August Letter From My Heart

Good Morning to the warm days of Summer,

Quick Invitation:

This Thursday evening, in Sunnyvale, I am invited to be the featured speaker for the San Jose Real Estate Investment group. If you are interested in a complimentary ticket (save $35), email me or call me by end of Tuesday. It would my pleasure to get you signed up. With it, I will send out all the details.

Our economy and markets continue in their resilient ways. So far they seem unfazed by “Brexit”, presidential elections, and all else catching the eyes of the press. For us – continued good news. Interest rates remain most attractive, while home sales are on target and doing the expected.

Our markets are telling us the following:

  • Employment growth continues healthy, though wages growth lags.
  • 2nd Q GDP remaining well contained, with low overall inflation.
  • Increasing talk from the Fed regarding “negative rates”.

Here are some relevant “Data Points”:

  • Listing to closing time: Nationwide the shortest number in 6 years – about ½ the time for 2010. And this despite a slow down in “cash sales”.
  • Rents: Nationwide average rents are on a steady increase, with little signs of easing, near term.
  • Housing Inventory: Under 1.5M and bouncing off 6 year lows.
  • Credit Score: The percentage of people having a credit score less than 600, has dropped nearly 20 % from its peak. This is 6th year of declining numbers for this group. Good news, looking ahead.
  • Bank lending: Shows some tightening. A note of interest: In the past 10 years, there are 1,340 fewer banks and only 2 newly created. Even during the peak days of the Great Depression, we formed 12 new banks or more each year.

The Good, The Bad and The Ugly

The Good: Our very low mortgage rates means that now 30% of the mortgage payments is being directly applied to principle reduction. Wow!! Please be sure to lock in these very low rates. You will build up equity in your home quicker, plus you have built-in protection against future inflation.

This month, a second “the Good: “U.S. Leading Economic Indicators picked up in June, reversing a May decline. Improvements in initial claims for unemployment insurance, building permits, and financial indicators were the primary drivers.  While the LEI continues to point to moderate economic growth in the U.S. through the end of 2016, the expansion still appears resilient enough to weather volatility in financial markets and a moderating outlook in labor markets.” Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board

The Bad: A well-intended gathering in several communities wherein groups gather together to help provide housing for the “under-employed”. Great heart, yet seeking needed funding through “impact fees” upon new construction, will result in new construction building bigger units – higher cost and less affordable.

The Ugly: We the people and our representatives sometimes lose sight of the pragmatic realties and real life trade-offs, when addressing social complaints. For example, Is traffic bad? Yes. Yet are we willing to lose up to 40% of home values? How about home / rents going up to fast? I hope we are not asking for another recession. How about housing for under-employed? Has one considered reducing regulation to lower costs or add the cost of housing to all members of society? Please don’t let platitudes, fears, and raw emotions govern how we live and vote.

In closing,

We remain positive as to housing and our economic future. Low supply, low rates, and higher rents are bullish indicators for real estate. Yet with growth, comes social issues – issues in need of both free market forces and social policies. What should be avoided are the quick-fix, pass-the-buck policies based in emotional bias.

Our business is to help you find safe and appropriate financing. We do so by sharing our learned perspective, as a tool to help you choose “Michael Ryan” to work with you. Thank you for the calls and introductions to your friends and families.

I love challenges, even the difficult, but most of all, is my conversations with you.

Have a blessed day and talk with you shortly.

Gratefully yours,

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