Bear Market Rally in stocks, Real Estate Market Softens

 Real Estate is an Asset Class that represents store of value.  Unlike stocks, bonds, coins, commodities and crypto, real estate offers offers livability.  

I have always had issue with the concept of interest rates being used to control the economy and inflation.  It is really nothing more than an adjustment of supply to match demand.  Common sense and affordability will control the rest.  The increase in rates with more to follow will affect real estate prices just as it has stock and bond prices.

One in 5 listings in the US has had a price cut.  We have not seen that so far in our area. As I watch the Daily MLS Listings summary for our area, I do see agents offering buyer agents more in commission to motivate their buyers, I do see more yard sales, I do see more open houses.  Sooner or later the trend in the US will follow through to our area.

Californication or the movement of Californians flush with cash to parts east to buy has finally slowed down, says Redfin.  Further Redfin states that the FHA buyers are now finding that they are not outbid by All Cash Buyers.  Unfortunately, HFA loans are not dominant in our area.

Further proving the softness is that New Home Sales, nationwide, declined in April 16.6% from March.  Meanwhile the inventory of unsold homes in the US jumped 8% in April to 444,000 a 13-year high.  Now this is not 2008 and home prices are not falling.  The average price of a home in the US ticked up to $450,600, up 45% from 2-years ago.  That number should tell you why Californication is going on when the median price in our area is over $1 million.

BOTTOM LINE:  While the frenzy is over, there is still Pent-up Demand from those who have been searching for the past 2-years.  It looks like we will see a sellers market will remain in our area.  For the frustrated the only recourse is "Go East Young Buyer, Go East"

Stock Market comment:  For those of you who have asked my opinion on various stocks that have "hit the tank" as we use to say when I was a trader and stock broker, we are in a Bear Market Rally..  The FAANG stocks have declined over 20% and some more than 50% to 70%.  This is a transition phase when those FAANG and related growth stock were the dominant investment in a low interest rate market when the FED was the investors friend.  That era has gone.  

Short sellers, or traders who believe their target stock has been over priced, sell to buy back lower at lower prices and borrow stock to deliver to the offset buyer.  Interesting part of this pairing it is really a triad.  The stock that is borrowed is lent from a mutual fund, investment advisor or similar related firm.  When prices decline to a point of being over sold, the short seller buys to cover the short sale. This starts the rally in a Bear Market.  Individual investors or traders sensing a bottom jump on the band wagon and prices escalate quickly.  Then all stop and the funds and investors who missed the initial sell begin to sell positions.  Down it goes.

NO, it will not always go up as it has for the past years.  This is a different phase of a market.  The FED is not a friend. 

Sell your growth stocks and look for high end real estate.  The Luxury Market is strong and there is seldom a Bear Market there!

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Silicon Valley Real Estate Newsletter

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