Blog with MAE Capital

We are coming out a year-long pandemic that has shut down certain sectors of our economy and now with the vaccine people are feeling better about going out in the world.  The Government has infused $1.9 Trillion dollars into our economy and other countries.  People are getting their stimulus checks whether they need it or not.   The stock market is at all-time highs and the Real Estate market is so hot it is prohibiting first-time homebuyers from entering the competitive market.  This all sounds like great news right, but is it?  This remains to be seen but if we follow the logic and basic economic principles this short-term run of euphoria will run out of gas over the next several years and here is why I say this.

Assuming the worst of the pandemic is behind us and those stores and restaurants that have been closed or limited in capacity will soon be up to 100%.  What will consumers do?  That is the question, will consumers go to Shopping Malls or stay to ordering online?   I do believe that people will go to restaurants again as that is social and people are social animals.  The landscape will look different as people’s habits have changed and adapted. Travel will also begin to get back to normal as people will want to finally go on a vacation and after they are vaccinated, they will feel confident in traveling again.  So as far as the obvious things people desire those will come roaring back but what about the price of those goods and services will they be able to afford the new higher prices?  

Higher prices of goods and services are inevitable with higher gas prices and inflation and the devaluation of the dollar.  Although the Federal Reserve has said they will not touch interest rates until 2023 the market will have other aspirations.  We are already seeing higher interest rates in the mortgage market as a result of the economy opening and stimulus.  Higher gas prices are due to the current administration’s killing of the Keystone Pipeline and moving to more oil dependency from foreign providers.   That dependency on importing oil makes the cost go up as opposed to relying on domestic oil production.  Thus, higher prices for goods and services that are imported, shipped, trucked, or driven to the marketplace.  We are also seeing increased prices in commodities (steel, copper, gold, silver, lithium, etc.) as the price to produce them has increased.  This makes automobiles and other items that depend on the price of steel or commodities more expensive to produce thus more expensive for consumers.  This is what we call inflation.

Inflation, left unchecked, can cause more problems than just higher prices of goods and services.   Inflation will cut potential buyers of goods and services out of the market thus causing businesses that sell those goods and services to slow production and lay off workers.  For example, automobiles, if the price of a new car is so high that the average or middle-class person can’t afford one they will not buy new cars, they will be relegated to buying used cars until their income catches up with inflation.  This will cause the automakers to slow and have to lay off workers.  This affects all goods produced thus causing other industries to have to lay off workers as well.  So, inflation is one of the most toxic things to occur in any economy.  Traditionally, the Federal Reserve would raise interest rates to slow inflation by making the cost of money more prohibitive for expansion.  Inflation is caused by 2 things; one the demand for goods and services are higher than the supply and; two the dollar is devalued to other currencies.  Currently, we are seeing both in action.

The demand for housing currently is a good example of where the demand exceeds the supply and that is why you are seeing skyrocketing housing prices.  You are also seeing the cost of the materials rising at a higher rate than normal to build a new house so new house prices are going up in response to demand and costs to produce.  In the short run, in the next 1-2 years, you will see this trend continue, and coupled with low-interest rates to buy a home the demand will stay strong.   The housing market will slow only when interest rates go up and the demand slows until then you will see increases in housing prices to the point that the average person can no longer afford a home.  The worry is that supply suddenly increases as people realize their homes are worth far more than they thought so they decide to sell all at the same time.   This would only be bad if the supply of homes for sale exceeds the demand for the houses.  When that happens, it would mean that all the demand has slowed due to higher interest rates or higher prices or high unemployment, or all three.  This is what we would call a perfect storm and we saw this occur in 2008 when the housing bubble burst.  

So, for the short term in the economy, we see higher inflation with industries opening up again and with the stimulus checks going out to Americans and to other countries.   The inflation we see will keep going as people get back to work and people feel better about their personal finances.  As people spend their stimulus checks or invest them this will keep the short euphoria going.  In the long-run, if inflation is left unchecked, the worry is that we will start to see normal economic moves such as higher interest rates to fight inflation which will cut people’s ability to buy higher-priced homes.  This will cause a slowing in demand for homes and eventually we will see supply exceed demand thus prices will have to go down to adjust for that.  How bad will this adjustment be is yet to be seen and will hinge on what monetary and fiscal policy the government adopts.  If the government raises corporate taxes to a point where corporations can no longer expand or hire, we could see an increase in unemployment which will hurt the economy.  The Government has also talked about raising taxes on individuals as well to pay for all this stimulus.  There is also talk about raising the capital gains tax to 43-48% from the current rates of 15-20%, if that happens people that have investments in Real Estate and Stocks or commodities will be impacted by either not selling or if they do having less from the sale to reinvest in the economy. In addition, if gas prices rise too high we could see a phenomenon that we have not seen since the late 1970s when we had “Stagflation” where we had a stagnant economy with inflation and super-high interest rates.  I do understand the human aspect of the government wanting to help people, but my worry is that what might be nice today will hurt tomorrow.  The $1.9 trillion dollars the government just spent is a worry that every American should have as that will have to be paid back and with the national debt over $35 Trillion dollars that’s over $80,000 per American that is owed.  When will it end, will the debt be called due at some point, do we just ignore it?   I am not sure the average American understands what this means to our country and to every American. Now there is talk about another $2 Trillion Dollars be allocated for infrastructure, the fixing of roads bridges.  

In the end, every dollar, the government spends it is money that we all owe back as Americans.  The way our economic system works is for every action there is an equal and opposite reaction.  So, If the government keeps spending our money every American will have to pay for it in higher taxes and inflation.  When the dollar falls from the world currency then America becomes like Europe that has had all kinds of problems with their monetary system since they went to the Eurodollar in the beginning of this century.  Every American has to pay for what our elected officials do.   This is not a political statement it is fact, and it is the way our country was founded.    What can be said about our economy is that we are in store for inflation and higher interest rates which will slow the economy and the slowing will cause higher unemployment.  We have the ability to stop all of this but the average American will not understand these basic principles as all they will see is the short-term benefits not the long-term harm.  We all need to learn basic economics so when we go to vote we are not harming our children and their children.  Rates are still great so if you have been thinking about refinancing or buying, now would be the time and everyone needs to look toward the future and hold their elected officials accountable.  

Posted by Gregg Mower on March 31st, 2021 10:57 AM

If you have been in the market to buy a home in the last 5-8 months you have seen competition for homes to likes we have not seen since the sub-prime era of the early 2000s.  If you currently own a home and have been looking to take advantage of historically low-interest rates, but have found it has been taking far longer than you would have expected, you may be asking; what is going on?  Americans have been under the crushing fear of a virus that most know nothing about and the Government has been closing businesses and making people work from home for the last 8 months, so you would expect that things would be slow right?  Actually, quite the opposite.  With the Federal Reserve lowering and keeping long-term interest rates at historic lows those that have “essential jobs” are thriving and are looking to better their financial situation by refinancing to lower their payments or take cash out to do home improvements or sell and move up.  The combination of a hot Real Estate Market and low-interest rates are creating a strain on a system that is already overloaded.    So what’s going on?

Real Estate has been booming as people have been forced to work from home and are looking for those properties that better fit their family’s needs.  This is a dynamic that we have not really seen before as most of the time people prefer to live closer to where they work.  Now that work is from their living room, or spare bedroom, or even the kitchen table people are realizing that the space that has fit them before the Health Crisis no longer fits their needs.  Add children who have too distant learning to the equation and people have quickly found out that their existing living conditions could be better.    So we are finding people selling homes that they have outgrown and people buying homes that need more space for their family, this includes first time home buyers.  As renters are also experiencing the same restrictions, they see that buying a home becomes a better option and are now in the market as well.

That said, how do you get in the game, so to speak, to buy a home?  Most of all homes on the market today are being sold in the first few days of the listing being offered to the public with multiple offers.  How do you win your offer when there are so many others to compete with and homes selling well over the asking price?  My recommendation would be to make sure your offer looks clean, what I mean by that is to do your homework upfront and be prepared to not get the deal of the century but to accept that you will be offering over the asking price.  So, if you maximum price you qualify for is a certain number be prepared to factor in about a 3-7% upward margin.  Simply put if you are looking for a home listed for $400,000 be prepared to go as high as $420,000.  Hint: don’t start your search at the top of your price range go down 10% so you know you can compete.  Next make sure you are with a Mortgage Broker that can offer you the lowest rate possible, like MAE Capital Mortgage where we have negotiated lower rates with the lenders, we do business with.  If your rate is .25-.5% lower that can afford you up to $20,000- $50,000 more in buying power, so if you have been prequalified by a lender let MAE Capital check to see if we can do better and win your business and your new home for you.  Another tip to look at is the type of loan has a major part in the negotiating process as well.  A loan that offers the least amount of costs to a seller the better your chances are to get your offer accepted.  An example would be a conventional loan versus a VA loan.  Although we really want to help our Veterans out, sellers just care about the bottom line and with a VA loan the seller would have to pay some of your closing costs by the design of the loan and the seller would have to be able to provide a clear termite report where a conventional or FHA loan does not have those restrictions to the seller.  The less you have to ask the seller to pay for in this market the better your offer will look to the seller.  

Anyway, back to the conditions causing this manic moving trend and the plugs in the system and how to overcome them.  With the COVID ruling the land currently and the potential for the government to enforce another round of “stay at home orders”, “Home”, has become the magic word as we do not know how long this will be going on.  Combine this with a record volume of folks seeking low-interest rate home loans and it is a combination for frustration.  The volume of home loans in the system and the work from home orders are putting an additional strain on the lending industry as well.  Some of our major lenders located in states that have strict lockdown or social distance directives are forcing them to work from home as well.  The problem with this is the fact that so much of lending is done face-to-face within companies it is making timeframes take longer.  When an internal worker has to email their superior or underwriter or any one of the people that comprise the process flow of a lender it will take longer than simply standing up and walking down the hall to get an answer.   When we want the process to work as it has always worked and have expectations of consistency and don’t get it we become very frustrated, at MAE Capital Mortgage we have always strived for top-notch customer service and when we don’t get it from our partners we depend it becomes frustrating not only for us but our clients as well.  We all have to be patient during these trying times and the good news is that interest rates remain low and the Federal Reserve has vowed to keep them low for the coming year.

Where does this leave you if you are entering the process of buying a house or refinancing an existing home?   First and foremost, you have to be patient with the process then you have to be educated on the process and how you can best manipulate it into your favor.  The best way is to be prepared and has all your documents ready to provide your lender when getting pre-approved for a home loan or starting a refinance.   The items you will need to have to get approved for a home loan to purchase a home are; current paystubs for the last 30 days, 2019 Tax returns, 2019 and 2018 W2’s, last 2 months of bank statements, copy of your Identification cards (Driver’s license), if you are refinancing you will need to provide you current mortgage statement and a copy of your home owner’s insurance declaration page.   By having your documents ready to go you will go to the top of the heap to be looked at and get a much faster turn.  If you are purchasing a home be prepared to make an offer over the listed price of the home as discussed earlier.  Having the best partner to help you through the intricate maze will help considerably and here at MAE Capital Real Estate and Loan, we have special low-interest rates that we have negotiated with our lender sources, and with Realtors on staff, you can bundle your home loan and your Realtor to save you thousands of dollars.    We look forward to further helping you with your Real Estate and financial needs.        


Posted by Gregg Mower on December 1st, 2020 1:21 PM

Ok enough is enough we need to open this economy back up.  Despite what people say about the virus it has already played out in California in December January and February.  You see every year in California the sun starts to shine more intensely in April and as we move towards summer.  It has been widely publicized that the Coronavirus will not survive for long in hot environments.  I personally traveled to Australia over the Holidays through the end of December and into January.  Upon arrival in Australia I started to feel ill but I was on vacation, so I was not going to let a little cold get the better of my vacation.  This mystery cold/virus had me not feeling well with a cough and infected eyes for 2 weeks and by the time we had traveled to the hottest portion of our trip ( Cairns Au.) the illness had subsided.  As you know it is Summer in Australia that time of the year so it was warm the whole time.  Then a month after I got home in February I got sick again almost the same thing but this hit hard and the cough was more severe and I had a fever and I coughed for a month until it went away the end of February.  Then we heard about the virus from China and we were told to shelter in place in March and by that time it had already gone through California.  The media neglects to show you a map of the world and how a contagion replicated itself and how it travels the world.  If you look at a map you can see that the West coast of the United States, California, Oregon, and Washington would get this virus way before New York would, so it stands to say that California already has developed a herd immunity or it is just too warm for the virus to exist long enough to infect more people.  This is not to say it won’t come back and then will we know what to do or do this all over again?

That said, we have to start to believe in in each other again and know that we will get sick and people will die from this virus and many other things that we get ourselves into as a free society.  So how do we get the economy going again with people working from home and or laid off and non-necessary business’ that have been closed for so long how do we get it moving?  This is going to be tough as the people that have been making money during this have to go out and spend it locally and if they are scared to go out and spend many small business’ will be forced to declare bankruptcy if they have not already.  The Travel business: when will people start to trust air travel again, hotels, rental cars, air bnb?  There are so many little avenues within the economy that depend on each other, so when you spend your money on travel you are supporting so many others than just the airlines.  Restaurants: how are they going to look?  Is the government going to make it a law that you must sit so far apart in a restaurant, or have a barrier installed and will consumers want to visit busy restaurants again?  If laws are imposed on restaurants to not accommodate as many people, at a time, they will be forced to raise their prices to offset the increased space requirements or shut their doors.  Restrictive laws will further inhibit growth and may force many of our favorite restaurants to go out of business.  Banking: as you know you can’t go into your bank’s lobby as they are closed.  Will they open up the lobby’s again or will they have realized that the consumer has changed they way they can do banking, will we see more virtual banks and less people working in a bank?  All of these little things and so many more will play in as the economy opens again.

Do you feel comfortable with your job or your financial situation?  That will be the most important question moving forward to open the economy.  If you don’t feel comfortable spending, you won’t, and if there are many more people just like you the economy will not open as everyone hopes it will.  The United States and capitalism are both all based on consumer spending, without it we have a stagnant economy.  On the other hand, is there a pent up demand?  Consumers that have been scared of going out now have the green light to move about so they go out in hordes and buy up things at a fevered pace.  If that is the case the economy will quickly get back to some sort of normalcy.

Either way the Real Estate and the Mortgage Industry will need time to get back to normal as well.  If consumers are tired of the house they have been locked in for the last month and a half they will seek out a new house for their family.  If one family that decides to sell their house and buy a new one that will help Realtors, Mortgage Companies, Title Companies, Appraisers, Home inspectors, termite companies, sign companies, credit reporting companies and home improvement stores.  So, if people don’t sell and buy after this is over you can see all these industries effected.  However, there is another little problem that will arise out of all this and that is employment.  The people that have lost their jobs during this crisis will not be able to buy a new home, in most cases, until they have gone back to work or can pay cash for a house.  Households may have had one of the two workers laid off and may not have the ability to save for a down payment or may not feel comfortable so they will hold off until they feel comfortable again.  Another concern people’s credit may have been hurt by this not allowing them to qualify for a home loan.  People that have not made their mortgage payments will not be able to refinance to the low interest that will be there to stimulate the economy when this is over.  People that did not make their rent or car payments may not be able to buy a home for 12 months after the crisis. 

Not to be a downer but it will take some time to get back to Real Estate as normal.  I heard from CAR (California Association of Realtors) that Realtors may not be able to show homes and that virtual tours are going to be the “new normal” of selling homes.  This means people will not be able to see the home they are buying in the inside until they can do a walk through at the end of the transaction.  This may see the demise of Real Estate transactions at the end from homebuyers seeing the house for the first time and may not like it.  This will be interesting to watch unfold as people get more “used to” the new normal. 

Let us conclude this with some positive news with the Mortgage industry.  Interest Rates are the good news here with them staying down.  Although there is still a lot of confusion in the Mortgage industry things are getting done.  Now that we have figured out how to work with large companies that have their workers working from home we can navigate through the process as well or better than most in the industry.  Here at MAE Capital we are booking new refinances every day.  People can apply from their home on their computer or they can download our App and do it from their phone.  As far as delivering documents to us you can scan the documents directly from your phone using an App like Cam Scanner.  Our experienced Loan Originators can work virtually from anywhere so you will be taken care when you apply for your refinance with us.  We look forward to working with you. 

Posted by Gregg Mower on April 28th, 2020 11:37 AM

OK the world has gone crazy, have you?  Do you have 2 thousand rolls of toilette paper, 15 bottles of hand sanitizer?  I get the idea of being prepared, but to hoard essential items is ridiculous, but with the media fanning the flames of hysteria I understand the effects.  What the average person doesn’t understand is how all of this works from an economic point of view.  We have a situation that we have never seen in history, and history is how we evaluate the present in economics.  Economics and theories that support the way markets interact are changing as I write this.  Obviously demand and supply is still in full swing, but in very different ways.   What we are seeing here is a rapid shift in demand from a wide variety of items that people want or need on a daily basis such as cars and appliances and other items that are nice to have but in the overall scheme of things  are not as necessary as food and basic need items like toilette paper and this is why we are seeing a rush on these items. 

So, it stands to reason that if the demand for those nice items such as Real Estate has diminished, temporarily, you will see some real change.  In the short term you will see Real Estate values will correct downward as people are not going to buy during these times.  People are also worried about their jobs going away or that their income will be cut from layoffs or even getting sick.  Interest rates are not helping with this at all, despite the Federal Reserve lowering their Funds rate to zero.  What people don’t know that Long-term mortgage rates are not controlled by the Feds.  In actuality, the mortgage markets have gotten worse and rates have risen significantly over the last few weeks.  Where the long-term mortgage rates, in the beginning of March, was down to 3% and now after all the panic in the markets long-term rates are up to around 4.5% or more.  Why is this happening? The answer is complex, but simply put, when everyone is trying to sell their investments and there are not enough buyers price has to go down to get people to buy.  When talking about interest rates you get an opposite effect as Interest Rates have to go up to attract investors to buy them (the Mortgage Notes), put simply. 

So, you have people with no jobs, or are laid off, and have a higher interest rate environment, the demand for housing dramatically down.  What you have here is a perfect storm.  The demand for housing or home ownership is going to stop until the world gets figured out.  The good news is that those that do own a home will most likely be able to keep it as the Government has enacted measures that will not allow mortgage companies to foreclose during this crisis.   Mortgage companies can offer forbearance as an option during these tough times, which is putting your mortgage payment off until you get your job back.  Forbearance, has to be granted it is not a given even in these times, you have to ask your mortgage company for forbearance and they will grant it to you if you can prove you have been financially hit.  So don’t just stop making your mortgage payment call first, but also know that you will have to pay the amount back that you are not paying now, it will be added to the end of your mortgage and you will pay interest on it. 

Renters that lose their jobs or can’t pay for some reason can’t be evicted for up to 4 month but know that you will have to pay that amount back within 2 years to your landlord, so if you can make your rent do as you will get way behind and may get evicted in the end.  It is always recommended that you make your housing payments if you can, because getting behind on payment that large may get you to a point in time where you just can’t make it up.  On the other hand, if you are renting and have been saving to buy a home and you don’t use that money to live on during these times you could come out of this being able to buy at low prices. 

If you have been considering selling your home, it might be prudent to wait until people get back to work in a few weeks to put it on the market.  Realtors in this market are seeing people that had their homes for sale prior to this put their listing on Hold.  What this means is that the sellers of property that put their listing on hold can’t show them or make offers on them but by doing so their listings are still being seen by potential buyers that after the crisis is over may be looking to buy.  As in the Stock Markets you want to buy low and sell high and I think that in the short term there will be deals for investors to get in on, but it will be short lived.  As this crisis ends and people go back to work their attitude will change towards buying again as they feel more financially secure.  If your house is on the market right now be patient and talk with your Agent as to how to strategize the sell of your home when this is all over.  I see that there will be a short-term drop in prices but will recover as the Stock Markets recover. 

This is unheard of and we have never seen this before on any scale let alone as large as it has gotten, global. With no history to look back on we just don’t know what is going to happen.  In history we had a pandemic in 1918 that ended up killing over 100 million people, we don’t see this happening with this one, but there was a war going on at time and no shelter in place orders.  During that time the war machine was roaring so the economy was not hit nearly as hard as this one with everything shutting down.  So, we don’t have anything else to compare to in history as to what is going to happen.  I can’t help but to think when this goes away what economic carnage will it have left for the entire world to mop up?  What I do see is that Interest Rates will come back down as the Government pumps money (liquidity) into the banking system and they start purchasing Mortgage Backed Securities again.  With Rates going down people will refinance their existing debt to lower rates and take equity out of their home to recover from this time.  For now, we all have to wait and be patient, put things on hold, and enjoy what we have and help others that may not be as fortunate. 

Posted by Gregg Mower on March 19th, 2020 12:41 PM

Here is a topic I have not visited in while but feel it is time again to address what is going on with mortgage rates.  The stock market has taken some serious hits over the last few days due to concerns with the Coronavirus and that has put downward pressure on the US Treasuries and the bond markets.  Why you ask?  I will get into the details of why later on but know that when there are panics in the Stock markets money tends to flow towards safe and secure investments while the markets are gyrating like bonds.   Some of the reasons the Stock Markets have corrected downward is over fear of the Coronavirus and the price wars going on now with oil prices after Russia pulled out of OPEC.  So there are a lot of economic new stories right now driving the markets.

Let’s talk about the effects of the Coronavirus and why it is driving the Stock Markets down around the world.  But first you have to understand what stocks are.  Stocks are shares of large companies that are sold to the public so the company can remain capitalized (i.e. have enough ready capital, money) to build and expand their business.  People who buy and sell stocks tend to look for companies that will have good growth into the future to buy so the hope is the value of the stock will grow with the company.  Investors in stocks will tend to sell their stock in a company if they foresee a potential down-turn in the company’s profits.  That said with this threat of Corona virus in the public it is believed that people will not buy or do normal activities if they can not go out into the public, thus not spending money on goods and services they would normally have spent their money. 

Now that you understand how the markets work in a basic form you now can see why the markets have been selling off.  But how does that affect the interest rates you ask?  Well this is where is gets interesting so follow along closely as I am about to open a door into a reality that few actually see or know about and that is economics.  As we have seen the Stock markets selling off due to the potential earnings loss of companies due to lack of demand (people not buying goods and services), investors in the Stock Markets have been looking for a relatively safe place to park their client’s money during this correction.  The place is the Bond Markets where fund managers and Stockbrokers park funds while Stocks settle down.  Specifically, the United States Treasury Bonds are the specific bonds that are purchased.  This is where it gets really interesting so hold on to your hat.  Not only do Stockbrokers and Money managers park their funds in U.S. Treasuries, the Mortgage industry uses the 10 year Treasury Bond to hedge their bet on interest rates. 

Hedging defined is buying or selling an investment to reduce the risk of an adverse price movement of another investment, kind of like an insurance policy.  In other words, the folks that sell mortgages will buy U.S. Treasuries to offset the possible movements in the interest rates.  The concept of hedging is important to know because the interest rates are being driven by this right now.  As the Stock market continues to correct and Treasuries are being pushed to their lowest levels in the history of the Treasury market, so what does this have to do with long-term interest rates?.  Although this does not directly affect interest rates it does take a way the hedge vehicle for mortgage bankers.  In response to that when interest rates should be declining, they have actually raised.  That’s right interest rates have gone up over the last few days as the Stock Markets declined the Bond Markets rallied but longer term interest rates have actually gone up. 

The Federal Reserve saw this affect happening and decided to lower the rate they can control to try to stimulate the markets with low interest rates.  You have to understand that the Federal Reserve does not control long term interest rates, the only rate they control is the Fed Funds rate.  The Federal Funds Rate is that rate in which Banks can borrow from the Federal Reserve.  The rub is that banks don’t need to go to the well for money in a strong economy to borrow money.  So, there is little to no effect on long term mortgage rates with the Federal Reserve or “Fed” lowering their rate. 

On another front is oil prices and their effect on long term interest rates.  With Vladimir Putin pulling out of OPEC ( the largest oil cartel on the planet who sets oil prices around the world) and OPEC responding by lowering crude oil prices to as low as $31 a barrel creating essentially a war over the control of oil prices.  This has a very adverse effect on American oil production as when oil prices dip to these kind of lows American oil companies cannot produce oil at that low of a price it will become more beneficial to import oil at the lower prices and hurting American oil producers and the workers that produce the oil.  There are now worries over American oil producers filing bankruptcy.  This now will impact American workers and those that support that industry like steel, heavy machines, plastics and so no, then the effects trickle down the towns in which those workers live and those companies that support those towns.   This will inevitably turn up in our unemployment numbers signaling a slow down in the overall economy.  This affects the Stock markets in the same ways as mentioned above. 

There is a bunch of things happening to where the Stock Markets and the Bond Markets have been reacting crazy.  This is a very unique time in our economy to watch what is going on as it is truly historic and has been going against everything we know and seen over time.  There is a component that I have not mentioned here that is hurting the overall economy in ways it has no idea and that is the media.  The media has been blowing this virus out of proportion to the point that people are panicking and running scared.  I do not profess to know anything about this outbreak nor do I profess to be any kind of medical professional but what I do know is numbers and when you see the differences between the deaths by Coronavirus versus the regular Flu there is no comparison far more people have died year to date over the Flu, so it stands reason that there is a abnormal hysteria going on out there.  I am not trying to discount how terrible this virus is, but I can’t buy into the hysteria. 

So, if you are wondering and scratching your head as to why interest rates have not done what the media is implying this is why.  Interest Rates are great I am not going to discount that and yes I love the attention we are getting from the media that interest rates are at historic lows it has been great for business, but don’t get set on getting a long-term mortgage in the 2’s without paying greatly for it.  My team is ready and waiting for your calls to go over your existing mortgage and see if now a great time to refinance.  We can refinance your mortgage without resetting the term which is a huge help with the over all interest you would pay on a mortgage over time.   For example, you took your existing loan out 2 years ago and have 27.5 years left on your existing loan and you don't want to lose those years you have already paid.  How about a refinance that would be a 27 year loan as to not take away the time you have already paid, we are doing this all the time.  For more information on refinancing your home or investment property give us a call today and we will tell you the truth about Refinancing and give you the best interest rates from Banks across this great nation.  916-672-6130 and download our app for free.  

Posted by Gregg Mower on March 10th, 2020 2:18 PM

Buying a house is a goal for many people in the United States, with some 79 percent of those surveyed agreeing that homeownership is part of the American dream. There’s no doubt that this is a monumental life event — and the hefty financial investment it requires reflects its significance. If you are purchasing real estate, you want to make sure the property you receive is in great condition. To assure this, part of the buying process involves determining the type of repairs the structure requires. You can even ask the seller to cover certain maintenance works. Find out how it works below.


Review the Disclosure Documentation


So-called “disclosure laws” require the seller to reveal problems related to the property, such as a leaky roof. This involves the seller filling out template documents answering a series of yes-or-no questions. Topics covered include former renovations and home improvements, as well as any past defects, property line disputes, and pest infestations. This list of disclosure laws by state will help you determine what the paperwork in your area should cover.


Check the disclosure forms against city building and zoning reports for the property. If the seller completed improvements without the proper permit or municipal approval, for example, then these may not have been done according to health and safety codes. There are also financial aspects to review; for instance, if the home was repossessed in bankruptcy proceedings in the past, you want to be sure the seller (and not the bank) is the rightful owner according to the property title.


Schedule a Home Inspection


A home inspection is needed to check for additional issues. Hire a third-party inspector to review diverse property components, including the roof and HVAC system. They will produce a written report detailing any red flags, such as mold in the basement. As the buyer, you are responsible for bearing the costs of a home inspection. According to HomeAdvisor, the average cost is $278 to $390 — but this is just for the report. If problems arise, you also need to factor in repairs. A new furnace can easily cost over $13,000, for example.


There are some renovations that you should simply resign yourself to covering as the buyer. Cosmetic issues, for example, are not something you should demand the seller cover. If the deck needs staining, kitchen tiles are cracked, or paint is nicked, handle these improvements yourself once you've moved in. Outdoor landscaping and fence repairs are also something you can add to your own “to do” list. However, there are some elements that you can ask the seller to cover, as discussed in the next section.


Negotiate with the Seller on Select Repairs


Major home inspection items to bring up with the seller include water drainage problems, wildlife infestations, elevated radon levels, and significant plumbing impediments that interfere with the home's day-to-day use. This list from Clever includes more such points, like lead paint and a leaking roof. When these problems turn up, you should ask the seller to cover them. If the seller is to cover improvements, this needs to be confirmed in writing.


When negotiating costs, you can ask the seller to cover repairs up front or request that they reduced the home's sales price, leaving you with the extra funds needed to undertake repairs. This latter option has the advantage of giving you full agency over who does the work. Any larger issues that affect the house's overall safety — such as asbestos removal — should be a priority and addressed before you move in.


The above pointers will help you determine which problems exist with a property before you have invested money in it. Unfortunately, a lack of agreement between buyer and seller regarding repairs can lead to a deal falling through. Even major problems in the home inspection may be grounds to keep looking. Don’t get discouraged: You want your dream home to be safe for you and your family. This guide assures your peace of mind.  Please fine more information at or call us and we can help you with all aspects of buying a home.

Article by: Natalie Jones


Photo Credit: Pexels

Posted by Gregg Mower on August 14th, 2019 10:24 AM


Aging in place is becoming a norm rather than an exception. About 76 percent of people over the age of 50 want to remain at home for their senior years, according to AARP. Aging in place tends to give people a higher quality of life, but also comes with its fair share of risks. Did you know that an older adult is treated in the emergency room for a fall every 11 seconds? Fortunately, many fall injuries are preventable. Here are some critical steps you can take to protect your well-being while aging in place. 

 Start an Exercise Routine Today

 Keeping your body strong, balanced, and flexible is critical for protecting yourself from injury. Get an early start to keep your body resilient. This will help prevent muscle loss and maintain joint mobility as you grow older. In fact, a recent study revealed that long-term exercise significantly reduces the risk that an older adult will experience a fall. Research suggests that about three hours of weekly exercise is your best bet. Exercise at home or head to the gym — it’s your choice! If you're a Medicare subscriber, you may be eligible to access 13,000 nationwide fitness centers through the SilverSneakers fitness program. Certain Humana Medicare Advantage plans include this benefit. So, consider switching your plan during the Medicare enrollment period if you're not already enjoying this valuable perk.

 Engage in the Right Types of Exercise

 Not all forms of exercise are equal. While aerobic activity has amazing benefits for your heart, digestive system, and mental health, strength training may be the most important when it comes to fall prevention. Core muscle strength will catch you when you start to stumble. If you’re new to weightlifting, talk to your doctor before you begin. Start slow — using your body weight or resistance bands at first — and work your way up to heavier weights as your muscles grow stronger. You can try some of these senior-friendly resistance exercises to get started.

 Balance and flexibility exercises will also improve your stability and reduce your risk of falls. Static stretches (held for 20 to 30 seconds) and dynamic stretches (moving stretches) have surprisingly positive effects on overall mobility. This list of stretches from Yurielkaim includes examples of both static and dynamic stretches that are good for seniors. Additionally, try yoga or tai chi for an excellent combination of flexibility and balance practice. These activities are also wonderfully meditative!

 Make Some Home Modifications

 In addition to key lifestyle changes, you can further prevent falls while aging in place by making some home modifications. Start by clearing clutter from your home and giving each item you own a special storage place. This will prevent things from ending up on the floor and becoming tripping hazards. Remove slippery area rugs and use rubber-backed non-slip rugs in your kitchen and bathroom. Lighting that is too dim or too bright can also be a problem, so set up night lights to illuminate paths you may need to walk at night and install dimmer switches throughout your home. Use curtains to block out disorienting glare from the sun. Also, grab bars by your toilet, bath, and bed can be very helpful.

 If Finances are a problem to do the home improvements consider a Reverse Mortgage to utilize the equity in your home to fund these modifications.  With a Reverse Mortgage you can use the equity and never make a payment until you move from the residence. 

 Finally, pay attention to your clothing. Clothes that are too tight may restrict your blood flow and make you lightheaded, while clothing that is too loose can catch on items as you navigate your home. Avoid loose-fitting shoes or those with slippery soles. Try to find shoes that fit comfortably and support your feet properly.

 Install Life-Saving Technology

 Don’t let your home modifications stop there. Technology can help you get assistance more quickly if you do have an accident in the home. Smart shoes, tracking devices, and fall detection, as well as automated lights and thermostats, will help you maintain your independence and safety while living in your own house.

 As with every aspect of health, preventing falls will take some preventive effort. Maintain your muscle strength and flexibility, take special precautions, remain aware of your surroundings, and remove anything from your environment that could become a hazard. By reducing your risk of falls, you’re securing a future for yourself in which you have the independence and confidence you need to live in the home you love.

 Take the Financial Worry Out of Staying in Your Home

 Don’t let the financial worry of the home effect your health.  Money worries can cause health problems.  As the price of goods and services continue to rise the income of seniors may not keep up with the rising costs of living and this can cause undo stress and lead to health issues.  A Reverse Mortgage from MAE Capital Mortgage Inc. may the answer.  These mortgages have come a long way over the last 30 years.  The extra income generated from a Reverse Mortgage may be the difference every month in being able to live and enjoy the retirement years instead of worrying about the rising costs of goods and services and medical expenses.   There are protections built into these loans to insure the seniors will be able to leave their home to hires when they are gone.  

Taking some of these steps will ensure that the “Golden Years” are, in fact, Golden.  Here at MAE Capital Real Estate and Loan we know the value of our senior population and hope to make all lives better with our services. 


Special Thanks to Natalie Jones for the majority of content of this article
Posted by Gregg Mower on April 11th, 2019 11:22 AM

As we embark into 2019 I enter my 35th year in the industry.  Not saying I have seen everything but I have seen enough to know what is around the corner for Real Estate and Interest Rates.  History seems to have a way of repeating itself over and over especially with Real Estate and market trends.  So as you read this you will see references to the past as that is how the future is formed and it has worked consistently for the last 100 years now as we have become a society of growth and invention.  But over time we as humans seem to follow the same trends and patterns in Real Estate and the Stock and Bond markets are no exception and we call this the “Business Cycle”.

The Business Cycle is a repeating cycle of booms and busts or good markets and slow markets.  In Real Estate and the Stock markets you can really see how this plays out with increasing home prices and lowering home prices and the Stock market going up then sagging back down over the business cycle.  The business cycle in Real Estate starts with investors entering the market picking up good deals (as they perceive it to be be) usually after a bust in Real Estate prices.  Once investors have taken a good hold in fixing and flipping or creating rental portfolios you start to see the first-time buyers enter the market.  When the first-time home buyers are buying and home prices begin to rise again you will see the move-up buyers enter the market creating more inventory. Eventually, over time the supply from the move-up buyers and the new home builders cools the prices from rising as the supply of housing catches up with the demand for housing.  When the supply or quality homes for sale becomes greater than the demand you then get a cooling down of the Prices of homes.  You will also see new home builders entering the market when the demand for homes is the highest and the supply is the lowest creating a greater supply of housing.  This is the Real Estate Cycle that has existed since the beginning of private land ownership.

This is important to know as if you can pinpoint where we are in this cycle you can formulate a plan to buy or sell Real Estate.   As far as interest rates are concerned the cycle is about the same but a little lagged compared to the Real Estate cycle.  This is simple economics, as well, when the demand for money is the highest (generally the peak of the Real Estate Market) is when the Federal Reserve starts to see inflationary numbers such as lower unemployment, and rising consumer prices.  You see housing drives the US economy as most products and services are designed for your home and when there is a high demand for these goods and services you will see prices start to rise.  That will trigger the Federal Reserve to raise interest rates to combat the possibility of inflation and the devaluation of the dollar.  I know this is a whole bunch of economic principles here, but this is how the business cycle works.  I could go into specific details as I hold a degree in economics, but this would bore you and I want to inform you so you can be ahead of others that are not smart enough to read anymore. 

As you see interest rates start to rise you will see almost an instant slow down in the demand for housing and goods and services as people can no longer afford to purchase the high-priced homes with high interest rates.  This, in turn, slows the whole economy down.  The Federal Reserve (the Fed) can’t possibly know how much interest rates should rise to slow the economy down to an acceptable inflation rate of 3-4%.  The Fed will generally raise rates too high initially and slow the economy down too much then rates sag back down until the economy is stimulated again then they raise them to get to the right inflationary numbers.  Since it is not an exact science we see volatility and this is where I believe we are at in the business cycle currently.  The Fed has not landed on the right interest rate combination yet and thus we are seeing volatility in interest rates and coincidentally the Stock Markets as well.  The Stock markets knows this cycle and reacts to it, as well, that is why we have seen record swings in the Stock markets in the last several months. 

So, we know where we are in the “Business Cycle” and we have seen the higher rates and the Real Estate Market slowdown in the 4th quarter of 2018.  Does this mean we are in for a bust?  I don’t think a bust is in order, but I do see a slow down and a leveling off in Real Estate prices and in some cases a decrease in perceived values.   Coincidently, this cycle has worked over a pretty consistent 10 year cycle with the slow down starting in the 8th year of each decade and going though the 9th year and slowly picking up with investors coming in on the 10th year.  For example 2008-2010 was slow for Real Estate as was 1998-2000 and 1988-1990 and so on, history repeats itself.  I am not saying that you should not buy Real Estate during these times I am simply pointing out the business cycle in Real Estate so you can be informed.  There are always deals out there and with the right Realtor and Lender partner like MAE Capital Real Estate and Loan you can profit.  With our experience you can make a plan to own Real Estate and not worry about the business cycle as interest rates are still low compared to history and there are some really good deals out there to purchase.  So, beat the investors to the punch and get in the game with your first home or your 20th home, we are here for you.  In our site you can look at properties currently listed on the MLS and get pre-approved all from your chair at home or work.   Give us a call and let our experience help you plan your future at 916-672-6130.     

Posted by Gregg Mower on January 8th, 2019 12:17 PM

The Real Estate Market is still Hot in California but not as hot as it was so why?  Rising interest rates has a lot to do with the lag or slight slow-down in the market as well as a few other factors.  When evaluating Economics and economic trends you have to look at more than just the numbers and statistics, you should be looking around and talking with people in the industry to hear first hand what is happening.  To fully understand what is going with Real Estate Economics there are many factors to take into consideration such as people and their tastes or appetite to purchase Real Estate which can't be found in published statistics.  In California we have about as many different Real Estate Markets as we have climate zones.    So to throw a blanket over the entire State’s Real Estate Markets would be doing everyone reading this a disservice.    So for the interest of time I will cover the macro economics of Real Estate in California (or for those that follow Bernie Sanders Macro is a broad overview of the Real Estate Markets in the state). I know economics is not a class taught in High schools in California so I will try to break the theories down to a level that everyone should understand.

First let’s start with the obvious change since the beginning of the year in the world of Real Estate and that is the fact that interest rates have gone up.  Interest have gone up from an average of 3.5% a year ago to 4.5% this year.  This may not seem like a lot but when you equate it to qualifying for a home loan it can be significant.  An example would be a couple that makes $100,000 annual income with about $800 a month in car payments and revolving debt.  These folks would have been able to qualify for a $464,000 home loan last year at 3.5% and this year making the same income they will only qualify for a $411,000 home loan.  The difference in buying power is $53,000.  So as you can see their buying power was diminished by higher interest rates.

The next factor we have seen is that prices of home have gone up by 10-20% over the last year depending on the area in California you look at.  What this means is that if you were looking at houses last year in the $400,000 range those same houses are selling today for an average of $480,000 at a 20% increase and to $440,000 with a 10% increase.  So if your income has not gone up as fast as home prices you just lost buying power.   Some Home buyers are feeling this coupled with higher interest rates and many have decided to stay put where they are at.  Potential move-up buyers may re-evaluate his or her ability to better their current living situation with these factors and may chose to stay put.  With rising prices and interest rates some first-time home buyers may have "priced out of the market" and not have the ability to purchase a home.  If you live in a market like Southern California or the San Francisco Bay area these percentage increases will hurt even more people with the higher home costs in these areas. 

Supply of housing is also a huge factor in how fast Real Estate will increase in value.  For example, in Southern California or the SF Bay Area there is only so much land available to build new housing on.  With a limited supply of housing and a large demand for the housing that exists the prices are soaring and in those markets like Southern California and the Bay Area many people have been held out of the ability to buy or even live in those areas.  So we have seen, and continue to see, people and businesses migrating to the central Valley to places like Sacramento, Fresno, Bakersfield, and the desert areas of Southern California.  This migration has caused home prices to increase in those areas to record highs as well.  Construction of new homes in those areas have increased dramatically and continue to do so as long as people and businesses need a place to be.  As we see the creation of more jobs in California we will continue see the demand for those homes to house the workers.  This could also be the demise of California’s housing boom as more and more employers are tired of the business environment in California and are choosing to leave this state.  With more taxes and regulations put on businesses in California we are also seeing a record migration of businesses leaving the state.  Although this is regulating the demand for housing to an extent currently there will become a time in the not so distant future that the business cycle will slow and the California Real Estate Market may be the first to feel a down-turn. 

Which brings up the fact that there is a current migration out the state of people, especially retired folks due to it’s high cost of living.  People are realizing that they can’t retire in this state and are looking to other states that have lower taxes and a lower cost of living to retire.  If this migration out the state continues when the Real Estate market corrects California could feel the pains worse than other places around the country.  However, as long as there are good paying jobs in California there will be people to fill them, but as soon as that changes so goes the Real Estate Markets. 

Going back to rising interest rates and what effects that has on the economy we will see business slowing their expansion for the simple fact that the money to expand is costing more.  This is the whole point of the Federal Reserve raising interest rates in the first place, to slow a hot economy and keep inflation down.  In California we are experiencing that slowing effect now in some industries.  The Real Estate Finance or the Mortgage Business has slowed dramatically with the rise of interest rates cutting out those that may have wanted to refinance to lower their mortgage payment. Although there is the home purchase business that is still good Mortgage companies depend on the demand for money to keep going as people need to mortgage their homes for other reasons that purchasing them, such as bill consolidation, College, home improvement and the rising interest rates have slowed those areas so the financial industry has also slowed.  

Other factors that are slowing the demand are seasonal with vacations in full swing people are looking for fun not buying or selling Real Estate.  The weather could have an effect on Real Estate Sales as the hotter the weather becomes the less people want to go out and look at houses.    This time of year traditionally we have seen the vacation/weather slow-down to around mid-august to September  then it starts to pick up as children start back to school and people have more free time to think about moving.  At MAE Capital Real Estate and Loan we know these cycles as we have seen them occur for over 30 years of being in the business.  We are here to help you buy and sell Real Estate as well as Finance it whether it be a cash-out refinance to pay for college or home improvement or to finance that first home or even that 20th investment property we have done it all and are doing it every day and look forward to working with you.  Call us today at 916-672-6130 and we can help you with all your questions. 

Posted by Gregg Mower on July 24th, 2018 11:02 AM

It is the time of year where we wrap up the prior year and look forward to the next year.  This year’s wrap up is about the same as the last several years with Real Estate in California and the Sacramento Area enjoying steady increases.  We have already gone past the highs in the Real Estate Market before the bust in 2008, which is a good thing, however, does that signify a coming change or correction to Real Estate Values?  Or are we going to keep with a steady rising Real Estate Market?  Residential Real Estate has been the cornerstone of the recovery over the last 5 years, with commercial Real Estate staying constant unless you happen to be around new growth areas such as around the Golden One Arena in Sacramento or other special developments projects.   In addition, the Stock Market has been hitting record highs and that could send capital away from bonds thus raising interest rates and possibly creating inflation in the short term.  There are a lot of things to consider when evaluating the economy and the future of Real Estate in 2017.

With the new regime change in Washington D.C. we could see some radicle changes that will affect the Real Estate Industry, but don’t expect to see the results of any changes right away.  Even with the most rapid and radicle changes it will take time to implement and for the Real Estate markets to adjust and adapt.   So, although it is my belief that we will some positive changes in the Real Estate Industry with regards to de-regulation these changes will take time to see any real changes.  It is too early to speculate on the changes that will come out of our Government, but my belief is that less Government intervention will ultimately be good for the American economy.  There are a lot of things the new leaders in Washing DC will have to address and in what order they want to attack them in may have consequences to all Markets.  The Government will have to make major changes to the Obamanation of a Health Care system that has been imposed on the American people as a first priority, as middle class America cannot afford the current health care system nor can small to medium sized companies.  That will have to be fixed first and could cause ripple effects i the economy.

When the New Leadership evaluates the housing markets and the changes that were made during the last regime, they will see the need to address changes here as a high priority as well.   Over the last several administrations we have seen monumental spending increases from the Government with the guise to help the citizens of these United States of America, but our Nation Debt is over 20 trillion dollars and growing every day.  We must change this radically or our once great country will be viewed as bankrupt by the rest of the world.  If this happens America and the US Dollar could lose world currency status, which could be so detrimental that America could fall as the world Economic Leader, thus causing a worldwide depression.  That may not be as far fetched as it sounds if we keep spending recklessly with no repayment plans.  These are some big issues that the new administration must address quickly.  Be aware if the debt issue is addressed first there could be a recession as a result, in the short term.  There would be no way of avoiding that, as when the Government Beast stops or slows spending, those people and companies that have been dependent on that spending will be no longer receive federal funds and thus will go out of business sending many to the unemployment lines.  Unfortunately, this is what has to happen in order to fix the growing problem, or the rest of world could just forgive that fact we owe more than we are worth, but I don’t think China would just say “no problem, we will just give you back all the treasury bonds and securities we bought from the US”.   That said, there will have to be a strengthening of our private industry first to stabilize income and private jobs.  There needs to be incentive to go to work from the government back to the private sectors and this must been done before there can be cuts to the government. It has has to start by lowering taxes, and providing non-monetary incentive to business’ to not only produce their products in the US but to expand in the US.  These actions would bring business back to America and increase employment and thus create more taxes as more people are employed and businesses are making more money in the US thus paying US taxes.  You see this concept is where most people are fooled or ignorant on how things work.  With a lower tax rate on people and business’ and incentives to live work and produce in the US there will be more tax dollars going back into the system.  Simple math, less people paying more in taxes is worse than more people paying less in taxes and having more people and businesses employed in the US.   For example; would you rather own 2 rental properties that you receive $10,000 a month on, valued at $500,000 each, or would you rather own 10 properties valued at $100,000 each where you receive $1,000 a month on each?  The theory here is multi fold, although you have the same value of real estate if you have a vacancy on one with the high value properties you lose half of your income, where if you have a vacancy in one or two of the lower value properties you are only missing 10-20% of your potential income.  Also, the chances of the $100,000 properties increasing in value at a faster rate than the higher priced properties is greater as there is more demand for affordable housing than luxury housing.  Same holds true in the labor markets if you create a demand for low cost labor and you can’t get enough you then need to pay more to entice labor to work for you, thus higher taxes and higher employment and the Government receives more income proportionately with more people and business working within the US in the private sector.  With higher wages in the private sector government could cut back and thus lower the debt.  Simple math that gets confused by some believing that you should tax the higher wage earner and business’, the very people and business’ that employ Americans, rather than lowering their taxes and provide incentives to employ and hire and expand within the US.    

I digressed a bit, but feel the education is necessary as it may be obvious to most folks others may have never heard of this concept.  So as the new administration makes changes to to bring business back to America and incent them to stay in the US we will gradually see a real demand for employment as business will need more folks working for them here in the US.  This will not happen overnight and there will be a lot of resistance, believe it or not, as some people actually believe that the Government can spend your money better than you can.  None the less, it will take time for any of the changes to take affect, but what you will see is a raising of interest rates in anticipation of a rising inflation due to a more game fully employed America.  This will slow housing in the short term until the average American sees the increases in pay from all of the positive incentives for businesses to do business in the US.  We saw this with President Reagan, his whole first term was dedicated to lowering taxes and providing incentives to businesses to expand.  The US economy didn’t see the effects of the changes until his second term and Reagan was almost not elected for a second term simply because of the time lags in the economy. 

So the long term outlook is great for the Real Estate industry, however, the short term will be a slowing down in Real Estate.   California, in the short term, will see an overall slowing of housing appreciation and demand will slow with higher interest rates.  The short term will be over the next 1-2 years.  We will not see a devaluing of Real Estate like we saw due to the mortgage industry implosion in 2088 through 2011.  We will see builders catching up with the pent up demand, however, interest rates will slow their growth as less people will be able to qualify with the higher rates.     Unfortunately California has implemented high taxes on companies and employers that companies will continue to move out of California as it will not be profitable to do business in California.  The California State Government seems to follow the doctrine of over regulating and taxing business in this state to the point where good businesses are leaving the state in droves in search of a friendlier environment to do business.  Until this State figures out basic economics the State will continue to go backwards.  So long term Real Estate trends for California I feel are going to be different for different parts of the state with the bigger Cities and their bedroom communities maintaining their values and a having steady demand, however, not as high as they have been enjoying over the last several years with low interest rates.  The central valley of California will be slow but steady with some depressed Cities like Stockton down to Fresno seeing a relatively flat Real Estate market as these would be the areas in the state that growth could occur but with high taxes on businesses the businesses that would consider moving into the state will seek other states to do business in.  Real Estate is always the best long term investment anyone can make, it is a hedge against inflation and over the long haul they aren’t making any more of it so it will have to enjoy growth.  To make America Great again will take the efforts of the whole not just the people educated in economics.    



Posted by Gregg Mower on December 9th, 2016 12:41 PM

Well with another year upon us and the stock markets in turmoil what might that mean for Real Estate?  Traditionally when the stock markets have been down for an extended period of time the Real Estate Markets have taken up the slack.  But this Real Estate market is going to be a little bit different as there just is not the capital out there with the appetite for Real Estate or any kind of speculative investments as there has been in the past.  This is not a negative statement it is just the facts. The job situation and relative incomes have not increased like we have seen in the beginning of past real estate booms.  To top it all off the availability of credit has tightened to the point where it is difficult for the majority of Americans to get a loan.    

Let’s look at what traditionally has driven up Real Estate values.   In the past we have seen the Real Estate markets driven by supply and demand with the supply side being the catalyst for investors to enter the market.  The supply of Real Estate that is currently on the market is in excess of 3 months’ worth of inventory nationwide, locally in Northern California we have a 1.2-month inventory.  Which means that if there are enough homes for the current number of buyers there is no real upward pressure on prices.  If prices are not forecast to go up investors will not enter the market.  Which means there will be ample supply of new homes entering the market to satisfy the need or demand for housing.  A good indication of a Real Estate Market that is about to take off is when investors start gobbling up Real Estate and we are not seeing this.  Oil prices have hurt the Real Estate markets in places like Texas, South Dakota, Montana, Wyoming and Alaska.  Although, these markets are not large metropolitan markets it does have an effect on all markets in America.  With these people that work for the Oil Companies in America we are seeing larger than normal unemployment with these types of jobs.  With a higher unemployment people will not be able to buy homes.  With the new “shadow unemployment” numbers (unemployment from those who have dropped out of the search for a job or settling for a lower income job) that can’t be quantified, consumers just don’t have the confidence to make those large purchases as they would with a good income. 

With the average American making less household income the likelihood of them venturing out to purchase a new home or an investment property is low.   The Stock Market is showing investors that the economy is just not what the government has been reporting to us that it is.  The Federal Reserve (the US Central Bank) has raised interest rates and subsequently banks have raised their lending rates.  This makes money tougher to get for investors or the average person on the street.  Banks have also raised their fees on their services that the average consumer may not even know of, such as overdraft fees, and usage fees. Even with these measures Banks and Financial Stocks have been on the decline and if that continues there will be lay-offs in that sector of the economy.  We are close to another recession or an extension of the one we have been in; however, you want to look at it.  I know this sounds like a lot of economic mumble jumble, and it is, but, it takes some of us that actually follow this stuff to bring it to the attention of everyone.

I am not trying to be negative on the Markets in general, but I want to open the eyes of those that might not otherwise be looking at what is going on in our economy and with government regulations and in some cases corruption.  We saw the collapse of the Mortgage Markets in 2008 and that should have opened the minds of Americans, but I think it was just too confusing for the average American to comprehend.  So I will paraphrase that situation and the current one facing us all.  The Government blamed a system that had been in place for almost a century, the mortgage business, with corruption, fraud and a few other choice words.  When in reality it was the government that allowed for this to happen and in some cases encouraged it for the gain of the legislatures.  What the news stories have not told the people is that most of the Senate Banking Committee and other legislators were invested in these types of investments so the longer it could go on the more they would profit from it, and don’t forget that most of our legislators are attorneys and our law makers are exempt from insider trading.  Then when the crash came it was blamed on private industry and the Mortgage Brokers not the Government and Wall Street where the blame should have been levied on.  You will not hear that story form the mainstream media as they are all in bed with each other.  In addition, the legislators and the Federal Reserve board, to make their investments good, they bailed out the banks that caused the problems in the first place under an action that has never been investigated as legal or challenged for that matter by anyone.  Over 100 Billion US Dollars used to bail the Big Banks out as the Government deemed them “too big to fail”; I wish I was too big to fail.  The Government, in an attempt to “make good” on their mistakes or corruption with the Mortgage Markets, have put regulations in place that takes away the ability of the privately owned mortgage markets to make decisions without the possibility of being fined, prosecuted, or imprisoned.  So if you wonder why it is so difficult to get a home loan in today’s world you can thank the Government again.   These laws and regulations enacted by the Dodd Frank Act of 2008 have been steadily tightening down on individual Real Estate borrowers every year since, to the point where an average borrower will have to sign paperwork that is even more confusing than ever before, all under the guise that it is to help them.

There is hope for both Real Estate investors and new homebuyers.   I predict that more and more investors are not going to look to Wall Street as their investment of choice, I believe that Real Estate Investors will soon learn to be their own banks.  Big Wall Street firms have learned this trick so why can’t the individual investor be their own banks?  Which simply means that all investments are driven by yield, the higher the yield the more attractive the investment, yield to Banks are interest rates and fees.  So why can’t an individual lend their own money for a yield that is acceptable to them.   Answer is they can, in fact Wall street has tried to be on top of this by creating such investments called hedge funds.  These hedge funds invest in mortgages that are higher risk and get higher interest rates as a result.  These loans in these funds are not as high a risk as they would like you to believe they are, as the loans are backed by large equity positions in Real Estate.  For example, if you go to a non-traditional lender and they are getting their money from a Wall Street Hedge Fund the money is coming from investors directly in that fund.  The lending requirements are less stringent than if you were to try and get a Conventional, FHA, or VA loan.  Generally, they will require the loans they invest in to be at 80% Loan to value or less, but they will not require things like tax returns to qualify borrowers as they figure the more money a buyer is willing to put into a piece of Real Estate the less likely they are to lose the property to foreclosure.   Even if the property they invest in goes to foreclosure the lender still can sell the property and get the money back they lent out.  Banks do this as well but have more rules and regulations to go by than a private fund or an individual investor.  So again I see investors wising up and using Real Estate Brokers to put together these types of transactions to gain yields of 9-12% on the average and essentially be their own Bank.  On the other side of the fence I see Homebuyers that cannot otherwise qualify for traditional loans, with all the new rules the Government has imposed on them, going to sources like the Mortgage Broker to get this type of financing.     This is not going to happen overnight but it has begun on a small scale and we are currently doing this at MAE Capital for both our investor friends and our borrowers.

So as the Real Estate Markets go along in 2016 at a normal pace with no big ups or downs, unless you live in a market effected by the Oil industry, we will see business as usual.  Keep your eye on the Stock Markets and start thinking of diversifying your investments.  Your Stock Broker will advise against this for no other reason than they will no longer receive commissions for managing your money.  If you see a good deal in Real estate buy it you can’t go wrong with that investment over time.  If you are a first time buyer, buy a home it is and always will be the best investment you will ever make, but don’t treat your house like an ATM card and take equity out every time it goes up in value you will lose every time doing that.  For more Real Estate investment advice give us a call at 916-672-6130 or visit our site at MAE Capital Real Estate and Loan we value you as our customer for now and into the future.  As I write this blog and every other blog post on this site I am entering my 32nd year in the Mortgage and Real Estate Industry and have seen a lot but still have not seen everything and will pass on as much advice and goodwill to my clients as I can.  We look forwarded to working with you in 2016.  


Posted by Gregg Mower on January 6th, 2016 7:08 PM



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