Well Its that time of year again when the days get a little shorter, there is smoke in the hot air from all dry fires starting all over California. The kiddies are starting a new school year. It is the “dog days of summer” and with everyone changing their attention to things other than Real Estate, we generally get a seasonally adjusted lull in the action. This is all perfectly normal and being in the industry now for over 32 years it is pretty normal. The only other time we have not seen the lull was in 2004, 2005 and 2006 when things were abnormally busy, due to an overheated Real Estate Market. Although the Real Estate Markets have been brisk over the summer it was more of a normal healthy market with move up buyers and first time buyers entering the market. Real Estate Prices rose but only in the price affordability ranges.
So why even write about the Real Estate Market you ask? Well as a business owner and an economist I like to share the trends that I see developing so my readers can be informed in their investment approaches. This is the time of year where California starts on fire and I am not referring to the Real Estate market I am literally talking about wild fires. In late August, September and October we generally have not seen any significant rain fall since May, which causes dry tinder conditions perfect for wild fires. This However, can’t be said for other parts of the country that have had record rainfall and severe flooding. I am sure California Fire fighters would love to have just one day of significant rainfall to help knock down our fires. If you have followed Real Estate trends for any length of time you will know that it is very cyclical and predictable if you know the signs to look for. Folks looking to move to California may take a step back during this time of year as they may think the whole state in on fire per the wonderful media that reports on all the fires. The truth is, although there are several fire throughout the state and the smoke can be seen throughout the state, on a percentage basis is is only a very small percent of the state that is affected by the fires (less than one percent). I can’t talk to the flooding in Louisiana but my guess is that there are parts severely affected and other untouched we just hear the bad.
Anyway, you ask what is ahead in the Real Estate markets in California for the rest of the year? I am here to tell you that whether you are a buyer or a seller of Real Estate that you will be able to find great deals if you are a buyer and sellers will be able to sell at prices that will stay steady through the end of the year. However, if you are buyer you might notice fewer homes hitting the market this time of year as most people don’t like to move when their children are starting school and they generally don’t like to move over the holidays. What this creates is slow down in supply of houses hitting the market. In economics, if the demand for housing exceeds the supply of housing prices will go up. Conversely, if the Supply exceeds the Demand then prices will go down. So, although we see less sellers putting their homes on the market, this time of year, we also see the demand to purchase taper off as well. So with both demand and supply tapering off till the end of the year there are still great opportunities out there for both buyers and sellers.
Interest rates will stay low through the end of the year as well. How do I know this you ask? From an economic point of view, you have to know what drives interest up. Interest rates will be driven up if we start to see inflation. Inflation is where prices of goods and services are increasing. We are currently at about a 2% or less inflation rate annually, which is lower than what would be considered a “normal” inflation rate. We can predict inflation rising by watching personal income levels and employment rates, as the more money people make the more they tend to spend which would raise inflation and thus interest rates. So I don’t see any great increases in personal income from now until the end of the year thus a steady inflation rate and thus no interest rate increases.
What will the election in November do to the economy? Well, again if you know economics, there are what are called time lags that occur when something major happens in the economy like an election. So no matter who is the next leader of the free world it will not affect housing at all this year. In fact, I don’t see any major changes occurring at the earliest the second half of next year. The markets will need that amount of time to see what the new administration is up to. What I am focusing on is the new laws from this administration that have choked down the ability for people to qualify to buy homes. These last 8 years have been the toughest 8 years in Real Estate in the history of Real Estate and Finance and Government intervention. Over the last 8 years we have seen the implementation of the Consumer Finance Protection Bureau (CFPB) and the re-writing of the all the lending laws that were in existence prior to 2008. We have seen Loan officer Licensing across the country. We have seen the regulation of underwriting standards when a person qualifies for a loan. We have seen the CFPB put fear into lenders of being fined so they don’t take any risks in underwriting loans. We have seen predatory attorneys taking advantage of people that feel they have been wronged by a lender simply because they can’t make their mortgage payment. In the past, the free markets were left to weeding out bad lenders and bad loans as those bad lenders writing bad loans would end up bankrupt and out of business. In 2008 we saw our government “bailout” those bad lenders deeming them “too big to fail” thus a new world of banking has emerged. Today we see those same Banks that were deemed “to big to fail” ruling the banking industry and with their profits sky rocking they have been able to buy their own legislation to carve them out as “to big to be regulated”. I could go on and on with the negative effects of Government intervention in a free market economy but that will be for another article. We just need to be diligent as voters and recognize that a bigger Government gives the people less freedoms. So Real Estate will continue steady until the end of this year but what happens next will be up to all of you to do your research and educate yourselves. I will not tell you who you should vote for if you value Real Estate Investing or if you are going to be in the market to buy or sell your home in the next 4 years you need to educate yourself on the market facts. As a voter don’t be fooled by all the social noise you hear in the media, you need to educate yourselves on the benefits of a free market economy and the problems that a free economy faces when Government intervenes. I wish all well and if you need help with your Real Estate endeavors I hope you remember us here a MAE Capital Real Estate and Loan as we would love the opportunity to work with you for either you Real Estate buying or selling needs in Northern California and or you lending need or both.