A conversation between Steve Harney: Keeping Current Matters and Tom Ferry: Tom Ferry Show
Do you remember that at the start of 2018 that the shortage of listings and price leveling adjustment were the two biggest things on every Realtors list that needed attention? Price appreciation is still going up but at a slower rate than in 2018, which is exactly what the market needed. The market could not sustain such rapid appreciation without first correcting itself.
Savvy Realtors realize that they need to educate sellers. Changes in market conditions locally, regionally and nationally need to be explained. There is a difference between the old market and the new market.
- Homeowners took equity out of their homes, an appreciating asset, and bought depreciating assets such as vacations or toys.
- Homeowners took equity out of their homes and bought second or third homes leaving no equity in the first home. When the downturn occurred they were left with homes with no equity and multiple mortgage payments.
- Banks were making horrible loans and that practice has been checked by the federal government.
Is an economic slowdown expected? Yes, most economists have recently changed the forecast from 2020 to 2021. Is a housing price bubble burst expected? Absolutely not and there are about 6 data points to support that supposition.
No. 100 leading economists and real estate market experts projections for 2019 have been tabulated. 94 out of 100 say prices will continue to rise, 2 say the market will about break even while the other 4 think the real estate market will depreciate slightly. You may watch someone on Youtube say otherwise but are they an expert or are they just looking for clicks on their channel? How much appreciation is expected? About 4.5% is expected which is still higher than historical averages which are about 3.6%. The National Association of Realtors, The National Mortgage brokers Association and Freddie Mac all anticipate higher home values in 2019.
Opinions, estimates, forecasts and other views contained in this image are those of Freddie Mac’s Economic & Housing Research group.
In 2018, homeowners had 21% more tap-able equity over the bubble to pull out of their homes. Tap-able equity is the amount over the 20% reserve in case prices dropped again. Over the last three years homeowners have pulled out $172 billion of equity which sounds like a big number but pales in comparison to the $824 Billion removed in 2005-2007. Also, the reasons for taking cash out have changed. Instead of buying a new car or taking lavish vacations with cash homeowners are paying down student debt or financing new business ideas. Have you ever watched the TV show SHARK TANK?
Millennials are more concerned with retirement than getting married. In the past, people got married, bought a house and worked toward retirement. Studies show that baby boomers who are renters have a net worth of $6,000 while homeowners show over $300,000. So if retirement is more important to millennials then they can help accomplish that goal through home ownership. 48% of the homes in America have at least 50% equity and that is a very appealing statistic to young people. Getting married is on the list but not the priority that it used to be!
Even though interest rates have been on the rise over the last year they are still at historical lows (see chart above)
People renting homes think they are saving because they are not paying for property taxes or repairs. They may only write one rent check a month but they most certainly are paying for the property taxes and repairs as well as one other category which is landlord PROFIT! Do you want to continue to pay someone else for your lodging or do you want to start building equity for yourself?