McKae Properties Real Estate Market Commentary

 We started out 2023 with sufficient amount of homes listed For Sale in inventory without the corresponding buyers to make many areas on the verge of becoming a buyers market.  As interest moved higher by FED decisions, many anticipatory  buyers began to look at the forecast of even higher mortgage rates.  That stimulated buyers back into the market to reverse the trend toward a Buyer's Market.  Inventory declined due to the belief of many potential sellers that they would be creating large capital gains, losing low a property tax base and the potential of even higher rates on a new mortgage.  They decided  Stay Put.   The lack of new supply created a negative balance of inventory to supply the resurgence of buyers.  Real estate agents revived an old strategy to create multiple offers and over bids.  Homes were priced drastically under market values.  The strategy worked.  Inventory began to diminish as new buyers gathered momentum to create what began to appear as a new wave in hi

1971 the Dow Average had hit 1000 for the second time, brokers were celebrating.  Within 4 years the Dow was down about 60%.  Interest rates during the years prior to the 70's were dropped to create employment, and cheap money was dominant.  THEN, Oil prices went from $10 a bbl to over $100 a bbl in 10 years.  Inflation went to 25%.  The administrations of both Republican and Democrat could not solve the problems.  WIN, "Whip Inflation Now" was a new phrase by Washington for an illness they created. Interest rates rose dramatically!  a 6%+ mortgage went to 15%.  Buyers still went on with home purchases.  Where else do they put their money when Trust was damaged? (See next paragraph) The 70's started with the greatest investment for the average individual with a Mortgage Real Estate Investment Trust, REIT, that borrowed short term and lent long term.  They all failed.  Every investment in the same related strategy fell like dominoes.  Following that came the Savings an

There was a time early in the founding years of our Democracy that store of value was the best measure of Trust.  Early savers were savers that put excess savings into real estate.  A home, extension of their present home, a farm and or a extension to their present farm.  The farms would buy better newer equipment as a method to increase their return.  The currencies of the past were gold or silver.  There was no fiat currency backed by any Full Faith and Credit.  When paper currency was added it too was backed by the gold or silver behind it.  Well before the formation of the Federal Reserve System, banks were local institutions who issued their own currency.  A holder of such a note for a specific amount, could go into the bank who issued the note and demand the gold or silver backing their note.  It is here when banks began to have Trust and Faith issues.  Banks gave loans to businesses and individuals that had a pay back in time.  The savings and notes were backed by gold or silver

* 33 A.D. After property speculation fed by low interest rates led to a crash, the Emperor Tiberius authorized a banking commission to bail out wealthy real estate speculators. 1825. British banks began to fall after falling interest rates goaded them into buying immense quantities assets, including debt issued by Poyais, a fictitious Central American nation invented by a con artist.  The Bank of England lent money "by every possible means and in modes we had never adopted before", a bank director testified. 1882. The Paris stock market crashed, and its membership of brokers ran out of capital.  With Government approval, the French central bank made an emergency loan of 80 million franc, preventing Paris bourse from going bust. 1890 The giant British bank Baring Brothers & Co collapsed after gouging on Argentine bonds right before the South American country defaulted on its debt.  To stem a panic, the Bank of England swiftly lent Baring's 75 million pounds and coaxed

 Matt Levine has followed up with commentary on the Silicon Valley Bank Bailout The banking system is under pressure for what I feel is a "Failure to Supervise". Bonds, Gold, Crypto have rallied as there is a search for a "store of value" In reflection on the past 60 years of similar events the stock market collapsed, and investors also fled to real estate as the true store of value. The rise in interest rates is like the Tide Going Out, you can see who was swimming naked! Bailouts etc. I don’t think that anything interesting turns on whether or not this weekend’s resolution of Silicon Valley Bank was a “bailout,” so let’s not discuss that. [1]  But when people talk about bank bailouts, what they often mean to talk about is moral hazard, the idea that if the government saves people from the consequences of bad bank behavior, that will encourage more bad bank behavior in the future. And that seems worth talking about. It is, I think, fair to say that Silicon Valley B

When the FED started raising rates, I stated that the inflation the FED saw was in realty Asset Inflation.  Yesterday March 9, 2023 we saw the results. The seizing of Silicon Valley Bank, the 15th largest in the United States, was the largest such failure and seizure since the Washington Mutual seizure.   There will be ramifications!  SVB the darling of the Valley has been one of the Prima's of our area.  One that WHO WAS ANYONE AND who wanted to be SOMEONE mentioned them as "Their Bank" during cocktail parties.  It was the bank that all funds from IPO's and formation funding that the Venture Capitalist put the new business proceed in to await to be drawn during the rise of the new company from birth to growth.  My thoughts are that History Does Repeat Itself.  This happened in the late 70's and early 80's when higher interest rates caused the abandonment of venture capital funding.  Take a risk or leave your investment money in T-Bills the question is not eas