Blaspheming!
October 9th, 2009 categories: For Buyers, For Sellers, Mortgages & Financing, Rants & Riffs
As much as I try to stay in my area of expertise (Honolulu real estate), I am going to drag you and myself into the impact of national tax policies and attitudes on the value of homes and condos on Oahu. I read Real Clear Markets every morning because they do a good job of conglomerating (wow, $2 word) financial articles from many different sources. Anyway, they posted a link to an article at the Wall Street Journal that talked about the beating the dollar has been taking against other world currencies. The quote that caught my eyes is below.
“The world’s investors can also see the arc of overall U.S. economic policy, which is becoming less inviting to global capital. Higher taxes on capital gains and income; new entitlements that will require trillions of dollars in new U.S. borrowing; a wave of new antitrust enforcement, more telecom regulation (”net neutrality”) and trade protection, new restrictions on energy production, easier rules for union organizing, and so much more. All of these are signals that U.S. growth is likely to be slower than it otherwise would be, and that the returns on investing in America will be lower than they should be. This too is a reason to sell greenbacks.”CLICK HERE TO READ THE ENTIRE WALL STREET JOURNAL ARTICLE
Whether we like it or not, what the bananas (is that disrespectful?) do in our national Capitol has a direct impact on our lives and the value of real estate all over the country. I believe that our foreign trading partners may be starting to view the USA as a substandard place to invest and, therefore, the American dollar could be left behind as the world’s reserve currency. If this becomes the case, here is what you could expect.
1. Rising interest rates. With the luster off the dollar, the Feds will have to raise interest rates to attract foreign investors. More possible risk means an investor will want a higher return on their investment.
2. American real estate could start looking cheap to those who have a stronger currency that ours (can you say Euro). This could drive Honolulu real estate values up, however, because we are paid in dollars our dollar may not go as far at the store or in the balance of the world.
3. The Federal government has been printing money faster than a liberal congressman wants to raise taxes. As this money floods the market, it could spark inflation. If it looks like inflation is coming, expect interest rates to rise.
What does this mean to the buyer and seller of Oahu properties?
For Buyers
1. Buy now. Interest rates are low and values are down, now is a terrific time to buy.
2. Lock in long-term interest rates. Today an FHA buyer could get a rate in the range of 5% with a 3.5% down payment. It probably won’t get much better than this. In other words, stay away from adjustable rate mortgages.
For Sellers
1. Sell now! There is momentum in the market and inventory is relatively low. Could it get better? Yes. Could it get worse? Yes. If you are thinking of selling in the next 2 or 3 years, do it now and take the unknown out of your life.
2. Did I say, “Sell now!”? The market is being driven by low interest rates and buyer tax credit incentives. When rates rise and when the tax credits go away, you may see the market slow.
3. If you don’t want to sell, then waiting 5 to 10 years is a good strategy. Given that lack of land to build on in core Honolulu, I believe there are many of reasons for real estate values to rise in this central area.
In summary, the next 2 to 3 years could be a roller coaster ride. If you are a buyer, buy now and fasten your seat belt. If you are a seller, either buckle-up for the long ride or sell now and do the best you can.
If you would like to discuss your real estate needs, feel free to call me at 808-737-2093 or toll free at 877-737-2093. You can email me at keahi@lava.net.
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Very good blog whether you are a buyer or a seller. Gives both good incentive to do one or the other.