McKae Properties Real Estate Market Commentary

Irrespective of what Wall Street and interest rate analysts thought a week ago, the FED may not be done with raising interest rates.  The debate over debt limits and spending continues as it has been for a number of years.  There must be a point where son is told by Dad, no more allowance increases just for you to spend more.  Once one has money the thought is it continues forever....TRY RETIREMENT!   I did not believe that the Government will stop paying interest and maturing debt.  Per a recent Wall Street Journal article some days ago, the analysis was that the monthly cash flow of Government Receipt outdistanced the payment of interest and maturing debt by a large multiple factor.  Then there is the 14th Amendment of the US Constitution that mandates payment of principal and debt.   What will happen when an agreement occurs with a spending cut?  The first obstacle is House of Representatives and then the Senate.  Not an easy choice.  The Republican control the House by a hair, the

Sermons are usually boring and sleep enhancing experiences.  In all my years of listing to sermons, this one from a Franciscan Father was memorable. A soul reaches the Pearly Gates and is shown his new reward for his past life.  As the soul tours Heaven they pass a door.  The soul inquires as to what is behind the door.  "Nothing important".  The soul pushes and the door is opened.  Behind the door are "PRESENTS", un-opened gifts as far as could be seen.  "What?".  The Creator's gifts to mankind that were never opened. Certainly we all have events and circumstances in which a gift not opened is regretted as we never realized the gift or we just didn't care or have time to open the gift, or never viewed it as a GIFT.  A job position? A house sale or purchase?  A date? A proposal? A gift unopened and lost forever. The greatest gift we have before us are opportunities created by the sharp rise in interest rates and the failure of bank management and t

 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