A Rising Tide Lifts All Ships

 We certainly do not have a rising tide; other than, interest rates.  The issue with the rising rates is that they have occurred in a quick like fashion that does not allow the market place to adjust.  The result the tide is going out.  As a result many of the rocks, debris and sunken ships are exposed.  This is especially the case when the rates rise without time to adjust.

The issues of the past indicate the problems of the future.  Whenever the FED has found themself behind the curve the quick action to raise rates to catch up to inflation has created issues.  This goes back to the 70's and the eventual result of the end of the 70's with the numerous financial crisis that occurred.  The reoccurrence of the lowering tide has created issues in the past and they can be seen in the present.

The issues are complicated by the various securities created by Wall Street and Banking.  Specifically: LDO...loan default obligations, and CDO....collateral debt obligations.  Insurance companies and pension funds were a great buyer of these items due to the higher rates and perceived less risk.   

The risk is the same as the Lehman crisis...the debt obligations fail, the loan default obligations cannot handle the size of the defaults.  When this happens financial institutions FAIL.  That is what happened in the United Kingdom. Their pension funds are defined benefit plans that bought these investments for the certain return that would fund the retirees benefits for their lives.  When the CDO failed the benefits were unfunded and the UK stepped in the support the market.  These defaults will continue to occur as long as the FED raises rates in their fight inflation game.  AsI have stated in the past, this is an asset disinflation goal.  Bring down the value of assets has some terrible consequences.  Investors who bought on margins get maintenance calls.  Developer who have short term loans for developments see the cost of carry rapidly rising beyond the cost of carry and are forced to sell irrespective of price.

This is a pitiful experience just to stop inflation and take down asset values; in order to, make homes once again affordable.  Fine home prices are down, rates are up; no longer employed and can't qualify for a loan.  Waste of time to put America on Welfare to stop inflation when all that was needed was to open the supply chain.  Drill more wells, create more gas and oil and refine more in the US to drive down gas prices.  This will drive down commodity prices.  Not all farmers are on electric tractors.  Even so, how can electric tractors charge when the electric grid fails.  Get out ole Dobbin.

Where are we today in or real estate market.  The Realtors Association is calling for 0 growth in prices for 2023 for California with declines in some ares of 10%.  Those areas that have seen too fast of a growth.  Does that really matter when qualifying for a 7% mortgage is putting buyers out of the market?  While our market is not freezing up.  Sellers cut to sell homes and buyers buy for cash.  

I believe there are numerous opportunities that will befall the astute buyer in this market.  I see income properties as the best place to look.  

I do not believe that the stock market will give the reward it once did.  I believe we are in the 70's and the idea of buy and hold is done!  Investors will become disenchanted.  They will look for secure investments that pay income.  Real estate is far better than a stock market that goes up 800 points one day and down 400+ the next.  Volatility does not breed confidence.

Forecast For Home Prices


Housing Inventory SnapshotSeptember 27, 2022
 Average List Price30 Day TrendAverage Sold Price30 Day TrendAverage DOM: active/sold30 Day TrendNumber of Active Listings30 Day Trend
Santa Clara County, CA
Single Family$1,684,222+4.65%$1,648,066+2.85%48 / 241 / 2707-46
Luxury Single Family$5,806,059+8.79%$4,122,160+5.17%63 / 246 / 0218-21
Condo/Townhome$799,395-0.39%$792,049+2.46%50 / 286 / 3314-30
Luxury Condo/Townhome$1,618,389+2.94%$1,495,192-1.88%48 / 256 / 599-15
San Mateo County, CA
Single Family$2,150,105+10.68%$1,813,964-6.39%43 / 262 / 636833
Luxury Single Family$8,724,443+7.76%$6,391,389+11.58%82 / 55-1 / 3512210
Condo/Townhome$831,665-2.26%$876,045+5.67%63 / 387 / 1158-11
Luxury Condo/Townhome$1,744,896+2.32%$1,793,932+2.92%51 / 456 / 3751-3
Santa Cruz County, CA
Single Family$1,247,080-1.19%$1,158,033-7.21%61 / 285 / -1167-9
Luxury Single Family$3,492,781-7.08%$3,873,643+39.02%76 / 40-6 / 2158-1
Condo/Townhome$745,295+9.23%$828,300+8.17%101 / 1634 / -1327-10
Monterey County, CA
Single Family$974,197-1.87%$941,456-5.39%58 / 299 / 3260-17
Luxury Single Family$7,525,922+3.44%$4,466,748-6.27%136 / 3413 / -2980-4
Condo/Townhome$667,814+9.10%$760,548+34.48%35 / 222 / 2282
Contra Costa County, CA
Single Family$824,289-0.13%$844,027+3.08%45 / 316 / 6913-66
Luxury Single Family$2,642,391+2.34%$2,257,463+3.78%48 / 273 / 2304-25
Condo/Townhome$512,059-2.77%$518,569-3.69%39 / 282 / 7205-2
Luxury Condo/Townhome$1,189,069-0.36%$1,109,913-5.18%36 / 216 / 6672
Alameda County, CA
Single Family$1,037,578-0.45%$1,080,484-1.21%42 / 273 / 4864-7
Luxury Single Family$2,623,511-2.11%$2,231,097-2.33%43 / 301 / 62870
Condo/Townhome$627,126-2.38%$642,219+4.01%47 / 286 / 0348-29
Luxury Condo/Townhome$1,144,026-2.92%$1,071,603-3.93%46 / 246 / 3116-2

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Silicon Valley Real Estate Newsletter

The Problems are the Path: FED calls interests rates Wednesday January 31

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the Problems are the Path: Notice of Default Opportunity in Multifamily Unit

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