We're in interesting times. A time where I'm uncertain what the future holds. I usually have a better gut feeling about the market as a whole and what to expect for the coming year. Thus far, we've seen housing prices hold steady with the rise in interest rates. Currently sitting around 7.75% on a traditional 30 year conventional loan. The monthly cost of buying a home has shot up immensely and to put things into prospective: A $500,000 loan at 3% PI is around 2108 a month. Now with rates near 8% you're looking at a PI cost of 3668. In just 2 years the same monthly out of pocket cost shot up nearly $1600 a month. This isn't peanuts folks! I wonder if prices will come down to balance affordability; however, inflation is having a negative effect on the dollar. It's not that house values have come down but the dollar has be devalued. With the current course of actions of those in charge in our government, this problem is only being exacerbated. They keep printing more money to fix problems. Many economist are expecting a recession or worse in the near future. Some would argue it's already here. Michael Burry who predicted the 2008 crash and bet against the housing market put a big wager in. 1.6 Billion put on the S&P and stock market to drop in the next 6 months. He's a numbers guy and I hate to think it but he's probably right. If people start to panic and withdraw we could see a massive collapse and the dollar devalued even more. A lot of people a looking for ways to hedge against large losses. Commodities are popular, like gold and silver. I like the idea of something tangible. No funny money bit coins for me but that's my opinion.
Are we going to see a wave of foreclosures in the Sacramento region again? It's not looking so with the date we have. Yes, we'll have an uptick in foreclosures; however, it will likely stay at an acceptable range. There's a lot of Americans that are hunkering down and locked in at 2-3% so they can weather the storm. Nearly 1/3 of Californians have their house free and clear. This is obviously a good place to be in. This is not the time to over leverage your position. With that said I think you can deduct that I'm financially conservative. I have clients that let it ride and take big risks. I just don't have the stomach for it and I need to be able to sleep at night.
We're going into an election year with the world unstable in the middle east, Russia and even China with Taiwan. There's a lot more variables and uncertainty coming 2024. If Iran gets a nuke, it's plausible that starts WWIII. I'm not a dooms day person, just looking at the global issues that are effecting us here. With more continued and heightened conflict we can expect energy pricing to continue to rise. Energy prices are what hits our pocket book the most. I'd like to see the US change some policies that would help us but the Biden admin seems to be more concerned with continued control of the county.
For home buyers in the area, I would want to make sure you are comfortable with the current payment with hopes to refi in the near future. There are some short term buy down products that might be a good tool to use. I can recommend several good lenders that will give you as a buyer all your options and make suggestions with your risk tolerance.
Let me know you're thoughts and if you have any real estate needs.
Re/Max Gold - Chad Phillips
Cell: 916-390-1476
