First I would like to say that today is voting day. I know it’s a very obscure day since we’re not voting on Governors or Presidents, but it’s a voting day just the same. If you’re like me and until very recently knew nothing about it, you should be able to look up the issues on line so you can GO VOTE. It’s these kind of voting days where they have very little turn out and they sneak through the bills concerning our real estate that if the general public was awake, they never would pass, like the never ending parcel tax in Fremont. Even if you don’t own a home now, some of these issues could affect you in the future should you decide to buy or sell any real estate.
Second, I would like to thank President Obama for the shot in the real estate arm by signing the extension on the higher loan limits for Fannie Mae, Freddie Mac, and FHA. Anyone who knows anything about real estate in the Silicon Valley knows we needed this. Until this crisis happened, the loan limits on FHA loans were so low they were almost useless. The only homes they were good for were the lowest priced homes in San Jose and the surrounding areas, and even then the buyer would have to either bring a lot of cash to the table or do a lot of fix up. The very buyer they were supposed to be helping, the ones on the lower end of the affordability scale, couldn’t afford to go with FHA financing because they didn’t have the extra cash.
Now the next “good news” in real estate is that it looks like the bill to extend the First Time Buyer Tax Credit is going to pass through Congress also. Not only that, but they are going to extend it to current homeowners also. It is not as good a bill as we would have hoped for, but it’s something. It’s unfortunate the the bill is pretty restrictive when it comes to current homeowners and comes in at a whopping $6,500.00. I’m not really sure myself if that would be enough to make me want to move.
Another “thank you” to the Obama Administration’s announced move to provide support to housing finance agencies across the nation. This action will help restart the housing market for low to moderate income first-time homebuyers, including in California, which has been among the hardest hit by the real estate crisis. These loans in California are known as the CalHFA, which had suspended their programs due to all the finance mess in the market. Supposedly this will be a new and better CalHFA.
Last but not least, I would like to render my opinion about all the hype in the news. First I think the news media is getting their numbers and stats from somewhere different than I do. Second, I wouldn’t be singing la, la, la, la, la just yet. I still don’t think we’ve felt the commercial real estate crash in all it’s glory yet, and that also will affect the housing market. Have we seen the bottom of the housing market and bounced back yet? I’m not so sure.
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Follow-up comment rss or Leave a TrackbackRegardless of the reasons, I think there are three items which do not bode well for commercial real estate prices in the next few years. First and perhaps most overlooked, investment or income producing properties, during the boom years, where purchased more for appreciation, rather than “income”. In other words, many deals were justified by investors who were willing to forego a rate of return (income), for future price appreciation. But as its name suggests, this is not what “income producing property” is all about. If it doesn’t give you an income stream in good times, it sure won’t be able to in bad ones. Only a “flipper” can make money on appreciation, and the trick is to know when to get in and when to get out. Second, the credit crisis has reduced the chances of obtaining loans, and also the leverage previously afforded owners/purchasers. Less money means less deals, and more cash out of pocket. This can only lead to lower prices. Third, we are for now in a “new” economy (although Americans often prove to be driven by fads and can be short sighted), where we will consume less, which should mean less need for commercial space. If there is one truth that history makes clear over and over again, it’s that most sectors of the economy will move in conjunction with one another, not in spite of one another. No doubt prices are tied to supply and demand issues, but too much of a swing invites change. So when prices double and triple in one sector while the rest of the economy isn’t going in that direction, chances are some force will snap that imbalance back into its proper place in the overall economy. And that change can be from social, economic, and/or political means.
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