Interest Rates Hold, Flips Rise - Your Real Estate Weekly Update

We unpack why a “stable” labor market may be overstated, why the Fed held rates, and how that steadiness is fueling a spring wave of property flips. We lay out practical rules for conventional, FHA, and non-QM deals, plus why lender choice and timing matter.

• Fed holds rates while labor signals weaken beneath the surface
• Jobless claims skewed by gig work and fewer filings
• Mortgage rates hovering high fives to low sixes
• Conventional flip resales and second appraisal triggers
• FHA 90-day rule, day 91–180 second appraisals, HUD REO exception
• Non-QM flexibility, DSCR changes, 90-day refi paths
• Why a second lender opinion can beat a single bank offer
• Spring market starts post–Super Bowl and prep steps for sellers and buyers

If you have any questions, always reach out Nikki Erickson or Me!!
Find Nikki @mortgages fromMNtoAZ, both on TikTok and Instagram. Otherwise on Facebook under Nikki Erickson or Kevnik Mortgage.

Transcript

Market Update And Fed Decision

SPEAKER_01 0:37

All right. Welcome to your Monday market update. It is February 2nd. Nikki, how are you?

Labor Data Behind The Headlines

Why Cuts May Still Be Needed

Mortgage Rates Hold Steady

Spring Surge In Property Flipping

Conventional Flip Rules And Appraisals

FHA 90-Day Rule And Exceptions

Non-QM Flexibility And DSCR Timing

Shortening The BRRRR Timeline

Spring Market Timing And Prep

SPEAKER_00 0:43

I'm doing great. Hope everyone else is doing wonderful as well. So last week we had the all-important Fed meeting where everyone was hoping that interest rates would drop from a Fed standpoint. And unfortunately, that didn't happen. So we kind of held steady on the rates. For whatever reason, Paul was just stating that he doesn't feel like there's a need to do this because he feels like the labor market is stable. But if you really look at the statistics from the labor market standpoint and you look at jobless claims, you can kind of see they're saying that they've remained steady since 2023. But if you really dig deeper and go into a couple more layers, you can really see that that's actually not the case. So pre-pandemic, if someone lost their job, they would normally file an unemployment claim. Well, now post-pandemic, what they're finding is if somebody loses their job, they're picking up things like Uber, Lyft, temp jobs, driving for Amazon, things of that nature where they can get income quickly and not filing those unemployment claims. So what it's making it look like, you know, that and a couple other factors, what it's really making it look like is that we're having just a very even or very strong job market when that actually might not be the case. The other factor kind of playing into that jobless claims or the idea that we're having a strong labor market is the idea of new jobs that are coming out that people can actually new job creations. 2023, we had 2 million new job creations by this time in the year. And so far this year, we've only had 600,000. So there is a claim to be made saying, you know, we do probably still need to drop these interest rates. As a result of that, a couple of the Fed members, particularly Walsh, has come on, went on record and said, you know, we really do need to drop these interest rates another 50 to 75 basis points to get ahead of things that can happen as the jobless claims increase and as the number of job creation stays low. And so he is really, really, really pushing towards more cuts. But again, until Powell is out of his position and we can bring in a new fit chair, it seems like things are just going to stay where they are. What that translates to from a mortgage interest rate standpoint is we are still sitting in the high fives, low sixes, depending on your situation and credit and how much you have put down. So that's kind of where we're at with everything. So it's good. I'm I'm happy to not see interest rates increasing as a result of the Fed not cutting the, not cutting the rate and the market kind of responding. So yeah, things are holding steady. One thing I wanted to talk about today is property flipping. So we're gonna start seeing a lot of this start happening because right now there's a point where when interest rates start to lower, you know, people who enjoy property flipping, people who, you know, understand the market and can purchase things and want to resell them, they're gonna start coming out more and more as we get into the spring and summer, especially as that demand for housing increases with interest rates coming down. So I want to talk about just different categories of property flipping and some kind of the rules that we need to think about as we are having buyers who want to buy homes that are flipped, and as we're having people who want to list homes after they flipped them. So, first and foremost, from a conventional standpoint, they do not have any official rules as to how long a seller needs to have owned a property before a buyer can come in and buy it at an increased price. They do, however, say and suggest that the lender gets a second appraisal done. That's what most of the time is going to happen, is that they're going to ask for a second appraisal if it's been less than 90 days. And on that appraisal, they're going to ask the seller to cite what renovations they've done in the home to justify the increase in value. So it's not to say that if a seller spends$20,000 on a kitchen that they're going to get an ROI of exactly$20,000. It could be$30 or 35%, depending on the market and what that increases the actual value. So it's not necessarily that if a property flipper goes in and does a chicken kitchen with some discounts or some cheaper things or doesn't do the full kitchen, it's not to say that there isn't a return on investment. It's just, you know, it's not necessarily dollar for dollar and hopefully that increases a little bit more. If there is an increase of 100% or more. So in other words, if they bought the property for$200,000 and are now selling it for$400,000, regardless of how much money they put into it, that is going to require a second level review and a second appraisal, just to make sure that the value is there. That's on the conventional side. On the F, if you have an FHA buyer, they are not allowed to purchase a property unless the seller has owned the property for 90 days. So they cannot purchase it at all whatsoever for the first 90 days. Between days 91 and 180, it's automatic second appraisal paid for by the lender. And then also they are going to need to document renovations most of the time as well through the appraiser, not just stated like they would on a conventional side. So an FHA buyer has a lot more to, you know, a lot longer waiting time before they can purchase a flip property. The other caveat to this is the only exception to the zero to 90 days for an FHA purchase would be if it's a HUD REO. In other words, a property that had an FHA mortgage on it that went into foreclosure and now is back with HUD. So that's called a HUD REO. Those anyone can purchase with any type of financing on day one. So we got that going on. Now, we have conventional, we have FHA. Then we have what we call non-QM. So the non-QM are the ones that I was talking about that are like alternative documentation, bank statements, self-employed borrowers with 1099s, DSCRs as investment properties, things of that nature. That category has basically no rules when it comes to the flipping. So they've removed, they've recently removed all flipping guidelines and just are basically saying to us as a lender, you make the decision. It's not on us. So that's the investor that's saying we'll buy it no matter what. Why this is important. If you have investors that are purchasing properties on DSCR or debt service coverage ratio loans, normally they would have to wait at least 180 days to refinance that property to put a renter in it. So let's just say they buy it for 150,000, they want to put 30,000 in renovation and they want to get a renter in there. They have to wait 180 days in order to be able to refinance that debt together with the renovation and the DSCR debt in order to, you know, lower their expense. They can put the renter in there before it, but in order to lower their expense and, you know, do that again, they need to wait the 180 days. This is important because now they only actually have to wait 90 days from the day of purchase in order to collect those debts together as they want to and recapture any of that equity in the house. This is important for investors who do the buy, sell or buy, renovate, refi, and rent. So the Burr process. That Burr process used to take six months. Now it only takes three. So that's a huge kind of change in the non-QM space from a property flipping standpoint and from a if they're going to renovate a property and then want to rent it out. So very, you know, just kind of things that we got to keep in mind as we're helping buyers and we're helping sellers, keep in mind the flipping rules. If you have any questions, always reach out to your lender, always reach out to me. I can give you the guidelines, I can give you the timelines, et cetera, because it can be confusing.

SPEAKER_01 7:59

Yeah. No, that's a lot of lot of great information. Remind me, when does the Fed share switch over?

Lender Choice And Strategy

SPEAKER_00 8:06

You know, I want I I believe it's at the end of March. That's what I thought. Okay. Yeah. Yeah. So not too long from now. That spring market just helps us out here tremendously. And we're hoping that you know the the government does move forward with buying those mortgage back securities, like I was mentioning as well, because that'll help us as well. Yeah.

SPEAKER_01 8:25

Well, and I know where I'm at in Minnesota, our typical spring market, because again, we're just coming out of the deep freeze. So today was 13 degrees. Yay. But there's always the misconception uh that spring market is April or May. And just so you know, out there, agents, it is after the Super Bowl. So you have about a week or so. So that is a friendly, yeah, friendly reminder to reach out to those people that were waiting until the spring. Now's a great time to reach out to them. If they're buyers, make sure to get them with Nikki to get pre-approved. I always say this, and maybe we can touch base on this a little bit as well, Nikki. I always say get a second opinion. So when I am working with a buyer and they're like, I'm going with my bank or I'm going with my credit union, I've been there for 25 years. I say fantastic. I don't care whom you go with. That is up to you 100%. My job is to make sure that you get the very best deal for you and your family moving forward. So one of two things will happen. If you go in with my one of my preferred lenders, Nikki, and get just see what she can do. You'll know one of two things. Either your credit union and bank is 100% where you should go and stick with because you're going to get the very best deal. Or number two, there may be something else out there that's even better. With all that information, you can still make whichever decision you want. So really be thinking about that. If you have buyers that are just stuck, you know, in their place. And I wonder how you describe this, but what I describe is when you walk into a bank, you're walking into their building and you're confined to those walls and what products they offer. Whereas when you go with Nikki, there are no walls and there are no limits. And it's just there's so many more. Like you could go to five products in a bank or 36 with Nikki.

Seller Prep, Staging, And Roadmaps

SPEAKER_00 10:23

So if you want to touch base on how you best describe that, or yeah, and I always say like it's not necessarily interest rate isn't always the best deal, if that makes sense. Best deal in terms of strategy, in terms of value, in terms of, you know, what are you looking to accomplish with your purchase? Best deal doesn't always come down to interest rate and costs on a loan. Number for number, it might, you know, that might be your case. It might be that you are just a very conventional 20% down, high credit borrower. And then, yeah, I mean, interest rate is going to play a factor in that and getting the best deal. Um, but there's also so many other things that can go into it. And being able to see what's out there and being able to strategize and how you should purchase your home, purchase your investment property, whatever it is, is super important. And you are correct. A bank is limited to bank products. And whereas, like it's like going into a stock market and only buying Disneyland stock when there's so many other options out there that could perform better for you. And so that's kind of, you know, what I always say is, you know, it's my job to look at different options, different products, different investors, compare and contrast them and help you get the best deal from that perspective. But it's not to say that there aren't better deals out there. It's just a matter of what does that mean for you and your strategy.

SPEAKER_01 11:35

Yep, absolutely. And then on the seller side, if you have listings coming up or people that are waiting, now is the time to reach out to them. I always get my listing contract signed along with the withheld, so you can keep them off the MLS and then you can start getting them if they're buying with Nikki so that she can get them pre-approved and understand what that looks like and what their bomb number is. And you can get your stager in there, you can start talking strategy, paint colors, and really bring your expertise to that listing. And I always say whether they're a month out, a year out, six months, two years, whatever it is, I'm so glad we connected today. Now's the perfect time because either you need to get going or you have this gift of time. And you can take that time, whether it's a buyer and get the roadmap of what that looks like, so that when it comes August or next April or this April, they're ready. And so it's always I'm so glad we connected today. Now is the perfect time, whether it's two months or two years. That's how how you can show up and really bring some strategy and you know, show your worth. Absolutely. Well, good. Well, Nikki, appreciate you as always. And where do we find you?

SPEAKER_00 12:53

At mortgages from M N to A Z, both on TikTok and Instagram. Otherwise on Facebook under Nikki Erickson or Kevnik Mortgage.

SPEAKER_01 13:00

Perfect.

SPEAKER_00 13:00

Till next week. You have a good one. Yes. Bye, everyone. Bye.