Looking Forward to 2024

By: D. Keith Dunnagan, Esq.
January 9, 2024

Every year we take an opportunity to look forward to the New Year and 2024, promises to be an interesting year. A main question will be focused on how will the real estate market perform this year? 2023 saw higher interest rates and significantly reduced number of transactions in the local markets. In the Sacramento metro area, I recently saw a statistic that suggested that transactions were about 50% of a normal year. Needless to say, we are anticipating the market adjusting.

Many sellers slowed listings over the last year, presumptively because they do not want to trade their current low interest rate for a rate that could be as much as twice their current rate. Over the last year, rate shock has been a deterrent to listings and transactions. However, in the last several weeks we have seen rates begin to ease (they are down almost a full percentage point) and the Fed has indicated that there may be as many as three rate reductions this year that could ease borrowing costs and help encourage activity in the real estate market. Something that many of us are hoping will come to fruition.

On the federal front – there are several factors currently at play. First and foremost is the general election in November. Without a doubt, national politics will be front and center with the Presidential election, all of the House of Representatives seats up for election, and 1/3 of the Senate seats up for election. Currently the majorities in each branch of Congress are small so the question becomes how will the American electorate respond? No doubt, inflation, housing costs (and interest rates) and the looming expiration of the tax cuts from 2017 will be issues of importance along with the social issues that have dominated the political conversation for the last couple years.

From the business perspective, FinCEN (Financial Crimes Enforcement Network) will become a new acronym in the small business lexicon. As the federal government tries to crack down on financial crimes, FinCEN, which is a component of the United States Treasury, will, pursuant to the Corporate Transparency Act (“CTA”) begin to collect information (in a confidential manner) on the owners and decision makers of small businesses that are not exempt from the reporting requirements. The penalties are substantial for noncompliance and include fines from $500 day up to $10,000 and jail time. If you are a business entity and you do not know if you are required to comply, you should consult your business attorney for advice on compliance with the CTA.

In California, we have already addressed costs, but housing supply remains a significant problem. When Gov. Newsom was first elected he attempted to layout a plan to address the housing shortage problem. Clearly, that plan has not gone as expected by the Governor’s office. Several bills have been passed aimed at reducing the red-tape associated with the construction of ADUs. However, the actual construction of homes and residential units has not been at a pace to reduce the actual housing shortage. Without addressing development and entitlement process problems, making meaningful headway on reducing housing shortages will likely remain a legal fiction.

More importantly, the California budget will be in focus this year, especially during midterm elections for the Assembly and Senate members. Projections suggest that the California budget deficit maybe as high as fifty-four billion dollars (that’s a lot of cookies) and the question becomes how does that shortfall get covered? It is no secret that CalExit is happening. Over the last few years California has had a net decrease in population and this decrease does contribute to reduced collection of taxes. Recently, the California Assembly has looked at (and we get plenty of questions) a wealth exit tax and its viability. Thus far, the legislation has not been passed but it is expected with the budget deficit to garner more attention. Such a proposal is not without its legal concerns and may violate provisions of the US Constitution, including the Commerce Clause, Privileges and Immunities Clause and Due Process Clause. The question remains, whether the Assembly will push such legislation across the line this year. Even if it does, it will almost certainly become the subject of litigation.

In Washington it is expected that Governor Inslee will not seek a fourth term and the Governor’s seat will likely be available. The question becomes what the political platform will be to drive the general election in Washington. Washington and California suffer from many of the same maladies, rising housing costs, rising costs of living, increasing levels of homelessness, etc. How will these issues affect the election and legislation in the coming year? In the meantime, BPE continues to serve its clients in Central Washington as it expands its presence across the state.

Clearly there are a lot of things in the works and 2024 will prove to be an interesting year. Only time will tell how this all shakes out, but we expect to continue to see increased legislation involving housing issues and the budget. We look forward to continuing to serve the people of California, Washington State and Nevada and look forward to adding and expanding our reach in the coming year.

Happy New Year!

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