These 27 economic factors are the fundamental basis of real estate.  For more information on how these factors influence real estate, click here.
Updated 02/13/2012

Factors having primary and initial impacts on the industry:

1. Jobs

• Market Chart: Jobs Move Real Estate (Updated monthly)
• Market Chart: Reeling from California’s lack of jobs (Updated monthly)
• FrannieA collective term for Fannie Mae and Freddie Mac forbears, unemployed homeowners defer (02/2012)
• 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

• Market Chart: Current market rates (Updated monthly)
• Market Chart: Buyer purchasing power (Updated monthly)
• Using the yield spread to forecast recessions and recoveries (01/2012)
• Historic mortgage rates herald momentous change (11/2011)
• Market Chart: Interest rates affecting real estate transactions (09/2011)
• Falling mortgage rates and housing demand (06/2010)
• Market Volatility Factor: Interest Rates (11/2008)

3. Real estate price speculation

• Anti-flipping waiver reincarnated (01/2012)
• Blame speculators for the intensity of the boom and bust (12/2011)
• The FHA — a flipperA speculator who purchases real estate at below market prices and depends on market momentum to sell at a profit’s best friend (02/2011)
• Speculations on speculator suppression (08/2010)
• Agency duties: the flipperA speculator who purchases real estate at below market prices and depends on market momentum to sell at a profit’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

• Market Chart: Home sales volume and price peaks (Updated monthly)
• Market Chart: NODs and trustee’s deeds: less depressed but still grim (Updated monthly)
• The morality of strategic default: businesses v. homeowners (01/2012)
• The homeowner debt debate (01/2012)
• Migratory lockdown: underwater homeowners confined (01/2012)
• Negative equity gains and losses (12/2011)
• How to facilitate a shortsale transaction (09/2011)
• You’re sure you’re a shortsale specialist? (09/2011)
• Strategic default smarts (07/2011)
• The negative equity plague: California’s home insolvency crisis (03/2011)
• 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. Renting

• Market Chart: Rentals: the future of real estate in CA? (Updated monthly)
• Undue restriction: the shortsale leaseback prohibition (11/2011)
• REOs for rent (09/2011)
• New tactics for competitive landlording (02/2011)
• Increasing renter populations drag neighborhoods down (12/2010)
• Consumers say they prefer renting to buying (06/2010)
• Renting vs. buying: the GRM (06/2010)
• Market Volatility Factor: Rents (11/2008)

6. Loans

• Market Chart: The iron grip of ARMs on California real estate (Updated monthly)
• Market Chart: NODs and trustee’s deeds: less depressed but still grim (Updated monthly)
• Market Chart: FHA, PMI, or neither? (Updated monthly)
• Why shouldn’t we hate Wall Street? (02/2012)
• Fair lending now (01/2012)
• California’s seductive conditions for mortgage fraud (01/2012)
• Down payment gifts prevent skin in the game (01/2012)
• The homeowner debt debate (01/2012)
• Shadow inventory lurks within lender balance sheets (01/2012)
• Better lender bureau will accept your mortgage grievance (12/2011)
• Inheriting debt: taking title subject to a mortgage (12/2011)
• 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

• Market Chart: Consumer inflation figures (Updated Monthly)
• Inflation Dashboard: a useful tool (01/2012)
• The equilibrium trendline: the mean-price anchor (10/2011)
• 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 (01/2012)
• Californians are optimistic about the coming year (08/2011)
• Like myths, this old dream will never die (07/2011)
• Looking through the window towards recovery (05/2010)

9. Savings

• Down payment gifts prevent skin in the game (01/2012)
• The 20% solution: personal savings rates and homeownership (11/2011)
• The 20% quagmire (10/2011)

10. Construction

• Market Chart: Monthly Residential Construction (Updated Monthly)
• Market Chart: Annual Residential Construction (Updated Monthly)
• Blueprints for future construction (12/2011)
• Factors in construction forecasting (11/2011)

Factors having concurrent secondary influences on the industry:

11. Inventory

• Market Chart: Home sales volume and price peaks (Updated monthly)
• Shadow inventory lurks within lender balance sheets (01/2012)
• FrannieA collective term for Fannie Mae and Freddie Mac’s REOs lying around with nowhere to go (12/2011)
• Nobody’s home: California residential vacancy rates (07/2011)
• Housing shortage or housing surplus? (06/2010)
• Where have all the REOs gone? (03/2010)

12. Value deflation

• The Fed purchases Treasuries, fends off deflation (10/2010)
• Deflation’s push on the real estate recovery (10/2010)

13. Pricing

• Market Chart: Home sales volume and price peaks (Updated monthly)
• Market Chart: California tiered home pricing (Updated monthly)
• Sticky pricesA seller's irrational reliance on past home pricing as a basis for setting current pricing, tricky situation (02/2012)
• Lower home price appreciation in socioeconomic enclaves (02/2012)
• Homebuyer optimism uninformed about future pricing (11/2011)
• The equilibrium trendline: the mean price anchor (10/2011)
• Budging from sticky pricingA seller's irrational reliance on past home pricing as a basis for setting current pricing (or not) (07/2011)
• 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

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

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

15. Retirees

• Why Boomers will still retire after the boom (12/2011)
• Boomers bust open doors to real estate investment era (09/2011)
• Boomers will always be homeowners (09/2011)
• Aging generation, budding market (09/2011)
• Golden state population trends (07/2011)
• Boomers retire, and California trembles (07/2011)

16. First-time homebuyers

• For Gen Y, bigger is not better (01/2012)
• First-time homeowners stuck and agents derailed (09/2011)
• First-time homebuyers and new housing (07/2011)
• The generations have spoken, who will listen? (02/2011)
• The demographics forging California’s real estate market: a study of forthcoming trends and opportunities Part II (11/2010)
• The demographics forging California’s real estate market: a study of forthcoming trends and opportunities Part I (10/2010)
• College debt makes graduates hesitant to become homeowners (07/2010)

17. Fiscal spending

• Lenders vs. owners and the real estate interest of each: 2000-2011 and beyond (02/2011)

18. Monetary policy

• The Fed’s monetary policy, straight from the horse’s mouth (07/2011)
• Home financing, mortgage-backed bonds, and the Fed (03/2011)
• The Fed’s plan of attack (07/2011)
• Suspect behavior: why and how the Fed creates a recession (06/2011)
• The lender of last resort: the Fed (12/2009)

19. Politics

• Rentiers and debtors: why can’t they get along? (09/2011)
• The President tweets his housing mistakes (07/2011)
• Some dread the demise of Fannie and Freddie (03/2011)
• Mortgage market reform from the executive branch (03/2011)
• The inconsistent cramdown policy (01/2011)
• The standardized short sale: brought to you by President Obama (12/2009)

20. Exchange rate

• China’s California syndrome (01/2012)
• High-tier real estate’s foothold in California (01/2012)
• European investors look to California real estate (01/2012)
• Wealth from other nations: foreign investments in California real estate (11/2011)
• Foreign investors have money, want real estate (11/2011)

21. Taxation

• New guidelines for the real estate tax deduction (12/2011)
• Common short payoff income tax reporting mistakes (10/2011)
• Give me homeownership or give me death! (08/2011)
• Subsidizing the American dream (06/2011)
• The home mortgage tax deduction: inducing debt and stifling mobility (03/2011)
• Federal housing tax credits = success? (05/2010)
• California’s homebuyer tax credit (04/2010)
• Getting rid of housing subsidies (03/2010)

22. Population

• Market Chart: Age and education in the golden state (10/2011)
• Market Chart: The distribution of California’s human resources (10/2011)
• Market Chart: Boomers retire, and California trembles (07/2011)
• Market Chart: First-time homebuyers and new housing (07/2011)
• Market Chart: Golden state population trends (06/2011)
• Immigration’s impact on the housing market (01/2011)
• Market Chart: Rate of Population Growth: CA v. US (02/2010)

23. Regulation

• The due-on time bomb (01/2012)
• Taming animal spirits in client buy-sell behavior (01/2012)
• California’s seductive conditions for mortgage fraud (01/2012)
• Blame speculators for the intensity of the boom and bust (12/2011)
• Better lender bureau will accept your mortgage grievance (12/2011)
• Undue restriction: the shortsale leaseback prohibition (11/2011)
• It’s payback time (not for homeowners) (09/2011)
• Kickbacks: the end of an opulent era (08/2011)
• Retribution deferred: lenders prove too powerful to be prosecuted (04/2011)
• 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.  Energy consumption

• The solar industry is growing. Are you keeping up? (11/2011)
• A green addendum for every green appraisal (10/2011)
• Solar energy simplified, a SAVE for everyone (08/2011)
• A property’s energy demands: an evolving factor in marketing (02/2011)
• Building green: a bright light in a dark recession (11/2010)
• Energy mortgages: monthly savings take you from red to green (11/2010)
• Energy efficiency in the home: not just for hippies (08/2010)
• Beware the drastic measures brought on by desperate times (09/2009)

Factors now having one-time shock effects:

25. Weather

• The Natural Hazard Disclosure Statement (NHD): included in marketing packages to create transparency and attract buyers (07/2010)
• Federal flood insurance program resuscitated (04/2010)

26. War/civil unrest

27. Financial crisis

• Why shouldn’t we hate Wall Street? (02/2012)
• Fed officials didn’t see it coming (02/2012)
• Why real estate won’t save us this time (01/2012)
• The homeowner confidence shift (12/2011)
• The rise of “zombie economics” (10/2011)
• The rocky roads: recession and financial crisis (07/2011)
• Children devastated by the foreclosure crisis (11/2010)
• Let the market crash? Not so fast, please! (09/2010)
• Cleaning up after the ruptured housing bubble (05/2010)

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.