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Market Commentary 02/23/2024

Posted on February 23, 2024 by Damon Germanides

The Promise Of AI & How It Will Affect Real Estate

As the promises of artificial intelligence (AI) and machine learning continue to propel equity markets, significant transformation lies ahead for various industries, including the mortgage business. While this shift may evoke both excitement and apprehension, embracing AI-driven processes offers the potential for increased efficiency, streamlined operations, and enhanced profitability.

But why is a real estate newsletter delving into the realm of AI? The answer lies in recognizing AI as a disruptive technology poised to revolutionize our lives akin to milestones like the automobile and flight. Moreover, it serves as a deflationary force, gradually reducing costs across goods and services.

In the context of residential real estate and mortgage origination, AI has the potential to identify promising prospects within each of our networks by leveraging vast computing power to assess probabilities. For realtors, AI can pinpoint prospective buyers or sellers based on life circumstances or shifts in employment status and provide real-time triggers.

This forward-looking optimism in the market has implications for interest rates, likely keeping them elevated for longer periods due to positive economic outlooks. As equity markets surge and financial conditions ease, individuals are inclined to spend more. Such increased activity prevents inflation from being lowered, delaying the anticipated rate cuts by the Federal Reserve. Consequently, interest rates have risen, with conforming loans hovering in the mid to upper 6% range, and jumbo loans around 6%.

In line with our assessment, a major Wall Street research firm has reached a similar conclusion: the overall expense of retaining a home you no longer desire is likely to bolster existing inventory. This is particularly true with rents on the decline and so many multi-family units becoming available. Such a trend has the potential to ease some of the strain on housing affordability and open up fresh opportunities in the real estate market.

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(1) Disclosures

(1) No Tax Return loans and foreign national loan products require other forms of income documentation and asset verification in lieu of tax returns. Not all applicants will qualify. Some products we oﬀer may have a higher interest rate, more points or more fees than other products requiring more extensive or different documentation. (2) Minimum FICO, reserve, and other requirements apply. Contact your loan officer for additional program guidelines, restrictions, and eligibility requirements. Rates, points, APRs and programs are subject to change without notice. Loan to values (LTV) are based on appraised value. Actual closing times will vary based on borrower qualiﬁcations and loan terms. All loans are subject to credit approval. (3) With an interest-only mortgage payment, you will not pay down the loan's principal balance during the interest-only period. Once the interest-only period ends, your payments will increase to pay back the principal and interest. Rates are subject to increase over the life of the loan. Contact your Insignia Mortgage, Inc. loan officer to determine what your payments might be once the interest-only period ends. (4) With an adjustable rate mortgage (ARM), once the fixed rate period ends, the loan payment will adjust after an initial period and then adjust on a regular basis as set forth in the loan documents. For example, a “3/1” loan will have an interest adjustment 3 years after the loan closes and every 12 months thereafter. Also, the loan will be subject to annual and lifetime adjustment caps. Contact your Insignia Mortgage loan officer to determine what your payments might be once the fixed rate period of the loan ends. (5) Insignia Mortgage, Inc., is a real estate broker licensed by the CA Bureau of Real Estate, DRE #01969620, NMLS #1277691

(2) Disclosures

(1) Minimum FICO, reserve, and other requirements apply. Contact your loan officer for additional program guidelines, restrictions, and eligibility requirements. Rates, points, APRs and programs are subject to change without notice. Actual closing times will vary based on borrower qualiﬁcations and loan terms. All loans are subject to credit approval. (2) “Loan to Cost” (LTC) is defined as the acquisition price of the property plus the cost to build as determined by a bank appraisal. Contact your loan officer for additional program guidelines, restrictions, and eligibility requirements. (3) With an interest-only mortgage payment, you will not pay down the loan's principal balance during the interest-only period. Once the interest-only period ends, your payments will increase to pay back the principal and interest. Rates are subject to increase over the life of the loan. Contact your Insignia Mortgage, Inc. loan officer to determine what your payments might be once the interest-only period ends. (4) With an adjustable rate mortgage (ARM), the loan payment will adjust after an initial period and then adjust on a regular basis as set forth in the loan documents. For example, a “3/1” loan will have an interest adjustment 3 years after the loan closes and every 12 months thereafter. Also, the loan will be subject to annual and lifetime adjustment caps. Contact your Insignia Mortgage loan officer to determine what your payments might be once the fixed rate period of the loan ends. (5) Insignia Mortgage, Inc., is a real estate broker licensed by the CA Bureau of Real Estate, DRE #01969620, NMLS #1277691.