Happy Thanksgiving...or is it?

 It does not seem so long ago that Wall Street, the Euphemism for the place were all savy investment decisions are made, was forecasting consecutive declines in interest rates from the (FED) Federal Reserve Board.  The FED would cut interest rates at every meeting.  Surprise!  The FED comments are that the economy is going too nicely along with inflation at a 2.1-2.3% on an annual basis for us to do so.  

Inflation rate may be well and good for the Nation at 2.3% annually, but we here, in California, we have some issues.  While gas prices at the pump have moderated a bit, the taxes that our Governor and Legislators put on gas keep the State of California as the highest in the Nation.  Add to that we have to contend with housing prices the highest in the Nation!

Next with all the push on the quality of the air and the carbon issues, the ability to convert to all electric has some road blocks.  The major roadblock is PGE ability to provide electricity.  As I look at the Nextdoor Neighbor site for parts of Silicon Valley there seems to be a regular outage somewheres in SV.  Poor Redwood City seems to be hit on a weekly basis.  Buying Gas Generators for power are hotter than pancakes, as the old saying goes.  Neighbors complain about the noise, the lack of power and the COLD in the house as furnaces are out.  Well that is for Silicon Valley.

Once one goes to the next Valley of our population, Sacramento Valley, solar panels are more common than EV vehicles.  

California Food prices are not really abating, or at least that is what my wife tells me.  Retired friends complain about medical costs and the cost of food.

Next we go to Savings Rates.  From 2020 to present the savings rate in the Nation is 2.3%.  That is down from 13.3% prior to the Pandemic in 2020 and during the Pandemic when savings skyrocketed to 38%.  

The Stock Market is cheering for the Trump Administration and getting a bit ahead of itself as the new president has not even been inaugurated.  His Cabinet and Staff have yet to be confirmed.  A bit like declaring a winner of a race before the bell to start has not even rung and the contestants are still in the locker room!

Housing prices continue to remain strong in sales, while the forecasts from Zillow are forecasting 2-3% declines in the next year.  New home sales are slowing down and existing homes sales see more price cuts and sales below list than that of a booming housing market.  

Mortgage rate hover around 7% and whenever this is a dip in rates below 7%, the Housing Industry shouts hooray!!.  A bit like a person coming out of a comma and the staff is already getting out clothes to discharge and getting the wheelchair ready!

With savings depleted the ability to afford home improvement lacks support in interest rates; even though, the equity in the home can support a Home Equity Loan, the borrower cannot afford the payments and the ability to take one out.

Where does that lead home buyers and sellers?  A Mexican Standoff?  Sooner or later prices need to adjust downward.  Sooner or later the migration to affordable parts of the state will continue.  I look at this as once living and working in New York City.  Great for a single person.  Not so great for a family.  The result is living outside the city and commuting.  That is similar to other big cities like Chicago.  Or even my home Town of Milwaukee Wisconsin.  

On the commute issue, I watch home prices on the East Coast.  North Carolina is up 3% and rising.  That seems to be the same for Tennessee too!  Florida and Texas have home prices declining and Arizona is up.

Rents too are adjusting downward.  Last year rents moved quickly and landlords were quick to raise rents and rent their homes and ignore work to make home habitable.  "Don't like it Move."  That creates other problems as lawyers and tenants revolt and lawsuits with State supported legislation force landlords to comply or pay heavy awards by Superior Courts and settlements by landords or their insurance companies.   

The commercial Real Estate Market is still reeling from the Pandemic.  Large Commercial Properties slowly go into default and foreclosure.  While it is not a newspaper item they are there.  Cap Rates that dictate buyers' and sellers' willingness to meet in agreement are slowing rising much to the chagrin of sellers and celebration of buyers.

The rotation of Commercial Properties in trouble have graduated downward from large properties to national companies, like CVS and Walgreen, even Starbucks is closing stores and buyers for their once sought after lease investments are finding it hard to get a buyer to take a risk for fear the store will close and they stopped getting rental income.

Throughout it all we should be happy and give thanks. Give thanks we are not in the Ukraine, the Left Bank in Israel, or Lebanon.   Give thanks we have a home or a roof over our heads, not a tent under a freeway bridge.  Give thanks we are not in a Cancer Ward, give thanks our children are healthy.

I had spinal meningitis when I was young.  I was told I would not survive.  I am here.  I came home partially deaf.  Angry? yes.....then I saw a worker who was in a wheelchair crippled the day before his wedding in a car accident 30 years ago. I was thankful......So Should We Be Thankful...GOD BLESS!

As before, call or write for any question you may have and think of me of your "in the know real estate professional".