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- The Borrow Smart Chronicles - Rate -vs- Return
“Love and work are to people what water and sunshine are to plants.”
Weekly Spotlight: The Interest Rate PIVOT
We don’t know what will happen, but we know that there is an election next year, and there is a lot of pressure to take pressure off people, businesses, the market, etc. Few are projecting higher rates next year, although Fannie Mae thinks they’ll be much the same as where we are now… The Fed says they’ll make 2-3 cuts, but the market believes there will be many more—5-7. We’ll know when it happens, but sentiment is improving across a variety of housing-related markets.
Interest rate estimates for 2024 range from:
a BORROW SMART CONCEPT
Rate or Return?
We use these terms all the time, but what do they essentially mean?
RATE - An interest RATE is the percentage of the principal charged by the lender for borrowing money. The principal is the amount of money lent. For example, if you borrowed $100,000 at an interest rate of 5% for a year, you would owe $105,000 at the end of the year. You would have paid 5% in RATE for the use of that money. You care about RATE if you are a borrower.
RETURN - An interest RETURN is the gain or loss on an investment over a specified period, expressed as a percentage of the investment's cost. For example, if you invested $100,000 at an interest RATE of 5% for a year, you would have $105,000 at the end of the year. You would have earned 5% in RETURN for lending your money. You care about RETURN if you are a lender.
We express that in our CLA course:
Rate and Return are the same thing—from two different perspectives.
LIABILITIES
What’s Happening?
we need to see this normalize and it can happen by rates coming down to make housing more affordable or rent going up which means more inflation
house prices in 2024: +4.1% and 2025: +3.3%
lower prices and higher rates, but a compounding of returns means housing prices are higher just as rates are higher for Millennials
progress being made on rates going down without rates being cut
find the hidden message? krea.ai is the site to create these…
REAL ESTATE
What’s Happening?
Expect 4.21 million to 5.07 million units by the end of 2024.
if you saw my prior article, a leading pivot for home builders is foot traffic improving
home start estimates vary from higher (NAR) to lower (Fannie Mae)
inventory continue to climb, but well below needs
From Mike Simonsen:
Last decade rates ⬇️ -> inventory ⬇️ each year
2018 rates ⬆️ 100bp -> Jan 2019 inventory ⬆️
2020 rates ⬇️ big -> inventory ⬇️ big
2022 rates ⬆️ sharply -> inventory ⬆️ sharply
1H23 rates ⬇️ from peak -> inventory ⬇️ quickly
2H23 rates ⬆️ again -> inventory ⬆️ until November
we need another 3.2 Million homes last year to support the demand
“If you want your children to grow up to be healthy and independent, you should hold them, hug them, cuddle them, and love them. Give them a secure base and they will explore and then conquer the world on their own.”
ASSETS
What’s Happening?
getting closer to target, and the target may be moving higher as well
since January of 2020, the increase in money supply and inflation means your dollar will buy you 22.63% less.
consumers who don't want to access (or can't) lower-cost home equity, are also turning more to their retirement savings.
while house equity is at record highs, negative auto equity is up 50% in the last two years. Meaning these cars are worth $6,000 less than their loan balance.
Expectations for 2024, market higher except for Morgan Stanley and JP Morgan.
over long periods, stocks outperform bonds but the margin narrows greatly, and the risk/volatility appears lower.
technology tends to concentrate wealth in fewer hands
Source: Forefield Financial
Source: Forefield Financial
I'm not sure consumers can do this; as they could they would need an endless supply of money to service that debt...
The 4 Agreements:
Be impeccable with your word
Don’t take anything personally
Don’t make assumptions
Always do your best
ON BEING HUMAN
What’s Worth Sharing?
DOPAMEMES
And Other Inspirations…
The fact that these artists are deaf makes it even more amazing.
This concerns me…
AIdeas
Future Hacks…
A favorite AI tool to explore new logo and illusion creation:
https://www.krea.ai/home
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