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Is anyone sick of talking about interest rates yet? 

We all got really excited about a PCE number that was supposed to drop bond traders’ drawers a few weeks ago and while the reading came in just right – the market was frozen by the season finale of the United States which had taken place the night before. So we didn’t get the reaction we wanted (or deserved) on mortgage-backed securities. Then the jobs report came out showing unemployment ticked up, also rumored to be a panty dropper when it comes to the market’s enthusiasm…but the reaction was pretty dry.  (too far?) Tomorrow we’ll get CPI numbers and while industry economists are trying to get loan officers hyped up that we’re going to see a party on demand for bonds, I’m not going to lose sleep tonight praying. 


If we’re being honest… 


I think the market has already built in two cuts to the Fed Funds rate and mortgage interest rates are reflecting it in what we are pricing and quoting today. Which means we aren’t going to see meaningful improvement on rates until 2025. So let’s talk about something else today. 


Upflation 


There’s inflation, there’s stagflation, there’s shrinkflation and now there is upflation. We’re all up to speed on inflation, more than any of us ever wanted to be. When inflation gets combined with stagnant economic growth and unemployment, you have stagflation. Now if you’re an economy nerd (meaning you read a lot of Bloomberg) you’re probably familiar with shrinkflation as well. This is when producers of our favorite products put less of the product in the package but keep the price the same


The new kid on the block getting lots of nods? Upflation. A tactic you’ll have to start watching for. Companies are taking everyday products and adding a very tiny, inconsequential twist and then charging a consequentially higher price. Have you seen whole body deodorant?  It’s the same as the one you rub on your pits. Same amount of product. It costs $5 more. Proctor and Gamble is betting on the fact that you’re tired of making choices, your brain is a bit fried after the past four years of nonstop drama. So you’ll pay more for a supposed innovation because we are all desperate for something fresh and new. Not just in the white house but our bathroom drawer too. 


Speaking of the White House.  


Both candidates are claiming the housing crisis is of utmost importance to their campaigns and administrations – making it a foundational piece of both platforms. 


What is the impact of another Biden term on our industry? 


Biden is a proponent of density. He wants to loosen zoning laws to allow for more multifamily development. He seems to be pro-tenant, advocating for renter’s rights. This is a catch 22 for the real estate market. Landlords don’t like regulation, we are seeing this right here, right now with rent control being proposed and fought fiercely in Nevada. 

His tax incentive for people to sell their starter homes and move up was well intentioned but the problem is that if a seller sells, they become a buyer. We need inventory created out of thin air – literally, that’s what it would take to solve this housing crisis. 


How about a second Trump presidency? What would that do for real estate? 


The man loves low interest rates and believes in real estate – I’ll give him that. His fans say he believes American society benefits from more homeowners. We also know he’s a proponent of deregulation which is likely to bring the NAR Lawsuit right back front and center. Trade disputes are a problem though because he’s not the most agreeable.  He imposes tariffs on whims and that causes inflationary issues. On the other hand, his 2024 plan to Make America Great Again includes a very interesting bit on opening up federal land to be developed for housing.  (Not sure how his middle America base feels about this.) This is a big deal here in Nevada – not only because old Reno folks hate density – but because 80.1% of our state is Federal land. Does anyone want to live in those rural areas? I don’t know but it’s an idea. 


The reality about real estate is this: housing is mainly a local issue. I would suggest focusing on our local representatives’ platforms because it is going to come down to them…to make meaningful change when it comes to housing and affordability here (or wherever you are). 

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