Blog with MAE Capital

2024 has started off with a bang with earthquakes and Tsunamis.  On the first business day of 2024, the bond market gave back some gains from the last couple weeks and the Stock market was flat but still positive.   If the first few days of 2024 are any indication of the year we will be in for some turbulent times.  2024 is also an election year so prepare yourself for a political ride that we have never seen before in history except for possibly in 1861-1865 (the Civil War).  

This year will start off with a slow economy, and a slow Real Estate market as interest rates are still too high for the average person to afford to buy a home, especially in California.  The Federal Reserve  (The Fed) has vowed to lower interest rates if they see the economy start to decline.  The Federal Reserve's Chief, Jeremy Powell, stated that there could be 3 times they consider lowering interest rates in 2024.  This would be a great thing for Real Estate as more people could afford to buy a home.  If the Federal Reserve does lower interest rates and you did buy a house in the last 2.5 years you would have an opportunity to refinance and lower your monthly mortgage payment.  If you have a $500,000 mortgage at 7.5% and the rates move down to 6.5% this could save you $336 a month in your mortgage payment and for most families every penny counts in this economy.  

Watch the election antics as this will also drive interest rates.  If it looks like people will be electing more of the same types of people to Congress and the Senate and the Presidency be prepared for more oddities like we have seen since the current administration has taken office.  We the people in the Real Estate and Mortgage industries know what has been done to the Real Estate Market over the last few years due to inflation caused by giving away taxpayer funds to other countries and stimulus checks and the general devaluing of the US Dollar.  You will not hear the truth on your TV or radio about what has really happened to the economy, so I am glad you found this article to see what has been done to the Real Estate Industry due to the mismanagement of the monetary system by our government.  This election will probably be the most pivotal election of your lifetime to determine the direction of the United States States.  I am not going to tell you who to vote for as I still believe people have the right to choose but some don’t as you see playing out in current news.  

One giant issue that is failing to make the news that is affecting the dollar is the advent of the BRICS money system which has vowed to take the US dollar out of being the world’s reserve currency.  BRICS is Brazil, Russia, India, China, South Africa, and now many other nations have joined this movement powered by China and the Yuan (Chinese money) to become the new world’s reserve currency.  This is slowly gaining traction as most countries are tired of Americans running the show and flexing their power all over the globe.  The BRICS system is poised to bring the US Petrodollar down which is how all oil has been forced to be purchased over the last almost century.   This means that until now all other countries had to convert their currency to the dollar to purchase oil which has made the dollar dominate and has allowed America to thrive over the years.  This is also a major reason why our military is in the Middle East currently and could spark World War 3, which is another topic that could have strong implications for the US economy.   If the BRICS money takes over as the world's reserve currency the US will be forced to convert the dollar to the Yuan to buy oil which could further devalue the dollar causing even more inflation for the U.S..

This is one reason why with the high interest rates we have seen we have not seen Real Estate values crash as inflation or the devaluing of the US dollar is keeping Real Estate values high.  We should also be aware of the debt the country has accumulated as America has over $33 Trillion in debt and until now it has not been a big issue as the US has controlled the world markets, if that changes then the dollar will be further devalued and we will have more inflation and with inflation comes higher interest rates.  Some would argue that America just needs to print more money and if that happened it would further devalue the dollar and cause even more inflation and more inflation means higher interest rates.  At this point in American economics, we are at a tipping point, and with the current path we seem to be on a collision course with monetary disaster unless we get spending and money giveaways under control, if not we could run into serious economic problems that I don’t want to get into in this piece.   

The economy is going to be the biggest issue of 2024 and that will directly affect the Real Estate markets if it is not managed properly.  Real Estate values will be in line with inflation this year and interest rates will have little effect on Real Estate values as inflation drives interest rates.  Interest rates are the Federal Reserve’s only way to combat inflation.  The theory is that as inflation increases the Fed will increase interest rates to slow consumer and business spending and thus slow the demand for goods and services.  What is not being addressed is the devaluing of the US dollar by other countries which makes all the goods we get from other countries more expensive, especially oil.   To conclude, I believe that 2024 will be a very volatile year for Real Estate and we can pray rates come down enough to get more first-time home buyers into homes.  

Posted by Gregg Mower on January 3rd, 2024 10:54 AM

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

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

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

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

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

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

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

 

Posted by Gregg Mower on May 18th, 2022 11:47 AM

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MAE Capital Real Estate and Loan

CA DRE #01913783|NMLS #806170

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Rocklin, CA 95677