McKae Properties Real Estate Market Commentary

Investors, home buyers, and agents are convinced the FED will lower rates later this year. However, their record is not that great! Whether the investor is a Wall Street Titan, a Commercial Real Estate Investor or Speculator or an individual investor in stocks and bonds or real estate, they have been caught offside in both directions while making their decisions on the Path of Interest Rates over the past years. Let's take the commercial bets on office buildings.  No one expected a major shift in employees working from home as a result of the Pandemic. The shift created massive vacancies in office buildings across the United States and major world centers.  Office building owners felt it wise to take additional loans on properties before the pandemic, planning to refinance at lower rates in the future.  It did not work out well for them.  The FED raised rates to combat inflation and vacancies created a fall in income that put properties at risk.  Offices were not the only victims o

REMEMBER!  Lenders and owners are Diametrically Opposed!  This Adversarial Relationship stems from GREED, an entrepreneurial trait which brings both parties together. From the 1960's forward, Legislatures and Judiciary parts of our government have worked to protect lenders from the abuses that created an uneven playing field that favored lenders. (Residential) The most important legislation came from California in the "Anti-deficiency legislation of the 1930's. Rising inflation during the 1960's produced a severe real estate recession in 1965-67.  This occurred while the economy improved due to employment from the war effort of Viet Nam.  1963-64 Boom Led To The Savings and Loan Crisis.   Lenders viewed excess money on deposit as wheat to be harvested.  Money was lent quickly and deals where chased aggressively.  Brokers were in control, rates were below 7% and deals were taken on without regard to risk as inflation was low.  The result was excess Real Estate inventory