All right. Morning, everyone. This is sunny with Synergy Real Estate and Property Management.
I wanted to go over some news that’s coming out. We have interest rates which are going up and now you have bankers kind of looking for clarity on, okay, what’s going to be happening with these interest rates. In doing that, you’re seeing a slide in the lending. You see mortgage applications dropping to the 25 year low. You’re seeing real estate investors coming in and now buyers are dropping out of deals. Sellers are backing out of financing that they had refinanced for. You’re really starting to see, okay, well, buyers are getting squeezed. Sellers are getting squeezed.
And so really, what’s next? We logically kind of look at this, well, if rates keep going up, that’s going to slow the real estate activity if you look at supply and demand. So if rates go up and it slows real estate activity, what happens to the price? Well, the price is going to go down, too, because you have slowed demand. Now, if you look at the supply side, so are we going to want to be selling our homes in this kind of market? A lot of people are going to say no, they know that. Okay, if you can wait through this, then we can go ahead and get a better price for our property. A lot of people are going to have to sell just because they’ve extended themselves and they’re no longer able to fill those obligations because now businesses are going to be hit, right? There’s going to be less excess spending, which means that there’s going to be less money flowing into these businesses, which means there’s going to be less money to be paying employees, which means there’s going to be less employees of the business. Right. And so because of all of this stuff going on, you know, obviously it doesn’t look great for keeping real estate prices where they are right now.
And then my argument against this is it really depends on where you’re looking. What I mean by this is, yes, I think there is going to be a flattening and a decline in the market and you’re already seeing that. The bounce back is really what I’m interested in. And the bounce back, I think, is going to be really interesting for places that are growing inherently because they should be, not because of situations over the past couple of years. Places have blown up with remote work and they have built up cities at this point for this remote work, and now you’re starting to see that people are going back to where they came from. These cities are starting to take a hit in their values and they’re going back to, you know, original places. This is really interesting to me as far as, you know, those Airbnb markets. Right. What happens to those people? As far as growth markets, what happens to, you know, San Diego, L.A., San Francisco? Something I really like about the Bakersfield area is that we’re an industrial based city and industrial businesses keep going even through COVID everything kept going. And so you saw a large growth of population, people coming to the area, getting jobs and staying employed. Now, they may not be the highest paying jobs, but these are stable jobs and people are staying employed. I really like kind of going over these topics.
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