Blog with MAE Capital

By now you have heard about the banks that have failed.  But what does this mean for mortgage rates and Real Estate?  The banks that have failed have been bailed in by the Federal Government.  Bailed In is different from bailed out in that a bailout keeps the bank doors open and Bailed In only gives deposits back to the depositors.  To be clear if you had stock in those failed institutions it is now worth nothing but if you had a checking or savings account in one of these institutions you will be whole courtesy of the Federal Government.   This is good for individuals who had deposits in those institutions but those who held stock in those institutions have lost their entire investment.    So what does this tell an economist that is looking towards the future of all banks and monetary policy moving forward and what will happen with Interest rates and Real Estate?  

What is next and what are the consequences of these banks failing, of the government bailing in depositors, inflation, and interest rates?   This goes deep and you may have figured out some of what is going on but the underlying issues you may want to put your seatbelt on for the ride.  You see knowing why these banks failed you may have heard on your favorite media source that told you that rising interest rates and poor asset management is what you have heard.  Meaning that when interest rates have risen the banks had assets that were purchased in a low-interest rate environment and now that rates have risen to more than double what they were when the assets were purchased thus devaluing the held assets.  When the customers came in to take money out of the bank it did not have enough assets set aside to cover the demand for the money so they failed.  That is the rhetoric we are hearing and some of it is true, however, we should be looking at what has happened to the dollar's value lately and why.  The dollar has lost a significant amount of value in the world marketplace and this has played a role in these collapses due to inflation and social economic factors in the world.  

Here is the problem I see as a follower of economics.  Inflation, we all know has been a problem with the high price of fuel and groceries, and consumer goods.  We also know that the Federal Reserve will raise interest rates to fight inflation, to slow the economy down.  Inflation is caused by a few things; One where the demand for goods and services exceeds the supply of goods and services; Two, when the value of money declines; Three when there is an oversupply of money in the economy; Fourth, and one that nobody wants to talk about and that is when people and other nations do not value the dollar as they used to and have lost some of their belief in the dollar.  The last one there is the biggest problem that no one is talking about as it goes against everything we have always been taught and that is that the US government and the US dollar issued by the Central bank is no longer favorable to trade for goods and services on the world stage.  This will be a topic for future blogs.

The problem with the government bailing in depositors is the Government will be infusing more dollars into the economy and that will further dilute the supply of money and create more inflation.   What you may not have heard or understood is that the average deposit in the Silicon Valley Bank was or is $2 million dollars and the Federal Deposit Insurance Corporation (FDIC) only insures deposits up to $250,000.  Yesterday, Biden told the world that the Federal Government would make up the difference to all depositors.  This was an attempt to calm the public from taking their money out of the banks and causing a complete failure of the banking and the Federal Reserve system.  You see, if you and I stop believing in the US dollar as a means of trade for goods and services then the dollar is useless and all US citizens have lost everything they have worked for.  This is a simplified view however, the US dollar is backed by debt, not by gold, or silver, oil, or anything of tangible value.  It has always been said that the dollar is supported by the good faith and full backing of the federal government.  The same government is $31 Trillion in debt.

Our world has now become more confusing than ever, if interest rates rise to combat inflation, then the economy will slow further, more jobs will be lost and the potential for more bank failures will loom if they have been holding low-interest rate assets as reserves.  If the Federal Reserve halts its interest rate march upward then we will continue to have higher inflation.  Another issue we all should be watching as citizens is the introduction of the BRICS monetary system that is supposed to go into effect in August of this year.  If you are not aware of what this is you should know that it stands for Brazil Russia India China South Africa and it is where these counties have got together to create a new currency to replace the US Dollar as the world's reserve currency.  Since its announcement Saudi Arabia, Egypt, Iran, Iraq, and many other countries and most recently Mexico is joining this new currency and denouncing the US dollar.  What this could mean to the US dollar could be staggering so stay tuned on this.  

What does all this mean to the Real Estate business? It will all depend on how people view this current situation.  Will investors look to real estate as a stable investment no matter what interest rates are at or will they stay on the sidelines in the current interest rate environment?  This question might be answered by looking at the super-wealthy and what they are doing with their investments.  Some of these whales or super investors are looking to real estate as an investment so in the short-term, this could be good.   Myself having been in this business for almost 40 years, I have never seen anything quite like this and pray it turns around as housing is the foundation of America as it supports all aspects of American life.  I have to stay positive as I believe we all have to and when investors come back into the Real Estate game we will be here for them with open arms.  MAE Capital Real Estate and Loan is here for all of your Real Estate needs.   

The title says it all if you know what you are looking at. A little history first then we will dive into the relationships between BRICS, the Dollar and Interest Rates and it will wake you up if you haven’t been watching the world.  BRICS is the formation of a new currency based on precious metals formed to take on the dollar as the world’s new reserve currency, we will get more into that in a minute.  The Dollar is our currency in the United States and is the current world reserve currency.  Then how do interest rates play into this equation you ask?  Interest rates may not react now to both of these currencies now but they will very soon.

BRICS stands for Brazil, Russia, China, and South America, they were the original nations that signed on to use this new currency.   Since the formation of BRICS, Several other countries have signed on to use this currency,  countries such as Saudi Arabia, Syria, Afghanistan, and several others countries.  What this means is that these countries will use the BRICS currency as their reserve currency, not the US Dollar.  This has not materialized yet but it is in the works.   If this new currency catches on and becomes the world’s reserve currency and not the dollar that could have to reach economic consequences for the Dollar.  If you are paying attention to what is happening in Ukraine right now you have to understand that this conflict is not about Ukraine’s sovereignty from Russia it is about money.  Money has driven almost all wars in history and this one is no different.  

The Dollar has been the world’s reserve currency since World War 2 and before that, it was the Pound Sterling (British Currency).  The Dollar was originally backed by Gold and Silver.  When the US was limited to gold and silver it could not expand as fast as those that held the gold and silver wanted it to so it moved from a currency that could be backed by precious metals to the Federal Reserve Note we have today.  That transition happened in 1971 under President Nixon.  The US moved to what some call a “Petrol Dollar” which is a dollar backed by oil.  Again, we have seen wars fought over oil now, why? Money.  Today’s Dollar is really only backed by debt and that is why the world sees the dollar as a dead currency where the debt has exceeded what a normal mind can grasp.  $33 trillion dollars is a number that is not quantifiable to a regular person, numbers like that are for mathematicians.   The dollar has been the great magical vehicle for decades with people believing it has actual worth and that belief has allowed the US to become the largest superpower in the world.  

Interest Rates, how does it play into the currency game?  This one will take a history lesson as well.  Interest Rates, by definition, are the cost of money.  Interest Rates in the US have been controlled by the Federal Reserve and the Federal Reserve also controls the Money Supply.  We can now see the relationship as the Federal Reserve controls both the supply of Dollars and the cost of the Dollar.  The Federal Reserve system has been under fire lately with the way they have managed this relationship as we have seen interest rates soar over the last few years.  With the dollar as the world’s reserve currency for so long the Federal Reserve Bank has been lucky that countries like China and other countries that hold a large stake in the US debt have not called it due.  If the world moves away from the Dollar as a reserve currency you will see the devaluation of the dollar worldwide and those still using the dollar will see it be devalued on the world stage.   A devalued dollar will create inflation and the cost of the money will have to go up to offset this.  The cost of money is interest rates.  

This is just a quick view of those things to come and can also explain what is going on in the world today. If you connect the dots you can see why BRICS has come to fruition.  War in today’s world is being fought on the economic front not so much on the battlefield.  If the BRICS currency takes over, the dollar will devalue and the cost of things in the US will skyrocket.  If we have high inflation we will have high-interest rates.  When you look at the conflict in Ukraine understand it is not about Ukraine at all, in fact, if you look at Ukraine you will find that their government has been corrupt for decades.  If you research President Zelenskyy you will see he started off in life as a comedian and actor and worked for a TV station prior to being “elected” President of Ukraine in 2019.  Zelenskyy’s net worth is estimated to be between $20 and 50 million US dollars, and some estimate it far greater than that.   Meanwhile, the US has recently sent Ukraine over $120 Billion in aid.  These are facts; you can even google it and see that the search engine has not yet closed the door on this information.  It is on top of this administration’s list to keep the dollar as the world reserve currency to keep America the strongest and richest country in the world.  When you are watching or listening to the news, however, you find your information, keep money in mind when watching as that is the underlying cause for almost every conflict in the world is money.   I tried to keep this to facts that we know, but I think if you peel the onion back a bit more you will see things and understand things that you may not want to have knowledge of.  There is a lot more to this that I can’t possibly go into for this short blog post so keep your eyes and mind open.  

If you are in the Mortgage or Real Estate business currently you are experiencing slow times and you are working harder than ever.  I am here to tell you that these slow times are all part of the business cycle that has been disrupted over the last 20 years or so.  With all the disruptions to the economy over the last 20 years starting with the rise and fall of the sub-prime era of the early 2000s and the recession that followed the recovery and then the pandemic the U.S. economy has been put the challenge.  The Real Estate Industry followed right along with the economic rollercoaster.  Having seen the type of market we are in for the first 20 years of my career I almost feel comforted by the normal slowdown of the Real Estate industry after the boom we just came through.  In the late 1900s, the cycle for booms and busts was on an almost predictable 10-year cycle, and normal slowdowns during the months of November, December, January, and February (the winter months) were predictable.  The change began when we should have had a slowdown in the early 2000s instead the Government came out pushing the Community Reinvestment Act of 1977 in an effort to get low-income folks into housing.  Thus, beginning the “Sub-Prime” era of lending with little or no oversight over lending and financial institutions.  By 2008 the economy was pushed past the adjustment period it should have had and coupled with financial institutions failing made for a perfect storm.

We know what followed, the crash of 2008, and in a lot of ways it is still affecting the ways we do business in the aftermath of no oversight to the new age of total oversight.     Fast forward to today, we are coming off one of the hottest real estate markets since the “Sub-Prime “ era where money was flowing, and this time money was flowing with low-interest rates.  So, it is perfectly normal for the economy to take a deep breath.  During these adjustment times or slowdowns, you will typically see a consolidation of Financial institutions and Real Estate firms it is a time for the well-positioned companies to gobble up the companies that couldn’t see the change coming.  We are seeing both Realtors and Loan Originators depart the business for a steady paycheck.  This is normal, and so will be a sagging stock market as the Real Estate Industry is one of the largest manufacturing sectors of our economy and drives so many other industries like construction, home improvement stores, home furnishings stores, and so on.  Technology is also affected when the housing industry slows as fewer people are investing in new technology when the old tech is working fine for time being.

This economy is normal but if the politicians see it as problematic for their future, they will do stupid things to try and stimulate the economy.  The biggest mistake the government has done over the last few years, pandemic and post-pandemic were to issue “Stimulus Checks”.  Putting more money into the economy does 2 detrimental things to the economy down the road, it devalues the dollar and creates inflation.  This is where we are at today.  As a follower of the economy with a degree in economics, it is not too hard to see the effects of Government intervention in the economy.   Unfortunately, there is another way the government can stimulate a sagging economy and I don’t want even to bring this up, however, in light of recent events it must be said.  War is a way to stimulate an economy and to keep power.   

Ukraine is going to be the war our government will get us into if “We the People” don’t stand up to it.   The reasons for this conflict are crystal clear from my standpoint.  One: The formation of BRICS (Brazil, Russia, India, and China) is the formation of those countries denouncing the US Dollar and creating a new currency built on a precious metals standard.  Since its formation, Saudi Arabia, and South Africa have joined.  This could very well mean the end of the US dollar’s dominance as a world reserve currency.  Second, is the United Nations, the World Economic Forum, and the World Health Organization and its push for global governance where the BRICS nations are not on board with this agenda, and quite frankly we should not be involved either.   Third: Oil and the flow of this resource or more so the control of the flow of oil is what is going to turn out to be a part of this global conflict.  I am not a doomsday kind of person, so I am praying that I am terribly wrong and the world turns to peace and unity rather than conflict.   

Not to ignore the elephant in the room, but I prefer to stay positive and to look at this time in our economy as a normal economy taking a breath after a very busy and robust time.   Going back to the crash of 1929 and the Depression that followed the nation's economy has seen this speed up and slow down pretty consistently.  At the beginning of 1941, we were still in the depression but the recovery was well underway, but the end of 1941 December 7^th to be exact is when we were officially out of the depression, and in 1945 when the war ended the economy was in full swing and returning Veterans had jobs to come home to and homes where being built and an extreme pace.  Things slowed a bit by the end of the 1940s and we entered into the Korean war and things pick up again.  The 1950s were a time of peace and prosperity. In 1960-1961 there was a recession caused by the Federal Reserve raising interest rates, then recovery.  Then in the early 1970s was another recession caused by “the oil crisis” which also caused the stock market to crash as well.   Then we had recovery and in the early 1980s  we had the “crisis with Iran” again over oil and there was a recession.  Recovery then followed and in the early 1990s due to the stock market crash of 1989, we again were in a recession.  The early 2000s had a slowdown but not as much as it should have spurred on by the ease of obtaining money and the creation of the "Subprime Mortgage" era.  This led to 2008 which as we know was the worst recession since the 1930s.   By 2011 we, as a nation were in recovery mode again.  Then in early 2020, COVID threw the country into an economic lockdown to a degree our nation has never seen.  To get us out of this recession the Federal Reserve lowered Interest rates to the lowest levels in history and so began the last housing boom.  Now we are resting and if we let our economy follow the normal cycle, we should be out of this by the end of the year 2023 or the beginning of 2024.  

Invest and buy real estate now while the economy is resting for if you think that interest rates will return to the historic lows of 2000-2021 you would be drastically wrong.   We are close to the equilibrium point with higher mortgage interest rates the economy will do far worse any lower we will have higher inflation.  It is all guesswork on Federal Reserve’s policy with interest rates and they hope they get it right with respect to inflation.  As a Real Estate and Mortgage Professional all I can tell others out there is to stay the course or if you can’t get out and find a steady paycheck.  Those that can weather the storm will end up at the top of the food chain when this comes back around and it will, it always has.  You see people always need housing and money so those of us that stick it out will be there first when it comes back.  So don’t despair get everything in place for the next housing boom and when it comes you will be ready.  Those consumers looking for housing now will find what they want a price that they can afford with a payment they can afford.  

As I sit here and write this article I can’t help to reflect on the state of our great nation and quite possibly the whole world.  America has always been the country people look up to across the world and the world’s economic leader.  In the last 2 years, we have suffered through the fear of COVID and been basically forced to get vaccinated, we have opened our borders to everyone including criminals, and we have elected a man that can barely remember where he is at any given time who believes that his administration can spend their way out of the inflation they caused by giving away our money.  The same President has strong ties to Ukraine in ways we should have known about before he was elected and since his election, he has paid closer attention to their borders than our own.  This is the same President that closed the Keystone pipeline and canceled leases for domestic oil production and sent oil prices to all-time highs further deepening the inflation.    Then we find out recently that the CIA actually killed JFK and we get no response from the American people.  Elon Musk exposes that the government suppressed Americans’ freedom of speech ( the first amendment) and no one seems to care.  We know the mainstream media is controlled by the government and suppresses stories that Americans should know about, and again no one seems to care.  We know, for sure, that Hunter Biden brokered deals to China, Ukraine, and other countries for monetary gains to both him and his dad Joe Biden and yet no traction, no one seems to care. These same people are fleecing Americans' and bad-mouthing, impeaching, shaming, canceling, and more to those that have opposing views and we are supposed to be alright with that.  So as I write this I wonder who really is going to care about an economy they have helped to create.  I know that some of you that will read this are on the same page as the author who is fed up with the failed social experiment.   I can only write from what I see and I don’t sugarcoat anything to protect your feelings the facts are the facts from a 40-year view point in the Real Estate and Mortgage industry.

So here it is, Real Estate for 2023 is going to be a buyer’s market, meaning that it is going be tough to find home buyers as interest rates are at 20-year highs.  The outlook for interest rates is that the will continue to rise as inflation will not slow down with the government continuing to spend taxpayers money frivolously.   Oil prices will remain high as domestic production will remain low and foreign dependence will continue to grow.  The government will also be implementing tax hikes to help offset their spending.  The previous congress just passed a budget that is larger than the current income the government is receiving from taxpayers thus we will have a significant gain to the national debt.  This will not slow inflation, in fact, it will do the opposite.     As inflation numbers stay around double digits the Federal Reserve will continue to raise interest rates until the economy is firmly in a recession.

Unfortunately, with higher interest rates less people will be able to afford the current prices of housing so the demand for people to sell and move up will be greatly diminished.   First-time homebuyers will still be priced out of the market last year by high prices this year by high interest rates and inflation.  There will be Real Estate buyers out there that will persevere in buying a home but that number will be significantly lower than the last several years.  I see home prices coming down 10-20% from the highs of March of 2022.  This will be good for potential home buyers, however, sellers will be a little less apt to sell their homes  There will be a lower amount of people doing home improvements in 2023 as they probably did it during the COVID years of 2020 and 2021 when interest rates were lower.   Home builders will have to lower prices on their new builds as demand has dropped off so significantly.  So if you are in the market to buy a home in 2023 you will have many choices and you will get the best of everything available to you to keep your business, at least at MAE Capital we will treat you like Royalty.   

In 2023 potential home sellers will have to be prepared to fix their property up before they sell, to get the high end of the market and or be prepared to make concessions like paying for a buyer’s closing costs and buydowns, and being flexible on the price.   For those home buyers that can’t afford to fix up their property they should be prepared to be on the low end of the market, meaning that if the same house fixed up sells for one price the fixer house will be significantly lower than the ones that have been fixed up.   This will bring opportunity for investor to come into the market for fix and flips again.  In fact, this segment of the market, Fix and Flip, will start making a come back in 2023 with money being tight.  Generally, when the market shifts to slower investors can again find opportunities when homeowners become distressed they tend to sell off their property to live and investors can step in a make big gains if done properly.  So, a shining light in 2023 could very well be investors getting back in the game.  At MAE Capital Mortgage we have all the investor programs needed to be successful with our Private Money division.  

The outlook of the Real Estate market for 2023 is not a real good one but for those that can find the opportunities amidst the adversity will be successful.  If you are in the Real Estate industry you will have to be working harder than ever to get the good word out to consumers.  The people on the mortgage side of the industry will have to be working extra hard and will have to diversify or die.  There will be consolidation in the mortgage industry so you will see companies go out of business or merge with other companies.  There will be a whole lot less mortgage Loan Officers as they go on to different jobs to survive.   As a whole with Realtors, Loan Officers, and Title companies there will be a consolidation and a shrinking of those employed in the industry.  As this happens we begin to see all the peripheral businesses also laying off and consolidating.  This will bring the whole economy down and probably a recession if we are not in one currently as write this.  A Recession by definition is a dropping Gross Domestic Product (GDP) in 2 consecutive quarters.  Since Real Estate and Tech has driven the economy since America has outsourced most of our manufacturing, both industries are not thriving currently so the effects on other industries will be felt soon.  I do not want to be negative, in fact I would much prefer to stay on the positive but when talking about the economy and all the indicators I can’t help but to see negative, however, it won’t last forever. We all must pay closer attention to the economy and stay away from social issues in 2023.  We have to work harder, we have to be advocates for our economy not other countries and believe that our economy is the most important economy in the world.  We will make it through this as we always do so be patient and kind and work hard and help others when you can.  Most of all remember MAE Capital Real Estate and Loan is here for all of your Real Estate and mortgage needs saving our clients money in every transaction.   

By now you probably have heard that interest rates have risen to a 20-year high, but how exactly is this affecting Real Estate sales and prices?  The Federal Reserve (the Fed) raises interest rates to slow demand for goods and services as with higher interest rates things cost more over time.   The Federal Reserve does not directly affect mortgage rates as the rates the Fed control are only the rates that banks borrow from the Fed.  This makes the cost of money to banks cost more so Banks raise their rates to the consumer to cover the increased costs to them.  Since consumers get loans from Banks to buy cars, homes, consumer goods, and services the costs for all of it go up.  In the mortgage arena, we have seen rates go from the low 3’s in January of 2022 to the low 7’s currently.

It should be obvious that a consumer will be able to buy less of a home in a high-interest rate environment, but home buyers don’t really understand how much it actually affects their buying power.  An example would be a couple who has been making an income of $100,000 combined with a normal debt load of a car payment of $500 a month and student loans of $250 a month.  This couple could afford a house with a 3% mortgage rate and 5% down at $561,000 sale price.  At a 7% interest rate the same couple can now only afford a house priced at $356,000.  This a $205,000 difference that has occurred in less than a year.  This will hold true when qualifying for  auto payments, business loans, and all loans to buy goods and services.  

So with the diminished buying power of potential home buyers, you would think that Real Estate values will go down to accommodate the higher interest rates.  You would be right in your assumption.  This holds especially true in the higher priced homes where the people that were qualifying for a million-dollar mortgage can now only qualify for a $700,000 mortgage.   Home sellers are having to come to grips with the fact that their home is not sellable at the same price it would have been a year ago.   With older folks looking to retire in the next 5-10 years they are seeing the value of their Real Estate portfolio go down, and this may hold off their plans for retirement and holding on to their long-term jobs not making room for younger folks to fill the gap.  Furthermore, the older generation has seen this before so they will be extra cautious with their money going into retirement and possibly not selling their family home to downsize for retirement as they may have originally planned.

The higher interest rates are pushing Real Estate values lower and this is making investors worried to the point they are holding back investing in Real Estate taking out a whole segment of Real Estate Buyers.  As prices decrease you will be seeing appraisals come in lower-than-expected making selling a house more challenging when the sale depends on an appraisal.  Those particular sales may fall through if sellers are not willing to lower their prices and eventually, if they need to sell, they will have to sell at a lower price.  If interest rates continue to go up, and it is looking like this will be the trend, prices will have to continue to go down to accommodate those that can no longer afford to buy in the same price range as the lower interest rates would have allowed them to.   The higher rates thin out the potential pool of home buyers as their buying power has diminished and those folks looking to move up by selling their existing home and buying a bigger one have dried up as well.  

From a lending aspect, as rates rise, lenders know that the home values will be decreasing so the appraisal is going to be a much more important part of the transaction.  FNMA and FHLMC will be cracking down in different markets where they know the prices are softening faster than other parts of the country, typically in higher-cost areas like California.  Since MAE Capital Mortgage also does Private Money lending, we are seeing private individual investors who actually lend their own money to others, tighten up their requirements as well.  This means less available funding for fix and flip programs, After Repair Value (ARV) programs, investor buy and hold programs, commercial funding, and more.  Talking about commercial funding where that market has been killed essentially by COVID and Amazon coming in to fill the gap, has gotten even worse.  As investors see the rates go up, they are less likely to buy or lend their money for Real Estate of any kind.  

To conclude, higher interest rates make it more difficult for home buyers to buy homes that fit their needs.  High-interest rates make home values have to come down to be able to sell their homes.   Higher interest rates make the desire to invest in Real Estate and Real Estate Notes and Deeds a whole lot less.   Higher interest rates make commercial lending even worse and make commercial values continue to decline.  So, all in all. higher interest rates are not good for Real Estate values, resales, investments, and rehabilitation of real estate.   If you are a potential buyer of Real Estate, you need to make sure your offer is a bit lower than the current market supports as prices will continue to fall as rates rise.  If you are a potential seller of Real Estate, do it now before rates go even higher and be flexible in looking at lower offers, if you are not flexible you will not be able to sell your property in this crazy Real Estate market.   On the bright side if you are well qualified first-time home buyer it should not matter to you what rates are so long as you can afford the payment associated with the house you want to buy.  As a first-time homebuyer, you now have more inventory to choose from and if you buy now and interest rates continue to go up you have a low mortgage and an affordable payment, when interest rates go down in the future you can always refinance to the lower rate.  So don't be afraid of rising interest rates as there is no perfect time to buy real estate but what I have seen over the long run owning is far better than renting so do it now and join the club of home ownership and let MAE Capital help you with buying your home and financing it as when you bundle with us you get perks like money for closing costs and an easier experience.  

We know the state of our economy is the worst it has been since the financial collapse of 2008.  We know we are having record inflation with no end in sight, and we also know that interest rates are being raised to combat the high inflation with no end in sight.  What we are not being told is how to fix this, which I find as odd as the answers are all right in front of us, but it seems like it is taboo to talk about the right way to fix things. We know that gas prices are the highest in history which affects the delivery costs of goods and services.  So why is it so hard for our elected leaders to figure out how to solve this problem in these modern times?

We need to explore the reasons why we have record inflation, high gas prices, and high interest rates.   We know that the Federal Reserve has only one tool to fight inflation, and that is to raise interest rates.  But the big question is why is inflation so high?   This can be answered by analyzing where the inflation is coming from and how to fix it.  We know that over the last several years since the pandemic started, the government has shut down the economy and paid it’s citizens to basically stay home.  All this extra money that has flooded into the economy has devalued the dollar and that has caused some inflation.  We also know that Americans have been at the mercy of other countries to deliver goods, pharmaceuticals, computer chips, and oil.  This dependency on foreign suppliers has been a challenge as other countries were also under shutdown orders and some far longer than the US.   We have all heard about the “supply chain” issues, which is really the big issue that is not being addressed by our elected officials.    

We know that when there is a low supply of goods with the same amount of people trying to get these goods that the price of the goods will rise and we have seen this occur in 2022.   To compound this issue when the United States slows its domestic production of oil this causes a decrease in the domestic supply of oil and more dependency on foreign oil and when foreign suppliers of oil slow their delivery of oil to the U.S. prices have to go up to slow demand of oil that is not there.  With oil prices going to the highest in history this dramatically affects the cost of diesel that is used by the trucking industry to deliver goods to stores for Americans.  With higher delivery costs you see higher prices on the shelf for consumer goods and commercial goods.  In addition, farmers will have higher costs to run their machines to get the seeds in the ground and when then harvest the food for Americans.  Thus, high prices for food as a result of higher costs to produce and deliver our food. Higher fuel prices also affect the individual consumer’s monthly budget as with high gas prices Americans have less money to spend on other goods and services that have raised due to the above.

Knowing this you would think you would have heard more about fixing the underlying problems with the supply of oil, and foreign goods that we are dependent on.  It seems all we hear about is how oil use is bad for “climate change” and the Government’s desire to fix this.  Granted the Earth is going through changes, but it has been going through changes from the beginning of time. To think that mankind has any control over it is just stupid and is a good excuse for globalists to try and control the masses with control over our basic needs.  The proof, for those that live in a city and rarely go out into the world, would be to look at the Grand Canyon and there you can see firsthand how that climate has been changing long before mankind was even present.  But I digress for the purpose of proving my point about the control of the masses and this is exactly why Russia and China formed BRICS to stay independent of Globalist's agenda, a topic for others to debate, but the “supply chain” is dramatically affected by all of this.

The way to fix our current economic dilemma is multi-faceted but the overall idea is to focus on the supply side of the economy and not so much on the demand side.  The reason for not focusing primarily on demand, like the current administration is, is simply because there will always be a certain amount of demand for basic goods and services, and we are currently really close to a basic demand market.  You see the Federal Reserve trying to curve demand by raising interest rates only can go so far then the high interest rates kill the entire market as capital is not readily available for expansion or even normal business activities putting the whole economy into a recession or worse a depression.  If the supply side of the economy was being addressed properly, we would see more investment into the expansion of US supplies and farmers.   Yes, we must stop being as dependent on foreign goods and oil.  We should bring computer chip manufacturing back to the US and we should bring manufacturing back to the US most importantly we need to open up new oil exploration and pipelines to deliver oil more efficiently.  We need to look to Hydrogen (the most plentiful element on the planet) as an alternate fuel source and explore other technologies that will curve our oil dependency.  Electric cars are good for the short term, but long term they create as much waste as fossil-fueled vehicles.  Investing in America and American engineering will be the key moving forward and education of our youth must be paramount for the US to stay independent and take the indoctrination to a certain set of beliefs out of our education system and focus on productivity not emotions as emotions don’t pay the bills.  If the supply side of the economy is not focused on the economy will continue to spiral out of control with higher and higher prices for everything.  

As most of you know Mortgage interest rates have been rising at a speed at which most people alive today in the home buying market have never seen before.  Some of us old timers have seen this before and it is very true that history repeats itself and we should all learn from it.  We are going to explore why rates are moving up so rapidly and then we will look at the future and where rates are heading and why.   When I say history repeats itself all you must look to is the early 1970s through the early 1980s and see how monetary policy was run.  I was a kid in the early 1970s and remember the gas lines and high inflation and interest rates that topped out right around 20% for a 30-year fixed-rate mortgage.   During this, the government also set the interest rates for FHA and VA loans and put ceilings on gas prices.  

If this sounds familiar it should be as the government has been involved since the beginning of time with free markets and it has never really worked out.  In the 1970’s President, Nixon put gas price ceilings in place in hopes to make gas prices go down or at least stabilize them.  This failed miserably as when you try to put a ceiling or a cap on prices that de-incentivizes producers from producing.  During this time the government was also spending and expanding the government and services the government felt would help the common American. Then to pay for all the spending they were forced to raise taxes across the board and the Federal Income tax rate got as high as 60%.  So, Government spending caused inflation, and the taxing of the citizens meant less money the average worker could take home on every paycheck thus they did spend less, and the economy was basically stagnant.  During this time the term “Stagflation” was coined meaning a stagnant economy with high inflation.  If this sounds familiar, then open your eyes and look around with the Government spending Trillions of dollars on “COVID relief”, the Ukraine war, AKA money being sent to the United Nations.   Then we have all heard about the 87,000 IRS Agents they are hiring to make sure they get their money from the average American after they raise taxes on all of us.  This type of economics is called tax and spending or Keynesian Economics.

This is poor Monetary Policy from an economic point of view.  I can say without one doubt in my mind that if Monetary Policy continues down this road then we are in for many years of high inflation and high-interest rates.  The government has totally neglected the economic curve's supply side and focused only on the demand side.  The evidence is seen at the gas pump, the grocery store, at the automaker's showrooms, and the list goes on.  Current monetary policy is to raise interest rates with the hopes that with high-interest rates consumers will slow their demand for goods and services, which has held true, however, when staples like food, fuel, transportation (automobiles), and housing prices have risen due to normal demand interest rates can’t slow the basic demand for these goods.  Couple the fact that we have just come out of an economy that was shut down for basically 2 years the supply of the goods consumers need has been diminished as there were fewer workers to build or produce these basic goods.   Since this has caused a shortage in supply and with the same amount or more consumers going after the same amount of goods and services with the same or less ability to produce more goods due to lack of labor and now high-interest rates or a high cost of money to pay for these workers to produce a normal amount of goods you get supply side inflation.  If you have heard of this before you are not wrong, Ronald Ragan was the first to look at the supply side of the economic curve and after that was addressed in the mid-1980s the economy was more manageable.  Also, with more workers working the government was getting more tax dollars by taxing the workers less and having more workers paying lower rates but more workers paying those lower rates made the government more money.   This is a concept that has been lost by our current Monetary Policies which are only looking at the demand side of the demand and supply curve.  

I think you now have the knowledge to see where this is all going unless some drastic changes are made.   The economy has no feelings and reacts only to what is given to it.  I will say without a doubt in my mind that if the supply side of the global economic and American economic curve is not addressed soon interest rates have to continue to rise.  The Federal Reserve or our Central Bank only has interest rates to fight inflation with they do not have the ability to address the supply side of the demand and supply curve and without the Government’s policies changing to address this we will continue to see high inflation and high-interest rates.  The way out of all of this is to actually do the opposite of what is going on currently.  I agree with the Federal Reserve in raising interest rates as inflation is high, however, high-interest rates will not curve the demand and it will only hurt the supply side of the curve as it is costing companies more to have workers with high taxes and high-interest rates.  Until the Government addresses the supply side of the curve this will continue to spiral upward out of control, and I am truly convinced that our current government leaders do not understand this basic economic concept.   In fact, they have gone so far the other way spending money to “protect the environment” they have basically stopped the expansion of oil production in the United States, and with a low supply of oil you get higher gas prices.  Oil is not only used for our automobiles but our roads, plastics, fertilizer, and so many goods are produced from oil that people don’t even realize.  The price of fuel is directly related to our food prices, as well, and people may not realize that it cost more to deliver the food on a truck, it also costs more for the fertilizer to grow the food.  It also costs more for the farmers to till the fields and harvest the food as that is all done with fuel.  We are nowhere close to using electric vehicles for all of this and then you have to ask the question, are we going to need fuel to power generators to make the electricity to power all the electric vehicles?  I agree we should be more environmentally friendly, but not at the expense of our way of life, and our economy invest more time to come up with real solutions not a knee-jerk to some environmentalists.   The real solution to clean power is Hydrogen as 2/3 of the Earth is covered in water and when you burn Hydrogen the byproduct is water, why we have not gone down this road baffles me, but I digress.

So, I will conclude this by saying if we stay on the current course the interest rates will be around 8% by the end of the year, and by the first quarter of 2023, we will have interest rates at or above 10%.  You might think this is a crazy prediction but look at the history of this type of Monetary Policy and see what happened last time.    I am not a Doom and Gloomer, I consider myself a realist and everything to this point under the current Monetary policy has not worked or has made things worse.   If you read some of my earlier blog posts and the dates, I wrote them you will see I have been dead on.  Remember the economy has no feelings it does what it is told to do, all you have to do is look to see what it is being told to do and you will come to the same conclusion I have.  Unfortunately, I have no say in how the government creates its policies and if I did I fear I would be called an “Extremist” in my views.  We will see sagging housing prices, but the rub will be that no one will be able to afford them with rates as high as they are headed without some income inflation to match the current inflation rate, however, if you make more income but are taxed at a higher rate your net income will have gone down.  We live in a world with cause and effect and if the elected people can’t see the cause and effect of their policies then We the People pay the price.  If you are a first-time home buyer don’t be discouraged by all this as there are only 2 things you should be concerned about and that is “What is my payment going to be and what is it going to cost me to get the house?”   Once you own the home and you can make the payment then it should not matter to you what your rate is if you are comfortable making the payment.   When the rates come down you can always refinance to a lower mortgage payment.  So now is a great time to buy your first home, but it is now before the rates go even higher because they will be worse before they get better.   

Moving is a big job. One of the best ways to avoid becoming overwhelmed by the enormity of the task is to break it down into a series of smaller tasks. It can be helpful to create a checklist that walks you through what you need to do during the different stages of your move. So today, MAE Capital is here to help you do just that.

Eight Weeks to Moving Day

Start scheduling moving companies for estimates. Create a budget for your moving expenses. If you haven't already chosen your new location, pick one. 

Considerations for Business Owners

If you are relocating a limited liability company from out of state, you may need to register your business with the state. The rules for registering LLCs vary by state so you need to research the rules before you move. You can handle the registration yourself or save some time and avoid expensive legal fees by using a formation service. Additionally, if you’re considering a mortgage to raise capital to continue or expand your business, contact the experts at MAE Capital.

Professionals You May Need Other Than Movers

While you are getting your movers scheduled, consider other types of professionals you may need to use. For example, if you have fragile or specialty items to move, such as musical instruments, pool tables, fine art or firearms, you may need to hire a specialty mover. It may also be helpful to engage the services of a real estate agent, find a new veterinarian and establish with a new primary care doctor.

What Could Go Wrong

Make a list of the various problems you could encounter during your move and brainstorm ways to overcome them. For example, what happens if the closing date on your existing home happens before the move-in date on your new home? Also, if your job doesn’t end up being what you thought it was and you have to go back on the market, don’t panic. You can give yourself an edge over the competition if you take advantage of free resume templates to highlight your skills as professionally as possible.

Six Weeks to Moving Day

This is the phase where you transition from planning things to doing things. Start organizing your stuff for the move. Acquire moving boxes and start labeling them. Get your vehicles serviced. Start packing a small amount each day.

Four Weeks to Moving Day

Donate or discard items you can't move or sell, such as frozen foods. Get your important documents together. Contact utility providers. Get ID tags for pets.

Two Weeks to Moving Day

Wrap up loose ends, such as using up your perishable food, during this period. Make arrangements for a safe place for your pets and kids to be during the move.

Your list will likely change and grow, meaning you might end up with more tasks. However, you can use this example to help you organize your move into more manageable chunks. Remember to stay calm. The process can be stressful, but it’s also a great chance to embark on an exciting new chapter of your life!

MAE Capital is a unique Brokerage firm born from the changing Real Estate and Mortgage Industry. Our operating model exemplifies a forward-thinking approach to the Mortgage and Real Estate Industry as a whole, which we apply to the benefit of our clients. Call (916) 672-6130.

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I am going to start this by stating that this is not meant to be political but it sure is going to sound that way after I give a true and accurate accounting of what will happen economically to the US if this Student loan forgiveness is allowed to go through.   I will not even get into the extreme unfairness this is and the blatant attempt to get votes this is, that would not be productive to the economics of this.  We are going to explore history, and what happened in the past when the Government tries to spend it’s way out of inflation and a recession.

 It appears the current administration believes that the value of the dollar will not decline if they put more dollars into the economy.   That is like saying if I gave you more money what would you do with it?  Then give everyone more money and ask what they are going to do with it.   You would be right if you said they are going to buy things with the money, cars, houses, clothes, vacations, electronics, etc..  Logically, you can say if more people are buying more things and those things are in high demand the price of those things will go up.  This is called inflation.  Inflation happens when more people want the same things and the supply can’t keep up with it.  If you forgive someone’s debt it is like giving them a raise, they will have more money every month to spend if they are not spending the money on the debt they owe because the government paid it off.

As you ponder that basic economic theory, let’s look at the effect on the value of the dollar worldwide and how that will affect you here in America.  So, our government gives its citizens money, and in this case to pay off debt.  By doing so they put more US dollars into circulation and that will devalue the dollar worldwide.  Why? Simple the more of anything everyone has the less value it will have.  For example, if I produce a specific widget and I have more than I can sell I will have to lower the price of the widget to sell them.  The same holds true with the dollar, the more US dollars that are out in the world the less value they have to other countries.    If other countries, see our dollar as plentiful or in oversupply then they will ask for more dollars when they sell stuff to the US thus inflation.  This type of economics is called Keynesian Economics and in the history of the world this has never worked, kind of like socialism has never worked, I digressed.  

I told you I would not get into politics here so I will give you the facts and you can do what you want with the information.  Keynesian economics is a tax and spend way of running a monetary policy.  Yes, after the spending will come the taxation, it is inevitable and already shown by the government wants to hire 87,000 new armed IRS agents.  It doesn’t take much of an economic mind to see what our government is trying to do.   When you couple the climate change agenda with all this and the slowing of domestic oil production you are staring at an economic disaster.  The people it will hurt the most are those older folks that have saved for retirement all their lives to see it all erode away with poor government money management.   

Again, trying not to be political here, but I am 59 years old and have seen this disastrous mindset in the early to late 1970s.  Back then the monetary policy was very similar to today’s tax and spend mentality.   Where that ended up was high inflation and high-interest rates which was called stagflation (a stagnant economy with high inflation).  I started in the mortgage business in 1982 and mortgage interest rates at the time were hovering around 18-20% for a fixed rate loan for 30 years.  We have just seen mortgage rates jump from the start of the year (2022) when they were at a nice 3-4% to a staggering 5-6% with no end in sight for how they will go.  The Federal Reserve (for those that don’t know is not part of the Federal Government they are a Central Bank that other banks use), has vowed to continue to raise interest rates until inflation gets back down to 2%.  Anyone can see that under this tax and spend regime we will never get there, so interest rates will continue to rise.  If you go back to my previous posts from last year you will see how correct I have been in my predictions.  

You might be making more money now at your job and that is great but now if the government cut your expenses more than half you would have even more money to spend.   Initially, you think this is a great deal but eventually, you will have to pay for it and in the end, you will be paying a lot more than the short-term relief you got.   It is simply the price of everything that went up and so has your tax obligation.  The more money you make the more you pay in taxes.   Next, the Government will raise your tax rate to cover the short-term benefit of getting your student loans paid off, and over your working life, you are paying more in taxes than the student loan was by about 10-fold.   So not to be political, but would you rather pay fewer taxes and have more freedom to open a business and not worry about the government coming after you, or would you rather pay more taxes and see the government pay for people that have not contributed to our economy in any way or send money overseas?  Or simply put would you like to put your neighbor’s kid through college or your own kid?  If you are close to retirement and you have saved all your life for retirement, would you like to see the government tax your retirement away to pay for people you don’t know and suffer because of it?  If you are a first-time home buyer, would you rather pay a 3% interest rate or a 6% interest rate and be taxed on your income at a higher rate?  If you said yes to any of the above then your wish has been granted by this administration.  Again not being political, I can’t stand back without informing those that have not had the benefit of a good education to fully understand the principle here.  You can probably tell I don't like the idea of paying off student debt or any frivolous government spending that appears to be only for getting votes at the expense of every American.  

Has the Federal Reserve Board gone too far with raising Interest Rates?  The Federal Reserve raises interest rates to combat inflation.   Yes, we have high inflation, but has it been caused by high demand for goods and services or is it normal demand with a diminishing supply of goods?  This question is not a question the Federal Reserve (the Fed) has not addressed properly as when inflation started to be seen the Fed initially called it “Transitory” meaning short term, turns out they were wrong.  So now after the Fed realizes their mistake, they are raising interest rates at a far faster rate than they would have normally.

When the Fed raises interest rates, they only control one rate which is the Federal Funds Rate or the rate at which banks can borrow from the Fed.  The Banks, in turn, raise their prime lending rate to the public which affects business loans, Home Equity Lines of Credit, but not the interest rates for your typical home loans.  The reason home loan rates increase or decrease when the Fed raises rates is the fact the home loan rates are driven by the FNMA, FHLMC, and GNMA and the bonds that are spun off of those securities.  Wall Street will actually set the rates based on a perception of what will happen as a result of the Fed raising its interest rate.  There is another factor at play here that needs to be addressed and that is the fact that the Fed has been buying mortgage securities since the pandemic started and now they are selling their holdings off reducing the “balance sheet” as some of you may have heard.  

The Fed is raising interest rates to slow down the economy in the hopes that the demand side of the economy will slow due to the higher interest rates thus slowing the demand to borrow money and expand.  This philosophy is fine and works if both sides of the demand and supply curve are addressed.  The problem I see here is that the Fed is overreacting to situations they can’t control.  The Fed has no way of controlling the supply of goods and services they only can control the demand side.  The problem with this philosophy in this economy is that I see normal demand with a shortening supply of goods and services.   So, by trying to slow demand they are missing the fundamental problem and that is the supply side of the equation.   We all have heard about China and its lockdowns over the last several months.  This is causing a supply shortage of consumer goods, auto parts, microchips, clothes, and retail goods.  The Fed can’t control the loss of these goods in our supply chain they are simply making it harder for American businesses to catch up to the loss of goods coming from overseas.  

As the Fed tries to fight inflation by raising the rates and ignoring the supply side we will see a recession in the near future as the economy will have to pay so much more for the money that is needed to expand American Business.  Oil prices are also a major factor in the inflation equation as we can all see at the pump.  The Fed can’t control the demand for oil by raising interest rates, so as prices for oil continue to rise so will the price of goods and services until the price of oil is addressed by increasing supply or at least showing the American people that the government is working on freeing up resources to increase supply inflation will continue.  As inflation soars and the Government doesn’t address the supply side of anything we will continue to see inflation and eventually with rates rising so high we will see an economy stagnate to the point where there is no possibility of expanding the economy with high rates to borrow money.  This is called stagflation and I would argue we have been in this state for some months now with it worsening every day.  

On the Real Estate and Mortgage side of rising interest rates, the signs will be obvious.  As interest rates rise the affordability of homes will diminish even further.  As demand for Real Estate dries up due to high-interest rates you will see the demand for home goods diminish as well.  As the demand for money drops off with the high rates mortgage companies will be laying off workers and so will home improvement stores, home builders, and appliance stores.  This ripple effect will cause other industries to have to lay off workers and the economy will slow so fast that you will have high prices for gas, food, and all services that revolve around them.  Eventually, the prices of homes will go down due to high-interest rates and people out of work not being able to afford a home.  I don’t want to scare people, but the government has been out of control of the economy for over a year now and it is showing and will continue to decline if logical decisions are not made.  My fear is that what should be done and what is being done is all somehow politically motivated.  Janet Yellen, the secretary of the Treasury of the United States, admitted that she made a mistake with inflation by not raising rates soon enough.  Now fast forward to today the Chairman of the Fed Jerome Powell is glossing over the supply side of the equation for some reason and that should scare you as that is the core problem with inflation, not the demand side.  So, I see the Fed raising rates to where we see a deep recession with mass layoffs on the horizon if they don’t stop with the interest rates and move to the supply side.   Again, politics get in the way with this as the current administration is responsible for the price of oil as they have shut off possibilities of America producing more thus having to look to foreign sources of oil.  Although this may look grim we are all Americans and we will persevere and prosper.  To counteract rising interest rates look for new innovative home loan programs coming soon to help those get into homes in a changing world.   

Tips for Moving to Another State While Starting a New Business

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MAE Capital Mortgage is a Brokerage firm that uniquely blends mortgage and real estate services to give you as many resources as possible to get you in the home of your dreams. Connect with us today by calling (916) 672-6130!

Are you considering a move to another state? If so, you're not alone. According to the U.S. Census Bureau, over 27 million Americans relocated in 2021. While moving can be an exciting adventure, it can also be daunting — especially if you're starting a business in your new location. Here are some tips from MAE Capital Mortgage for a successful move.

Find Neighborhoods in Your New Location

When you're ready to look for a place to live, it's essential to do your research. Consider neighborhoods in your new location and what type of housing is available. If you're moving to Sacramento, CA, for instance, check out Historic Chinatown and Discovery Park. 

Secure a Job in Your New Location

Job hunting in a new city can be challenging, but there are a few things you can do to increase your chances of success. Start by researching the job market in your new location and identifying hiring companies. Update your resume and cover letter to reflect your qualifications and what you can offer potential employers.

If the move involves either relocating a business that you currently run or plans for launching a new venture, you’ll want to make sure that all your tech needs are covered, ideally before moving day. Using software that’s based in the cloud is your best-case scenario, as you’ll be able to access and use mission-critical apps on the fly. For example, you can get payroll services processed quickly with online payroll software that allows you to pay your employees on time and with direct deposit to avoid having to print checks. You can also rest assured that your tax liabilities stay in check, as such software calculates and pays payroll taxes automatically.

Know the Cost of Living in Your New Location

One of the most important factors to consider when moving to a new location is the cost of living. In Sacramento, the cost of living is relatively affordable. Sperling’s Best Places notes that the median home price is $435,600 and the median rent is $1,556 for a two-bedroom. The cost of groceries and utilities is also relatively low.

The area has many free or low-cost attractions, such as the historic “Old Sacramento” riverfront downtown area. Also, the warm weather makes it perfect for outdoor activities year-round, including at nearby Lake Tahoe.

Do you have children? Sacramento County has some excellent public schools and several private schools. Colleges include Sacramento State (California State University, Sacramento), the University of California, the Los Rios Community College District, and the University of the Pacific.

Purchase a Home in Your New Location

If you're planning on purchasing a home in your new location, it's essential to be aware of the different mortgages available. Talk to a local lender about your options, and compare interest rates. It's also good to get pre-approved for a loan before you start looking.

Adjust to Your New Location

Moving to a new location can be overwhelming, but there are a few things you can do to ease the transition. Make sure you're familiar with the area and have a good map of your new neighborhood. Get to know your neighbors and introduce yourself to the community. 

Start a Business Plan, Including Creating a Logo

If you're thinking about starting your own business, it's crucial to create a formal plan to have a road map for where you want to take your company. Your plan should include information on your target market, your product or service, how you'll reach your customers, financial projections, and funding. 

It should also have a marketing strategy, an important part of which is a stand-out logo that will help you create a memorable brand. Money is usually tight during the startup phase; fortunately, you can generate a logo online for free that will help you create a professional logo that pushes your messaging and identity in just a few straightforward steps.

With these items in place, a well-crafted business plan can give you a better chance of success as you start your new venture. 

Moving to Another State With Ease and Confidence

Moving to another state can be an exciting and challenging adventure. The right plan – which includes aspects like securing financing, using online payroll services, and drafting a business plan with a marketing strategy that should include creating a logo – can ensure everything comes together. For help finding financing for your dream home, contact MAE Capital Mortgage, where real estate meets mortgage!

MAE Capital Thanks  Suzie Wilson for authoring this article 

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Debt Management Tips for First-Time Home Buyers

Are you planning on buying a home within the next year? Now is the time to start managing any existing debt so you can improve your debt-to-income ratio and boost your credit score. While you don’t have to pay off all of your debt before buying a home, do what you can to get your financial house in order before taking on more debt. The last thing you want is to become house poor! Here are some debt-management tips to help you prepare for a home purchase in the next 6-12 months.

Home Buying Steps for Business Owners

If you own your own business, you may have to take some extra steps as you prepare to buy a home. For example, consider forming an LLC to protect your personal assets from business-related debts or lawsuits. This will keep your new home safe from creditors! LLCs also enjoy tax advantages and management flexibility that can make it easier to grow your company. Plus, when you file an LLC, your business will seem more credible to mortgage lenders when it comes time to buy your new home. Check specific state regulations around forming an LLC so you know what to expect.

Cut Your Spending

If you want to pay off a lot of debt quickly, one of the first things you should do is reduce your spending. MoneyUnder30 recommends against creating a strict household budget and tracking every dollar you spend. Instead, set up a system that tracks all of your spending automatically, like using a single debit or credit card for everything. 

Consider allocating yourself some money to spend on personal expenses, like a dinner out or a new clothing item. For example, you could set aside just $100 a month to spend on treats for yourself. Rewarding yourself for your spending cuts is a great way to maintain your motivation.

Make a Debt Reduction Plan

People use all kinds of different methods to pay off debt. Look into your options and choose a debt repayment method that will work best for you. For example, you could start by paying off either your smallest loan amount or your debt with the highest interest rate. These methods are known as the debt snowball and debt avalanche, respectively. Both of these methods can boost your confidence and increase your sense of control over your debt, encouraging you to continue down the same path.

Transfer Your Debt

If you’re paying a lot of interest on your debt, consider transferring your remaining balance to a line of credit with a lower interest rate. This will make it easier to pay down your debt. For example, you’ll typically pay a much lower interest rate for a line of credit than for a credit card or personal loan. A line of credit can also be useful for consolidating several loans into one. Just use the money from your line of credit to pay off all of your other debts, then you only have to focus on making one loan payment each month.

Land a Side Gig

Bringing in some extra income will help you pay off debt more quickly. Consider picking up a side gig for a little while until you’re happier with your debt situation. Look for a part-time job in town, drive for ride-sharing companies in your free time, or offer professional services remotely on a freelance basis. There are countless ways to make money on the side of your full-time job!

If you’re planning to buy a home within the next year, start preparing your finances now. Don’t let your existing debt get in the way of your homeownership goals! Make a plan to start paying down your debt now so you can feel confident in your decision to become a homeowner in the near future.

Are you looking for your dream home? MAE Capital Real Estate and Loan can help you find an affordable mortgage! Call today so we can discuss you

Article was written by: Suzie Wilson

It wasn’t too long ago that we were looking at multiple offers on million-dollar homes and fights erupting on homes in the affordability range.  This was just in March of this year.  We are looking at something dramatically different now with interest rates driving the changes.  Those million-dollar homes are now sitting on the market longer and we are now seeing price reductions in that price range.  While in the affordability range we are seeing the demand get sucked up quickly and houses are coming on the market at a much faster rate.

I will start with the analysis on the upper end of the market, those million dollars plus homes.   I now can say without a doubt that the top of the Real Estate Market was March of this year.  Since then, interest rates have risen above 5% which alone has slowed the market.  In March of this year, you could still get a home loan with an interest rate in the 3’s, and now with rates in the 5’s that has cut the purchasing power of potential home buyers by a lot.  What we have seen is that people were qualified back in March for one loan amount and didn’t realize that rates have risen as much as they did and while they were not looking they no longer qualified for the homes that were in their price range.   Watching the Multiple Listing Service or MLS we are seeing more properties that were in pending status come back on the market with no fault of the seller but turns out buyers no longer qualify with the higher rates.

In the affordability range (here in California) is between $450,000-$650,000 we have seen more homes hit the market in the last several weeks.  As potential home sellers realize that the top of the market has come and gone they are now putting their homes on the market.  I believe that potential sellers have waited to market their homes until the top of the market and now that we are there, they are all putting their houses on the market at the same time.  This is great news for potential home buyers that have been beaten out of the Real Estate market and decided to sit on the fence until this very thing happens.   Demand will quickly be eaten up and inventory will continue to rise.    As interest rates continue to rise this will cut a significant amount of potential home buyers from the market.  So, if you fall into this price range of home buyer then I believe it won’t be long before we enter a buyer’s market.

As interest rates rise and inventory rises, prices will have to soften a bit to get buyers to buy.  In addition to that, those sellers will be making concessions to get potential buyers to buy their home.  A sales concession is when a seller pays for pest work to be done, the buyer’s closing costs, and other things to entice a potential home buyer to buy their home.  This is what is commonly referred to as a buyer’s market.  This will occur once the pent-up demand slows down and interest rates price home buyers from the market.  This is not something we like to see; however, I believe this will not cause a manic sell-off as we saw in 2008 through 2011.  The reason is simple we don’t have a money crunch like the last Real Estate correction.   Money is still available but at a much higher rate and we have relatively full employment, and we are not seeing mass lay-offs as we saw during the recession of 2008-2011.   This is not to say that it still can’t happen.  The way this would happen is if the Federal Reserve continued to raise Interest Rates past the equilibrium point which is where we could be today.

If you are a home buyer today my advice would be to buy as soon as you can as interest rates will continue to rise.  At MAE Capital Mortgage we have a “Lock and Shop” option for home buyers.  The “Lock and Shop” is once we have you approved for a loan amount, we can lock in today’s interest rates.  The lock period could be up to 180 days to give you the opportunity to look for the right home or if you are having a new home built it will allow time for the build.   Doing this will cost you a little more than if you were to have a home a lock your rate for 30-60 days, but in a rising interest rate market, it could save you hundreds on your monthly payment.  We are at a rare place in history where the Federal Reserve has already told us that they will have 2-3 more rate changes this year alone.  That said the “Lock and Shop” option offered by MAE Capital Mortgage Inc. is an easy choice to do if you are shopping for a home to buy in the next few months.

If you are a Potential seller in this market, know where your house falls in the affordability range.   The higher the value of your home the more difficult it is going to be to sell your home.   If you are considering selling your home in the next 6 months now should be the time to get your home on the market to get the very best price.  My advice would be to talk with a MAE Capital Real Estate Agent about getting your home on the market and devise a strategy with them to get the highest and best price for your home.  Here at MAE Capital, we are no strangers to changing Real Estate Markets and how to market to the changes our Agents are seasoned pros and our newer agents have the energy and mentors to get you the very best price for your home.  We also have a bundling program that when you list, sell and buy your next home with us and use our mortgage options we will buy your interest rate down so you have a lower than market interest rate thus a lower payment as our realtors will put some commission towards your closing costs on the new loan.  This program is great and is not offered by any other Real Estate firm.   

If you are considering buying or selling now would be the time to get on it.  I can say that next month the Interest rates will be higher, and so will gas prices, and food prices.  Inflation is here to stay for a while and the Federal Reserve has said they will be continuing to raise rates, we know that gas prices will continue to rise until we either produce more domestically or cut our demand, which is not possible.   We also need to keep a watchful eye over geopolitical events as they could cause even more problems to our economy.   We are living in a very unique time with a very unstable economy, high gas prices, high inflation, and a government that wants to spend more money and raise the minimum wage, and raise taxes, all of which will cause even more inflation.   

MAE Capital Real Estate and Loan’s operating model exemplifies a forward-thinking approach to the Mortgage and Real Estate Industry as a whole, which we apply to the benefit of our clients. Reach out for more info today! (916) 672-6130

Your Guide to Getting the Best Deal on Your Home

Whether it’s your starter home or forever home, you deserve to get the best deal possible. This guide from MAE Capital Real Estate and Loan looks at the pros and cons associated with buying either type of home, as well as important considerations to take into account.

Starter Home or Forever Home?

If you’re a first-time homebuyer, the decision to buy a starter or forever home can be difficult. As you weigh your options, there are many factors to consider. The most important is your future plans and how much space you’ll need in the next few years.

Should You Rent?

When deciding whether to buy a starter home or a forever home, you should also consider the possibility of renting. While this is not always an option, Money Management International notes that it may be a solution for those who don’t have the money saved up or have bad credit.

Considerations Before Buying Your First Home

Ramsey Solutions points out that if you are looking for your first home, then you need to ask yourself a few important things, such as, am I ready to buy a starter or forever house?

You should take into consideration your future plans, the location, and the price. Are you looking to settle down in one place, or do you want to keep moving around? What is your budget like?

The pros of buying a starter home include affordability, less upkeep, and the possibility to earn future income (i.e., renting it out). The cons of buying a starter home include smaller size, the possibility of needing repairs, and typically more difficult to sell.

What to Consider When Buying a Starter or Forever Home

Before deciding whether to purchase a more affordable starter home or your forever home, there are a few things you need to consider.

The first is the size of the home. Starter homes are smaller and do not typically have as many amenities as a forever home. For example, if you have a growing family, starter homes may not be the best choice for you. 

The second consideration is how much upkeep will be required from homeownership. Finances and time constraints should also be considered when purchasing a starter or forever home. Another factor is purchasing a home warranty, which will help offset any costs for minor or major repairs down the road. So if you're looking for the best home warranty company you’ll want to start your research right away. At MAE Capital Real Estate and Loan, we will pay for your home warranty if you use one of our buyer’s Agents to help you find the perfect home and the warranty for peace of mind.   You’ll also need to be prepared to put in the work needed to maintain your property? Once these decisions are made, it’s time to decide which type of property meets your needs!

The pros of buying a forever home include putting down roots, you won’t have to move again, and they’re a larger size so you can grow your family. The cons of buying a forever home include a higher cost and more upkeep.

As you can see, you have a lot to think about as you compare the pros and cons of starter homes and forever homes. Depending on your current financial situation, it might make more sense to go with a starter home initially and then work your way into a forever home.

MAE Capital Real Estate andLoan can help you make the best decision based on your needs.     Bundle Your Real Estate services with allowing MAE Capital Real Estate and Loan and save thousands of dollars and get a lower than market interest rate thus a lower mortgage monthly mortgage payment.   We look forward to helping you with all of Your Real Estate needs.  

Authored by Suzie Wilson

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