These 27 economic factors are the fundamental basis of real estate.  For more information on how these factors influence real estate, click here.
Updated 07/06/2010

Factors having primary and initial impacts on the industry:

1. Jobs

• Jobs Move Real Estate – Market Chart (Updated monthly)
• Reeling from California unemployment (06/2010)
• Buyer purchasing power (05/2010)
• Future sales and occupancy rates rest on job losses (09/2009)
• Closed for business? The anti-business mythology of the Golden State (09/2009)
• Market Volatility Factor:  Jobs (11/2008)

2. Interest rates

• Current Market Charts (Updated monthly)
• Falling mortgage rates and housing demand (06/2010)
• Using the yield spread to forecast recessions and recoveries (03/2010)
• Market Volatility Factor: Interest Rates (11/2008)

3. Real Estate Price Speculation

• Agency duties: the flipper’s quandary (06/2010)
• Flipping: contracting to assign or double escrow the resale transaction (04/2010)
• Homebuyer beware: the real estate game lacks fair play (01/2010)
• Market Volatility Factor: Real Estate Price Speculation (11/2008)

4. Home Equity

• 1Q 2010 California Foreclosure Data (05/2010)
• The underwater homeowner, his future and his agent (03/2010)
• “To default or not to default: that is the question.” (01/2010)
• The effect of home equity borrowing (11/2009)
• Negative equity and the Great Liquidation (11/2009)
• Negative equity and foreclosure (10/2009)
• Market Volatility Factor: Home Equity (11/2008)

5. Rents

• Consumers say they prefer renting to buying (06/2010)
• Renting vs. buying: the GRM (06/2010)
• Market Volatility Factor: Rents (11/2008)

6. Loans

• 20-Year FMRs offer attractive alternative to some jumbo borrowers (06/2010)
• Loans for commercial RE are scarce, but available (06/2010)
• A surge in loan modification defaults (04/2010)
• Proposed bill takes aim at prepayment penalties, lending practices (05/2010)
• The danger of ARMs build-up (03/2010)
• Market Volatility Factor: Loans (11/2008)

7. Inflation & CPI movement

• Consumer Price Index – Urban Consumer (Updated Monthly)
• Calculating owner-occupied housing CPI (11/2009)
• Consumer inflation changes independently of housing prices (11/2009)
• Fear mongers’ inflation prediction unjustifiable (10/2009)

8. Consumer confidence

• Homebuyers feel ready and willing to buy, but not financially able (05/2010)
• Looking through the window towards recovery (05/2010)

9. Savings

10. Construction

• Monthly Residential Construction (Updated Monthly)
• Annual Residential Construction (Updated Monthly)

Factors having concurrent secondary influences on the industry:

11. Inventory

• Housing shortage or housing surplus? (06/2010)
• Where have all the REOs gone? (03/2010)

12. Value deflation

13. Pricing

• Home sales volume and price peaks (06/2010)
• Where have all the REOs gone? (03/2010)
• California tiered home pricing (01/2010)
• The flat-line recovery: a side-effect of sticky housing prices (12/2009)
• Price persistence and market illiquidity (09/2009)
• A realty Black Hole: belief in ever-rising prices causes implosion (09/2009)

14. Stock market values

• S & P 500: Stock Pricing vs. % Earnings (P/E Ratio) (Updated Quarterly)
• REIT investment (May 2010)

Factors having long-term impacts on population, monetary policy, or regulatory policy:

15. Retirees

• Boomers retire, and California trembles (07/01)

16. First-time buyers

• First-time homebuyers and new housing (02/2010)

17. Fiscal spending (government policies)

• The lender of last resort: the Fed (12/2009)

18. Dollar devaluation

19. Politics

• The standardized short sale: brought to you by President Obama (12/2009)

20. Exchange rate

21. Taxation

• Federal housing tax credits = success? (05/2010)
• California’s homebuyer tax credit (04/2010)
• Getting rid of housing subsidies (03/2010)

22. Birth rate

• Rate of Population Growth: CA v. US – Market Chart (02/2010)

23. Regulation

• New HAMP revisions: mortgage-relief plan version 2.0 (04/2010)
• HR 4173 and the failed homeownership cramdown amendment (03/2010)
• The Home Valuation Code of Conduct (07/2009)

24.  Financial crisis

• Beware the drastic measures brought on by desperate times (09/2009)

Factors now having one-time shock effects:

25. Weather

• Federal flood insurance program resuscitated (04/2010)

26. War/civil unrest

27. Energy Consumption

• A property’s energy demands: an evolving factor in marketing (02/2011)

These are first tuesday’s observations and commentaries on the fundamentals controlling the analysis of real estate valuation from a price, time and location matrix, with thoughts on realistic expectations about the future use and occupancy of real estate owned or leased.

Such a review is challenging to write and to read. In producing the review, we are paying close attention to the application of long-lived real estate concepts to future transactions. This allows for an informed prediction of the future for real estate market participants such as brokers, agents, sellers, buyers, tenants, landlords, builders, and lenders.

As you are directly effected by the future of this industry, we ask you for your input on the consequences the 27 factors will have on current activities of brokers and their agents as we leave the seller’s market behind, activities ranging from client negotiations and contracting to escrow practices and lending.

We will be reviewing 27 factors and fundamentals which have historically affected real estate transactions. They have been categorized by whether their effect has:

• a primary and initial impact on the industry;

• a concurrent secondary influence on the industry;

• a basis in population, monetary policy, or regulatory policy; or

• a one-time shock effect.

On all subjects, the opinions of experts predicting the future are unreliable, giving no better advice on which of the two diametrically opposed opinions of the future is accurate than would the flip of a coin. On the other hand, the wisdom of the crowd with its collective knowledge has an 85% to 90% track record for accuracy.

Thus, the collective knowledge of a cross section of real estate brokers and agents who have been actively involved in real estate transactions will have an accuracy nearly double that of an opinion given by any self-described expert. The goal of this series is simple: we are aiming to get information from those in the fray so readers can better explore the impact of each factor of the list of 27, and use the information to help develop the course of their real estate activities in the California real estate market.

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