Many of clients have asked lately what I think about the coming year and where markets will go.
Obviously, due to my position, this question comes up quite a lot. But recently, the market in question isn’t only the stock market but also the real estate market.
This article from the Fiscal Times is an interesting outlook on the 2014 real estate market in America. The author makes interesting points, most concerning to me is the tight lending market.
For five years now, our Federal Reserve has been printing money in order to stabilize our economy. One of the main reasons for doing this ‘quantitative easing’ (QE) has been to provide banks with liquidity in order that they may make loans. The theory being, banks make loans to businesses and individuals. The loaned money then gets spent in the economy and drives the consumer economy to recovery.
The only problem is, as this article points out, loans aren’t being made. It is another example of our Government’s left hand not speaking to its right hand. While the Fed and ostensibly the Obama administration want liquidity in the economy (QEs 1,2 & 3) Congress is busy dreaming up all sorts of ways to scare the hell out of banks that want to lend with misguided regulations.
So, what you have is a bunch of deer in the headlights known as lenders. If lending standards could simply come back to pre-2000 underwriting, it would significantly increase lending, pumping up bank profits, economic activity and along with it, home prices and the stock market too.
I guess I’m just being too practical again.
In general, I think the residential al estate market in Northern California should continue to recover in 2014 but perhaps not at the same pace we saw last year. Tight lending and interest rate increases aside, the simple equation of supply and demand still benefit the Bay Area home owner over the buyer at this time. There is an increasing demand for homes and a limited supply for sale. That scenario will likely drive home prices higher in 2014.
If you’ve got questions about your own property, we can make time to sit down with you and go over your situation. Just give us a call.