There has been dramatic transition on the global and national political stage within the past month that has made it hard to fathom the scale of changes occurring at the global and national level, even as we try to sort through the changes in our community, including the local real estate market, and at every level it appears we are at a crossroads.
At the global level, with the demise of USAID, plus the imposition of tariffs and reversal of longstanding agreements, our country is signaling a return to an imperialist mentality. Over the past few weeks, Greenland, Panama and Gaza have all been suggested as possible acquisitions, and the Gulf of Mexico now shows up on Google Maps as the Gulf of America. While from a profit perspective these policies appeal to large-scale real estate developers and investors, they pose multiple humanitarian concerns and imply a lack of respect for the rights of smaller nations. And for those of us who only have domestic holdings, the imposition of tariffs will translate to higher materials costs.
At the national level, the administration is actively breaking down the foundations of multiple government departments and programs. Some are cheering the dismantling, but results are still unknown, and the way it is being done has largely bypassed legal protocol, creating widespread disruption. One of the early casualties was the shutdown of the Consumer Finance Protection Bureau that was set up in the wake of the 2008 credit crisis, which will make it easier for lenders and consumers to do push marginal applications through. In the short run this will likely stimulate the market, but at the risk of an eventual repeat of the last meltdown.
At the state level, we are dealing with the effects of both government regulations and the elements with the fallout from the recent wildfires which have increased fire hardening requirements and thrown our insurance markets into a crisis. The latest headlines are signaling that State Farm requested a 24% increase in rates across the board and that the funding for the California Fair Plan is going to require a government bailout, so we can expect ongoing challenges and rising costs for insurance in the foreseeable future.
Locally, the mandates for high-density development are transforming the skyline of our downtown and other major corridors. In anticipation of the impending population growth, our main highway through the county continues to be widened, while a battle rages over whether the RTC’s light rail line should be built. And in the midst of all this, we are getting reports that things have heated up in the Silicon Valley market, which bodes well for real estate in Santa Cruz County for the coming year.
Against this greater backdrop, each real estate transaction is a microcosm at a crossroads of its own as a property or business awaits news of its likely future. As in the case of a current assemblage I have listed on the Eastside, this will be determined by whether the new owner intends to keep renting the property to the current businesses there, or replace the buildings with a new development of mixed-use housing over podium. And how we navigate to that future will be a part of the process.
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