Dave Aielli - Solomon Financial Mortgage & Realty

Dave Aielli - Solomon Financial Mortgage & Realty I pride myself in giving you the best consultation as if I was consulting my own family members. I am here to help you!

06/02/2026

Could a June Gloom Become a Precursor?

For those who live in California, the term June Gloom should not be a surprise. For the rest of our readers, the June Gloom is a period of cloudy, cooler days in late spring and early summer especially in Southern California. It is a precursor for sunny, hotter days on the way. Well, this spring has been comprised of cloudy cooler days for the economy and especially the real estate market. But there is potential for sunny and hotter days ahead. Mind you, cloudy and cool is not the same as cold and miserable. We have had some decent economic numbers released this spring. But in no way can we describe today’s economy as hot.

What would it take to heat up the real estate market? That would take three major ingredients. First, lower inflation, which would lead to lower mortgage rates. Second, more housing inventory. Third, some semblance of peace in the Middle East, which would lead us back to the first ingredient. More importantly, it would add a sprinkle of consumer confidence which is always an important seasoning for a warmer economy and housing momentum. And perhaps a hot economy would not be a great idea anyways. Just a bit warmer would do the trick without igniting more inflation in the long run.

This week we will get a reading which will tell us more about the state of the economy. On Friday, May’s jobs report will be released. April was the first month of stable jobs growth after a roller-coaster first quarter. In January we added 130,000 jobs, in February we lost 156,000 jobs and in March we gained 185,000 jobs. April was a more stable gain of 115,000 jobs. Analysts are only expecting around 55,000 jobs to be added, thus another gain of 100,000 or slightly more jobs would be welcome – especially if the unemployment rate stays steady at 4.3%. Of course, the analysts will be looking at wage growth closely as inflation has been heating up due to the rise in energy prices.

05/26/2026

Is it Almost Summer Already?

Is it us or is this year moving extraordinarily fast? We just celebrated Memorial Day, which is the unofficial start of the summer season. Even pools up north are open by Memorial Day. Memorial Day is also the time when the spring real estate market morphs into the summer season. But there was so much going on this spring that we are wondering whether the season will become extended. Between the Iranian conflict, higher gas prices and fluctuating mortgage rates there has been a lot for the real estate market to absorb.

These factors did not cancel the spring selling season, but they certainly caused demand to be somewhat muted, especially in certain areas of the country. We continue to believe that there is a good amount of latent demand built up and it would not take much to keep the ball rolling throughout the summer. What factors could help this equation? One factor is already present – there are more homes available for prospective purchasers. A shortage of inventory has been a factor which has kept demand lower for quite a few years. Another factor would be a true resolution of the conflict in Iran.

Ending the conflict would likely bring both gas prices and mortgage rates down. This would certainly bolster the real estate market. Keep in mind that ending the conflict would not necessarily mean an immediate return to the levels we witnessed at the beginning of the year. As we saw at the end of the pandemic-induced recession, shipping and other snarls do not disappear overnight. But progress in that direction would be a very welcome phenomenon. Even if the conflict stays in a muted stalemate we have seen over the past several weeks, this could help the real estate and several other markets to normalize -- hopefully.

05/19/2026

Searching For Direction

It is not only the jobs data which is hard for us to decipher this year. It is also the state of the economy and especially the real estate market as well. There is always a modicum of uncertainty attached to the economy every year. But this year seems to be somewhat of a special case. If you want to imagine the economy as a recipe, we never know how the mix of ingredients will come together as a finished dish. This year we have the normal mix of ingredients, but we add and subtract some special sauces to the equation.

What are we adding? Two major ingredients are the on and off tariffs and the conflict in the Middle East which has snarled shipping traffic significantly and has contributed to a rekindling of inflation. What are we subtracting? In this case population growth -- as we have not only deported immigrants but also slowed the pace of legal immigration while birth rates have lagged as well. One might think that the economy is poised for a major contraction as a result of these factors, but not all these ingredients are negative for the economy. For example, increased defense spending can boost economic growth. Other factors are hard to discern such as the effect of tariffs.

Which brings us to the real estate sector of the economy. Here we have an even more complicated mix of ingredients. For example, the real estate market has been slow for the past few years. This has created latent demand, which was really percolating at the start of the year as interest rates moved to multi-year lows. A rise in rates due to the conflict has stemmed this demand somewhat but has certainly not turned it off. Plus, we can subtract another ingredient. The lock-in effect of homeowners who have been keeping their homes off the market due to low rates achieved during the pandemic has started to ease as life moves on. Regardless of the future of rates, this latent demand and easing lock-in effect are factors that will influence the market as the year progresses.

05/12/2026

Parsing The Jobs Data

For those of you who are technology buffs, the task of parsing data is a familiar process. For us laymen, it is a bunch of gobbledygook. This, we would like to introduce parsing for those who technology adverse. In this case we are taking data provided by the government and trying to make sense of that data. Previously, we have discussed the economy moving from adding close to 200,000 jobs per month to a small percentage of this number for the past year. Ordinarily, this would be a warning sign of a recession. More than a warning sign, it would be lights flashing red.

Yet even though economic growth has slowed, we seem to be chugging along without slipping into negative growth. For the fourth quarter of 2025, the economy grew at a rate of 0.2%, or 0.7% on an annual basis. We recently received the preliminary estimate of economic growth for the first quarter of 2026, which came in at 2.0%. Again, slow growth but not a recession. Most analysts are attributing this phenomenon to slowing population growth which is due to lagging birth rates but also influenced greatly by reduced legal immigration and the deportation of illegal immigrants as well.

Moving to the jobs numbers, in April the economy added 115,000 jobs and the unemployment rate remained at 4.3%. The previous two months of jobs data were revised downward by 16,000 jobs. In addition, wage growth expanded by 0.2% on a monthly basis and 3.6% annually. How can we parse this data to understand what is happening to the economy? We believe that we are entering the Twilight Zone of economic data. Somewhere that no one has tread before. It is not a recession. But it is not robust economic growth either. It is somewhere within another dimension. Pretty clear now – right?

05/05/2026

It’s Employment Report Time

Usually, the jobs data does not resemble a roller coaster. But for the first quarter of the year, that is exactly what we have experienced. In January, the economy added 160,000 jobs, which was not bad. In February the economy shed 133,000 jobs, which is very bad. In March, the economy added 178,000 jobs (back to not bad). What a wild ride! Both February and March data are still subject to revisions. If you average the three months, we added just under 70,000 jobs per month during the first quarter, again subject to revision.

Expecting things to get quieter? The April data to be released this week will include a full month of the economy operating under the influence of the war in the Middle East. The immediate effects of the conflict would be difficult to predict, but since we have had so many wild swings this year, any major movement will be even harder to decipher. Speaking of the conflict, by mid-April it was hard to decipher whether the conflict was on or off. One side was declaring the Strait of Hormuz open, and the other side was declaring it closed. Confused? We sure are. The rhetoric has caused a roller coaster effect upon oil prices.

We would guess that higher energy prices will cut economic growth somewhat in the short term. If the prices continue to trend higher, this contraction is likely to widen in the medium term. In the long term, defense spending will rise significantly, and this could boost economic growth and employment. While this increase might offset the earlier effects of the conflict, any boost in government spending will exacerbate government deficits, which in turn could create another set of difficulties highlighted by increased interest rates. The moral of the story? Everything is connected and expect another wild ride.

04/28/2026

It Is Fed Time Again

If you are a member of the Federal Reserve Board’s Open Market Committee, you can surely understand that things never seem to go as planned. Certainly, the pandemic was not expected -- and neither was the sharp rise in worldwide inflation which accompanied the recovery from the pandemic. As that was happening the war in Ukraine took center stage. While the inflation rate was recovering from all this, we got hit with another great unknown – the implementation of tariffs which had the potential to at least temporarily reignite inflation.

And just as we were finding out how tariffs were going to affect inflation, they were struck down by the Supreme Court and implemented in through another avenue which remains in question. Enough curves for you in just six short years? Just to make sure that there was enough twist and turns we get hit with an all-out conflict in Iran over several weeks. This was followed by a cease fire, and peace talks which wound up being extended. Regardless of the result of these talks, the conflict had an immediate and severe impact on the price of oil, thus igniting our inflation stats for the month of March.

Today the Fed meets with this concern to consider -- is the spike in oil a temporary phenomenon which will dissipate immediately after the conflict, or will increased inflation seep through the economy as the price of other goods rise? Some analysts are concerned that the Fed will consider increasing rates as a result of these fears. Maybe not today, but sometime in the future. To further complicate things, the economy is likely to slow down as higher gas prices have the potential to depress consumer spending. On the other hand, increased defense spending is likely to provide a boost to the economy in the long run. There is one thing for sure, we would not want to be a member of the Fed in this environment as they face very precarious concerns without appropriate "fiscal" solutions.

04/21/2026

Recovery Timeline

Just a few more weeks. That is the message we have heard from the Administration for several weeks. If we assume this will be the case (give or take a few weeks), then we must ask this follow-up question—how long will it take to recover? We understand that it could take years for the recovery of the physical and psychological damage of war. And we are not discounting these extremely severe factors. But our focus in this newsletter is upon the economic factors.

On the surface, the economic effects of war are obvious. We have seen a sharp rise in the price of oil, a concurrent rise in mortgage rates and a drop in the value of the stock market. Additional factors are beneath the surface but are also easy to surmise. The price of oil has the ability to exacerbate the overall inflation rate – including gas, food, plastic and additional commodities. Additional defense spending will escalate government borrowing, which in turn could place additional pressure on interest rates. Higher interest rates have the potential to affect the real estate market.

Will these factors just reverse themselves automatically after the hostilities cease? Not likely. Some factors might rebound quickly, such as confidence in the stock market. Other factors will take more time such as the calming of inflation. Still additional factors might depend upon the conditions which will prevail after the hostilities cease. For example, will shipping lanes reopen promptly and completely? It is not just oil which moves through these conduits. The entirety of these factors will be on the plate as the Federal Reserve meets next week. And because most of these questions cannot presently be answered, most market analysts are expecting the Fed to keep rates steady in a wait and see approach.

04/14/2026

Is The Damage Done?

There is no doubt that the war with Iran has caused damage to the economy. Higher mortgage rates and oil prices coupled with a falling stock market and waning consumer confidence represent a lousy combination. In addition, the government is now accelerating spending which is going to have a negative effect on the federal budget deficit in the long term. The good news is that many of these factors are temporary. There is a chance that as soon as the conflict is resolved, we may very well see a fairly rapid recovery within many of these segments of the economy.

The fragile ceasefire which started last week gave us an indication of the markets’ potential resiliency. Of course, the longer the conflict goes on, the longer the recovery is likely to take. Thus, we are all rooting for a conflict with a quick resolution. But at this point we can no longer label the timeframe as extremely brief. On the other hand, the timeframe is not yet considered protracted by any means. There is a big difference between a few months and years of fighting. If you look at the market’s reaction to the Ukraine war, there was a recovery which took place over time as the markets adjusted to the fact that the war was not spreading to other countries, even though it has continued for years.

Regarding the real estate sector, initially we have not seen major negative implications. Certainly, higher interest rates are not ever welcome within the sector. But when rates rise initially, this factor often tends to attract prospects that were waiting for mortgage rates to fall. The longer interest rates stay elevated, the more likely the market will be affected adversely. Obviously, the refinance spigot tends to turn off more quickly, which we have already seen. The purchase side of the market is one sector which has the potential to rebound quickly if mortgage rates come back down as the conflict abates. Let’s hope for a quicker resolution and a return to falling rates.

04/07/2026

Nothing Like It

The conundrum continues with regard to today’s employment situation. In years past, the current level of job growth would be associated with a concurrent or impending recession. Yet, after last week’s announcement of 178,000 jobs added to the economy in March, we now have 171,000 jobs added for the first quarter of the year, as the previous two months were revised downward by 7,000 jobs. This follows a year in which only 181,000 jobs were added for the entire year. Keep in mind that the economy added 2.2 million jobs in 2024, a year of moderate growth.

So why are we not in a recession at the present time? The unemployment rate moved from 4.4% to 4.3% last month and it is merely 0.3% higher than the beginning of 2025. Though it has moved upward, the movement has not been indicative of a recessionary economy. Since we are no longer removing Federal jobs at a robust clip, we can only point to the reduction of legal and illegal immigration as factors which could have caused this phenomenon of tepid jobs growth without a spike in the unemployment rate. There may be other factors in play, but this is the most obvious factor to consider at the present time.

So how will the economy react to this new reality in the long run? Since we have not experienced this relationship before, the reaction of the economy is an open question. Thus far economic growth has been muted as well, which certainly should be expected in the immediate term. Plus, we are experiencing another factor – the conflict in the Middle East which will create at least a short-term rise in inflation. Hopefully these will be temporary factors which will certainly affect the numbers in the next few months. But certainly, these additional factors will make it harder to determine the answer to the "new reality" question.

03/31/2026

What a Difference a Month Makes

Let’s go back to the end of February. After a year of tepid job gains, slow housing growth and higher-than expected interest rates, things were starting to look up. We had a solid month of job growth in January and mortgage rates were moving down enough to entice prospective homebuyers to start shopping again. Plus, those who purchased more recently were starting to refinance in greater numbers. Even inflation, though it had not reached the Federal Reserve’s target, was stabilizing at a tolerable level. In other words, there were plenty of reasons for optimism.

Then the calendar moved on. The first salvo was fired literally at Iran. Unlike the limited strikes of last year, this conflict represented a sharp escalation in intensity. Immediately, oil prices surged, causing significant concerns about the future of inflation. Not surprisingly, mortgage rates rose from the recent lows, despite the labor department reporting that the growth of jobs we witnessed in January was erased the very next month. The stock market reacted as we would expect, with heavy losses in reaction to slower growth and the fear of higher inflation.

Thus, the term stagflation is being dusted off by market analysts. All this news is just a sober reminder that predictions are impossible. Plus, markets can change on a dime. If the conflict is short-lived, the stock markets and mortgage rates could reverse their directions overnight. If the conflict continues for a longer period, there is concern about long-term damage to the economy. One thing we do know is that the consumer is resilient. If mortgage rates head back down, there is a significant amount of pent-up demand for homes and there is still the potential for a bounce-back year in 2026.

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