This past week we’ve experienced large fluctuations on Wall Street. Wall Street fear may spark Main Street opportunity. Financial markets are fearful trade wars may carry over and harm earnings, which would put a damper on company valuations. Everyone agrees the United States must confront China, as most agree the best time to do it is when we’re at our strongest economically. Just the same, it does create worry amongst our farmers, companies, and investors as they need a road map of where it’s safe to invest.
Main Street Opportunity
Enter Main Street. In financial turmoil’s past, there’s always been a flight to quality. Right now, it’s U.S. treasuries, pushing the yield on the 10-year note down to 1.62%. It simply can’t go much lower. Europe has negative interest rates, which means people trying to protect their money choose to lose money invested in government bonds, because they feel that’s their safest bet.
Money always moves. We saw money this past week move into Gold and oil, and then it moved back out. Investors are seeking safety and return if they can get it.
Real estate may become the preferred investment once again. Wall Street fear may become Main Street Opportunity. Money is practically free. The Federal Reserve has been forced to cut interest rates to protect against the dollar becoming too strong. A strong dollar means foreign countries will buy less of our stuff because it’s too expensive. In this case, the trade imbalance widens, so we weaken the dollar by lowering interest rates to remain competitive. There is no inflation right now, so it’s safe.
Lower rates have helped propel the Southwest Florida real estate market. Going into 2019 we were experiencing a shift. The feds had just raised rates about 1%, and the market responded. Buyers couldn’t afford as much as in the past and the market cooled. Inventory built up.
Fast forward to today. The feds are fixing their mistake. It’s not the feds job to prop up the stock market or housing market. It is their job to manage our monetary policy to keep us competitive, and they are responding.
The advantage real estate brings is it’s tangible. If the stock market collapses, investors lose money. If the real estate market falls, homeowners can still live in the property and investors can still rent out a property. Real estate can still provide income. Buying gold or silver provides no income, just a tangible asset. Real estate is both.
Most Americans believe the best long-term investment is real estate by far. It might surprise you to know that millennials prefer real estate as an investment more than any other generation. This is surprising because many millennials put off home buying compared to predecessor generations.
Right now, home sellers have an interesting opportunity in front of them. They already own a home, and perhaps they’ve considered a move. They’re not sold on the idea though, but they are considering it. These lower rates help sellers in two ways. The most obvious is, when they pay off their mortgage and buy another home, they’ll save big-time when they purchase their next home.
Secondly, lower rates help more buyers qualify for homes today than last Fall. More buyers create more competition for the listings. Listing inventory begins to fall, and this helps raise home prices. Or, at the very least, it stalls out price declines. June inventory numbers were lower than April. We’ll be pulling August numbers soon to compare.
The fact that sellers win in two ways creates an opportunity for home sellers. Usually home sellers have questions, because there are many pieces to the puzzle that must be answered before deciding. The most obvious would be, where do we move to? How do we accomplish this logistically?
A seasoned real estate professional can help answer these questions. Call Sande or Brett Ellis at 239-489-4042 Ext 4. We’ll guide you through the maze and help you decide if a move is right for you. Or visit www.SWFLhomevalues.com
Thank you, News Press readers, for voting the Ellis Team at Keller Williams Realty the Best in Real Estate for the 4th straight year.
Good luck, and happy house hunting.
See last week’s article Total Volume Down 7.15% Year to Date in Lee County