May 27, 2018

Gitter Goes Greek in National Arena

Lucky Striker Ron Gitter took the national stage today with his column in The Huffington Post. The Manhattan-based real estate attorney and author of the coopandcondo.com blog, provided an insightful overview of the “challenges du jour” that obstruct our journey towards economic recovery.

We’ve excerpted part of the column below:

The Real Estate Economy as Greek Mythology

Jason and the Argonauts

Those of us of a certain age loved that 1963 film based on the Greek myth of Jason, who searches for the Golden Fleece. Along with his mighty crew (including Hercules), he overcomes many challenges and demons to accomplish his goal. I grant that it’s a bit of a stretch, but those in the real estate industry find themselves on such a journey, with new challenges to a recovery presenting themselves daily.

The Challenge du Jour

Last week interest rates ticked above five percent for the first time since last spring. One of the endearing rationalizations for continuing to buy real estate in a market with a bottomless bottom is that interest rates have been remarkably low for a very long time. So now the jitters begin that the low-interest-rate party is over and one of the good reasons to buy into this market is going away. At a minimum the refinancing market is about to get whacked….

There’s a lot more great stuff about Fannie/Freddie and the possibility of the government pulling the plug on the mortgage safety net. My favorite lines: “The 30-year fixed has become a part of the fabric of the country that has made a better life possible for many. And when you start tearing at the national fabric, proceed with caution, as there will always be unintended consequences.”

But you’ll need to see that and the rest of the article on The Huffington Post site by clicking here

Comments

  1. Ryan Hinricher says:

    Ron, interesting points. I think the overwhelming reason people will continue to purchase in the face of higher rates is confidence. The economy is improving, thus the inflation concern and higher rates following. Fannie/Freddie is a potential large concern but markets innovate with or without government regulation. Also I read an interesting study conducted by the American Real Estate and Urban Economics Association showing that the optimal mortgage structure is a 7-year ARM with the additional cost savings going into 10-year bonds as a hedge. Obviously few people are doing anything like this but based on a largely more transient society (until recently where people are stuck in houses they’re under water on), people don’t stay in homes for 20-30 years too often anymore.

    Overall, I think we’ll see buying activity improve this year over last and next year over this as the economy improves (even if rates are 7%).

    Cheers

  2. I really do believe what Ryan mentions about an economy regulating itself regardless of government. I think that the interest rates being so low for so long was due to market pressures and, to be honest, with prime being between 0 and .25% the rates could have gone lower. Reporting record profits and paying back TARP money earlier than expected support that.

    Now that they are bumping them up it can only do one thing – affect home prices. The economy will come back but I think that the real estate market shadows that. If houses are moving, as always, it will be because they are priced right with regard to the prevailing market conditions reacting to that system.