Happy post Veterans Day and all that they have done for our country!
Now that the midterm elections have concluded and we have a divided government, the house controlled by the Democrats and the Senate dominated by the Republicans, what effect will future decisions, have on real estate going forward.
For sure, interest rates have gone up and will increase again in December ( and possibly two-three more times in 2019) and it appears Trump is not happy about it, whatsoever, and I am sure no realtor is either.
This is only making the cost of housing that much more out of reach for the current typical purchaser. The down payment is higher, since prices are still higher, although increases should be considerably less, maybe 3-4 percent per annum, unless demand increases going forward into the spring.
However, the higher rates really reflect the monthly cost of housing and I am seeing more people putting off their search due to these costs!
Although inventory is up ever so slightly from 2017 year over year at this time; it is still much lower than normal and choices at this time of the year are so thin, as another reason buyers are sitting on the sidelines and saving more money, waiting for new inventory or moving out of New York.
Another problem that is evident that the state and local allowable tax deduction (S.A.L.T.) of $10,000 is having another major effect on the sales of higher taxed properties especially in locally and in New York City.
Even for the minority that can afford to pay cash without financing, I see a psychological pullback waiting for prices to drop; which they will, if you have to sell those million dollar McMansions here on Long Island and the pricey places in the city and everywhere else that the impact is being felt.
However, buying is still a better decision than renting in 39 out of 50 states, where a year ago it was more advantageous to purchase than to rent in 49 out of 50 states.
I imagine our leaders in both parties must realize, (and hope they are listening) when you slow down the real estate market, you are slowing down our economy. We are no longer a “producing things” economy, but an information and service economy.
What is left of the middle class is really thinning out and those in the service economy may never have an opportunity to own their own home based on current wages.
When people aren’t able to move, they don’t buy those things like refrigerators, stoves, dish washers, washers, dryers, etc or capital goods that help people stay employed.
Also important to consider are the tariffs on the imported foreign goods and components from other countries for building and finishing the final products that are assembled here, that will have an impact on American jobs.
Also the tariffs on our goods being exported to those countries that we placed tariffs on, are doing the same thing back to us. I realize China has imposed an unfair tariff on our goods entering their country and this is not fair to free trade.
But looking back 100 years, tariffs have never worked and there needs to be a better way to approach this issue. If every country is going to squeeze each other, is it now survival of the fittest of who can last longer financially without screwing up each other’s economy?
Tit for tat just doesn’t seem like the proper approach. Our debt has now expanded by $1.5 trillion just within the last two years by the reduction in taxable incomes of corporations and higher income families and individuals.
The American consumer will be hurt the most, unless something different can be proposed and all the countries involved can somehow sit down and figure out an equitable way to solve the tariff issue.
I am hoping what we are doing at the current time will end more positively, but I am not feeling very confident it will and the end result might have an unfortunate effect on the majority of us.
Since 2015, the influx of foreign money and investment into the U.S. has been drastically reduced, slowing especially from China and the European Union.
Chinese citizens are having a much more difficult and challenging time in moving money out of China, where $50,000 is the maximum allowed per family per year, unless you are doing an EB-5 transaction to attain your green card.
We are the largest importers of foreign vehicles and with the imposed tariffs the costs of purchasing is up considerably; however, for those who are in the “1 percent club” it may not make a difference to those who have the income to buy what they really want. I am an extremely positive person, but my fear is that somewhere along the line, these extra costs for purchasing the items we import will obviously be passed on to the consumer, who will decide “do I really need to buy” this item?
Will this force many to purchase an “American Made” item?
But do we or will we produce the same item, if we can find it, at the same cost or will it be much more? Will this finally have a profound effect on our real estate, whether it be our primary homes or investment properties to be purchased? There are so many variables in the mix and the outcome can be anyone’s guess.
One thing is sure, that if our politicians don’t get their acts together and sit down in a non- partisan way to talk, discuss and solve our current and future issues, then our future (and real estate) may or may not be as bright as we would like it to be.
We may be divided, but those in charge can attain a brighter future, if they really want to and after the midterms they need to always remember they work for us, not for themselves and that they can be fired, as we have seen and someone can take their place!
Philp A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 Great Neck. He has earned designations as a Graduate of the Realtor Institute and a Certified International Property Specialist. Receive regular “free” updates of sold homes in your area and what your home would sell for in today’s market or search on: WWW.Li-RealEstate.Com He can be reached by email, at: Phil@TurnKeyRealEstate.Com, or by cell: (516) 647-4289.