Things to consider while moving forward in buying or selling a home is the change in your spendable dollars in part due to the effect of the pandemic on future economics for the next 5 years. Affordability: First we had the reduction of mortgage deductions reducing the amount of deductible mortgage to $750,000 and the property tax deductions capping at $10,000/year. In California, where jumbo loans are common, those changes were hard. However the new whammie is that there is no doubt that taxable income will increase regardless of our next president. We have the $2.2trillion stimulus package and another $4trillion being organized to defer the fall out from COVID. Currently America is in debt $24.7 trillion and rising. The tax rate of 37% will rise in Jan 2026 to closer to 40%. No choice. Since a lot of the money borrowed is from social security the future of social security is even more in jeopardy. In 1935 when it was started 42 people were putting money in for every one that was taking money out and life expectancy was 62 so there wasn't as much being taken out. Now since baby boomers represent 1/4 of our population only 3 people put in compared to 1 taking out. Their life expectancy is that 65 is the new 45. (I am 65 this year and don't plan on going anytime soon.) By 2026 only 2 people in America will be putting money into social security for every one drawing. Time to look at your tax deferral strategy and what your real estate investments are doing to off set these losses or if your rental is breaking even isn't this the time to reinvest?
Rates: Home loan rates continue to hover at historic lows, presenting an incredible opportunity for existing and future homeowners. Today the 30 year fixed is at 2.875% though bank qualifications are harder and 10% loans are not being offered through the primary bank lenders. That is not going to change much this year.
Stimulus helps both Stocks and Bonds, but Stocks even more, as the overwhelming support takes a bit of risk out of the markets ... hence the term, "Don't fight the Fed." Stocks had a rough week but I think we can safely say that the volatility in the stock market this year has not been a huge indicator of the buying and selling activity in the bay area. If Stocks regain some of this week's losses, it could be at the expense of Bonds and rates.
Property values have rebounded
and then some!
Inventory: Watch closely the numbers of people in forbearance on their mortgages because as those numbers continue to rise - that will alter inventory significantly in certain areas driving prices down.
The key to property values as always, but even more, so is location -- I am seeing pretty strong price drops in areas outside the acceptable commute distance or in areas of poor schools and that effect is more than doubled if the home is in both at risk areas.
