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Trust This.
By Joseph E. Seagle, Esq. ● Jun 10, 2022
Smart Brevity® count: 3.5 mins...903 words
👋 Happy Friday! In a month filled with 🌈rainbows🌈, how can you not smile?
This month is the 20th annual National 🏡 Homeownership 🏡 Month. To celebrate, we’re helping to create as many new homeowners as we can!
One fun thing: If you’re a golfer or know one, check out next Friday’s Pride Chamber Golf Outing and Expo. We’ll be there with bells on at the expo when golfing ends and lunch begins.
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1. Fractional real estate investing
We’re hearing buzz about fractional real estate investing as a hedge against inflation with lower risk than traditional real estate investing.
Why it matters: Unlike Real Estate Investment Trusts (REITs) that traditionally focus on commercial real estate, fractional ownership can be used for shared ownership of residential properties located throughout the country.
For years, many clients have teamed up to co-own properties for flipping or renting. Others come together to pool funds to make mortgages to other real estate investors. However, ownership of huge portfolios of residential properties, like those owned by Main Street USA, Innovation Homes, and other large entity investment funds, has been out of reach for individual investors.
But companies such as Cadre, Entr, Yieldstreet, Crowdstreet, and Pacaso have filled a void.
They provide platforms where individuals can diversify their investments through crowdfunding or fractional ownership where they own slices of the real estate directly along with other individual investors among other ways of structuring their ownership and investments.
Our thought bubble:
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Stocks are volatile.
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Inflation is rising.
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Cryptocurrency is so 2020.
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Cash is plentiful.
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Real estate is scarce while demand for it is higher than ever.
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Any way to hedge a bet is helpful.
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These platforms appear to be a simple path to diversifying a portfolio into real estate without the complexities of a REIT or the hassles of direct whole ownership.
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2. Mortgage demand and home sales slide
Mortgage applications dropped 7% this week from last week and were 21% lower than this time last year. The average 30-year mortgage rate rose to 5.4%.
Why it matters: Inflation has been rising at the fastest rate in 40 years, so the Fed has been pressing the brakes to slow it down while trying to maintain the current low unemployment levels. A key report on inflation will be released after this newsletter goes out, so we’ll find out if the Fed’s actions are helping more than they’re hurting.
The bottom line: The question becomes one of whether a recession is coming and how bad it would be.
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The consensus so far is that — if a recession comes in the last quarter of this year — it won’t be tied to a housing bubble.
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Higher interest rates and supply chain issues have slowed new home construction.
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Therefore we’re going to see a shortage of homes compared to the demand for the foreseeable future, keeping home prices and rents rising instead of falling.
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Consumers are still spending freely, but there are indications based on travel bookings, that people are planning to slow down spending after the summer vacation season ends.
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When consumers slow or stop spending, that’s when employers will start cutting labor costs and also cut their consumption, slowing and even contracting the economy further.
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But even with all this, most experts are saying this recession — if it happens at all — will not be a repeat of 2008-2012’s Great Recession. It will more likely be a traditional recession that comes each decade or so, meaning it will be soft and short-lived.
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Buy a candle, plant a tree
Photo: Bloom Candles website
Proving that there are cool things from Kentucky that can bring joy, Bloom Candles hand crafts scented candles that make great housewarming gifts for new buyers or referral sources. In addition to the regular collection, their special “Kentucky Collection” includes scents like Mint Julep, Bourbon, Honey Suckle, and Bluegrass. How can you resist?
Their big difference? They plant a tree for each candle they sell.
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Tampa, Jax, and Cape Coral are still topping lists of the most affordable migration spots, while Miami has gotten too hot to stay in the top of migration destinations. The Title Report
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The Consumer Financial Protection Bureau (CFPB) is chilling the use of artificial intelligence in making loan decisions. The bureau is concerned that the AI algorithms will violate Fair Housing regulations. The bureau this week moved to revoke a no-action letter (promise not to punish) it had issued for Upstart to allow it to use AI in underwriting loans. They are also having comment periods and studies to potentially further regulate the use of AI in making loans. CFPB
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One of the top 10 mortgage trends that every Realtor should know is that homebuyers prefer nonbank mortgages. Go Deeper for nine more hot mortgage trends. Inman
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The Yesterdays, Todays, and Tomorrows under a cypress tree by the lake exude an infinitely wonderfully sweet smell as the north wind whips across the lake, around the tree, and through the flowers to carry their scent up to the porch.
Reminds me of this week’s song, k.d. lang’s redux of Willie Nelson’s classic.
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We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.
Be on the lookout for our next issue! 👋
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