Interest Rates from the FOMC

How the federal Open Market Committee meetings fare, is a good indication of what interest rates in the real estate market will be like and what to expect on a potential buyer’s ability to actually purchase a home and get into a mortgage. As such, it is important to keep an eye out for all FOMC happenings in order to be more informed about when the best times to buy and sell are.

The Federal Open Market Committee is to blame for the rising risk in bank loan portfolios, according to a new industry report. The FOMC is responsible for setting the Zero Interest Rate Policy; in place for years now.

Kroll Bond Rating Agency’s report stated that the FOMC “explicitly set a policy to push up asset prices to facilitate greater risk taking.”

The problem is that these higher asset values have not been validated by the performance of the economy, either in terms of rising income or GDP.

Which means, when valuations for commercial and residential assets are rising faster than income or GDP, and LTVs are rising as well, the only certainty is that the prices will not be maintained.

The results from KBRA’s study of data published by the Federal Deposit Insurance Corporation made it believe that “there are clear signs again of mounting future credit risk present in the zero or low default rates being reported by the banking industry.”

KBRA said this threat too closely resembles the situation America got into nearly 10 years ago. “During the height of the mortgage bubble in 2004-2005, obligors such as Washington Mutual and Countrywide actually reported negative defaults, meaning that recoveries exceeded charge-offs, suggesting that credit had zero cost,” the report stated.

Now, the report stated that falling market prices for oil, copper and other key industrial commodities have cut the value of collateral by more than half over the past year, raising the specter of increased corporate defaults and related collateral damage for lenders and investors.

“The deflationary environment facing the global economy has been explicitly orchestrated by the policies of the FOMC, which has pushed up asset prices (and compressed credit spreads) to foster economic growth,” the report said.

Loan categories to be concerned about: construction & development, 1-4 family mortgages and multifamily loans are showing signs of stress.

“Plainly stated, the credit results measured by metrics such as charge-offs and recoveries are simply too good to be believed – or sustained,” the report said.

Last month the FOMC voted to table an interest rate hike, and after the horrible September jobs report most think the chance for a rate hike at the Oct. 27-28 FOMC is remote. The next FOMC meeting after that is Dec. 15-16.

Source: http://www.housingwire.com/articles/35284-kbra-fed-actions-inflate-financial-risks-in-bank-portfolios

Growing Housing Markets

Although, the housing market has been on a rebound from the economic recession, it is much healthier than many people realize especially in certain areas. Cities are changing rapidly as jobs are bouncing back. Take a look at these ten cities that should be looked at if you are wanting to invest in real estate.

Atlanta, Charlotte, Fort Lauderdale, Riverside, and San Diego have been included among the 2015 Best Markets Top 10 List compiled quarterly by HomeVestors and Local Market Monitor.

The list evaluates and rates approximately 300 markets, and names the 10 where home prices are likely to increase steadily over the next few years, resulting in better returns, since home bargains will be harder and harder to find.

At 696,000, the number of borrowers in active foreclosure is the lowest it’s been since November 2007.

“The boom in snapping up foreclosed properties is pretty much over,” said Ingo Winzer, president and founder of Local Market Monitor.

 “Our Top 10 list consists of growing markets where higher home prices already signal more demand than supply, and where renters are at least a third of the local population. With the exception of Atlanta, where bargains still exist, home prices are pretty much aligned with local income,” Winzer said.

 The third-quarter 2015 top 10 list includes:

1. Orlando, Florida – the large and growing tourism industry provides plenty of lower-paying jobs.

2. Dallas, Texas – growing rapidly, with lots of jobs in business services and finance; many renters despite fairly modest home prices.

3.  Riverside-San Bernardino, California – growing again after a big real estate recession.

4.  Seattle, Washington – high home prices give many renters little choice; economy is doing very well despite a moribund manufacturing sector.

5.  Austin, Texas – as with other Texas markets, not enough construction in the past decade; strong demand for rentals from government and university workers.

6.  Fort Lauderdale, Florida – renewed growth in a market with a large retirement population and service providers.  

7. Charlotte, North Carolina – the large banking and business services sectors provide ample medium-pay jobs; home prices are moderate but many prefer to rent.

8. Atlanta, Georgia – recovery from the large number of sub-prime foreclosures has produced more renters; some bargains can still be found.

9. San Diego, California – high (but not outrageous) home prices produce a large renter population; the large business services sector – with medium-pay jobs – provides growth.  

10. San Antonio, Texas – increased tourism boosts demand for rentals.

“These Top 10 markets demonstrate that real estate investment opportunity is widespread,” said Ken Channell, HomeVestors co-president. “There are locations with great potential from coast to coast, in the biggest markets and in smaller cities, if you evaluate carefully. For instance, while some people might assume any California real estate is completely overpriced, we see two Southern California markets that have exceptional values.”

Source: http://www.housingwire.com/articles/35287-amazing-markets-housing-investors-really-need-to-consider