Floating offshore communities

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Published Date 11/6/2017

Realtor Report

Floating offshore communities

Hong Kong is evaluating creating floating offshore communities to help with their housing crisis. Sound far-fetched? Not really, considering many of our largest U.S. Cities like Chicago and Boston created land to expand their city's footprint.

But instead of using timbers, cement, and landfill to expand the shorelines like in Chicago, Hong Kong is considering a “floating community” formed of cruise liners, with its own community square, gardens, open-air theater and shopping malls, and taking a ferry to get to work in a downtown area. It may sound futuristic, but a Hong Kong think tank has suggested this could be an efficient solution to the city’s housing shortage and sky-high property prices.

Each community would comprise 66 cruise ships connected to floating piers and a central deck, with each ship providing some 4,000 flats ranging from 183 sq ft to 549 sq ft.

Based on the construction cost of existing hotels converted from cruise liners and an assumed average living space of 192 sq ft per person, the cost per capita would be about HK$1.2 million.

Technologies have already been developed to support floating facilities, and many existing hotel projects such as the RMS Queen Mary in Long Beach in California proved that the project was feasible.

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market improved by +37bps.  This was enough to improve mortgage rates or fees.  Mortgage rate volatility was about average last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three things that have the greatest ability to impact mortgage rates this week. 1) Tax Reform, 2) Fed and 3) Geopolitical

1) Tax Reform: The House tax-writing committee begins revising the bill on Monday with tweaks and some more substantial changes expected to a number of individual and corporate tax proposals. The changes that the House Ways and Means Committee puts into the revised bill will have a significant impact on MBS (mortgage rates), not only regarding evaluating the impact on macroeconomic growth but also on the probability of it passing.

2) Fed: The bond market made a sigh of relief on the pick of Powell for the next Fed Chair compared to the more "hawkish" options like Taylor and Warsh. But are those two done? Or will we still see them on the board? With the announcement that NY Fed President William Dudley will be resigning/retiring that leaves just 3 Federal Reserve Board Members slated so far for 2018 which is not enough to operate. There are now 5 open positions. Presumably, if a candidate is worthy of consideration for Fed Chair, then they are also worthy of consideration to be a Governor. Will Warsh and Taylor be nominated? If so, that puts a much different board composition than what the markets are used to and may have a significant impact on bonds.

3) Geopolitical: President Trump's trip through Asia will get plenty of attention as he talks trade imbalances and North Korea with Japan and China. But there is also a lot of attention on Saudi Arabia as they shot down a missile launched by Yemen. The Saudi's claim it was really Iran using Yemen as a proxy and are threatening war with Iran. North Korea is also saying that they will be launching a new missile "soon." And Spain is continuing to crush Catalonia's independence.

Treasury Auctions this Week:

• 11/07 3 year note
• 11/08 10 year note
• 11/09 30 year bond (most important of the week)

This Week's Potential Volatility: Average

Mortgage rates are very likely to trade relatively sideways this week. A lot of things can happen this week that could cause mortgage rate volatility. The most likely of which are changes to the tax reform plan. As changes leak out, we're likely to see mortgage rates move up or down depending on the changes likely impact on the economy.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

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All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Fred Gruber

CMPS

NMLS: 256707

First Rate Financial Group

3027 Townsgate Rd., Suite 110, Westlake Village CA 91361

Company NMLS: 1777223

Office: 800-620-8802

Cell: 818-943-2712

Email: fred@fredgruber.com

Web: http://Fredgruber.com