McKae Properties Real Estate Market Commentary

One of the most enjoyable classes I had in college were in the Statistics and probability classes.  I must admit my greatest source of successes from these classes in my formative days was Black Jack.  A colleague of mine named Tony, who looked like Tony Soprano and was from New Jersey, and I were so successful at in that in the mid 70's we were told not to come back to Las Vegas.  So it became a rather humorous endeavor when I listened to Economists talk about the various forecasts they had on the economy and where the future was going. Another  benefit  was in viewing the FED and their attempts to use interest rates to solve and economic situations.  The Federal Reserve of St, Louis published an economic report which detailed the past actions of the FED with interest rates.  I can say, that my interpretation was the FED was alway Behind the Ball.  They either failed to cease their interest rates cuts until inflation started and ceased to act fast enough to stop inflation without

 The National Association of Realtors, NAR, creates and Affordability Index  on a regular basis.  It really defines how the FED uses certain tools to determine inflation. It also gives insight on how various real estate markets will perform.  I see the CPI as being 30% home prices and rents. The index is simple, the higher the number the greater the affordability.  The lower the number  the more unaffordable the area.   Last letter I took a swipe at our state legislature and those who support multiple housing units in all the state towns.  I spent too many years in local politics not to realize that politicians want to get elected.  It is not logic of the laws they pass.  They capitalize on voter ignorance more than voter intelligence.  If the voter based elections on their representatives intelligent work there would be a 99% turnover in all political posts!  In my opinion and experience. Woodside, as an example, is to put in multiple housing they would need a very large septic system

Interest rates rise.  No end in site, YET!  CPI rises, the best Valentines gift for your Lady Faire is a Dozen Eggs.  Price cuts are beginning to tumble out in the Ultra High End and Luxury Markets.   Spec Builders in the Luxury Markets are trying to sell projects on a "To be completed basis".  Once in demand "medium priced homes" are beginning to see price cuts.  The Medium Price of an Oahu Home has now broke below $1 million to $986,000, inventory doubles.  Locally, the real estate forecasts bounce like a drop of water on a hot skillet.  The latest forecast is a rise for 2023 of 1.5%, from a slight decline.  We will not know what the future will bring until 30 days from now. Then, the inventory of homes once taken off the market at the end of 2022 may come piling back on the market.  Real Estate Markets across the Nation are all seeing price cuts.  The once "hot markets" that the "Work From Home" group flooded to are weak.  Slowly there appears

The problems we have seen in the real estate market started with the aggressive push in values due to cheap money by the FED and the expansion Money Supply of over $9 Trillion to the FED's Balance Sheet.  Today the FED's Balance Sheet is $8.58 Trillion.  FED rates have went from below 1% to 5.25-5.75.  That relates to Morgage rates of less than 3% to a high of 7.3% in 9 months!  Or; $2,500 per month Interest Only mortgage on $1 million to $6,083 per month.  A rather large jump in a period from roughly March 2022 to November 2022.   In my past commentaries of early 2022, I had forecasted a decline in the average price of homes in the Bay Area which occurred. What did also occur was a decline across the US in home values.  The largest declines where in areas where the "work from home gang" went to live.  San Francisco saw the biggest drop in home values in the Bay area and Rents.   I was amazed on how well the Santa Clara valley, aka  Silicon Valley, held up and more su