For those of you keeping track, yes, I successfully ran my half marathon at the end of May, knocking off Maryland by running a race along the Potomac. But I learned two fascinating things that I thought I would share. Back in our founders’ day there was once a tax on playing cards, but it was only applicable to the “Ace of Spades.” To avoid paying the tax, people would purchase 51 cards instead. However, most games require 52 cards, so these people were thought to be stupid or dumb because they weren’t “playing with a full deck.”
Of course, my pre-race routine involved a visit to the Guinness Brewery in Baltimore. There, I learned that in 1760, the original St. James’s Gate Brewery in Dublin was established with a security deposit of about $135 and monthly rental at about $5. But here is the killer – the lease was for 9,000 years – AND NO INCREASES! Gosh, Guinness must have had one heck of a broker negotiating that deal!
On my way home, I read a story about Dollar Tree spinning off Family Dollar stores for $1 billion. What was buried was that they paid $9 billion for the chain in 2015. Wow! Now I know the dollar is not what it used to be, but…
Upon returning home, I met with a tenant whom we had recently renewed for 10 years (not 9,000 years!). I was suitably impressed with her staying power when I noticed that the name of her business was tattooed on her forearm from wrist to elbow – now that is commitment!
Unfortunately, we are inundated with misinformation and disinformation. Fake news bulletins and alterative facts, hereinafter known as lies. Unending political spin, dopes on TV, and academics, all not playing with a full deck! We live in a time where normal human discourse has turned into a minefield into which no mere mortal dares tread.
So, what is one to do? Looking at the markets, one would think buying gold is the answer. Its value has soared more than 60% since the start of 2024. Analysts say it could rise another 25% through the end of 2026. I will tell you that I think gold has a place in everyone’s portfolio, but I don’t think it is the catch-all. Mostly, this is because it doesn’t produce income. Companies that make things and pay a dividend, or real estate whose occupiers make or sell things and pay rent, will generate income over the next 100 years, while your gold will still be sitting in your safe.
As of mid-2025, the real estate economy can be best characterized as a bumpy plateau. This washboard condition has existed for some time now. But, we are expecting a slowdown heading into 2026, primarily due to higher interest rates and the destabilization of both immigration and trade. Currently, builders are harnessed in by newly imposed trade taxes on materials and the intimidation of the migratory labor force. This market confusion is likely to precipitate a drop in property sales and prices, followed by a decline in job availability going into 2026, which will further affect pricing.
Sales volume will not stabilize until the market works through the government’s onerous deficit and spending habits. The market must find a path to find real value and consistent returns after the past five-year double-dip recession in real estate.
It is rarely, if ever, possible to identify the top or bottom of a market cycle until after it has already passed. However, real estate market cycles can be neatly divided into three phases.
- Buy Phase: the ideal moment for buying property is the start of the recovery.
o This phase is characterized by:
– Cyclically low prices;
– Low interest rates; and
– Few willing buyers.
- Hold Phase: the phase following a purchase during the buy phase or a sale in the sell phase, can be the longest time period in the cycle. Prudent investors patiently bide their time, awaiting the boom or bust to play out before reentering to buy or sell; and
- Sell Phase: this phase commences with a peak in sales volume. It is characterized by:
o Price contraction;
o A drastic fall in the yield spread; and
o Monthly reductions in sales volume.
The buy and sell phases each occur just once during a real estate cycle. The hold phase appears twice: once after the buy phase and once after the sell phase.
Nick’s Numbers
Great news! San Diego’s unemployment rate fell to 4.2% in March, down from 4.4% in February. Unfortunately, a lot of those jobs were local and state government jobs. The office-using sector (information, professional and business services and financial activities) reported 5,500 jobs lost in the past year. During that time, San Diego’s office vacancy rate climbed to 12.5%, which is the highest level since 2012.
If you would like an analysis of your properties’ value or discuss what you should be doing with regard to interest rates or inflation and their impacts on your business, tenants, or property, I’d be happy to talk. (Nick Zech, 858-232-2100, nzech@cdccommerical.com).
People regularly ask us how the market is doing and whether it is slow. We’re blessed to be able to answer that we are in the “problem-solving business” and we are busier than ever because there are plenty of challenges presenting themselves to our clients. Indeed, this is a time for creativity and experience, both of which we like to think we bring to the table with a soft touch. I guess that is our “Ace in the Hole.” Cheers to a Happy 4th! The dollar may be struggling, but you might want to share its history with friends and family over the barbecue this 4th. Hope you enjoy the story…
On the backside of the One Dollar bill, you will see two circles. Together, they comprise the Great Seal of the United States.
The First Continental Congress requested that Benjamin Franklin and a group of men come up with a seal. It took them four years to accomplish this task and another two years to get it approved.
If you look at the left-hand circle, you will see a pyramid. Notice the face is lighted, while the western side is dark. This country was just beginning. We had not yet begun to explore the West or decided what we could do for Western Civilization. The Pyramid is uncapped, again signifying that we were not even close to being finished. Inside the capstone, you have the all-seeing eye, an ancient symbol for divinity. It was Franklin’s belief that one man couldn’t do it alone, but a group of men, with the help of God, could do anything.
‘IN GOD WE TRUST’ is on this currency. The Latin above the pyramid, ANNUIT COEPTIS, means, ‘God has favored our undertaking.’ The Latin below the pyramid, NOVUS ORDO SECLORUM, means, ‘a new order has begun.’ At the base of the pyramid is the Roman Numeral for 1776. (MDCCLXXVI)
If you look at the right-hand circle and check it carefully, you will learn that it is on every National Cemetery in the United States. It is also on the Parade of Flags Walkway at the Bushnell, Florida National Cemetery and is the centerpiece of most hero monuments. Slightly modified, it is the seal of the President of the United States, and it is always visible whenever he speaks. Yet, very few people know what the symbols mean.
The Bald Eagle was selected as a symbol for victory for two reasons: First, he is not afraid of a storm; he is strong and he is smart enough to soar above it. Secondly, he wears no material crown. We had just broken from the King of England. Also, notice the shield is unsupported. This country can now stand on its own. At the top of that shield, you have a white bar signifying Congress, a unifying factor. We were coming together as one nation. In the Eagle’s beak, you will read, ‘E PLURIBUS UNUM’ meaning, ’one from many.’
Above the Eagle, you have the thirteen stars, representing the thirteen original colonies, and any clouds of misunderstanding rolling away. Again, we were coming together as one.
Notice what the Eagle holds in his talons. He holds an olive branch and arrows. This country wants peace, but we will never be afraid to fight to preserve peace. The Eagle always wants to face the olive branch, but in times of war, his gaze turns toward the arrows.
They say that the number 13 is an unlucky number. This is almost a worldwide belief. You will usually never (or seldom) see a room numbered 13, or any hotels or motels with a 13th floor. But think about this:
13 original colonies,
13 signers of the Declaration of Independence,
13 stripes on our flag,
13 steps on the Pyramid,
13 letters in ‘Annuit Coeptis,’
13 letters in ‘E Pluribus Unum,’
13 stars above the Eagle,
13 bars on that shield,
13 leaves on the olive branch,
13 fruits, and if you look closely,
13 arrows.
And finally, if you notice the arrangement of the 13 stars in the right-hand circle you will see that they are arranged as a Star of David. This was ordered by George Washington, who, when he asked Hayim Solomon, a wealthy Philadelphia Jew, what he would like as a personal reward for his services to the Continental Army, Solomon said he wanted nothing for himself but that he would like something for his people. The Star of David was the result. Few people know that it was Solomon who saved the Army through his financial contributions but died a pauper.