In The News June 29, 2023

Every Which Way But Loose….??

We’ve been bombarded by divergent economic news events and statistics for the past few years. The forecasts seem just as divergent. There seems to be some consensus that a recession is coming but when? How severe? How long? What can we do about it? There’s no consensus on these answers. We, the general public, have done remarkably well at coping with this chaos and our ability and willingness to ignore this chaotic data only confounds the so-called experts and their forecasts. We were going into or in a recession in early 2022 but to most of us, it didn’t feel that way. The data said some things, life said others.

So how does this impact real estate? Interest rates doubled last year—bringing on more fears of an economic or at least real estate “CRASH”. This much of a rate hike would typically slow down buyers and we’d see the real estate market cooling off dramatically. That’s what the FED said they wanted—“to kill the real estate market”! However, the rise in interest rates created a shortage of homes for sale as some who were considering selling, stopped and sat still. They didn’t want to give up their low interest rate by selling their home, then turn around a buy a different home at likely a still higher price point and much higher interest rates. So what happened? The market didn’t crash. Prices did drop, in some of our area 25%, but in other areas only 10%. Then buyer demand kicked back in and sales came back with multiple offers and prices being bid back up 10-25%+! While these bids may not have reached our peak prices from the early spring of 2022, they still were and are going well above the valley of prices from November/December of 2022. Yes, overall sales volume, quantity of homes selling, is lower but the market is still quite active and the search for more homes to buy is still quite strong.

We’ve seen a pretty steady rise in median home prices in all of our region since the first of this year. Month over month in most areas and price ranges, we’ve seen a steady rise in home prices. But how with interest rates so high? Simply put—demand. We still have plenty of new household formations going on; people with new jobs in our area or in need of new houses and able to afford the homes they want at the interest rates of today. They’re all looking to and planning on refinancing their homes in 1-2 years, when we expect rates to be back into the 5% range, but for now they can and are affording to buy. It’s this willingness to spend, with confidence in their incomes, that is confusing the financial forecasters. Most forecasts expected the threat of higher interest rates would stop the market. Add in the threat of a recession and/or a job loss would surely stop people from spending but—the spending goes on. In housing, in travel, in automobiles, certainly in grocery spending. We’re all spending more and confounding “the experts”. Jerome Powel, FED Chairman, is still threatening to raise interest rates more to slow down the economy. We will see if these come to pass. New jobless claims are up, near peak levels for the past 4 years, but our confidence in the overall American economy, in our abilities to get that next job with a stable or better income is keeping the economy moving ahead.

There are certainly many economic indicators that are not encouraging but so far none of them are really dampening the housing market or the economy. There’s lots of talk about worrying but the overall sentiment appears to be more of an eye for opportunity and caution but a willingness to take on risk. We’re seeing some people diversify out of the stock market into real estate—fearing if there is a real economic collapse, real estate will perform better as we continue to have demand—in particular in our area of the country. People have to live someplace. Certainly the stock market’s rebound or strength is more concentrated in fewer stocks than most would like to see but it’s hard to say the market isn’t performing well. There’s lots of promise and optimism, despite constant watching for signs of trouble.

Fear is never a great motivator nor a good guide. Taking on risk is unique and subjective to each of us. I never recommend buying or selling a home without a broader discussion of your wants, needs and timelines. That said, we saw a huge run up in home values since 2019 and despite the drop in values last fall, it’s hard to say that real estate isn’t a wise decision—in our local region in particular. We have great diversity in economic engines in our region; wonderful natural resources to enjoy; pretty amazing weather—despite our reputation for rain and great services, culture and opportunities. Huge amounts of wealth and innovation are also in our region. These 2 factors alone, will continue to attract others to the Puget Sound area. Combine them  with our other attributes and we are a unique and desired location for many and this means strength in the housing market.

This isn’t a great real estate market for everyone, sadly not a great one for those trying to climb onto the economic ladder, but it seems likely we will continue to see stable to improving home values. Steady demand to buy into it will continue, especially when interest rates improve. We have some recession fears to watch, but the most likely scenario if these come to fruition are for  improved interest rates and improved demand for housing. Home prices usually improve or stay stable during times of recession. Waiting for the economy to crash and housing prices to drop isn’t likely a good strategy for those looking to get into the housing market. A better plan is to talk with advisors on how to save monies, pay off specific debts and find unique opportunities for you to get into the market. If you’d like advice or specific assistance with your needs, please reach out. I’m happy to help.

Photo by Jon Tyson on Unsplash

In The News March 7, 2019

Home Buying Confusion–On the Path to Chaos

In our increasingly global economy, outsiders from everywhere in the world want an “in” to the U.S. real estate market. There seems no end to the amount of money people, companies and investment groups can and will spend to get in to our market. Most claim they “know” how to improve efficiencies, speed up and simplify the processes, save consumers money, aggravation and eliminate the need to talk withe lenders, agents and Realtors. Funny thing is, almost none of these people, investors or companies have any actual real estate industry experience. They speak with supposed authority from a 40,000 foot perspective. None of them recognize a fundamental that every Realtor, agent or loan officer who has survived in this industry for more than 5 years knows–this is a people business, not a commodity or even transaction business. People have personalities, unique needs, circumstances and subjective criteria driving much of their decisions about real estate.

There are Disruptors in every business or industry out there; some better than others with some industries better suited for Disruptors than others. The point being, most of them only want to talk about efficiencies of removing the people, the conversations, the variables and the calculus of weighting all of these market and subjective factors for any one person’s circumstances. Home buyers can look online and get computer generated valuations for most properties, but is that really what they’re worth? According to who and what criteria?

Many think they know what it takes to write a winning offer. They aren’t seeking the advice and counsel of an informed agent in the area they are looking in. They only find out what doesn’t work when their offer is rejected and the home is sold to a different buyer. How can an automated company, unwilling to talk about all of the options you may have available, answer this? It’s not usually just about price. What makes a better  offer varies with every property but usually requires a conversation with the buyer, the seller’s agent and the lender involved. Find the common ground and solutions to win and get the home. This takes a willingness to care, to listen, to educate and to be involved. Putting a priority on what’s the most efficient use of the agent’s time shouldn’t be in the matrix of factors for your offer.

New tools and technologies can help make the process more efficient but they can’t replace true conversations, understanding and educating. While Disruptors and Outsiders see buyers and sellers agreeing to sell a home or property, they don’t see the relationships and the time it took to build them, to gain buyer and seller trust with their agents and lenders and to work together to  benefit their clients and customers. With all the promise of new widgets and gizmos to make this process simpler, easier and better for the consumer, they don’t
have a way to replace the simple fact that this is a people business. One that requires people talking, educating, understanding, coaching, assisting and counseling Buyers and Sellers on how to find the best opportunities in any market for their actual needs. Speed or simplicity may be “a” factor for some, but when we’re usually talking about people’s long-time homes to buy or sell, speed or simplicity are only a couple of many variables likely considered. Sadly none of the rest will ever be known without an actual conversation with an informed agent or lender to help you.

No one person, group or company will stop Disruptors, but on their present course, the simplification will only lead to more chaos. Information is getting easier to find but knowledge and the ability to apply it are getting more rare. The cost is usually the same for an ill-informed or under-informed person, company or program to help you. Why not get real advice  from a quality agent or lender who will truly benefit you, saving you time, frustration and effort as a Buyer or netting you more for your home as a home Seller?

 

 

You may know where you want to go but how do you get there?

Photo by Andres Haro on Unsplash