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I have heard a lot of talk about bubbles in both the real estate and stock markets recently.  It sounds like the same challenge of trying to time the markets (which rarely is successful).  Investing, for the most part, is a long-term game.

With that stated, I think it is time to take a little bit of a pause and see what the news is saying to all of us. Looking at the articles provided below, there’s a lot going on. We see that the Fed has changed their stance on interest rates; and the 10-year yield is now approaching its 12-month low.

Then we have the articles that talk about the increased demand from the big companies in the area, how San Jose is now going through a development boom, and how Bay Area home sale prices are flattening.

So, it seems we are slowing, but at the same time we are expanding. Those two points seem to be at odds with each other.  When we look back over the last few months, we had a major stock market correction and significant concerns with trade tariffs. Since that time, we have recovered just about everything that was lost in the stock market.  Also, at that time, we had increasing fears of higher and higher interest rates. Those have not manifested as expected; and as a matter of fact, it appears the pressure on raising interest rates is much lower now going forward.

With that said, there really isn’t a lot of pressure on pricing in the Bay Area to drop. We have increasing jobs, we still don’t have enough housing supply, and interest rates remain low. If we’re being honest with ourselves, then it should appear to us that were probably just experiencing seasonality right now in the residential markets.

As I’ve said before in the past, until we start losing jobs in this area, we are in really good shape. The SF Bay Area is a very unique economy. Yes, we had prices rising much faster than they probably should have over the last few years (so our growth might be a little less going forward). However, eventually, values in the area will increase just because of the normal supply and demand factors.

My point here is things really are fairly positive.  Will we eventually get to a recession?  Of course.  For now, though, there are still plenty of opportunities in both the residential and commercial real estate markets.

That’s it for this week.  As always, feel free to give me a call with any of your strategic financing needs.

Articles of Interest:

Bloomberg reported “The Fed’s Balance Sheet Is Misunderstood.”

Bloomberg also reported “U.S. Fed adopts ‘patient’ rate stance with balance-sheet flexibility.”

NREI shared “With Demand from Amazon and Facebook, Bay Area Industrial Market Leads the Country in Growth.”

The SJ Mercury News reported “Downtown San Jose development boom seen: real estate experts.”

The SJ Mercury News also reported “Bay Area home sales slow, prices flat to end year.”

See the table below for approximate interest rates.

Type Rate Fixed Term
Apartments 4.215% – 4.790% 3 to 10 year (30 yr amortization)
Commercial 4.515% – 5.090% 3 to 10 year (25 yr amortization)
SBA Lending Call for Options Call for Options