A WEEKLY GLIMPSE OF REAL ESTATE NEW
3/2/26
War and Real Estate: The weekend news focused mostly on the hostilities between the U. S. and Iran and whether the President’s unilateral decisions violated war powers that are typically granted only to Congress. The political aspects of declaring and/or going to war are beyond the scope of this author’s expertise. On the other hand, it seems reasonable to speculate a bit regarding war’s effect on the real estate and financing arenas.
Real estate values generally react slowly but depending upon the duration of the economic disruption, home values eventually trend downward. Uncertainty creates reluctance to engage in long-term investments and thereby reduces the number of competitive buyers vying for the home of sellers who want or need to sell. The likelihood of rising interest rates is an additional reason for buyers to postpone home purchases. An unexpected advantage to higer interest rates might be viewed as necessary to curb inflation that typically accompanies a war-time economy.
Past economic episodes of war provoked investors to seek investment safety which could mean a rush to purchase gold and other hard assets vs investing in real estate. Ironically, real estate often turns out to be a pretty safe investment, especially if values actually stabilize or decline – it could be a good time to buy and reap the equity growth benefit after war ceases.
Recent past wars in the middle east have been judged, during or after hostilities cease, as being about oil and its availability. Oil does not initially appear to be the issue but sanctions have already curbed some Iranian oil production and the administration insists this engagement is about curbing Iran’s nuclear capabilities and, more broadly, regime change. Any ultimate analysis regarding the war’s purpose will be left to the experts but, in a longer view, manufacturing priorities could be realigned for defense production, jobs created and material costs increased for consumers.
The overall effect of this “war” upon the real estate and financial communities will depend upon the duration and intensity of the conflict, If the consensus around the globe is that
this is a “war of choice” , initiated by the U.S. without credible reasons, international support for America could be in short supply. We have no precedence for such global reaction to America and thus cannot predict its impact upon our economy. Hopefully, we will have additional information for next week’s glimpse.
The Iranian conflict dominated the news this past weekend. The previous big news was the tariff decision from the Supreme Court and the President’s immediate reaction resulting in an arbitrary imposition of tariffs across the globe. The next article is the latest reaction to the tariff situation.
Tariffs Remain an Uncertainty: The Supreme Court’s recent decision that the President had exceeded his authority via the unilateral imposition of tariffs exceeded his authority and were thus illegal angered the President. His reaction to the Court’s decision was viewed by some as a childish “you are no longer my best friend” kind of response and by others as defiant in his “I have other, better ways to impose tariffs” statement. This last statement resulted in an immediate Executive Order of a global 10% tariff, to be almost as immediately increased to 15% and changed just as quickly back to 10%. To a majority 60% plus consumers this on-again off-again behavior is indicative of an unclear or perhaps absent tariff policy.
Small businesses particularly expressed an inability to plan for the future. Supply chains will remain interrupted; pricing goods remains a challenge and planning for staff hiring or business growth remains an impossibility. Although larger companies have a little more wiggle room, they also predict higher consumer prices moving forward. The Court emphasized that tariffs are taxes, paid by U.S. consumers, and that tax policy is Congress’s responsibility.
Despite economists’ indication, supported by the Court, that our consumers pay the tariff burden, the President insists that billions of dollars are being collected from foreign nations via the tariffs. It is therefore likely that we will see more tariffs levied accompanied by more litigation.
In the absence of any clearly defined tariff strategy to support the President’s decisions, there is a growing belief that this entire action is simply an assertion of Presidential power underlined by the President’s unwillingness to admit his tariffs to date have been a tax paid by U.S. consumers and not a money-making plan paid by other countries. For the near future, at least, the uncertainty surrounding tariffs will likely continue to impact FED decisions related to future rate reductions and, in turn, affect our mortgage rates.
Interest Rate Fluctuations: The reaction to the above news on Wall Street is best characterized as mixed. Investors and business prefer stability and clarity vs the uncertainty of pending war and what appears to be a non-existent tariff policy. The FED is quiet and the market is a bit of a roller-coaster ride.. In the meantime, 30 year conventional rates dipped below 6% momentarily several times before jumping back above the current 6% baseline. Lots can occur before the FED meeting later this month
Until next week be good to yourself and kind to others.
2/23/26
Government Shutdown Persists: The partial government shutdown is likely to continue until one of the parties determines that they are being blamed for any economic hardships suffered by consumers. Then, compromises may be discussed and an agreement reached. As a reminder, the partial shutdown involves mostly the Department of Homeland Security (DHS) over continued funding in light of recent actions deemed unacceptable, especially in Minnesota. Although the DHS was heavily funded in previously approved legislation and will be modestly affected, several departments under DHS control, including FEMA, the Coast Guard and the Transportation Security Association (TSA) are more burdened by the shutdown. Since the employees of these agencies are considered “essential” consumers are unlikely to sense much difference in service, except for minor delays in transportation. Thus, it could be some time before Congress feels consumer pressure and is induced to perform. Although this situation seemingly has little impact on our financial arena, any government disfunction takes some toll on the economy, even if it is mostly hidden.
Is this the Time to Refinance: Many home owners who purchased with higher interest rates are frustrated that interest rates have not declined as much as anticipated (or maybe only hoped for). While rates have declined, they have remained stubbornly higher than expected. Recent chatter suggests that rates MAY reduce a bit more but are unlikely to get lower than the high 5 percent range. And there are numerous considerations beyond just a lower interest rate. Evaluating the financial benefit of refinancing depends upon the rate spread but also how long it will take to recoup the costs and how long you intend to remain an owner. Challenges such as appraisal value or sufficient equity to eliminate mortgage insurance are critical concerns. How your debt load increased or your income changed, either of which might now prevent a refi. We advise consulting your trusted mortgage provider and discussing your personal refinance loan profile. Send us a text, email or call us and we will gladly send you a comprehensive review entitled Refinancing-Lots to Consider. We are always available to answer personal questions. This could be a great time to refinance but maybe not for everyone.
A Few Local Statistics: When quoting national statistics, I often remind everyone that in the end, all real estate is local. With permission from Charles McCann or Community Realty, who has compiled local statistics for many years, here are few of his recent comments based on December information. Home inventory showed a slight unexpected decline but is expected to rebound as we move toward Spring. Median home values, while moving up and down, remain mostly range bound with an average price at $425,000. Both median list price and sales price declined but within expected margins for the end of year time period. The days on market (DOM) can symbolize buyer readiness to purchase or sellers’ pricing a little high for the current market. The DOM changed little this year from 27-52 in December down to 27 in early January. Charles typically provides context along with the stats but the above are merely the numbers.
Shared Ownership Back in Fashion: It has taken a while but lenders are finally getting around to promoting shared ownership transactions. This is when multiple unrelated parties combine assets to purchase property that is individually unaffordable. Most commonly, this involves two or three close friends or sometimes couples prior to marriage purchasing a home or investment property together. The title is taken “in common” allowing for percentages of ownership to be identified, usually based upon the percentage of assets originally invested. This can be a way to get one’s foot in the door and on the equity building escalator that popularizes real estate ownership. This can work but getting into a partnership is easy, termination can be difficult. Determining up front the agreements for payment of the mortgage and up-keep costs, the eventual distribution upon sale or the terms of buying out each other’s shares need to be addressed. The idea that “we are all friends” or “we are in love” can quickly become mute when seeking an exit strategy for a financial partnership.
Tariff Situation Still Unclear: As expected, the Supreme Court ruled that the worldwide tariffs imposed under a 1977 emergency powers law exceeded presidential authority. Tariffs, in spite of the President’s vehement disagreement, are a tax and the powers to tax reside with Congress not the Executive Branch of government. Past tariff policies tended to be with individual nations (or groups of nations) and were detailed documents that attempted to create win-win arrangements. To many individuals and nations, the current practices seemed less like a policy and more like a device with which to force compliance with U.S. interests. By some measurements, the tariffs imposed by Trump seemed more at his personal whim and/or based upon his personal relationship with a nation’s leader at any given time vs any actual thoughtful policy.
The market reaction was difficult to gauge because some issues were not addressed in the Court’s decision. $133 billion dollars of collected tariffs were paid by American businesses and consumers who may seek the return of the illegally collected fees. How this would be fairly accomplished as one Supreme Cout Justice indicated “is a mess”. Nations that struck recent trade deals based upon now possible illegal tariff negotiations have dragged their feet performing, perhaps anticipating this court ruling which may provide reason for agreement cancellations.
In a disgruntled response, the President indicated that there are other powers under which he can impose tariffs and he intends to do so regardless of the Court’s decision. The President then imposed, via Executive Order, a worldwide 10% general tariff on all nations. Will this action lead to more court decisions while keeping new supply chains from being established along with a delay in creating a reliable pricing model for many businesses. Various groups of nations, during the tariff confusion, created new trading relationships that may not include the U.S. in the future.
Why, you ask, is this important for those of us in the real estate and/or real estate financing arenas? Mostly because many of these unresolved issues have very real inflationary potential which, in turn, will affect the FED’s future decisions on mortgage rates. (see below)
Economy Slows and Inflation Looks to Increase: In the midst of the tariff decision (noted above) the latest economic news suggest concern. Gross Domestic Product (GDP) figures showed that the economy was slowing. Although the 43-day government shutdown accompanied by reduced public and government spending, undoubtedly affected the economic production figures, the news was disappointing. Economists were somewhat upbeat that “underlying consumer and business activity would remain resilient but that the weaker-than-expected report might suggest more modest growth going forward”. At the same time, inflation numbers climbed only slightly but sufficiently to perhaps cause the FED to definitely pause in any rate change at their upcoming March 17-18 meeting. Although some are now predicting a possible increase in rates, it is more likely that rates will simply hold steady.
Increasing Insurance Costs Are Both a Buyer and Seller Problem: The dream of home ownership lives but, for many, is getting more difficult. As would-be home buyers grow to mostly accept that higher rates are here to stay, they now face tax and insurance increases. Insurance costs have nearly doubled in many cases, making a modest insurance cost now in the $300 or more a month range. The increase calculates to the loss of $25,000 in purchasing power when qualifying for home loan financing. This not only affects prospective home buyers, but sellers are also impacted. Clear evidence of neglected home maintenance can affect the cost of a new buyer’s insurance premium. Insurance companies refer to “older” roofs as almost an assurance of an increased premium cost. Sellers should retain all roof repair receipts along with evidence of past replacement. A roof inspection assessing a roof as in good repair and expected long life might be useful in obtaining a lower insurance bill. While buyers must consider insurance costs in their qualifying calculations, sellers have to consider potential how best to prepare their homes for sale. Buyers having to face repairs of roof replacements are unlikely to make maximum value offers in spite of buyer competition in the marketplace.
Until next week be good to yourself and kind to others.
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