When 2022 started, we were looking forward to being out of the pandemic and starting our lives over again. We had barely set foot out of that frying pan to find ourselves in the fire of a war in Ukraine. We are so unhappy to see the human suffering, of course. But what do U.S. interest rates have to do with a war across the globe? A lot.
The CREM Group works with buyers and sellers of probate, trust, and conservatorship homes In Southern California, along with “regular” property. We also deal with commercial properties above and below the probate/trust/conservatorship umbrella. Our job is to keep our clients apprised of trends and changes we see in interest rates, which is why we write about them a lot. A tiny increase in interest rates over a 30-year mortgage can affect the P & I payments and the overall cost of acquisition by thousands of dollars. Either way, interest rates affect the supply and demand of real property, and wars affect financial markets and interest rates everywhere, including the United States.
What are the effects of the conflict in Ukraine on interest rates?
If you’ve been to the grocery store or a gas pump lately, you know prices are going up. Or, if you’ve been listening to the news, you’re probably aware that inflation is the highest it’s been in 40 years. (USA TODAY 3/11/22)
Generally speaking, the Federal Reserve raises interest rates to stem inflation. CNBC uses this quote to help explain it: “The Fed uses interest rates as either a gas pedal or a brake on the economy when needed,” said Greg McBride, chief financial analyst at Bankrate. “With inflation running high, they can raise interest rates and use that to pump the brakes on the economy in an effort to get inflation under control.” Huh?
It's complicated. When people are uncertain about the future (like COVID, or now, the war in Ukraine), they tend to put their money in safer investments. This puts downward pressure on interest rates. On the other hand, the Federal Reserve has been threatening to raise interest rates to “slow the economy down.” If interest rates are higher, borrowing money for expansion and, in our case, buying homes and property is more expensive. If that happens, the economy “should” slow down. If businesses do not invest in growth, then the fires of inflation die down. Wait. But if they stop expanding, sometimes they stop hiring, and employment falters. People lose jobs! We are glad we’re not the Federal Reserve because too much of a slowdown can cause a recession. It’s a delicate balance.
The CREM Group’s crystal ball keeps clouding over. We are very sad for the people in Ukraine and their leaders in Ukraine. Still, we want to advise our investors, buyers, and sellers of probate, trust, and conservatorship properties, whether residential or commercial. As COVID-19 variants come and go (the World Health Organization WHO is calling the latest one “deltacron”) and the markets will be unsteady as the war in Ukraine progresses. That said, it is still worthy to remember that according to the MortgageReports.com (mortgage), interest rates are fairly low from a historical standpoint.
That means the market is good if you want to buy or sell. Transactions are generally stimulated when interest rates are low. Mortgage rates usually follow the overall interest rate trend. So, it might be best to obtain financing sooner rather than later. As long as the world finance market is “on edge,” the rates should stay a little lower than previously expected. Don’t forget, probate and trust properties tend to be lower priced than “regular” properties.
The next meeting of the Federal Reserve is March 15-16, 2022. Meanwhile, veteran investor Mark Mobius told the media on Friday, March 11, that the war in Ukraine will lead the FED to be cautious with rate hikes. We’ll be watching the Fed’s moves and try to keep up with a world that just doesn’t seem to want to give us a break. Other than that, we hope you keep coming back to this blog to find out the latest in real estate trends. Keep a good thought for the people in Ukraine, and be glad if you live in the United States. * * *
We at the CREM Group have been handling probate real estate transactions for both residential and commercial properties in Los Angeles and Orange Counties for years now. We try to ensure that we support our clients so they know the legal and tax aspects of selling their probate, trust, and conservatorship homes in California. We also try to make our readers aware of many trends in real estate and related issues.
As always, contact us by email here if you have any questions about real estate, probate real estate, conservatorship, or trust real estate properties, especially in Los Angeles and Orange Counties in California.
Mark Cianciulli, Esq. [email protected]
DISCLAIMER: This content is meant purely for educational purposes. It contains only general information about real estate and related matters. It is NOT legal advice and should not be treated as such. We recommend consulting a legal or tax professional before acting on any material, opinion, or point of view described herein.
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