Blog with MAE Capital

Here we are in the middle of 2023, had to believe.  This year has been one of the slowest Real Estate Markets we have seen since 2009.   We are experiencing record inflation for the 21st century of the like we have not seen since the early 1970s.  This tells us that the cost of goods and services has risen faster than most people’s income streams have.  What does this mean for Real Estate now and into the second half of 2023?

Based on the history of inflation you see the Stock markets go up due to the fact that the valuations of companies tend to go higher with inflation.  We have seen this throughout history and this time is no exception.   What you must be cautious of is when companies’ costs rise so high and the demand for those goods or services decreases thus income for those companies will also decline.  After this companies will have to lay off salary-based employees to keep up with the rising costs and when this starts to happen you will see the economy fall into a recession or worse depression.   

Inflation is such a killer of economies in many ways not just with the higher costs of goods and services but also with the availability of money with higher interest rates.  Over the last year and a half now we have seen interest rates move from historic lows for 30-year fixed-rate mortgages from the 2%-3% range to now a 7%-8% range.  What this has done is cut out a whole segment of the population’s ability to qualify for a new home loan.  In California, we have starter home prices hovering around $500,000 on average for the state.  What the higher interest rates have done is cut the people that could have qualified for this house.  For example, the payment on a $500,000 house with 5% down at a 3% interest rate is $2002.62 principal and interest at 7.5% Interest rate the payment would be $3,321.27.   At the 3% rate, an average borrower would have to make right about $7,000 a month to qualify for the mortgage.  At 7.5% the borrower will have to show around $11,500 a month.  This shows you the power of interest rates and buying power.  

That said you would assume that Real Estate prices would have to come down to accommodate the higher interest rates.  We saw this occur in some markets but not nearly enough to make up the difference. Today we see Real Estate prices staying relatively steady.  The reason for this is interesting.  Since so many people refinanced or purchased their homes with lower interest rates, they are reluctant to sell their homes as the can’t qualify for a move-up home, and in some cases, people couldn’t afford the house they are living in if they had to do it all over again.  So, we are seeing people holding on to the lower interest rates and not selling their homes as they would have to qualify for a new home under the higher interest rates.  With people not selling their homes, we are experiencing a supply shortage of homes on the market and with that low supply of available housing prices have remained steady even with the higher interest rates.  

The next hammer to fall, unfortunately, is going to be employment layoffs.  This is going to happen due to inflation and government spending that fuels inflation with an oversupply of money.  In the second half of 2023, I see consumers holding on to their hard-earned money as the average consumer feels that something is going to happen, they just don’t know what.  There are many factors that could fuel inflation, but the biggest unreported issue will be the worldwide devaluation of the dollar.  When the world drops the US Dollar as the worldwide reserve currency, all the goods we buy from overseas will cost more and more.  This is something that no generation of Americans has ever seen, the closest we got to this was the great depression.  The way America got out of that was World War 2 by producing Ships, Planes, Autos, Guns, Ammunition, and such.   The largest difference between then and now is that we produce very little in the US, we outsource to China and other countries.   History tends to repeat itself, so shouldn’t be preparing for a war?  If you are paying attention to the world and not preoccupied with all the social issues going on in our country, you will see how close we are to this prophecy coming true.  

I don’t like to be negative, and I truly believe in America and the American way of life, however, I must be a realist with what I know and have seen with history.   As the US Dollar becomes less valuable in the world markets this will cause further inflationary pressures on our economy.   The only way out of this at this point is to figure out a way to re-set America’s debt to the Central Bank or get rid of the Central Reserve Banking system altogether and start with something new.  How this could be done I would not know, but I do know it will be a very painful process to every American.  With the BRICS nations and a new world reserve currency on the horizon, America is going to have to do something fast, very fast as that is supposed to launch in August of this year, and over half of the world’s nations have agreed to sign on this new asset-backed currency.  Our central Bank is going to try and compete with this with a new Central Bank Digital Currency (CBDC).  The problem with this is that even our own citizens don’t like the idea of this as Americans don’t like the idea of being watched or controlled in the name of some made-up government issue like climate control.  For more on this please I urge you to do research on this as this CBDC is supposed to come out in July of 2023.

What will a CBDC do to interest rates, housing, and inflation?  This is something that remains to be seen but rest assured it will be a rocky ride going into the end of the year.  I always say if you can own Real Estate do so as Real Estate will have value.  I believe that once people see the changes happening there will be a flight to quality investments like real estate.  I will bet the Stock Markets will struggle, to say the least.  Interest rates will be dependent on how much inflation we have as interest rates will rise as inflation rises.  So, if you are looking for advice as to when to buy Real Estate my advice would be to buy as much as you can now, if you can find it, and hold those properties that you hold currently.  Keep an eye on the world and what is going on, and research other sources other than your mainstream media that most of us have grown up on as we are not being told the truth to keep the masses under control for as long as they can.   Not that one individual can do anything, but the power of the masses can make changes.  

Posted by Gregg Mower on June 1st, 2023 11:02 AM

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.  

Posted by Gregg Mower on February 27th, 2023 1:40 PM

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 7th 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.  



Posted by Gregg Mower on February 21st, 2023 12:14 PM



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