Weekly News (April 20, 2022)

Interest Rate (16th Week)

( By Fairway Home Loan )

  Prime Rate:3.25 – 3.50%  /  Fed Fund Rate: 0.25- 0.50% 

• 3% Down payment for 1st home buyer is available.
• 5% Down payment 2-4 units FHA program available
• 15% Down payment 2 families -conventional program available.
• Potential home buyer — Have a pre-approval first before the shop.  Now we have 48hour underwriting turn-around times for regular loans.
• Self employed borrower – Need to prepare 3 month business bank statements and the YTD Profit and Loss Statement. YTD income can’t decline more than 30% compared to last year.
• 2022 Conventional loan limit:

Conforming SFR : $647,200.00/ Conforming high balance: $970,800.00

Conforming 2 Family: $828,700/ Conforming High Balance: $1,243,050

Rent-Controlled Apts’ in NY Rent Allowed Up to 9% increase

(  Korea Times  4/16 )

• NYC RGB(Rent Guidelines Board) proposed a big increase for about 1M rent-controlled apartments in NYC.
• According to this proposal, rent can be increased 2.7 – 4.5% for one year lease and 4.3 – 9% for 2 year lease. If this guidelines are passed in July, and start practicing from Oct 1st, it will be the biggest increase for the last 10 years.
• Landlords’ burden as inflation soars is reflected with this increase, but tenants’ complaints might be concerned as well.
• According to Elliman’s report, a median rent for 1br apartment in Manhattan in March was $3,788 which is 24.2% up, compared to a year ago.

Residential New Construction increased in March

(  Korea Times 4/20 )

• According to the U.S. Dept of Commerce report, new home construction increased 0.3% from the last month to 1.79M, increasing two consecutive months from Feb, which is the highest since 2006, and 4% up from a year ago.
• Apartments and multifamily units construction increased while single family construction decreased.
• The number of permits increased 0.4% to 1.87M from the last month, and up 6.7% from a year ago.

Homeowner Groups Fight Investors’ Push into Suburbs

(  WSJ  4/19  )

• Small group of neighborhood volunteers are blocking companies from buying single family homes, rewriting home ownership rulebooks to thwart investor purchases of suburban housing.
• Some home owners’ associations believe that the rise in home purchases by rental investors has led to a decline property maintenance and made their neighborhood less desirable. Investors are also making it more difficult for local families to buy houses, these groups said.
• Homeowner tactics include placing a cap on the number of homes can be rented in a particular neighborhood, or requiring that rental tenants be approved by these association boards, or requiring new buyers to live in a home or leave it vacant for six months before they can rent it out.
• Investor purchases have been increased in recent years and accounted for more than one in five home sales in December, according to housing research firm CoreLogic.

A Home is Your Castle Against Rising Inflation

(  WSJ  4/19  )

• Mortgage interest rates have been rising at their fastest pace in years. Last April, the 30-year fixed mortgage rate was 3.2%. Today it’s 5%. But if you’re holding back from buying a house because of the rise in rates, consider that inflation is up even more.
• A year ago it was running at 2.6% on a year-over-year basis (March 2020 through March 2021). Today, this retrospective annual inflation measure is 8.5%. We haven’t seen inflation this high since early 1980s.
• If inflation continues at this rate, you’re better off borrowing money today at 5% and paying it back a year from now with dollars that have depreciated by 8.5%.
• If inflation drops as predicted because of the Fed’s move, interest rates on fixed-rate mortgages will likely decline as well. This means you should be able to refinance your 5% mortgage at a lower rate and monthly payment. If inflation exceeds expectations, you’ll be ahead of game.
• The reasons inflation stay high: first, supply-chain bottlenecks may continue, particularly because of current and likely future Covid-19 shut-downs of major parts of the Chinese economy. Second, European Union may join the U.S. in expanding the embargo against Russian energy, which pushed oil price higher. Third, countries that can’t pay their bills, make money by making money.  The Fed has been printing a vast quantity of money for decades which portends more inflation, against which a home provides excellent protection.

Residential Market is Bubbled?

(  Korea Daily  4/16  )

• Economists at the Fed Bank of Dallas, TX are pointing out that home price increasing pace is bigger than supply-demand structure and is out of the fundamentals.
• Two main factors of bubbling conspiracy are considered: 1) FOMO(Fearing Of Missing Out) syndrome of buyers and 2) Investors’ driving force which is 33% of total purchases and it is 5% higher than 10 year average.
• However, the opponents against bubbling theory are saying that the bank guidelines for mortgage loans are much tighter than 2009 financial crises period.

Blackstone Bets Big On Student Housing

(  WSJ  4/20  )

• Blackstone Inc agrees to buy student-housing owner American Campus Communities Inc. in a deal valuing the company at about $12.8B, including debt, a bet that rents will continue to rise as more college students return to campus.
• Austin, Texas-based ACC is the largest publicly traded owner and developer of student housing in the U.S. The deal marks Blackstone’s single biggest foray into the sector to date.
• A national housing shortage is pushing up rents near campus, too, and return of more international students could boost demand further. That has drawn in large investors such as Blackstone and Brookfield Asset management Inc.

Investors’ Purchases Beat Interest Rates Hike

(  MIJU News  4/15  )

• Typical buyers are trying to buy homes before mortgage interest rates going up, but investors equipped with huge cash power are not affected by rates hike. Currently about $60B funds are ready to enter into the residential market.  This might be the reason the home prices could be uphill mode even though transactions reduced and interest rates increased.
• Small investors can participate through REITs: for example, one of ETFs is iShares REZ which is concentrated into apartments and single family houses, and Blackstone’s smallest investment is $2500.

                                             Home Purchase between Owner and Investor

  This is News Brief & Mini Seminar in YOUTUBE

https://www.youtube.com/watch?v=hAwaUbWUop0

https://www.youtube.com/watch?v=0IM7H47VzTY