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UK lenders have cut the cost of mortgages, offering hope for the housing market in a week when the Bank of England hiked rates to their highest level in 15 years and house prices fell the most since 2009.

The BoE raised rates to 5.25 per cent on Thursday, its 14th consecutive increase, and Huw Pill, BoE chief economist, indicated on Friday that rates were likely to stay high for a prolonged period. 

But over the past few weeks, markets have priced in a lower peak of interest rates next year and it is these “swaps” rates that banks use to price mortgages.

NatWest, Halifax and Virgin Money have all cut rates this week — by as much as 0.41 per cent in some cases. That action followed cuts by Nationwide, Barclays, TSB and HSBC last week. Santander and Coventry Building Society also announced reductions.

David Hollingworth, director at London & Country Mortgages, said that Thursday’s news had been priced in to lenders’ calculations.

Aneisha Beveridge, head of research at Hamptons, the estate agent, said: “If everything follows the BoE expectations from here on in, I think we’ve seen mortgage rates peak about a month ago. They might come down a tiny bit more but they won’t come done too much until we see inflation falling across the board.”

Aaron Strutt, director at broker Trinity Financial, said: “We are starting to see more of the lenders reducing rates.”

In spite of the individual rate cuts, the average two-year fixed mortgage rate is still at 6.85 per cent, close to the highest level in 15 years, according to data from website Moneyfacts.

The pain of higher interest rates is having a very uneven impact in the housing market, according to research by Savills.

Nearly three-quarters of cash buyers surveyed by the estate agency said that their purchasing budget had remained the same. But nearly 60 per cent of those seeking to take out a mortgage with a loan-to-value ratio above 50 per cent said they had cut their budget. 

“Cash buyers who are not exposed to concerns around rising interest rates have been able to drive ahead strongest in the current market,” said Frances McDonald, director of research at Savills.

By contrast, Chris Storey, chief commercial officer at digital lender Atom Bank, warned that the 1.4mn households due to come off fixed rates this year faced a steep increase in costs.

“People will perhaps have to become more accustomed, in the long term, to higher interest rates than they’ve faced in the last 15 years . . . especially if they have a payment shock coming off of a fixed-rate mortgage,” he said.

“The Bank of England might have to start cutting rates late next summer,” said Beveridge. “You might see mortgage rates react a bit earlier because they’re priced off of swap rates.”

The BoE’s Pill said: “Monetary tightening . . . is working. There’s no pre-determined path for interest rates, but rather we are responding as the economy and the data evolve.”

Additional reporting by James Pickford

Source: ft.com

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Have you found yourself contemplating flipping a house for the first time? Or you’ve flipped a house in the past, and something went terribly wrong. Now you want to know what other home renovators are and aren’t doing.

Whether you’re searching to flip a house in Ventura, CA, or a home in Las Vegas, NV, this Redfin article offers valuable tips to save time and money. From selecting the best location to choosing a reliable contractor and marketing your property, we’ve got you covered.

1. Do consider the location

Choosing a location is one of the most important factors when you flip a home. For starters, if you plan to actively participate in the renovation process, you’ll want to ensure the commute is close. However, to assemble the right team (contractors, painters, designers, etcetera), you’ll also want to be sure that anyone working on the home can access it readily and isn’t deterred by the distance.

Now, from the perspective of when you go to sell the property, location is equally important. Flipping a home in an area with active demand for your listing can make or break the deal. If you plan to keep the property as a rental, consider both short-term and long-term demand. Would it be best to be located near the city for visitors to access hot commodities quickly? Or is the home a retreat tucked away from the hustle and bustle of the world and instead amongst the quiet wilderness?

Rui Wang, is the VP of marketing for Ark7, an online platform for investing in fractional real estate. She recommends having a rental property near an urban center. This will boost occupancy rates and give easy access to travelers.

2. Do budget accordingly

Numbers are critical when it comes to flipping a house. Spend too much, and you’ll find yourself at a financial loss. On the other hand, spending less may find yourself struggling for occupancy or buyers.

Real estate finance gurus, BiggerPockets, discuss the importance of calculating after-repair value (ARV). What is the property going to be worth after repairs? To determine a property ARV, you must know its current value, the value of the renovations, and perform a comparable market analysis (CMA). A good rule of thumb to help you along the way is the 70% Rule, which states that you shouldn’t pay more than 70% of the ARV minus the repairs needed.

Konstantin Podyachev, CEO of Expo Home Buyers, recommends “setting aside a buffer of around 10-15% for unexpected expenses.” These expenses can arise throughout the renovation process; the last thing you want is to be financially strung out. In the best-case scenario, everything goes according to plan, and the 10-15% stays in your pocket.

3. Do consult with a real estate agent

Even before you purchase a home to renovate, you’ll want to consult a real estate agent. Agents are equipped with a vast knowledge of the area you desire to purchase and can guide you through the process. From learning about recently sold or leased homes comparable to your vision, it’s essential to understand what you’re up against.

Additionally, assembling a team of contractors, designers, appraisers, and inspectors can be challenging. Having a real estate agent as a guiding resource to connect with those individuals can be a step in the right direction.

4. Don’t assume your plan can’t be derailed

Try to assemble a foolproof plan when beginning the process of renovating a home; however, don’t expect it to stay that way. If you plan to reconfigure the layout by demolishing walls or ripping beneath the surface of the floors, you never know what may be discovered.

Termites, asbestos, mold, and other jarring, plan-wrecking things may be found beyond what the eye first sees. Before purchasing a property, perform due diligence and have an inspector review the house. They should look at everything from sewage pipes and water lines to foundation and structural integrity.

Bobbie Wasserman, Founder and CEO of Single Lady Estates, shares to bring in a specialist if concerns arise. “Their insights can provide you with a comprehensive understanding of the current state of the home’s critical (and expensive to repair) systems.”

5. Don’t cut corners, but don’t over rehab

The lowest contractor bid is constantly enticing. However, before deciding, be sure you’re asking to see a portfolio of anyone’s work (maybe even touring a current project). Another helpful tip is to read reviews or connect with someone they’ve worked with before to hear firsthand how well they executed their vision.

Will Rugeley, marketing manager for Good Vibes Homebuyers, shares that in 2020 their team bought a home for $15,000, sold it for $143,000, yet lost $8,500. This happened because they chose a contractor with the lowest bid before vetting them. Based on early estimates, Will and his team were significantly over budget as expenses continued to arise. He now advises “being wary of strangely high or low rehab estimates.”

6. Do consider the design

You’ve considered the location; now it’s time for the fun part, crafting the home’s design. First and foremost, decide if you’re going to design it yourself or if you’re going to hire a professional interior designer. 

Designing a home as a short-term rental (such as an Airbnb or VRBO) can be much different than how you’d create one for a long-term rental or to sell. For short-term rentals, Wang suggests molding each room into a “functional oasis, where guests are treated to both essential amenities and supreme comfort.”

When designing a long-term rental or selling property, the saying “less is more” may be helpful. Consider prospective buyers or renters touring your magnificently curated property; you’ll want them to picture their life in the home. That life may mean leaving room for accent walls or taking inspiration from what you’ve already designed and offering a higher price tag for added features.

7. Don’t forget about marketing

After pouring your heart and soul into designing the perfect property, the last thing you want to forget about is marketing. Your real estate agent will be the greatest asset for introducing your home to potential buyers or renters. 

The experts at Old Pueblo Stucco share the reminder of creating stunning curb appeal so that there is a “wow” factor at first glance. Hire a photographer or videographer to capture the best angles of everything that makes your home unique. Additionally, be sure you (or your agent) have written an attractive copy that will be front and center within the property description, highlighting all the best features.

Final thoughts on do’s and don’ts for flipping a house:

Flipping a home can seem extraordinarily overwhelming. Remembering integral parts can serve as your guiding light from start to finish. Learn from people along the way, consult experts, and continue diving into online resources available when you need clarification.

Beyond the challenges and the windy road that is “do this” or “don’t do that” lies an incredible experience of what is your piece of art coming to life.

Source: redfin.com

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The ruling, effective August 1, phases out incandescent bulbs in favor of efficient LEDs. 

Fast facts:

  • Homeowners can still use existing incandescents, but can no longer purchase replacements (with a few exceptions) and should start switching to LEDs.
  • Switching to efficient light bulbs is estimated to cut US emissions by 222 million metric tons and save consumers around $3 billion over 30 years ($100 every month per home).
  • Retailers have already been pulling inefficient bulbs off shelves for over a year in preparation, so consumers won’t notice a large shift.

What happened?

In April 2022, the Department of Energy (DOE) passed a new rule requiring all new light bulbs to emit at least 45 lumens per watt (with a few exceptions), essentially phasing out incandescents. The rule went into effect on August 1, 2023, but has been in the works since 2007. The European Union passed a similar law in 2012. 

Because most light bulbs other than LEDs (Light Emitting Diodes) don’t meet these standards, this rule bans all inefficient light bulbs, including incandescents. Businesses can no longer sell inefficient bulbs after August 1, and manufacturers haven’t been allowed to produce inefficient bulbs since January 1, 2023. 

Consumers likely won’t see a difference in product selection, however; most retailers have been taking inefficient bulbs off of shelves for a year in anticipation of this ruling. 

Why did the government ban incandescent light bulbs? 

DOE passed this ruling to help reduce the country’s carbon emissions. Importantly, this isn’t an outright ban on incandescent lights, and some specific ones are exempt, such as those in vehicles, appliances, traffic signals, and emergency lighting. However, all other new incandescents (including halogen lights) will become illegal to sell and purchase if they don’t meet the new efficiency standards. Many compact fluorescent lights technically meet the new standards, but will also be outlawed soon. 

Joel Worthington, President of Mr. Electric, a Neighborly company, notes that the government is phasing out incandescent light bulbs because they are very inefficient. “They only convert about 10% of the energy they use into light,” he says. “The rest of the energy is wasted as heat.” In addition to being inefficient, incandescent light bulbs also have a relatively short lifespan; most only last about 1,000 hours. 

By contrast, LED light bulbs usually last well over 10 years (with a few outliers). They’re also extremely efficient, converting up to 90% of the energy they use into light. This efficiency helps dramatically reduce waste, cut carbon emissions, and lower consumers’ utility bills. ENERGY STAR rated LEDs provide the most efficiency. 

Can you still buy incandescent light bulbs?

Starting August 1, 2023, lightbulbs that don’t meet the efficiency requirements are illegal to sell and purchase (except for a few specialty bulbs). This means it will be very difficult to find new incandescent and halogen light bulbs.

You don’t have to destroy your inefficient light bulbs, though. “As your incandescent light bulbs go out, you can replace them with energy-efficient bulbs,” notes Joel Worthington. If you have a backstock at home, you can continue installing and using them until you run out. 

What the incandescent ban means for homeowners

Transitioning from incandescents to LEDs is good for everyone. It helps save you money, lower your carbon footprint, and reduce unnecessary waste. In fact, nearly half of US households already primarily use LEDs.

The new ruling doesn’t mean you have to test and get rid of your inefficient light bulbs immediately. “It simply means that when they burn out and when your supply runs out, you will have to find a more efficient replacement, most likely an LED,” says Joel Worthington. And because LEDs last up to 30 times longer than incandescent lighting, you won’t have to replace them nearly as often. 

This decision matters most for those with lower incomes, who generally spend a larger percentage of their income on utility bills. Incandescent lights are cheap but inefficient, and are often the only option in budget stores. This leads to higher electric bills. 

Luckily, LEDs  have been dropping in price for years. And with new rules, they will likely decrease even more. making them more accessible and helping reduce electricity costs for everyone.

How will switching to LEDs affect your home? 

If you primarily use incandescent light bulbs, you may be worried about how switching to LEDs will affect your home’s aesthetic. Luckily, Joel has some good news: “The regulation exempts a few specific incandescent bulbs that you may have around your home, such as chandelier bulbs, grow lights (for gardening), and holiday lights,” he says. “Yes, your holiday lighting is safe.”

For the large majority of bulbs, though, you will have to switch to an efficient option when your current bulbs go out, most likely LEDs.

Some people prefer incandescent lighting because of the quality of light it produces. However, LEDs actually offer a much wider range of color temperatures than most other bulbs, and are highly flexible, with dimmable, multicolored, string, or strip options available. 

What happens next?

The incandescent light bulb ban is just one step in a larger effort to make lighting even more energy-efficient. The DOE recently proposed significantly higher efficiency standards, pushing the requirement to 120 lumens per watt. This would essentially phase out every option except LEDs, including fluorescents.

The DOE is also considering new efficiency standards for other types of appliances, such as refrigerators, dishwashers, and washing machines. These standards are designed to help consumers save energy and money, and to reduce greenhouse gas emissions.

It’s important to note that the DOE is not the only organization that is working on energy efficiency standards. The US Environmental Protection Agency (EPA) also sets energy efficiency standards for appliances, such as through the ENERGY STAR program. In addition, many states and local governments have their own energy efficiency standards.

The future of energy efficiency standards is uncertain, but it’s clear that the trend is towards more stringent standards.

Source: redfin.com

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At last glance, the 30-year fixed mortgage was back above 7%, depending on the data source.

Prior to late July and early August, the popular loan product could be had for closer to 6.5%. Or even in the high 5s if paying points.

And forecasts from prominent economists pointed to rates making their way back to the 5s, or even the 4s by next year.

Then rates suddenly reserved course and continued their upward climb, challenging the high levels seen last November.

The question is, why are mortgage rates so high? And why aren’t they coming down if the Fed is done hiking and inflation is abating?

Blame the Resilient Economy for High Mortgage Rates

As a quick refresher, good economic news tends to lead to higher interest rates.

And bad economic news typically results in lower interest rates.

The general logic is a hot economy requires higher borrowing costs to slow spending, otherwise you get inflation.

Meanwhile, a cool economy may require a rate cut to spur more lending and get consumers spending.

Unfortunately, the economy continues to defy expectations, in spite of the many Fed rate cuts already in the books.

Since March of 2022, the Fed has raised their key fed funds rate 11 times, from near-zero to a range of 5.25-5.50%.

This was deemed necessary to battle inflation, which had spiraled out of control, causing the prices of everything, including single-family homes, to skyrocket.

While the Fed has more or less signaled that it’s now in a wait-and-see holding pattern, mortgage rates have continued to march higher.

The reason is hot economic data, whether it’s the CPI report, jobs report, retail sales, etc.

Sure, some of these reports have come in better than expected recently, but it’s never convincing enough to result in a mortgage rate rally.

On top of that, Fitch recently downgraded the credit rating of the United States, citing “expected fiscal deterioration over the next three years,” along with growing government debt.

Nobody Believes the Inflation Fight Is Over

While the Fed doesn’t set mortgage rates, its own fed funds rate does dictate the general direction of long-term interest rates such as those tied to home loans.

As such, rates on the 30-year fixed (and every other type of mortgage loan) increased markedly since early 2022.

Those 11 rate hikes translated to a more than doubling of the 30-year fixed, from around 3% to 7% currently, as seen in the illustration above from Optimal Blue.

It was further exacerbated by a widening of mortgage rate spreads relative to the 10-year Treasury.

And while the Fed appears to be satisfied with its rate hikes, they’re still watching the data come in each month.

Without getting too convoluted here, nothing has convinced Fed watchers that a rate cut is in the cards anytime soon.

Simply put, this means mortgage rates may need to stay higher for longer, even if the Fed is done hiking.

Compounding this higher-for-longer narrative is the U.S. deficit and their larger-than-anticipated borrowing costs, which will require selling more bonds.

This puts additional pressure on interest rates as the supply of bonds grows and their associated rates increase.

But that’s just the latest sideshow. The overarching theme is that the economy remains too hot, unemployment too low, and consumer behavior not much changed.

Despite much higher borrowing costs, whether it’s a mortgage, a credit card, a HELOC (whose rates are up about 5% from 2022 thanks to the increase in the prime rate), the economy keeps chugging along.

There has yet to be a recession and the stock market has been resilient. In other words, there’s really no reason to lower interest rates and reduce borrowing costs.

Why would the Fed do that now, only to risk another surge in inflation? Or another home buying frenzy.

What Would Lower Mortgage Rates Mean for the Housing Market Today?

Let’s consider if mortgage rates finally did trend lower in a meaningful way.

Despite some short-term victories over the past year, they’re pretty much back near their 20-year highs.

If they did happen to fall back to say the 5% range, what would what mean for the housing market?

In case you haven’t heard, Zillow expects home prices to rise 5.5% this year after beginning the year with a decidedly bleaker -0.7% forecast.

This figure is “roughly in line with a normal year,” despite those 7% mortgage rates.

But what would happen if rates came down to 5%? Would we see a return to bidding wars and offers well over-asking?

Would home price appreciation reaccelerate to unhealthy levels again?

The answer is most likely yes. And this kind of sums up why the Fed isn’t going to just start cutting its own rate anytime soon.

All their hard work would be in vain if inflation notched higher again and their so-called housing market reset became awash.

Even if a rate cut does come as early as 2024, it might only be a 0.25% or something relatively insignificant, which may not move the dial on mortgage rates much.

Like the Fed, mortgage lenders (and MBS investors) are defensive as well. This explains why it has been really hard to see a meaningful mortgage rate rally in 2023.

Even when a jobs report or CPI report comes in cooler than expected, it quickly gets overshadowed by something else.

And that’s just the nature of the trend right now, which isn’t a friend to mortgage rates.

This will eventually change, but it could take longer than expected for mortgage rates to finally reverse course.

Similar to how they stayed low for so long, they may remain elevated well beyond the rosy forecasts indicate.

Source: thetruthaboutmortgage.com

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Equifirst announced today that effective immediately, it will be ceasing lending operations.

Going forward, the Charlotte, North Carolina-based mortgage lender will no longer accept applications for “any type of Mortgage Loan product.”

“EquiFirst will continue to process any completed Mortgage Loan application and will notify the submitting Broker of the status of such Mortgage Loan application upon completion of underwriting and processing,” the company said on its website.

“All previously submitted Mortgage Loan applications must continue to comply with the terms of the Wholesale Mortgage Broker Agreement (“Agreement”) currently in effect between the Broker and EquiFirst. This action will not affect current Mortgage Loan applications that are already scheduled to close.”

Prior to the announcement, the company was offering run of the mill wholesale FHA loan products, meaning its departure wasn’t all that unexpected.

Over the second half of 2008, Equifirst transitioned its product line to be a “fully functional FHA lender,” closing more than 1,700 loans during the period.

As of February 17, underwriting turn times took a whopping 11 days, while conditions took an average of three days to be reviewed.

Equifirst was founded in 1990, and operated as both a retail and wholesale mortgage lender through the years; the company was subsequently acquired by Barclays Capital Real Estate Holdings Inc. in 2007 (yes, bad timing).

In mid-2007, the company was offering an assortment of subprime, Alt-A, and jumbo loan products, while sporting the slogan, “Non-Conforming Results.”

Shortly after, Equifirst cut more than 400 jobs as the mortgage crisis began to gather steam.

Note: The Equifirst website previously displayed a message regarding operations being shut down, but has since been replaced with the company’s standard layout.  It’s unclear if this is a technical issue…or something else.

Source: thetruthaboutmortgage.com

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In an effort to boost loan workouts and their related effectiveness, a plan is reportedly in the works to give mortgage lenders a subsidy if they cut mortgage rates for troubled borrowers, according to the Washington Post.

The Obama Administration is apparently mulling over a proposal that would provide greater incentives for lenders to offer loan workouts to more borrowers in need, not just those close to foreclosure.

Under one possible scenario, the government would share the cost of lowering an at-risk borrower’s interest rate, which may promote the use of loan modifications as a loss mitigation tool instead of less effective repayment plans.

“For example, consider a homeowner with a $200,000 mortgage and a 9 percent interest rate who now pays about $1,700 a month, including taxes and insurance. Lowering the interest rate to 5 percent would reduce the payments to about $1,160. The government and industry would each chip in to cover the difference, about $540,” the Post reported.

The program will likely be financed with the $50 billion in Troubled Asset Relief Program (TARP) funds set aside for homeowner relief.

It’s unclear how such a program would be carried out, though sources close to the plan believe Fannie Mae and Freddie Mac will have some involvement.

Homeowners looking for such aid may be subject to an affordability test, as well as an appraisal of their home to qualify.

Of course, some critics have already argued that many homeowners are simply beyond help, and don’t belong in a mortgage.

Others question why we should subsidize mortgage lenders to do what’s in their best interest to begin with, as a loan modification is often cheaper than foreclosing.

Regardless, most seemed optimistic by the notion of the plan, which was evident in a late rally on Wall Street.

But with re-default rates expected to be in the range of 60-70 percent, it’s hard to get too excited about the initiative, especially with the giant pool of underwater borrowers left to deal with.

(photo: loopoh)

Source: thetruthaboutmortgage.com

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Homebuilder confidence declined for the first time this year in August, reflecting the difficulties of 7% mortgage rates and reduced housing affordability.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) report showed that builder confidence fell 6 points from July to a reading of 50.

The HMI index is a monthly survey that gauges NAHB members’ perception of current single-family sales, expected sales for the upcoming six months, and potential homebuyer traffic. An index of 50 is neutral; higher than 50 indicates that builders view conditions as favorable.

“Rising mortgage rates and high construction costs stemming from a dearth of construction workers, a lack of buildable lots and ongoing shortages of distribution transformers put a chill on builder sentiment in August,” said Alicia Huey, NAHB Chairman and a homebuilder from Birmingham, Alabama.

Huey added that while housing affordability remains a persistent challenge, demand for new construction has been aided by a lack of resale inventory. Many homeowners are locked into low-rate mortgages and are staying put, she said.

In July, shelter inflation accounted for 90% of the Consumer Price Index’s reading of 3.2%, contributing to housing affordability challenges. The NAHB said builders need to be constructing more multifamily and single-family homes to cut into the decade-long inventory shortage.

“The best way to bring housing inflation down and ease the housing affordability crisis is to enact policies at all levels of government that will allow builders to construct more homes to address a nationwide shortfall of approximately 1.5 million housing units,” said Robert Dietz, the NAHB’s chief economist. 

Additionally, high mortgage rates called for the return of sales incentives in August. After dropping steadily for four months (from 31% in March to 22% in July), the share of builders cutting prices to bolster sales rose again to 25% in August. The share of builders using incentives to bolster sales was 55% in August, higher than in July (52%). However, it was still lower than in December 2022 (62%).

The NAHB also reported that all three major HMI indices posted declines in August. Homebuilders’ gauge of current sales conditions fell 5 points to 57. The gauge measuring traffic of prospective buyers declined 6 points to 34. And the component charting sales expectations over the next six months fell 5 points to 55. 

The three-month moving averages for HMI were mixed across the four major regions. The West edged down a single point to 50, the Midwest and the South remained unchanged, while the Northeast rose 4  points to 56.

In spite of a falling homebuilder confidence index, the Wall Street Journal reported this morning that Warren Buffett’s Berkshire Hathaway made a fresh bet on U.S. homebuilders in the second quarter. The company revealed new positions in D.R. Horton , NVR and Lennar, cumulatively worth more than $800 million at the end of June, when rates were still high but not quite 7%.

Homebuilder stocks have been at record highs in recent months.

Source: housingwire.com

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This article originally appeared on The Financially Independent Millennial and was republished with permission.

The views and opinions expressed in this article are those of the author only and are not endorsed by Credit.com.

Investors nearing retirement have different needs than investors with many years remaining in the workforce. Retiring means losing the regular paycheck from work, and as a result, replacing that income is a key consideration. There are many investments that appeal to retirement investors, such as purchasing quality dividend stocks like the Dividend Aristocrats. But there are also many investments that retirement investors should stay away from. Retirement investors should avoid the following 16 investments.

#1: Cash 

“Cash is king” is a well-known phrase, but when it comes to retirement investing, cash is hardly king. Cash should be avoided by retirement investors because it earns no return. In stark contrast to bonds which pay interest or stocks that pay dividends, cash earns no interest. As a result, cash loses value over time due to the steady erosion of inflation.

While retirees have a number of pressing challenges to pay for expenses without a paycheck from working, keeping a great deal of cash on the sidelines is not the best idea. Ideally, retirees can generate enough income from their investments, in combination with other sources of income such as Social Security so that they do not need to hold a large amount in cash.

Read more: How to Sell Covered Calls for Monthly Income

#2: High-Yield Bonds

Sometimes referred to as junk bonds, high yield bonds are fixed income securities issued by companies with sub-investment grade credit ratings. 

With interest rates still near historic lows, fixed-income yields have plunged over the past several years. As an example, the 10-year Treasury yields just 1.3% right now. With inflation running significantly above this level, retirees will see their purchasing power erode with low-yielding bonds.

Because of this, high yield bonds are appealing due to their higher yields. But investors may be reaching for significantly elevated risk in their search for yield. Bonds with below-investment grade credit ratings have a higher likelihood of default.

Read more: Can You Retire at 62 With 300k?

#3: Cryptocurrencies

Cryptocurrencies like bitcoin are all the rage these days. The massive rise in the value of bitcoin and other cryptocurrencies over the past few years is enticing for any investor. And cryptocurrency gets a lot of coverage in the financial media.

But retirees need to remember that volatility is a two-way street. The price of bitcoin has declined by nearly 50% from its 52-week high, a reminder that any investment can lose value. Bitcoin also does not pay interest or dividends, meaning investors will not generate income from their investment. And another reason retirees should avoid Bitcoin is simply the higher level of risk involved in buying cryptocurrencies, not to mention the tax implications.

#4: Oil & Gas Royalty Trusts

Oil and gas royalty trusts are niche securities within the stock market. These are companies that own oil and gas-producing properties. Investors receive distributions depending on how much income the trusts generate from these properties. Some well-known oil and gas royalty trusts include BP Prudhoe Bay Royalty Trust (BPH) and Permian Basin Royalty Trust (PBT).

As with any group, not all royalty trusts are bad investments. But the risks are high across the board—royalty trusts are essentially a bet on underlying commodity prices. Investors also have to face the prospect that reserves will decline faster than the trust had originally anticipated.

If oil and gas prices fall, share prices of the royalty trusts collapse, and their distributions decline, often to zero as occurred in 2020 during the coronavirus pandemic.

#5: Mortgage REITs

Real Estate Investment Trusts, also referred to as REITs, are a great way for retirees to earn higher levels of investment income. Many REITs have strong yields of 4% or more. Retirees might be tempted to buy mortgage REITs, a subset of the asset class that typically offers even higher yields.

Indeed, many REITs have double-digit yields in excess of 10%. But in many cases, sky-high yields are an indication of elevated risks, and mortgage REITs are no different. Mortgage REITs are extremely complex, financially architected business models that are not easy to understand, making them relatively poor choices for most retirees. In addition, mortgage REIT share prices and their dividend payouts can swing wildly based on changes in the yield curve.

Read more: Diversify Your Portfolio With These Top 10 International ETFs

#6: Gold

Every few years or so, gold gets a lot of attention in the media, usually because the price of gold has risen over a certain period of time. But for retirees interested in generating sustainable income from their investments, gold should be avoided.

Gold pays no dividends or interest, which is why it is not attractive for many retirees. To quote legendary investor Warren Buffett on gold: “The idea of digging something up out of the ground, in South Africa or someplace and then transporting it to the United States and putting it into the ground, in the Federal Reserve of New York, does not strike me as a terrific asset.”

Some gold stocks like Barrick Gold (GOLD) do pay dividends, but their dividend track records are highly inconsistent. Many gold stocks have cut their dividends when precious metals prices decline.

#7: Momentum Stocks

Momentum stocks are those that have captured investors’ attention, most often due to a rapid rise in their share price. This causes other investors to jump in, perhaps because of a fear of missing out, which can push share prices even higher. But in many cases, momentum stocks fall back down to Earth, as their underlying fundamentals may not justify the rallying share price.

Momentum stocks that have gotten a lot of attention in the financial media in recent months include GameStop (GME), AMC (AMC), and more. In all cases, their share prices skyrocketed in a relatively short period of time. But retirees should resist the urge to buy momentum stocks, as they can be highly volatile and almost never pay dividends.

Read more: 15 Dividend Kings With 50+ Years Of Dividend Growth

#8: Microcap Stocks

Stocks can be classified according to their market capitalizations, which is simply the current share price multiplied by the number of shares outstanding. Large-cap stocks have market caps above $10 billion, while small-cap stocks have market caps below $2 billion, with midcaps in between these ranges.

The smallest group of stocks is known as microcaps. These are stocks with market caps below $100 million. Microcaps are very small businesses, their stocks generally have low liquidity, and many are in questionable financial condition. As a result, retirees should stick to midcaps and large caps.

#9: Stocks With Too Much Debt

Debt is a big concern for income investors such as retirees. Stocks with bloated balance sheets and too much debt are at high risk of cutting or suspending their dividends during recessions. Profits may decline substantially when the economy enters a downturn, but debt still needs to be repaid. 

Stocks with excessive debt have high-interest expenses that may force them to cut their dividends. This is of particular concern when it comes to high-yield Master Limited Partnerships, many of which have leverage ratios above 5x.

Therefore, retirees could generate dividend income with other tech stocks like Apple (AAPL), Microsoft (MSFT) or Cisco (CSCO).

Source: credit.com

Apache is functioning normally

Second quarter results are in for proptech’s public companies.

Our last summary of results was Q2 2021. As part of launching our Crystal tier, we’re bringing the earnings radar back. This time, better than ever as an ongoing Biz Intel Series. We’re re-starting with the ten companies we deem as the most important players in the broader category:

  • Airbnb
  • Blend Labs
  • Compass
  • CoStar
  • eXp World Holdings
  • NewsCorp
  • Opendoor
  • Redfin
  • WeWork
  • Zillow

However, it’s likely we’ll add companies to the list in future editions—if there’s one you’d like to see covered, let us know.

Let’s get to the numbers…

Here’s what you can expect in the report, with our coverage of Blend Labs & Airbnb…

Airbnb saw 115 million nights and experiences booked, up 11% YoY, on top of more than 7 million active listings. That led to more than half a billion in net income, making it the most profitable company of those included—by a mile. Also, it’s worth calling out that 18% of all gross nights booked were long-term stays (28 days or more)—down from 25% a couple of years ago in Q1 2021, signaling digital nomadism being an important movement but not the end-all-be-all trend some predicted.

Market cap: 85.7B

Notable Takeaways:

  • $2.5 billion in revenue, up 18% YoY.
  • Net income of $650 million, a big uptick of 72% from a year ago. Net income margin came in at 26%, up 18% YoY.
  • Free cash flow was $900 million, which helped enable $2.5 billion in stock repurchases over the trailing twelve months.
  • Average nightly booking cost was $166.

Learn more: Press Release // Shareholder Letter // PhocusWire // Skift // Inman

Blend Labs exceeded company guidance on both topline and bottomline numbers. Revenue came in at $42.8M in Q2 2023, down 35% compared to $65.5M in Q2 2022. Net Loss was $41.2M.

Market cap: 349M

Notable Takeaways

  • Gross profit margin was approximately 55%, up from 39% in Q2 2022 primarily due to expansion in its Blend Platform.
  • Year-over-year Mortgage Suite revenue per transaction increased from $77 to $93.
  • Consumer Banking Suite revenue totaled $5.8M in Q2 2023, a YoY increase of 27%.
  • Professional services revenue increased 10% year-over-year to $2.2M.
  • Within the Platform segment, Mortgage Banking Suite revenue declined by 17% year-over-year, to $22.3M in Q2 2023.
  • Operating expenses decreased by $391.8M from Q2 2022 due to the impairment of intangible assets and goodwill caused by the acquisition of Title 365 from Mr. Cooper Group. Excluding that transaction, operating expenses decreased 16.7% from Q2 2022 to Q2 2023.

Learn more: Press Release

Want to see the other eight company summaries? You can read it in its entirety, free of charge, by subscribing to GEM Crystal today at our special introductory pricing of $9.99 per month or $99 per year (good for the first 250 subscribers). Plus, there is a 21 day free trial. So, there is absolutely no risk…

Read Full Company Summaries

The ten companies covered represent a combined $152.46 billion in market capitalization. It was a mixed bag of wins and losses in Q2: six lost money on a quarterly basis, and only two generated Net Income of more than $100 million.

Read Company Earnings & Market Cap Table

Most notably though, WeWork is in dire straits. Despite a small YoY revenue bump, the firm said it would need to cut its own rent costs, further boost revenue, reduce expenses, and attract more capital to continue.

With the CoStar/Realtor.com acquisition falling through in Q1, both companies reported small YoY losses. What was meant to be a shot in the arm to take on Zillow as residential category king, now means both companies are forced back to the drawing board to determine how to reach buyers, sellers, and renters.

Airbnb came out Q2’s big winner, furthering its stronghold as proptech’s unquestioned leader.

We’ll check back in Q3 to see if WeWork can pull a rabbit from its hat.

Source: geekestateblog.com