Unlock Financial Success in 2025: Insider Tips on Mortgages, Markets, and Wealth Strategies

Welcome to this week’s edition of KPA Wealth Weekly, your go-to resource for staying informed on the latest trends in the financial and mortgage markets. Each week, we bring you insights on economic updates, mortgage rate trends, and practical advice to help you build a solid financial foundation.

Let’s dive into this week’s highlights!

• Mortgage Interest Rates

• Stock Market Update and Trends

• Bond Market Update and Trends

• USA Financial Numbers This Week

• Loan Program Strategy of the Week

• Real Estate: Buy or Sell?

• This Week’s Wealth Strategies

Mortgage Interest Rates

Stock Market Update and Trends

The overall market was bullish this week, however it may not be out of hot water. The downtrend we entered after the market top on 12/6/2024 is moving up and down through a wide channel, and is more apparent on the QQQ tech index instead of the S&P SPY index due to a heavy reliance on tech in the stock market. We do however look like we have broken out upwards from this channel (bullish).

Notable earnings this week consisted of TSMC that reported great earnings that pumped its stock(TSM) by about 4% and United Healthcare (UNH) that reported good earnings but dumped the stock by 6%. TSMC reporting great earnings is a sign that 2025 and probably 2026 could be great years for AI and semiconductors.

JPM also reported great earnings, with headlines reading that they posted “Record profits” pumping the stock from 247 to todays 256. I think its definitely a good time to buy JPMorgan Chase stock!

The market is trending up long/mid term, but we can still maybe see some pain in the short term to let company valuations catch up to the overextended stock market. There are a lot of bubbles that arise in bull markets, and one current one that may be pretty obvious is quantum computing stocks. It is already apparent there will be no significant revenue for a long period of time from quantum computing, yet the market is hyping and pumping the stocks. I can see these stocks deflating during this current market correction as long as the correction continues.

Bond Market Update and Trends

We had a couple good days to end this week with interest rates and the bond market but….

Bonds are still dying ): and there is nothing we can do about it. Excessive government spending and lack of foreign interest have made the 30 year bond market not desirable. Why is this important? The answer is if the United States is going to continue being the golden goose that lays golden eggs for its people, it needs constant demand in its bonds. Through excessive money printing and debt creating, the US has dug a hole of debt that is not something that will go away overnight or without inflation long term.

If no one is going to buy our bonds, then rates will go up crazy and slow down the entire economy. The higher likelihood of our country defaulting on its debt, the less people want to buy our bonds. Resulting in interest rates going up up up.

We need some drastic changes in our country for this problem to be solved, that way our grandchildren can have a future and not get burdened with insane taxes.

USA Financial Numbers This Week

PCE - The producer price index rose 0.2% on the month, which is less than the 0.4% increase in November and below forecasts of 0.4%. This number excludes food and energy along with trade services, and still rose by 0.1%. We are seeing a spike in natural gas prices so these numbers could be worrisome.

CPI - The CPI index report for December showed inflation rose 0.4% for the month. Energy rose 2.6% month over month, which accounted for 40% of the total increase. Food increased by 0.3% in December, and it is possible that the current egg problems and shortage will further worsen the food number for January. Airline fares also rose 3.9% which I guess makes sense because lots of people are flying for the holidays. Rent went up 0.3% which isn’t too bad (rent needs to stop going up and go the other direction)

Loan Program Strategy of the Week

Have you heard of a DSCR loan before? DSCR = Debt service coverage ratio. This is a type of non-QM loan that you don’t need any income to qualify, you just need 20% down cash or 20% equity and a good credit score (if you don’t know what non-qm means just think not a normal loan but it means non-qualified mortgage)

The cool thing about a DSCR loan, is that the interest rate and terms that you are given, are based on the amount that the property is expected to rent for on the market (also credit score). The goal for a DSCR loan is to get an appraiser to say that the expected rent for the property will cover most or all of the mortgage payment.

So after hearing all this, what is the strategy for a DSCR loan that you can take advantage of? It requires being able to find a decent deal on a rental property, and having the minimum reqs for qualifying for a DSCR loan.

I’ll tell you a story about a previous client of mine. My client “Tim” was able to find a great deal on a 3 unit property in California for $500k that was almost practically move in ready. The 3 unit property was in a decent area with the going rate for rent being $1500 for each unit.

Tim was able to get a DSCR loan with a 10 year interest only period, meaning his monthly payment including taxes and insurance was a total of $3200. Tim’s total rent with 3 units rented out was $4,500 total per month. Tim is now cash-flowing $1300 per month for the next 10 years. He can now choose if he wants to, to also sell the property 10 years from now and profit from any appreciation on the property. $1300 × 12 × 10 = $156,000 cash flow over 10 years as long as the property is rented out. This is not considering increases in rent and vacancies.

His cash to close to buy the property was about $125k, which if his property appreciates, he will be able to get out of the property when he sells in 10 years after the interest only period is over.

This is GREAT profit on investment.

Real Estate: Buy or Sell?

California association of realtors expects homes to appreciate 4.6% in 2025. Their expectation is that supply will grow causing more buying and selling. More changes in hands causing prices to go up? More supply equals more demand? Do we believe CAR? Not sure but lets see what others are expecting.

Core Logic saw a 3.4% year over apprecation on homes in 2024. A little bit lower than what they expect in 2025.

You know what, I believe them. Myself and many others in my industry have experienced a lot of potential buys who struggle with the limited supply on the market. If there’s more supply these people would be more likely to find what they want or need.

This Week’s Wealth Strategies

Wealth strategies are hard to come across, especially if you don’t know how to find them.. This week we will go over the 1031 exchange.

1031 Exchange - Section 1031 of IRS tax code allows investors to sell investment property and use all of the proceeds to purchase a new investment property while deferring taxes from the sale of the property.

Who is this for -

This is for anyone who owns an investment property that is planning on purchasing a different one. This is for anyone who has owned an investment property for a long time and are far in their home depreciation schedule.

Pros -

• Defer your taxes

• Switch property types

• More purchasing power

• Build wealth easier by deferring taxes

• Increase cashflow

• Reset depreciation schedule on asset

How it works -

Basically you sign a contract to sell your property to a buyer, then you have a 45 day identification period to find a replacement property. You will have 180 days in the exchange period to actually acquire or buy the new property.

This is an extremely cool tax strategy, because it is unique to real property such as houses. I wish you could do something like this with stocks, but no the government wants their bag.

I have some great resources to connect you with if you want to explore a 1031 exchange.

Thank you for reading and please share with anyone who you think will benefit from this weekly newsletter! There will be 1-2 posts every week keeping you updated on everything in the markets.

Kyle Allgair

CEO of KPA Home Loans - (279)977-8149 - [email protected] - KPAhomeloans.com