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How much longer can this go on?

Updated: Sep 24, 2020

"Despite all the moving parts in the economy, the election, and worldwide pandemic, real estate appears to be charging forward with no indication of a slow down in demand for Montecito properties."

INTEREST RATES

The Fed Chair Jerome Powell spoke at a conference this week and reiterated the importance of stabilizing and restoring the US economy.  To do so, the Fed is willing to commit to holding interest rates at or near 0% for an extended period, even if inflation exceeds their annual target of 2.0%.  This decision is significant as it promises low-interest rates for years to come.  While low rates will reduce returns for some investments (e.g. bonds and CDs), it will potentially magnify returns for stocks and homes.  The Fed’s new approach means the recent surge in home buying may be only the beginning of a longer trend.


"Our inventory of available homes in all price ranges is at an all-time low and buyers are digging deep to find properties.  Prices are rising but as the demand continues and interest rates remain low, we are sure to see even greater price appreciation in the months and years to come which has further driven buyers to lock in properties now."

CHANGING CONSUMER BEHAVIOR

Over the last 15-20 years, the trend has been to move from the suburbs and into the city. From the 1950s and 1960s and up until the 1990s, people were moving out to the suburbs, and then around 2007 being close to the city started becoming more desirable. Then literally overnight, people are wanting to move away again for several reasons. The pandemic definitely accelerated that process but it’s also triggered by the fact that it’s not that important for a lot of people to go to an office anymore.


RECESSION?

Recessions and the real estate market do not line up parallel with each other. They never have. In the last six recessions we’ve had, only one of them negatively impacted real estate and that was in 2008, because it was caused by real estate. In every other recession we’ve had in the last 30 years, real estate continued to go up. Prices are driven by separate financial situations, sometimes opposite ones.

MONTECITO MARKET SNAPSHOT

Here’s what happened in Montecito last week:



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