Wow! What a difference a year makes

It has been a while since I have posted on Active Rain, and it is interesting to read what I was thinking last year. I will reiterate that this is not meant to be a political posting, merely a place to prompt a discussion about how things affect our business.

For those of us in the Real Estate community, 2009 has been a truly remarkable year of market conditions. No one is taking business for granted anymore (if ever we should have in the first place). I applaud the Congress and Administration for extending the tax credits for home ownership. This program is certainly a great way to provide an extra benefit for home ownership, and is one of the few government programs that has a good sense of who the true middle class is. (the income limits do a good job of reaching all markets and maximizing peoples' access to this benefit)

In my opinion, the next big thing to watch is inflation, especially as it relates to interest rates. It was not too long ago that I was selling New Homes between 8% and 9% (circa 2001 & 2002) for mortgage rates. You needed to have an ARM to get into the 7% range. I recall a home I owned, and I was thrilled with my 7% 30 year fixed rate. What will happen when the American consumer is presented with rates above 6% let alone potentially 10% or greater? Interest rates are the most common vehicle to stem the tide of inflation which is coming sooner rather than later. This situation creates two considerations. First, with rates as low as they are, it would behoove a potential buyer to get locked in at these low rates. Builders are buying blocks of money in order to offer lower rates as well. With a Builder doing this type of incentive, you could lock in your rate below 5% for a 30 year fixed rate. Second, when inflation hits its stride, commodities become more valuable than currency, as a commodity is by nature a tangible "thing" which will often retain some value. Even the Pontiac Silverdome can be sold for $580,000.....think about that for a moment. The Silverdome cost $55,000,000 when originally built 2 decades ago. Even though this is an example of one of the worst Real Estate transactions , possibly in history, the Silverdome still had SOME value. As the value of our dollars decreases, it will make more and more sense to put our money into a tangible commodity, Real Estate being a great example.

We need to be talking to our clients and customers about the realitites of the current financial environment. Real Estate remains a great repository for their finacial futures. If we can clearly articulate the current market conditions, we can put someone in a posititon to hedge against the coming devaluation of our money. Good luck out there, and always try to do right for our customers, colleagues, and partners.

"You cannot escape the responsibility tomorrow by evading it today." - Abraham Lincoln