Tucson Real Estate-The Next 12 Months Good?
Tucson Real Estate-The Next 12 Months Good?
Courtesy of Tucson Rates and Real Estate
What doesTucson Real Estate andTucson Mortgages have to do with Economic History?Economic History in the United States has proven to repeat itself over and over again, always yielding the same results. If you watch CNBC or spend your time reading Stock Analysts Reports, you will find that they are always right, half of the time.Wall Street makes money when the price goes up and if it goes down. So understanding this, you will realize that when a specific Commodity is rising or falling, Wall Street will do everything possible to push that directional trend until it reaches a point of no return. When that happens, the valuation of such an asset is either way overpriced and can't support it's price any longer, or it falls to a point that the Real Value is distorted. It is in the best financial interest of Market Speculators to have and create volatility in theFinancial Markets. Case in point: Did Banks make money during the Real Estate "Boom Times?". Answer: "Yes".
AreBanks making money after theReal Estate andMortgage Market crashed in 2007? Answer: "Yes"
The term Bubble" is usually used to describe an Asset that the price has risen quickly, but only because the Collateral's price rises in relation to the amount of money available to secure a debt. Whenever something becomes "Hot", everyone wants to get in on it, driving prices higher, with no regard to the assets Real Value. As soon as the price reaches a point where there are no longer buyers, it crashes, immediately. Then that particular Asset loses all purchase demand interest, sending it into a falling price spiral, leaving the last buyers with an Asset they can't sell to anybody. All of the Investors and their Money then go and chase the next "Hot" Commodity.
The goodnews for everyone else is, when this happens, these Assets tend to become Oversold, driving the prices down under what their Real Value is, making them a bargain. Then, it starts all over again.
About half of the Real Estate transactions in Arizona over the last year were "Cash Deals". These are not First Time Buyers, these are Investors. They have cash because they Sold their properties when prices were inflated. Why are they buying now? They are buying now because theTucson Real Estate Market is Oversold and the prices are lower than the Real Value.
Although it is impossible to predict the future Policy Direction the Federal Government will head in these days, they do give us an idea. QE is scheduled to come to an end in June. This was a way the US Government could inject liquidity into the Financial Markets by buying Treasury Notes from Lending Institutions, basically giving them money to lend, and also artificially lowering Interest Rates. I can argue both ways as to the policy's effectiveness, but three things are for sure.
1.Interest Rates went up, not down.
2. By creating Hundreds of Billions of Dollars out of thin air, and not backed by GDP Growth, The Dollar has lost another 8% of it's value, in addition to the 30 plus percent it has dropped the last few years.
3. Inflation has appeared to of have increased a tremendous amount. I know the Government Reports say otherwise or are ambiguous. Here is the proof:
Last Six Months
Gasoline Prices- up over 30%
Raw Materials(Aluminum,Copper,Lumber, Etc.)- up over 30%
Food Staples- up over 30%
Dow Jones Industrials- up over 15%
The Stock Market increasing 15% in six months with only a 2% increase in GDP, means that the increase in Stock Prices have more to do with the Weakening Dollar and Actual or FORWARD looking opinions of Inflation.
If the Government does end QE in June, that will stop Hundreds of Billions of Dollars that are flooding into our Lending Institutions. In the short term,the tightening of Credit will follow, along with an increase in Stock Market Volatility (putting downward pressure on Stocks), and also the acceleration of Inflation, making Goods and Services more expensive, but offset somewhat by the Strengthening Dollar. Interest Rates will rise.
It's not as bad as it seems. Lending Institutions that have been the beneficiaries of these funds have enormous war chests of money,because they didn't actually loan much of it out. Now to maintain the record profits they have been making, they will have to make actual loans to realize returns.
When the Stock Market gets volatile, Investors tend to move their money into safer products, like Treasury Bonds (replacing Government subsidized funds), and Oversold Hard Assets, like Real Estate.
The US Government has subsidizing Interest Rates for so long and to such an extreme degree, it is kind of unknown whether inflation will adjust to where it should be, or if we enter into a period of Hyperinflation, which I think is unlikely, as the Dollar will strengthen, and the Dollar is still the Benchmark Currency in the World. The rise of Interest Rates if not subsidized, will be in relation to the demand for Credit, and are a good sign of Economic Growth, especially when you start from 0%. At least if they rise and the Economy needs a boost again in the future, the Federal Reserve will have another option to stimulate growth.
How does public opinion move the Markets? It has a tremendous influence. With a Presidential Election coming next year, you can bet there will be a regular dosage of Positive Economic News fed to the American Public. In fact it has already started. When the Government releases good news over a period of time, people believe it, whether it is true or not. When Consumers feel that the Economy is stabilized and growing (which it is), their attitudes about spending change. The US could have the best Economy ever, but if Consumers are convinced otherwise, it will crumble fast. Likewise, a struggling but growing economy, can get a big boost by public sentiment changing from negative to positive. Typically, the mainstream media is very liberal and without a doubt, will give President Obama their full support. Conservatives who will be campaigning about the Depressed Economy to discredit their opponent, will find few outlets to get their message out. Watch the news the next few days and see how many "Negative" reports on the Economy you hear. My guess: Zero.
If you have been sitting on the sidelines the last year or so, now might be a good time to get started again. If you have been doing well, it is time to to get even better. There are plenty ofTucson Real Estate Agents andTucson Mortgage Brokers who have successfulBusiness Plans, and are doing very well. If you aren't one of them, you should be. The only person that can make it happen is you.
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