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Selling through the current economic “Yin-yang”
(The coherent fabric of nature and mind, exhibited in all existence)
The Yang
It is interesting how there always seem to be two sides to every economic rebound. One recent effect of increased real estate market activity is a gradual increase in long-term mortgage interest rates. After bottoming out this past March in the vicinity of 4.5{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} for a 30-year fixed loan, the current and still historically low rate of 5.5{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} seems inflated to increasingly price-sensitive consumers. As a result, homes sales and refinancing are being impacted, albeit only slightly.
The Yin
On the brighter side of the equation, slightly higher home-loan rates are being offset by low real estate prices as well as the $8,000 tax credit available to first time buyers. Perhaps I view things too simplistically, but why can’t the $8,000 tax credit be available to all home buyers. This would certainly spur demand for homes at a time when increasing demand is critical to the health of the real estate marketplace.
The Yang
Dichotomies are the rule in a recovering marketplace such as this one. For example, the Federal Reserve will likely allow interest rates to increase as long as they do not exceed 6{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} or so. But if the Fed buys more treasury bills to again artificially reduce rates, fears of inflation could begin to foment and that could create a slowing effect on the market. After all, consumers are already concerned over a budget deficit that will exceed 12{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c}, which is the highest in over 60 years.
The Yin
Still, this a great time to refinance, if you are able to navigate the waters and work through everything that banks now seem to require. I successfully refinanced my own primary residence in the past few months and found that the process bore no resemblance whatsoever to the refinancing experience of just a few years ago. The red tape and details required to get the job done were absolutely horrific, but in the final analysis it was well worth the effort.
The key to a full recovery lies in several areas. They include, but are not limited to:
- Improving consumer confidence – Since we are a consumer-based society, any recovery is inherently linked to mobilizing the consumer.
- Increasing demand for homes – Through keeping rates low and offering pervasive tax incentives, such as the example mentioned earlier.
- Restructuring Fannie Mae and Freddie Mac – It stands to reason that in order for recovery to come, it would help for us to at least know who will wind up owning these enormous entities, which together are the primary purchasers of mortgages in the secondary market.
- Returning to monthly job gains – Thankfully, things have been improving overall and monthly losses are down, but we are not quite there yet. Stay tuned. My next blog will have more details.
Despite all of the Yin-yang in the air these days, the signs of a general improvement are clearly emerging. It is my observation that every market, whether bull or bear, is good for some individuals and for certain industries, so let’s focus our attention on where the real opportunities lie. Ask yourself and the people that you work with this question: “who is business good for today”. After everyone calms down and finishes hurling abuses at you (lol), you may be surprised with the answers that surface. All in all, the key for real estate professionals is to seek out opportunity, even while others may allow themselves to be distracted by the Yin and Yang of everyday events.
