The housing market, picking up steam yet again. And other ramblings….
The housing market was relatively tame. In fact tamer than normal for the slow periods of January and February. As this article points out, those who came out of the woodwork when the interest rates declined, have noted another jump in prices. In daily discussions with other brokers, we talk through different buildings and when they are breaking out in value. In same cases, like one of my current listings, it is just a matter of a new contract price, and more importantly its appraisal, sticking and closing. As these continue to close and prices per square foot make new highs, it is then a self-fulfilling prophecy. This of course is the reverse of four years ago in 2010 which saw new lows based on a steady stream of foreclosures.
Again, given the dynamics of an improving economy (both globally and most importantly locally), lower unemployment (ever so slowly…thank you Obama), and a world awash in excess currency backed by the good-faith of various regimes (in particular the Fed/US Treasury), you will continue to see a flight to hard Assets. Unfortunately this is leading to one of the most dramatic segmentation of wealth in America in nearly 100 years. As workers receive paltry 2% wage increases, and maintain savings in accounts paying far less then the real inflation rate, a greater degree of American’s will find themselves left behind. First housing rates will rise, then eventually rents will rise at a rate not seen in decades.
Liberal government politicos will attempt to stabilize these market changes, but instead will find themselves even more dependent on big business, developers and REITs to establish more housing for the masses. It really sounds like “Too big to fail” all over again. An example of this is currently playing out in New York City, where the only real new unit construction is in highrise developments where the City offers impressive tax breaks in exchange for making certain percentages (think roughly 30%) of the units, affordable. Top notch highrises now have main entrances, and entrances for their low tiers of occupants with subsidized housing. Such economic polices may ratchet up a cities Residential sky line, but they can also be incredibly divisive. This in-your-face, two separate doors means of economic growth will often give rise to grand-standing politicians like Bill de Blasio.
Many could argue that the tiering of wealth in America is a simple progression of Capitalism which would inevitably happen. In fact, with so many Men return from World War II, basically on a very similar socioeconomic baseline, it becomes more clear why Capitalism has NOT tiered society’s wealth sooner. Sure the top 1% in American hold something like 20% of all assets, but that still pails in comparison to many other countries where the top 1% hold 50%. Education and people’s ability to access/afford it, as well as clear, plannable contract/tax law (rules of the game) are two of the most important aspects of a level playing field where the average American can still get ahead. In the interim, while both of these items are still far less then ideal, the rich of the world are buying more Hard Assets then ever. Some who are “getting ahead” may have their savings accounts (CDs where you lose daily against inflation), and 401Ks (a large “Nest Egg” ripe for quick plunder by Hedge Funds which will effectively steal an account’s balance during a markets collapse), but in the end they are really losing. Indeed, the quest for Hard Assets like Real Estate should be at the forefront of everyone’s mind. Figure it out.
Please see Diana Olick’s report below:
http://www.cnbc.com/id/101555304
