March Letter From My Heart

Good morning to Spring Buying,

The economy is rocking as the numbers keep rolling.  Even more: While the Fed has jumped their rate by a full one percent point, mortgages are up only ½ %.  This remains an extremely attractive rate considering the current economic growth and any historical perspective. Love it. The next Fed meeting will in about 15 days and one should expect another +¼ %, as they try to remain ahead of possible inflation. The question: Will actual inflation be more or less than expected.  I am leaning towards the notion that productivity increases – stimulated by corporate tax reform – will help offset and keep inflation in check. If so, expect a slowing in rate increases. We will keep watching with and for you.

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In response to requests, I will be providing a point-by-point, quick educational seminars in our local Bay Area.  Two topics: “Avoiding or Deferring Capital Gains Taxes on Highly Appreciated Real Estate” and “6 Strategies on How to Age in Place – Not Just a Reverse Mortgage Conversation“.  Check in with us if you have an interest in attending.

 Monthly Fun News

1) 1.2 million houses were started in 2017, double the starts in 2009. Yet this is still 400,000 starts below what’s needed based on population, job growth, and tear-downs. This translates to being “under-built” by 4,500,000 units, with the gap continuing to widen.  Outcome:  The gap between “house-price” appreciation and income growth, may have consequences.

2) England, home of the Industrial Revolution, has its lowest carbon emissions after stopping the burning coal since April.  And, Solar energy costs dropped 25 % in the past year.

3) Pay inequality, per the Pew Institute,  shows the gender pay-gap in the US is now 17%, vs 36 % in 1980. It is down to 10 % for young women. Great results – Keep going !

When gathering info for our letter, I peruse many sources to gain a sense of the direction and movement of our markets.  My particular concern is real estate, equites, and interest rates.  I consider this invaluable and keeps my investing safe from the emotional ups and downs of headline news. Will there be a downturn in our future?  The past indicates yes, with 5 complete cycles in the past 30 years. But these are of facts and figures, not fears.

Coming Months 

Here a few of the data-points keeping me positive for the coming months:

1) Housing and Job Creation: The prime-age population – between 25 through 54 – numbers 125 million. Of these, 100 million are in the labor force and comprise 63% of employees. Since 2000, near 17 million net new jobs have been created, mostly from the ranks of those 55 and older. Plus the number of employed – over age 54  – rose from 18.5 million to 35.5.  Interesting thought: As the older retire, will our young be trained and ready?

2) Program for teachers: 2-yr old SF startup offers down payment assistance for teachers.

3) Often people building a downpayment, become very conservative with their credit. As a result they lack credit data to support a traditional loan. The good news: “Rental karma” – the adding of your rental payment history to your credit score.  Makes good sense.

Now for a bit of our monthly The Good, Bad n’ Ugly:

The Good:

The trend line for housing starts, continues upward.  On the business side, the National Federation of Independent Businesses sentiment index for Small Business, continues to add to highs not seen since 1973.  32 % of Small Businesses indicate now is a good time to expand – their plans and planning. It would seem business momentum is just warming up.

The Bad:

Housing and Transportation.  With little desire for higher density housing or bringing an end to a fractured transportation industry, I fear all the political noise regarding either, will simply remain unproductive noise.  Even with 700 private buses running ( less than 3 % of the working population bikes or walks) and after adding many thousand housing units last year, we barely put a dent in the issue at hand.  Yes to more conversation, but soon the painful noise must become needed alternatives and real solutions, with corporate input.

The Ugly:

We strive for balanced understanding, communication and consensus, while clearly aware of how the slippery slope of misdirected zealousness can be a paralysis to needed change.

In Closing

We continue to expect prices appreciation rates – in the local residential market – to exceed historical averages. Consider the following: The lack of supply will not change; job growth and the expanding economy will continue; over 1/2 of all new jobs being created, are 6 digit incomes; and tax reform. All support continued increasing demand and higher prices.

In pace with this, is the increased calls and work we are doing with land purchases and loans for new construction, apartments, and NNN properties. Give a call and tap into our knowledge base, investment tools, and proven lender resources of over 30 years.

Preparation is key and our team is ready to help you successfully achieve your dream.

Have a blessed day and Joyful Springtime to all.

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