust.

You can also take adult education classes… if you can find them. Be leery of free seminars –they’re likely to be selling
traps.

Here’s a promise: If you start investing in rental real estate this year, you’ll be glad you did. If you keep investing – buying at
least one new property per year (which will be easy once you get going) – you will be a real estate multimillionaire in no
time (not counting your other assets).

And you’ll be well on your way to retiring as a multimillionaire.

When you look back on all the wealth you acquired, you may feel the way I do now: that real estate was the easiest and – next to
your personal business – most lucrative wealth-building activity you ever got involved in.

Regards,

Mark Ford