Note School TV - February Industry Update

It’s time for our highly anticipated end of the month update! When you hear some of these statistics you better be sitting down. Whether you’re buying groceries, filling up your gas tank, or shopping for a house, you know that economic conditions are changing fast. That means new opportunities for savvy note investors are opening up fast. For example, there’s a cascade of nonperforming loans coming on the market—about 6X more than in 2008! In today’s episode, Joe Varnadore and Eddie Speed take you through the most important news stories that impact the real estate industry in general and note investors in particular. If you want to learn about opportunities to jump on and potholes to avoid, you definitely need to watch.

https://new.noteschool.com/tv


TIME STAMPS:
1:45 Joe Varnadore introduces Eddie Speed who describes the popularity of monthly updates.
3:05 Black Knight reports mortgage rates are rising. 30-year mortgages are 3.77%, which is significantly higher than back in September. New purchases are down slightly, but refis are down much more.
4:20 Due to rates creeping up, forecasts predict mortgage industry will shed 100,000 jobs this year.
5:08 The Mortgage Bankers Association reveals that mortgage credit availability is way down. The latest numbers show that October, 2021 had the same level of credit availability as way back in May, 2014. (It’s still not as bad as 2012.) When lenders tighten their credit availability, it creates voids in the market which can be filled with creative financing.
8:30 Inflation is the monster lurking in the economy. JPMorgan now sees Fed hiking interest rates 9 times to combat red-hot inflation. They meet next in mid-March. In February, 2021, the rate was just 1.7%, but in October, 2021 it rose to 6.2%. January, 2022 hit 7.5%. Oil prices are over $93 a barrel, and oil futures are over $100, so there’s more inflation ahead.
10:50 Single Family Residential inventory continues to stay low. A balanced market is about 2 million houses on the market, but today we only have about 1.1 million. Demand is still high which keeps prices up.
13:25 Shadow inventory expected to increase due to delinquent mortgages. This is a huge opportunity for note investors. Foreclosure-related filings are starting to rise due to moratoriums expiring on loans that have fallen behind. About 500k legacy loans that fell behind prior to the pandemic are now hitting the market. But 2,000,000 loans that became delinquent during the pandemic will soon hit the market. By comparison, there were about 350k defaulted loans in 2008.
21.55 The spike in foreclosure activity is not a surprise. It’s up 29% since January, 2022, and up 139% YoY. Now is a great time to dust off your nonperforming loan skills because the loans becoming available often have high levels of equity.
24:55 Eddie shows a chart of defaulted rent based on income. The $50k and below segment shows 68.5% of tenants are behind. In the $50K to $100K segment, 23.6% are behind. That means there will be lots of burned out landlords who will want to relieve their headaches by getting rid of their rental properties and defer their capital gains taxes.
26:55 Canada’s real estate forecast reveals home prices may fall 20% in some markets. The U.S. is not on the same trajectory, but this decline does remind investors to make wise decisions.
28:48 Joe closes with a reminder to learn the three pillars or note investing: How to invest in nonperforming notes, how to appeal to burned out landlords with creative seller financing, and the third pillar of learning is to be the bank. He invites you to our next 1-day class, so visit noteschool.com/tv. Feel free to send an email to connect.
31:15 Brian Lauchner closes with a word from our sponsor, the upcoming 1-day “Gold In Notes” class. The class covers key topics such as: How to raise capital, defer taxes, create notes, wholesaling notes, how to create partials, make money from performing and nonperforming notes (which is a huge opportunity), and much more!