Real Estate, Opinions and the President
“My psychiatrist told me I was crazy and I said I want a second opinion. He said okay, you're ugly too.” Rodney Dangerfield isn’t exactly a philosopher I commonly quote, but this quote rings true when you look at the number of opinions circulating online.
Now that we know who will be in the big chair for the next four years I asked myself in what ways may this help my client or hurt. Scanning the many media channels for answers is not only mind-numbing, but full of conflicting information and a plethora of opinions.
Reading several articles written on what to expect with a Trump Presidency gave me many differing views. Several points being in agreement, but most not.
One thing is for sure: we just don’t know yet--no matter how hard we try, how many calculations we make or how many opinions are expressed about how our future may look. November 8th was a classic example of how wrong the prognosticators can be.
As emotionally-tied our stock market system is at times so goes the reactions to a new president, old laws, new laws and new ways of doing things. One thing for sure is that real estate will be affected, the question is how?
Will we have a higher risk of a recession or a boost in the economy? It depends on who you ask. Some feel there will be a short-term stimulus to the economy with proposed tax cuts and additional federal spending on infrastructure upgrades.
Consumer confidence may increase, but then so may interest rates. WIth growth comes increased productivity and therefore more jobs.
Some expressed based on years of examining the economy with each incoming president that such growth could lead to a recession when the honeymoon is over in the second half of 2017.
Mortgage rates are tied to many factors one being the U.S. Treasury bonds another being the economies of other countries.
The feds evidently will be postponing a proposed rate hike in December so the current rise in rates may be only a short-term fluctuation. It would be difficult to know what rates will be like in the coming months.
With all the regulations imposed on banks and lending institutions came tougher underwriting standards for borrowers. WIth deregulation of Dodd-Frank being the talk this could ease up the ability for small institutions to lend thereby helping borrowers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 overhaul is being discussed. The CMBS (Commercial Mortgage Backed Securities) industry is directly affected by this Act in the packaging of loans of commercial real estate.
Next month will see another requirement being imposed on banks to hold five percent of the securities created--basically making borrowing tougher and more costly for commercial investors.
The Residential Mortgage Backed Securities (RMBS) industry is in the same boat, but has some relief through Fannie Mae (FNMA) and Freddie Mac (FHLMC) who backs RMBS. However, both FNMA and FHLMC were bailed-out by the government years ago so their future is uncertain.
One thing the incoming president vowed to do is to simplify the tax code. We are still not sure what that looks like or how it will affect the bottom line of our tax return.
There has been ongoing discussion by Congress of cutting back on the mortgage interest deduction, reducing the property tax deduction, cutting exemptions from capital gains and reviewing the 1031 like-kind exchange.
I leave you with a more thought-provoking quote: Ralph Waldo Emerson once said, “We are of different opinions at different hours, but we always may be said to be at heart on the side of truth.”
Burt M. Polson, CCIM, is a local real estate broker specializing in commercial, luxury estates and wineries. Reach him at 707-254-8000, email@example.com. Sign up for his email newsletter at BurtPolson.com.