December 2015 Newsletter

Recent Deals Examples

  • Wilmington, Delaware
  • Purchase price $22,500
  • Rehab $25,000
  • After repair value $120,000
  • Loan Amount $50,000
  • Funded December 4, 2015

  • Newark, New Jersey
  • Purchase Price $125,000
  • Rehab $55,000
  • After repair value $300,000
  • Loan Amount $120,000
  • Funded December 3, 2015

Commonly Asked Questions

Wishing you all a wonderful Holiday Season and Happy New Year!

2015 is almost over. It was a year of slower growth in Real Estate. The US National Year-over-Year price growth slowed down to about 4.3%, this is after years of double digit growth. Recent data shows that the existing home sales dropped to the slowest pace in the last 19 months.

So, what is 2016 going to bring us?

Let’s start by looking at Interest rate trend. The FED made the initial increase of 0.25% in Dec, but guidance has been very cautious. Yield Curve (difference between long term and short term rates) has been flattening. What this means is that, long term rates are not likely to rise despite FED raising short term rates. This is actually good news for the housing affordability. If the overall economy slows down, long term rates will actually come down. I think that Mortgage rates are not likely to rise much in 2016. In fact, 30 year fixed rate might actually drop slightly next year. This would be certainly good news for the housing market.

Now, let us look at the US Unemployment rate – it is likely to dip below 5% in 2016.

This might finally trigger some much needed wage inflation. In turn, it’ll improve affordability of housing, and support real estate prices.

GPD growth of 2-3% per year, combined with the election year “boost” will provide steady fuel for the overall economy. Average Household formations, say around 1.25M, combined with the “tight” rental market will support rent growth and 1st time home buyer demands. Rents will probably rise somewhat faster than housing prices.

The Strengthening USD is making US assets more expensive to foreign investors. The reason for the Dollar strength is the weakening global economy. Commodity prices have been very soft. OIL price is weakening further. Goldman Sacks projects OIL to be at $20. The US is a global economic super-power, but the rest of the world might put a drag on US economy sooner or later.

So, here are my predictions for 2016:

  1. 30 Year mortgage rates – stay flat, or slightly down 0.25%
  2. Housing prices rise slightly 2-3%
  3. Rental rates increase 3-4%
  4. OIL goes down to $20-25
  5. S & P 500 goes down 7-8%, dragged down by OIL and slow global economy

Enjoy the Holidays

Mike Zlotnik

Managing Director / Co-Manager

TF Management Group LLC

Inspire Capital Management Group LLC

Tempo Funding LLC