So who won the debate last night? Should you care? Like most of you I’m still trying to understand what Rosy Odonell has to do with anything! But, regardless of who won the debate last night or who was right or wrong, what happened during the debate in the markets was an important event. While I watched the debate (along with 100 million other folks), I was also watching the markets: futures, treasuries, gold, bonds, etc… each of these items told a story that could have profound impacts on real estate values. Why? How can a debate impact real estate?
Don’t get me wrong, this election is a very important election that could shape our country for years. I’m not going to get into the actual politics but want to focus on an important issue as a result. Why are the markets reactions important? As I watched the debate I had Bloomberg up to see how the markets were interpreting the debates. I was surprised to see the swings in futures, gold, bonds, etc… during the debate. The volatility was amazing with markets moving leading up to the debate and during the debate all trying to price in “risk” of one candidate’s win verse the other.
Who cares? The volatility of the markets is the key story. This is a lead indicator that the markets are lacking clear conviction and small events could be market moving. In other words, there are allot of soft variables (how people feel) moving the markets as opposed to just hard data. This is most true with gold. Gold is considered a “safe haven”; prior to the debate and during the debate the price of gold fluctuated as people “felt” one way or the other about the debate.
Real estate like gold is a “hard asset”. As volatility and uncertainty in the markets looks to continue (see today’s article in bloomberg that international bonds, another safe haven are rising) there will be higher demand for perceived safe assets. One of which is real estate.
The desire for safe assets will help real estate in two ways. First, bond prices continue to be high (remember a bond price moves in inverse with the yield, so the higher the bond the lower the yield). This desire for safe havens continues to keep interest rates at record lows (many rates are pegged of the 10 year treasury.) So real estate now has cheaper financing (due to lower rates) which ultimately increases the yield on real estate. Along with rates, the general desire to buy real estate as a safe haven from the volatility of other sectors will further increase the values.
In a nutshell the volatility created from the election appears to be a driver of a flight to safe havens like real estate and gold which should ultimately increase their prices. As the election cycle is in full swing volatility is certain to continue through year end which will continue the real estate appreciation through the year on commercial properties.
Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide. To get started on a loan all they need is their simple one page application (no upfront fees or other games).