August-2015
No doubt you have heard much about world economic events. ANOTHER Greek bailout. The China miracle becoming a bit less miraculous to say the least. Europe as whole, fighting to fend off their recession from reaching depression status. The US dollar soaring to multi-year highs.
So, who cares? How does this affect me? First, the good news. The deflationary pressures on the world economy have helped to keep interest rates at or near historic lows. While the fed has indicated that it will soon bump rates by a quarter, it is unlikely that there will be a pronounced rapid increase in rates. Now, the bad news. As the dollar soars, US goods become less attractive to foreign nations. Not just goods. Think REAL ESTATE. One of the hallmarks of the recent surge in real estate prices has been "cash buyers'. Many of these cash buyers were foreigners smart enough to hedge their portfolios with assets backed by a strong currency. But now the currency has become so strong, it is massively more expensive for foreign nationals to convert their falling currency to dollars to purchase real estate. For these reasons, Florida has seen an abrupt slowdown in activity. Latin American buyers are drying up as are Russian and Eastern European buyers. While that is far from here, Asian money is drying up as well. That does not bode well for US exports, which could very much affect our economy. How about South Bay real estate? Is it driven by foreign money? For the most part, no. However there is a trickle down effect. Just 13 miles north, Santa Monica income real estate has been dominated by Russian money. Don't expect that to continue. All of this has a spill over effect. I cannot say when. I would be disingenuous if I said I could. But the bullet train will need to make a stop to let a few passengers off. Locally, we have seen less cash buyers, less multiple offers in the last 3-4 weeks. There are more properties listed. The "shortage" of inventory is beginning to balance out. That is good news for buyers. By no means, are prices declining. To the contrary, prices are still rising, albeit at a seemingly slower rate. As I have mentioned before, we are not approaching another 2007, which was caused by massively loose lending standards and sub, sub sub prime borrowers. However, we are due for a cooling off, and there are beginning to be signs that it may come sooner than later.
