Tag: real estate finance

Market Commentary 11/01/2024

Posted on by victoria chuidian

Bonds Yields Rise As Markets Brace for Election & Fed Meeting

Interest rates are on the rise as a weak Jobs report showed the addition of only 12,000 new jobs. Bond traders reacted unexpectedly to the news, with the market’s focus shifting to the growing U.S. deficit and the risk of persistent inflation. Of particular concern is the fact that neither presidential candidate has presented a plan to address the deficit, while the bond market appears to be signaling disapproval of continued government spending. With long-term Treasury yields rising since the Fed’s 50 basis point rate cut in September, we’re closely watching the 2-year Treasury as a proxy for next week’s Fed meeting. While a 25 basis point cut is anticipated, some experts suggest a pause might be more prudent, given the recent upward trend in rates and mixed economic signals

There’s an argument that current interest rates aren’t overly restrictive despite numerous factors like steady GDP growth, improved consumer confidence, a strong stock market, speculative crypto activity, tight underwriting, narrow bond spreads, and persistent wage inflation. For many individuals and businesses that secured historically low rates, recent rate fluctuations have had minimal impact. Additionally, with money market yields near 5% and rising housing and equity values, higher inflation may benefit wealthier Americans.

There may be an additional silver lining for real estate professionals. Many homeowners have held onto properties longer than planned, and home builders are running out of incentive options. If rates stabilize, home prices may need to adjust downward, which could entice prospective buyers off the sidelines.

Market Commentary 06/07/2024

Posted on by Damon Germanides

Stronger Than Expected May Jobs Data Pressures Bonds

We were initially encouraged by the JOLTS report which showed signs of a cooling economy as interest rates trended lower, earlier this week. However, Friday’s much better-than-expected May jobs report exceeded expectations for job creation and wage growth, reversing this trend. As a result, interest rates surged, and the likelihood of a Fed rate cut has been pushed to September. Those hoping for rate cuts are focusing on the rise in the unemployment rate to 4% as a sign of a subtly eroding economy.

While there are early signs of consumer stress, such as rising credit card balances and commercial real estate defaults, it is difficult to justify a near-term rate cut after today’s employment report. Cumulative inflation has been a significant drag on our most vulnerable citizens. However, the consumer remains in good shape overall. The stock market is at record highs, with a resurgence of FOMO, reminiscent of the Gamestock mania. We will listen closely to Chairman Powell’s insights on the economy and the direction of rates. The anticipated pain that Powell suggested would be needed to bring inflation down never fully materialized. With the upper 30% of the US population enjoying strong home price appreciation, stock market wealth, and rising wages, the loosening of financial conditions may stoke further inflation.

Trending In Real Estate Finance

Smaller banks and creative lenders are making exceptions on home loans that make sense. We are seeing some banks begin to waive income requirements for very liquid borrowers, increase debt-to-income ratio limits to 60% for the right profiles, and accept a credit blemish or two with a good explanation. Given the slowing existing home sale market, lenders who can lend are doing what they can to approve loans. This is significantly helping good borrowers secure home loans that they would have easily qualified for just a few years ago. Notably, interest rates remain range-bound, and lenders remain eager for business, with our best-priced lenders offering rates under 6% for well-heeled applicants.

INSIGNIA MORTGAGE AT THE 5TH ANNUAL NON-QM FORUM 2024

Posted on by Admin

Meet Insignia Mortgage founders, Damon Germanides and Chris Furie, at the 5th Annual Non-QM Forum 2024 at the Waldorf Astoria Monarch Beach Resort & Club, in Dana Point, CA, from June 12th to 14th. We’re excited to announce that Damon Germanides will be a featured speaker for the session on “Harnessing Automation & Optimizing Your Technology Stack to Improve the Lender, Broker & Borrower Experience” along with John Lowenthal, Paul Gigliotti, and Peter Fastovsky, scheduled to take place at 11:45 am on June 13th, make sure to save your seat!

Damon Germanides, known for his insightful perspectives and expertise in mortgage lending, will share his valuable experiences and knowledge during the conference. His panel will focus on the latest innovations in underwriting processes, standards, and automation technology. His participation is eagerly anticipated, as attendees look forward to learning from his extensive background in the mortgage industry. He also writes a weekly “Market Commentary” with insights on current rates, trends, and where the industry is headed.

About The 5th Annual Non-QM Forum 2024

The 5th Annual Non-QM Forum will be constructed from both the loan origination and investor perspectives, delving into the critical issues through panel discussions with multiple points of view, and smaller group meetings and roundtables for a more holistic forum experience.

As lenders begin to re-enter the space, Longevity is still relevant. Can lenders take the long road? Mortgage rates and subsequent housing prices continue to surge, Non-QM could be viewed as unstable. The market is certainly seeing some level of resilience and housing prices are beginning to lighten up a bit. Join the biggest conversations surrounding the industry’s top trends, opportunities and challenges this June.

The 5th Annual Non-QM Forum 2024 promises to deliver meaningful content and excellent networking opportunities for those interested in the evolving landscape of private lending. For more information on the conference and to register, visit the IMN event page.

Don’t miss the chance to gain insights from leading experts like Damon Germanides and explore the latest strategies in the private credit marketplace. We hope to see you there!

Market Commentary 9/29/2023

Posted on by Damon Germanides

Better-Than-Expected Inflation Readings Fail to Lower Rates 

Although the market welcomed a better-than-expected core PCE report (the Fed’s favored inflation gauge), it had a less-than-desired impact on bond yields. Several factors may have contributed to this subdued response from the bond market. The looming government shutdown, with a staggering $33 trillion in debt, has cast a shadow on any other momentum. In addition, a significant strike by the United Auto Workers is likely to encourage other large unions to demand higher wages. Matters become further complicated by the tight oil supply causing oil prices to push back toward $100 per barrel. 

Speaking of oil, it is worth noting that the PCE metric excludes the more volatile components of inflation, namely food and energy. With energy prices surging in recent months and the cost of living growing larger, this report offers little relief to most Americans. 

Homebuyers Barred from Market Due to Mortgage Rates 

Higher mortgage rates are now dampening demand, making the market inaccessible to many potential homebuyers. Homebuilders try to clear inventory by reducing prices and offering substantial incentives, such as 2-1 buydowns on mortgage applicants. While the tight supply in the resale housing market prevents prices from dropping significantly, an economic downturn could leave people struggling to afford mortgage payments as other costs rise. In California, the soaring costs of health and homeowner’s insurance are becoming increasingly burdensome for small businesses and homeowners. Credit card costs have also shot up, comfortably exceeding 20%. 

Lower-rated credit card borrowers are beginning to make delinquent payments, signaling that the Fed’s substantial rate hikes are starting to take a toll. However, despite some receding, inflation is not rapidly decreasing. Americans are grappling with both higher capital costs and increased expenses. While the economy continues to show resilience, many are beginning to feel the severity of a slowing economy and a higher inflationary environment. 

Prominent figures like Jamie Dimon and Bill Ackman, both Wall Street legends, would not be surprised by higher rates. They foresee rates settling above 5.00% at the long end of the curve. We share this view and are closely monitoring how the markets adapt to a world of elevated interest rates. 

Circling back to mortgages, this market remains difficult and fragmented.  The days of speaking to one or two banks on a deal are gone. Insignia Mortgage provides value by surveying many different lenders on each deal and locating incredibly competitive terms for prospective borrowers, especially those borrowers with more complex or nuanced financial profiles.