The New Normal Will Become An Older Normal
This past Monday I opened the MLS website for agents and hit what I call is my "Hot List". The "Hot List" is a summary of all the new listing, pendings, solds, price cuts or raises, withdrawn and expired properties for that day. or week. 24 price cuts for my universe of real estate. 11 price cuts in Redwood City, for an average 5.62% price cut for an average list price of $1,830,000. A 6.78% price cut in Palo Alto in 5 listings at an average list price of $3,756,000. Menlo Park has 3 cuts to average 5.63% on an average list of $2,498,000. Atherton has 3 cuts to average 7% on an average list of $7,848,000 and 2 transaction fell through.
Summer clean up of inventory? With inventories low it would seem that prices would remain stable. Too many cuts to warrant a low inventory market.
The week has been loaded with news articles on renters, both residential and commercial. The jury is out on this one. Stories abound on landlords that will not relent on renter non-payment to landlords who forgive a month or so, and even cut rents. The recent bill from Congress deals with halting evictions, California has done so until September 30 and San Mateo County until the end of August. In the meanwhile; county by county have gone back into lock downs.
This recovery is looking more protracted than many had anticipated. The good news is the real estate residential market remains vibrant. Low interest rates are the main benefit to buyers. With 30-year rates below 3% buyers can look at affordability as attractive.
Two articles came across my desk.
One from the Saturday/Sunday edition of the Wall Street Journal. The article spoke of work from home after 5 months and the results on family life. The article stated that employers were surprised that employees were more productive. So much so, employers looked to keep the work from home option. Now we had the picture of Dad in his shorts with a shirt and tie on a video call. What was missed in the cartoon was the back ground static. The kids were noisy, the dog barking and Mom was yelling. The children and home schooling, Dad and Mom working from home soon became a chore and hard to accept. Slowly the move back to the office started. this time the desks were 6 feet apart. Meeting and decisions became easier as the parties were in the office. The long process of video calls and recalls of participants to one another to talk over the ideas lengthen the decision chain. Back in the office decisions could be make and acted upon as they were talked out.
I thought back to my first job as a Financial Analyst at General Electric Medical Systems Department. Our desks were far apart to allow the mail room to deliver items to us, or they were in cubicles with glass partitions. As one moved up the food chain offices replaced cubicles.
That's the way things were in the 70's and onward until we get to the Dot Com and social media revolutions and open floors with full out flow of ideas among employees.
The virus changed all that and we all went home to work. The single employees soon became like a criminal is solitary confinement. Not only stuck in their $3400 one bedroom, they could not go out! Soon the idea of renting in a hot neighborhood became a burden and off they went to open country. Larger homes with room for an office. Rental markets soon collapsed as the well paid renters departed.
City dwellers are now looking to the suburbs to own. Old suburb owners finally can get out of their homes to smaller homes in locations near children, that place in the desert or Hawaii.
The other article was a presentation from John Dione, Senior Lecture at Harvard Business School and Senior Advisor to Blackstone Group, The Pandemic World Before, Now and After.
The new economy will become the old economy of the 70's. The high budget deficits and debt load will only be paid by higher taxes. Income tax rates will go up, capital gains taxes will go up, estate taxes will go up. Property taxes have to go up! Municipalities are over loaded in debt. Hawaii just passed a tax on the Big Island to increase property taxes on all homes over $2 million. Friends have told me of rate increases of $20,000 to $1 million per year. WOW!
Taxes will put a halt on economic growth. We will see years of slow growth to no growth economy. Investing ideas as buying an index will become a loser. Picking stocks will become the better ploy and only for pro's. Real Estate will be a chosen investment of the masses. At least for those who have a job and money to invest after taxes.
Historically it takes 31 months for employment to return to past lows, except the Great Financial Crisis which took 76 months.
The presentation is attached below.
https://isvr.acceleragent.com/usr/1024408819/CustomPages/The_Global_Coronavirus_Recovery_-__John_Dionne_-_Final__1_20219.pdf
The key to Mr. Dione's presentation is the Democrats take the presidency, house and senate and key red states.
I don't like the forecast under that assumption. But we will see what the people think.
Summer clean up of inventory? With inventories low it would seem that prices would remain stable. Too many cuts to warrant a low inventory market.
The week has been loaded with news articles on renters, both residential and commercial. The jury is out on this one. Stories abound on landlords that will not relent on renter non-payment to landlords who forgive a month or so, and even cut rents. The recent bill from Congress deals with halting evictions, California has done so until September 30 and San Mateo County until the end of August. In the meanwhile; county by county have gone back into lock downs.
This recovery is looking more protracted than many had anticipated. The good news is the real estate residential market remains vibrant. Low interest rates are the main benefit to buyers. With 30-year rates below 3% buyers can look at affordability as attractive.
Two articles came across my desk.
One from the Saturday/Sunday edition of the Wall Street Journal. The article spoke of work from home after 5 months and the results on family life. The article stated that employers were surprised that employees were more productive. So much so, employers looked to keep the work from home option. Now we had the picture of Dad in his shorts with a shirt and tie on a video call. What was missed in the cartoon was the back ground static. The kids were noisy, the dog barking and Mom was yelling. The children and home schooling, Dad and Mom working from home soon became a chore and hard to accept. Slowly the move back to the office started. this time the desks were 6 feet apart. Meeting and decisions became easier as the parties were in the office. The long process of video calls and recalls of participants to one another to talk over the ideas lengthen the decision chain. Back in the office decisions could be make and acted upon as they were talked out.
I thought back to my first job as a Financial Analyst at General Electric Medical Systems Department. Our desks were far apart to allow the mail room to deliver items to us, or they were in cubicles with glass partitions. As one moved up the food chain offices replaced cubicles.
That's the way things were in the 70's and onward until we get to the Dot Com and social media revolutions and open floors with full out flow of ideas among employees.
The virus changed all that and we all went home to work. The single employees soon became like a criminal is solitary confinement. Not only stuck in their $3400 one bedroom, they could not go out! Soon the idea of renting in a hot neighborhood became a burden and off they went to open country. Larger homes with room for an office. Rental markets soon collapsed as the well paid renters departed.
City dwellers are now looking to the suburbs to own. Old suburb owners finally can get out of their homes to smaller homes in locations near children, that place in the desert or Hawaii.
The other article was a presentation from John Dione, Senior Lecture at Harvard Business School and Senior Advisor to Blackstone Group, The Pandemic World Before, Now and After.
The new economy will become the old economy of the 70's. The high budget deficits and debt load will only be paid by higher taxes. Income tax rates will go up, capital gains taxes will go up, estate taxes will go up. Property taxes have to go up! Municipalities are over loaded in debt. Hawaii just passed a tax on the Big Island to increase property taxes on all homes over $2 million. Friends have told me of rate increases of $20,000 to $1 million per year. WOW!
Taxes will put a halt on economic growth. We will see years of slow growth to no growth economy. Investing ideas as buying an index will become a loser. Picking stocks will become the better ploy and only for pro's. Real Estate will be a chosen investment of the masses. At least for those who have a job and money to invest after taxes.
Historically it takes 31 months for employment to return to past lows, except the Great Financial Crisis which took 76 months.
The presentation is attached below.
https://isvr.acceleragent.com/usr/1024408819/CustomPages/The_Global_Coronavirus_Recovery_-__John_Dionne_-_Final__1_20219.pdf
The key to Mr. Dione's presentation is the Democrats take the presidency, house and senate and key red states.
I don't like the forecast under that assumption. But we will see what the people think.
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