Bank failures and their effects on lending

I am extremely concerned especially with the failure of SVB, Signature and now Credit Suisse! There will be smaller banks that are stressed financially with the much higher rates; that had investments in Bitcoin and other digital currencies and do not have the money to back them up. OMG, we are in for very tumultuous and scary time and this will have a major impact on lending and real estate purchases.

What I have been watching and waiting for are “what makes sense” opportunities. They are coming and will be flooding the market over the next 6-36 months. Unfortunately, Jerome Powell, who has increased rates 10 times in the past 16 months; and will possibly add another 1/4-1/2 very soon as job creation has still been somewhat robust. Although the rate has come down from the 8%+ high last June; I believe he will have to continue raising rates to quell our unrelenting stubborn inflation in order to get it down to his 2% goal. I am not sure how many months or even a few years that it will take to succeed in achieving his objective.

Looking back, The Fed, through “Quantative Easing” made available 6+ trillion of digital currency to the banks and consumers and actually only printed of that total, approximately 3 trillion and 99 % of the population, probably didn’t know this. The middle class, whatever is left of it, is in huge trouble. Credit card debt was 972 billion in Jan 2023, the most ever on record because everyone who was receiving PPP, EIDL, Unemployment insurance, etc. is now out of dollars and they are using their plastic to survive and that is a sad and truly scary position to be in.

As I said, the opportunities are slowing coming; however the best ones will be coming down the pike starting in 6-36 months and beyond and who can predict when this catastrophic situation will end. It’s obvious inflation is still out of control, raising rates further will only exacerbate our fragile, yes fragile economy as layoffs will continue to shed excess employees as consumers continue to slow their spending, especially on discretionary purchases.

Just look at the fact that there were

BY PHILIP A. RAICES

23,600 restaurants that occupied NYC in 2019, and I have read that the number has been reduced by 45%. Layoffs will be the main stay of our market as things continue the way they are. I wouldn’t be surprised if we see more food pantries spring up and more families and individuals need assistance because of the lack of available money to buy food. I already see this in Long Island at the 501C not for profit “The Interfaith Nutritional Network” Food Pantry on 100 Madison Ave, out in Hempstead NY. They are feeding in excess of 500+ families and individuals twice a day and it will be getting much worse!

Purchasing any homes or any other type of real estate with financing will be that much more challenging and difficult as it has and will continue to be too costly to be able to afford the monthly expense. However, that will depend on ones income as higher income families and individuals will most likely still be better-off buying as the comparison with rentals, depending on their cost will still be more advantageous due to the tax deductions, potential of using part of your home as an office, as many have been doing and the stability of being your own landlord and having a fixed-lease (a mortgage) for 30 years. Taking a 7 year fixed ARM (fixed for 7 years/adjustable rate mortgage) for now might be the best approach and rates could come down within that time. At least you won’t be throwing out your money on someone else’s property, paying his/her mortgage, providing them tax and expense deductions, reducing your wealth each and every month as well as the security of knowing you are in control as the landlord and can determine if and when you want to move.

Cash purchasers are and will be in better positions to make purchases whether it is a home or a investment property, because “cash just might be king” (and not “trash,” as Ray Dalio, Bridgewater Associates Founder and

CEO always says!) in those situations that motivated sellers would rather take a sure transaction than worry about financing with an appraisal that may not be what your agreed and accepted price is. The buyer can now come back and renegotiate the price or if the sellers are not going to be reasonable; which in this current market may not be a prudent way to go, will force the buyer to come up with the additional amount of money that their bank will require to have the mortgage approved. There will be many situations going forward that will be the normal scenarios that will occur and I would impress upon sellers not to lose a qualified buyer and might think outside the box to make the sale work and close.

As more banks potentially fail, then the existing banks will become even more restrictive with their lending requirements. This in turn will create a tougher environment for financing for those with mediocre credit, insufficient income and debt/income ratios. As I have conveyed in a previous column, that some sellers should who really need or want to sell should consider providing either a short or longer term mortgage to create a greater demand for their home or even investment. As long as a buyer is putting down at least 20%, the chances of them walking away wouldn’t necessarily be something that most owners would not choose and be resigned to lose their down payment. I would imagine they would seek out ways to earn additional income as there are still a huge amount of jobs available. Most important for the seller is if there are substantial capital gains then providing financing will stretch out their capital gain taxes over many years and you will receive a great interest rate, than any bank, as you now become the bank.

The future is uncertain and the Fed is between a “rock and a hard place.” We are already seeing bailouts for depositors, although they are candy coating it by saying “shoring up the banks and protecting consumer’s deposits (but not investors in those banks). It is very obvious that tax payers will be footing the bill in the future and I am somewhat convinced at this point in time that there will be a recession, and how bad it will be we’ll find out this or next year.

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S.) and in 2022 has earned his National Association of Realtors “Green Industry designation for eco-friendly construction. He will provide you with “free” regular updates of sold and new homes in your town via the Multiple Listing Service of Long Island (MLSLI) or go to https://WWW. Li-RealEstate.Com and you can “do it yourself (DYI) and search on your own. For a “FREE” `15 minute consultation, as well as well as a “FREE printout or digital value analysis of what your home might sell for in today’s market without any obligation or “strings” attached. He can also provide a copy of “Unlocking the Secrets of Real Estate’s New Market Reality, and our Seller’s and Buyer’s Guides for “Things to Consider when Selling, investing or Purchasing your Home.

You can email or snail mail (regular mail) him with your request or ideas, suggestions or interview you for a specific topic and a Q & A for a future column with your name, email and cell number. He will email or call you back and respond to your request ASAP as long as he has your complete name, cell, email and/or full home or business address. Again, for a “FREE” 15 minute consultation, he can also be reached by cell: (516) 647-4289 or by email: Phil@ TurnKeyRealEstate.Com to answer any of your questions and concerns in selling, investing, purchasing, or leasing residential or commercial property.

BY DENNIS MAMMANA

Week of April 16-22, 2023

I’ve always felt that astronomy is best learned when something occurs to make us question our eyes or, in some cases, even our sanity. If we’re curious and dedicated enough to follow through on what we’ve experienced, we will most likely make a wonderful discovery.

It’s in just this way that I enjoy helping people learn about the heavens, and anyone who has ever been on one of my popular Borrego Night Sky Tours knows this well. In fact, more than once during the night, people will hear me say: “Turn around!” That’s because stargazers often become so fixated on what’s in front of them that they miss what’s around them, and sometimes that’s even more amazing or beautiful.

It’s not only after dark that I do this. Often while watching a beautiful sunset, I’ll do something that befuddles everyone nearby. Just as the western sky show becomes especially colorful, I turn around and face east.

The reaction I get is usually a puzzled look, followed by a gentle reminder: “Uh, what are you doing? Sunset’s the other way.”

Perhaps even more perplexing to people is my response: “While you’re watching our daytime star set, I’m watching nighttime rise.”