Where the stock market goes, so does real estate. These days the stock market is up; so is real estate, said Susan McHan, Opes Advisors CEO and president. McHan and chief investment officer Mike Duvall shared their analysis of the economy and Silicon Valley’s housing market with members at Wednesday’s Los Gatos/Saratoga District tour meeting.

“There is amazing infrastructure in the Silicon Valley area arising from the development of new companies and when that happens, money drops in our area. Money is coming back to Silicon Valley,” announced McHan.

McHan added that it is “an unbelievable time” to buy property in the region. Interest rates are low, values are up and home prices are at a 14-month high. Illustrating the correlation between the stock market and real estate, McHan noted indicated just as the Dow Jones Industrial and S & P 500 Composite returns increased 19 and 23 percent, respectively, from January 2012 to May 31, 2012, Bay Area median home prices rose 30.8 percent.

The mortgage advisors said interest rates are at an all-time low and cannot get any lower. They expect rates to remain this way for at least another two years and then rise. Inflation is still at a low level that the Feds are more worried about deflation at this time.

Despite the recovery, there are challenges ahead. Expect a mild recession on the horizon. During the next year, McHan anticipates earnings and revenue growth of companies to slow down. High-income earners will especially feel the impact as the tax rate policy is realized. The federal income tax on $400,000 income earners will rise from 35 percent to 39.6 percent, as will medicare taxes for those with incomes above $200,000. Companies will also feel the effect of corporate tax policies.

The global economy will likewise experience a slowdown due to debt concerns in Europe, China and the U.S. Not to worry, said McHan. This recession will not be as stark as what others predict it will be. There will be light at the end of the tunnel. She predicts 2015-2018 will be the “most bullish years” and the best years yet to come.

On the mortgage lending side, they announced effective January 10, 2014, the distinction between Ability to Repay and Qualified Mortgages (QM) will be more defined and borrowers will see a difference in rates between these two types of mortgages. Lenders need to and are beginning to enter the non-conforming market, as well.

“This is good news for us. The more lending, the better for all,” said McHan.

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