Baghdad By The Bay

OMG - RATES ARE UP!!! Don't panic... it's just the "Discount Rate."

The "Discount Rate" is the rate that the crooks... (ooops)I mean, the banks pay to borrow directly from the Fed.  The Feds did surprise the market a bit with the move to 0.75% Thursday but it does not affect Credit Card or Mortgage rates.

The Federal Reserve made it clear Thursday that the hike in its emergency lending rate won't mean a thing for the interest rates paid by consumers and businesses any time soon.  If I'm a business and I believe the economy is growing, the fact that the fed funds rate is 0% or 1% won't impact my decision to hire people or restock inventory.

A Fed Funds rate hike in the near future would be quite disruptive to the economic recovery.  All major markets were up today, so this move didn't seem to rattle the markets, that's good.  Keeping the fed funds rate, low is one of the tools used by the central bank to try to spur economic activity.

Oh yeah, what about the CPI (Consumer Price Index) number?  All things considered, strip out energy and food prices and Consumer Prices were actually down .1% in January.  That is the first time that has happened since 1982.  There is no real inflation pressure in the US so if team Obama focuses on jobs we could see things start to turn up.

There is a lot of discounting in the restaurant industry.  The Jack in the Boxes and McDonald's of the world could see some challenges ahead.  In my personal opinion, I think that's a good thing.  Families will stop feeding their children fast food and maybe they will spend more time across the dinner table with each other.  Companies like Crate and Barrel and Williams Sonom(+7.6%) see higher earnings and they say it is because families are spending more on their homes, their kitchens specifically and eating at home.

It's a good time to go buy a new cookbook and try out that cookware that you have in those cupboards.  Experiment with a few friends and invite them over to taste your cooking.  I guarantee you'll have a fun evening and deeper friendships by experimenting in your own kitchen.  Your friends, family, children will be talking about the great meal they had at your house and know that those house warming gifts they gave you are getting good use.

BTW:  If you don't have your own kitchen yet, pop me an email or give me a call and lets see if we can go find one for you to buy!

Concerns about the Commercial Loans & the next shoe to drop.

Lately a handful of my buyers/seller's have talked about what's going on in the Commercial area.  Supposedly the next shoe to drop.  Many experts seem to think that a Commercial loan catastrophe would make the residential losses look like a walk in Golden Gate Park.

Yesterday, Simon Properties Group Inc., the nation's largest shopping-mall owner, made a $10 billion bid to acquire rival General Growth Properties Inc., which is seeking to emerge from bankruptcy. 

I think as time goes by, we will see many more deals like this come out of the woodwork.  As many of you know, my experience is both Residential and Commercial and I watch both markets.  My financial securities licenses and the periodicals I receive daily keep me up to date on what's going on in the broader markets.  Buying a single family home or condomium and making that good long term decision is healthy for your portfolio.

The cost of money is still very cheap. Don't let the distractions on the side of the road postpone your goal.  The 24 hour news cycle fosters stress and indecision. Whay may happen in the commercial markets should not affect your personal decision to provide a good home for you and your family.

Look at the long term advantages of buying versus renting.  Lets say you bought a 3 bedroom/2 bath home in San Francisco for $800K.  You put down 20%.  Now you have a $640,000 loan.  Your mortgage and taxes are roughly $3400/month with an average $9500 in annual tax savings.  Okay, I've simplified it greatly and I have based that on a 10 year hold but it's not as complicated as you may imagine.  Renting the identical home in San Francisco would probably be between $3200-3400/month and NO tax savings.

The HUD website has a great tool for you to use to calculate buying vs renting.  Check it out. 

My numbers tend to be conservative and my outlook is optimistic.  Give me a call or pop me an email and I can get into this much deeper based on your individual needs.