Friday, July 10, 2015

Real Estate – the Peak is Here

I reported we sold my mother’s house in one week. I too follow our model. The bounce in real estate into 2015.75 seems to be unfolding on time. What will make the peak is a rise in taxes. You have Chicago looking to raise taxes by 30%. Even in Texas there are protests starting over tax increases everywhere from DallasAustin, to San Antonio.
la-propriete-cest-le-vol-copieIn France protests call it just theft. The London market has been propelled higher than ever because of the problems in Continental Europe with the Euro and France. To the locals, anything that brings the prices down and makes housing more accessible in London is perceived as a good thing since the influx of foreign capital has been to get off the grid. This type of influx of foreign “investment” into the London property market has been seen as actually a destructive force with entire neighborhoods transformed into ghost towns since they are just owned with no one living there. This has had a ripple effect forcing local stores to close down for lack of business when nobody is actually there to service. Prices of this type of property will decline for the property is not actually being utilized.
The bounce in real estate into 2015 that our model projected was the higher end, not the low-end as was the case in 2007. So far everything seems to be on target. The overall long-term decline will be impacted by the reduction in long-term mortgages combined with insane increases in property taxes as government try to stay afloat. The 30 year mortgage was the product of the New Deal. With Fannie declining and volatility in debt rising, the value of property should decline lacking the “leverage” of long-term mortgages. We will see a decline more in line with the decline in prices meeting the available of cash for deals.

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