Pivoting Your Real Estate Thought Process

How is the real estate market across Southern California? Are homes still selling? Are new properties coming on to the market? The answer is YES! 
 
Homes are still selling, they are just selling at more of a steady and consistent pace. But instead of taking our word for it, let's hear it from some market experts. 
Cathie Wood, Founder, CEO and CIO of ARK Invest, recently shared an amazing article about what is REALLY going on with interest rates.
 
The Fed is using “lagging indicators”—including employment and headline inflation—to justify tighter monetary policy when maybe they should be using “leading indicators” such as commodity, used car, and home prices that tell a very different story? That’s according to Cathie Wood.  
Inflation in much of the world has been driven by Covid-related supply-chain bottlenecks and energy price shocks. Raising interest rates is not going to bring more gas or microchips or homes to market, but rather the contrary. Reducing investment will limit future capacity and thus future supply..... 
 
Click below article to read more
 
'An Open Letter To The Fed'

Focusing On Asset Allocation & Location
An Article by: Financial Advisor Ben Phelps

"Market volatility is by no means an enjoyable time; we all feel the pain and we all fear that this time is different. That emotion creates recency bias, meaning we try to connect the dots on what this most feels like and what we can expect. 
 
1. As a result of the $10T of stimulus that poured into the economy during the pandemic, the American consumer stands in a stronger position than ever before. Household debt is at near record lows and 66% of all household debt is mortgages (more on this below). Additionally, the American consumer has more liquid assets on their balance sheets (approx. $2.02T in excess savings compared to immediately prior to the pandemic) and are capable of withstanding both the higher prices brought on by inflation, as well as an increases in interest rates as a result of the Feds’ current actions.
 2. As it relates to the housing market, why is this not like 07/08? It is because during the pandemic, homebuyers and homeowners at an overwhelming majority structured their mortgage debt as fixed rate liabilities in the high 2%/low 3% range. This means their debt is not variable and subject increase as a result of the Feds’ rate hikes and there won’t be a need for mass refinancing. Part of the issue in 07/08 was that there was a high percentage of variable rate mortgages that contributed to the crash. Simply put, the homeowners do not have the same issues that we faced in the 07/08 crash. It does mean, however, that inventory is likely to stay low as few homeowners will want to trade in their 3% mortgage for a 6% mortgage, and those houses that do come on the market will face a smaller pool of buyers who can afford the 6% cost of capital on debt, so there will be some downward pressure on prices. Those without a true need to buy, are best served sitting on the sidelines for the time being. 
3. If we are in, or headed for a recession (whether or not it matters, I believe we already are in one), a couple notes of context. Since 1900, there have been 24 recessions in the US; only two of those have risen to the level of “Great”. Any recession we do see, it is highly unlikely to be the 3rd “Great” one. First, once the Fed finally does beat inflation (and some indicators are beginning to suggest it has), it will be under immediate pressure to begin cutting rates as it cannot afford to continue to raise rates or keep rates high in the face of a recession. All current indicators point to the Fed having to begin cutting rates again as soon as the second half of 2023. Also, as noted above, the American consumer stands is in a stronger position than ever before. With 70% of the country’s GDP a function of consumer spending, and the consumer having more money to spend than ever before, once the Fed has tackled inflation and balanced out the supply and demand curve, we can expect to see spending return, stimulating the economy. Thus, we would expect any likely recession to be relatively shallow and shorter in duration than those might otherwise expect. 
As I would remind all my clients, like the Nicol family knows, we’ve planned for this. We’ve been here before, and we’ll be here again, which is why we remain focused on the long term. We remain focused on asset allocation and asset location, and remind people that money is made in bear markets, we just don’t know it yet." 

El Segundo

700 West Sycamore Avenue

4 BD 4BA 3431SF $2,599,000

Scot Nicol
 
DRE# 01918400
Realtor®
M: 310.529.5286
[email protected]

Compass is a real estate broker licensed by the State of California operating under multiple entities. License Numbers 01991628, 1527235, 1527365, 1356742, 1443761, 1997075, 1935359, 1961027, 1842987, 1869607, 1866771, 1527205, 1079009, 1272467. All material is intended for informational purposes only and is compiled from sources deemed reliable but is subject to errors, omissions, changes in price, condition, sale, or withdrawal without notice. No statement is made as to the accuracy of any description or measurements (including square footage). This is not intended to solicit property already listed. No financial or legal advice provided. Equal Housing Opportunity. Photos may be virtually staged or digitally enhanced and may not reflect actual property conditions.

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Pivoting Your Real Estate Thought Process

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