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How to Judge the Impact of the Next Economic Slowdown on Housing

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How to Judge the Impact of the Next Economic Slowdown on Housing | Simplifying The Market

We’ve experienced economic growth for almost a decade, which is the longest recovery in the nation’s history. Experts know a recession can’t be too far off, but when will this economic slowdown actually occur?

Pulsenomics just released a special report revealing that nearly 6 out of 10 of the 90 economists, investment strategists, and market analysts surveyed believe the next recession will occur by the end of next year. Here’s the breakdown:

  • 9% believe a recession will occur this year
  • 50% believe it will occur in 2020
  • 35% believe it will occur in 2021
  • 6% believe it will occur after 2021

When asked what would trigger the next recession, the three most common responses by those surveyed were:

  1. Trade Policy
  2. Stock Market Correction
  3. Geopolitical Crisis

How might the recession impact real estate?

Challenges in the housing and mortgage markets were major triggers of the last recession. However, a housing slowdown ranked #9 on the list of potential triggers for the next recession, behind such possibilities as fiscal policy and political gridlock.

As far as the impact the recession may have on home values, the experts surveyed indicated home prices would continue to appreciate over the next few years. They called for a 4.1% appreciation rate this year, 2.8% in 2020, and 2.5% in 2021.

Bottom Line

On the same day, in the same survey, the same experts who forecasted a recession happening within the next 18 months also claimed housing will not be the trigger, and home values will still continue to appreciate.

Why Now Is the Perfect Time to Sell Your House

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Why Now Is the Perfect Time to Sell Your House | Simplifying The Market

As a homeowner, it’s always tempting to dream about the next big project you’re going to tackle. The possibilities are endless. Should I renovate? Should I refinance? Should I stay? Should I move? The list goes on and on.

In today’s housing market, it’s actually a great time to shift your thoughts toward selling your house and moving up into the home of your dreams. Here’s why:

Inventory is on the rise, but there’s still an overall shortage of houses for sale (less than a 6-month supply found in a more normal market), so homes are going under contract quickly. In fact, the National Association of Realtors (NAR) Realtors® Confidence Index Survey reports that right now homes are only staying on the market for an average of 27 days. That’s less than one month, an even more accelerated pace from the 36-day trend we saw last spring.Why Now Is the Perfect Time to Sell Your House | Simplifying The MarketThe same report also indicates there are more interested buyers than active sellers today, which is one of the big factors driving home prices higher.Why Now Is the Perfect Time to Sell Your House | Simplifying The Market
Why Now Is the Perfect Time to Sell Your House | Simplifying The MarketThis power combination provides an ideal environment for sellers aiming to close a quick sale and earn a big return as we wrap up the summer season.

Bottom Line

There’s still time to make a move before the school year starts and the fall weather sets in. Maybe it’s time to make a change. Let’s get together to determine if selling now is the right decision for your family.

Mid-Year Housing Market Update: Three Things to Know Today

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Mid-Year Housing Market Update: Three Things to Know Today | Simplifying The Market

Shifting trends and industry-leading research are pointing toward some valuable projections about the status of the housing market for the rest of the year.

If you’re thinking of buying or selling, or if you just want to know what experts are saying is on the horizon, here are the top three things to put on your radar as we head into the coming months:

  1. Home prices are appreciating at a more normal rate: Home prices have been appreciating for about ten years now. Experts at the Home Price Expectation Survey, Mortgage Bankers Association, Freddie Mac, and Fannie Mae are forecasting continued growth throughout the next year, although it should be leveling-off to normal appreciation (3.6%), as we move into 2020.
  2. Interest rates are low: Over the past 30 years, the average mortgage rate in the United States has been 8.27%, and rates even peaked as high as 18% in the 1980s. Today, at 81%, the rate is considerably lower than the historical 30-year average. Although experts predict it may climb into the low 4% range in the near future, that’s still remarkably lower than our running average, suggesting a great time to get more for your money over the life of your loan.
  3. An impending recession does not mean there will be a housing crash: Although expert research studies such as those found in the Duke Survey of American CFOs and the National Association of Business Economics, are pointing toward a recession beginning within the next 18 months, a potential recession isn’t expected to be driven by the housing industry. That means we likely won’t experience a devastating housing crash like the country felt in 2008. Expert financial analyst Morgan Housel tweeted:

“An interesting thing is the widespread assumption that the next recession will be as bad as 2008. Natural to think that way, but, statistically, highly unlikely. Could be over before you realized it began.”

In fact, during 3 of the 5 last U.S. recessions, housing prices actually appreciated:Mid-Year Housing Market Update: Three Things to Know Today | Simplifying The Market

Bottom Line

With prices appreciating and low interest rates available, it’s a perfect time to buy or sell a home. Let’s get together to discuss how you can take the next step in the exciting journey of homeownership.

What a Difference a Year Makes for Sellers

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What a Difference a Year Makes for Sellers | Simplifying The Market

Over the last few years, many sellers have been hesitant to put their houses on the market because they feared not being able to find another home to buy.

We’ve reported on inventory shortages in the past, and it’s been a constant concern for potential buyers throughout recent years. New research shows the inventory concern is starting to decrease among potential buyers.

According to First American, the two leading obstacles to homeownership that buyers feel today are Affordability and Limited Inventory. This means the feeling that homes are less affordable has risen, while the fear of limited inventory has decreased, delivering a wealth of good news for sellers.What a Difference a Year Makes for Sellers | Simplifying The MarketAt the same time, over the past 12 months, we’ve seen a steady month-over-month increase in the number of homes coming to market for purchase. In the past, the lack of listings and available inventory slowed down the real estate market. This recent increase in current inventory has many buyers and sellers now thinking it is time to make their move – and rightfully so! For the last two months, we’ve seen over 4 months of inventory become available for sale, a promising number that’s been slowly increasing this year and creating more buying opportunities.What a Difference a Year Makes for Sellers | Simplifying The MarketTo further support the idea of an improving real estate market, Sam Khater, the Chief Economist at Freddie Mac says,

“…In the near-term, we expect the housing market to continue to improve from both a sales and price perspective.” 

Many experts, like Sam, believe the second half of 2019 will drive a stronger market than we saw at the beginning of the year. This is great news for homeowners who have put off getting their houses on the market and are now ready to make a move.

Bottom Line

What a difference we’ve seen over the course of this year! If you’re thinking of selling, now is the time as inventory is on the rise.

The Enormous Divide Between the Headline and the Truth

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The Enormous Divide Between the Headline and the Truth | Simplifying The Market

“I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.” – John Stuart Mill (1840s)

Even back in the mid-1800s, people knew that negative news sells. That is still true today. All forms of media realize that they will get more eyeballs, clicks, likes, and engagement by posting something negative. However, they must realize that negative headlines impact markets.

Just last week, the National Association of Home Builders released a survey revealing:

“Negative media reports making buyers cautious was a significant problem for 48% of builders in 2018, but 62% expect it to be a problem in 2019.”

Even today, good news is headlined with a negative spin in order to get attention. Here are two recent examples from mainstream media:

Actual Headline #1: Cash-out refis are back – will homes become ATMs again?

The real story: The headline is accurate – to a point. It is true that the percentage of refinances in which the homeowner received cash at the closing has increased to levels that existed in 2006. However, the actual amount of equity homeowners “cashed-out” compared to a decade ago isn’t close.

The dollar amount cashed-out last year was $63 billion. That seems like a really large number until we compare it to 2006, when homeowners cashed-out $321 billion. That is more than five times the current amount.

In 2006, people did use their homes as ATMs. They purchased new cars, boats, and lavish vacations. Today, the cashed-out equity is being used to consolidate debt, as seed capital for a new business, or to help a child with their college tuition.

Actual Headline: Consumer Debt hits $4 Trillion. Americans are diving deeper and deeper into debt.

The real story: The first sentence of the headline is accurate. The second sentence couldn’t be further from the truth. Total consumer debt is the highest it has ever been. That’s because the population continues to grow, and so does the economy (prices and wages).

The important number is how that total debt ranks as a percentage of disposable personal income. That percentage is the lowest ever recorded!! People are not “diving deeper and deeper into debt”. The exact opposite is true. They have less debt now than ever before.

Bottom Line

If you are thinking about buying or selling a home, it is important that you have a true professional handling your real estate needs. Someone who knows the truth about the current economy and its potential impact on the housing market.

Why It Makes No Sense to Wait for Spring to Sell

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Why It Makes No Sense to Wait for Spring To Sell | Simplifying The Market

The price of any item (including residential real estate) is determined by the theory of ‘supply and demand.’ If many people are looking to buy an item and the supply of that item is limited, the price of that item increases.

The supply of homes for sale dramatically increases every spring, according to the National Association of Realtors (NAR). As an example, here is what happened to housing inventory at the beginning of 2018:

Why It Makes No Sense to Wait for Spring To Sell | Simplifying The Market

Putting your home on the market now, rather than waiting for increased competition in the spring, might make a lot of sense.

Bottom Line

Buyers in the market during the winter are truly motivated purchasers and they want to buy now. With limited inventory currently available in most markets, sellers are in a great position to negotiate.