Tag Archives: market crash

A Peek Behind the Real Estate Market

If you can believe Discover the Nation, rental markets in metropolitan areas are falling, as much as 12% in some areas. Grand incentives are being offered: rent credits, large gift cards, months of free rent to sign on, and still a lot of empty units sit empty, the windows staring out at what still looks like a bustling economy. It’s a matter of time before the truth breaks forth.

Air BNB homes are either empty or being switched to properties for sale. International investors are standing by, based on new laws, high prices and astronomical special assessments in some areas. For the first time in decades, “renters are back in control”. But are they really? Costs are rising faster than wages, free months worth of incentive notwithstanding, and people are giving up on ‘traditional’ housing like renting or buying. Well what else is there?

This is being called a ‘cultural shift’. More and more people are embracing ‘off grid’ types of lifestyle. More and more people are finding out that a life in under 400 square feet is pretty good when you’re not stressing about how to make a 5 figure house payment. According to Discover the Nation, “Housing markets don’t defy gravity forever.” Some of us watched a big correction in 2008: proof. We didn’t learn a thing, except that greed lives on, no matter what. I feel the effects of that greed looming.

On a side note and keeping the cultural shift in mind, remember that people in their 30’s are focused on setting roots…buying a home, starting a family. This market makes that impossible, and could be one reason young people are so angry these days. Their expected trajectory has been destroyed.

The ones who would be rushing to the market to experience the ‘American Dream’ cannot afford to buy a home now. Jobs are not as available and student loan debt still cripples young people. Those who can afford to buy are eyeing high interest rates and just refusing to accept both high home prices and ridiculous monthly payments. Some are moving back in with parents. House prices have been ridiculously high for a long time now, too long, so one important part of society is now pushed out of home ownership or even renting. Entire groups of people are being offered ‘free housing’, which kills the market in those areas while builders keep flooding the market with product that won’t sell or rent. If I didn’t know better, I’d call that insanity.

The rental market is struggling, clearly. But it’s not just rental high rises and it’s not just luxury accommodations nobody can afford instead of sensible, affordable housing. It’s also production builders. They have finally gotten a strangle hold on resale sellers, because only the wealthy builders can offer the tens of thousands of incentive dollars they offer to potential buyers. One builder is offering up to FIFTY THOUSAND dollars to fill their inventory with bodies, while they still build, by the way, and that’s with a total of 500 to 1500 dollars out of pocket to the buyer. That surely feels like a dream to those brave enough to test that water.

One builder is using their own in-house lenders to ‘qualify’ a buyer with a credit score under 500 in order to sell them a home. Oh, and how about a 3.99% interest rate offered by builders too. Often these come with adjustable rate products which ensure that the 490 credit score buyer will lose that home to foreclosure within years. I’ve seen this before too. By the way, that house that was such a dream come true? It’s still vastly overpriced and possibly cheaply built.

But the builders and lenders have made their money. Builders have ridiculously overpriced badly built product. Loans are sold to investors who will cash in on mortgage interest over the life of the loan…until they default. Am I writing history? Does this sound familiar to you at all? Do you remember the last housing crash?? It’s starting again. When I heard the ‘under 500 credit score’ advertisement, I knew. Here we go again. The only good thing is that buyers who have had to give up hope, will get it back. In the aftermath of a crash, or even during it, buyers have all of the power, and their demands are brutal. Sellers take a beating. Personally? I’m tired of this ridiculous greed-fueled, roller coaster market. And it makes me very sad to see young people blocked out…BLOCKED OUT…of the housing market. So while I see them take revenge after a crash, I understand.

If we think the crash of 2008 was horrible…which it was… we ‘ain’t seen nothing yet’ as they say. This time, the pain will be greater and spread thicker across America. And the recovery will take longer and will look awful if it happens.

Not painting a lovely picture, am I? Well maybe I’m wrong.

I’m Brenda Briggs with Premier Advantage Realty. Reach out and let’s talk.

Stop Saying “Crash”, Will You???

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We should all know by now that the media thrives on negativity.  I think the same is true of real estate news.  Here’s why.  Every time interest rates jump, we get the word “crash” shoved in our face.  What the media SHOULD be saying is that the market is CHANGING.

Let me say again that “Real Estate is Local!”  This means that your end of the subdivision may have a different valuation that the homes on the OTHER end.  It’s all about location.  Other factors come into play as well, like: Do you have a pig pen beside your house which will tank the value of your neighbors houses?  Or, is your house painted neon orange? That will kill your house value and that of the entire street!  But you get the idea.  Now back to the point.

Yes, interests rates are going up and yes all other prices have risen as well.  Yes, life is harder financially.   Yes, some buyers will be out of the market because of interest rates going up. But this is not a crash. It is this:

First, a section of buyers will be pushed out of the market unless lenders get creative.  Buyers won’t have huge sums of money to put into the purchase up front.  There are ways around that issue and the ‘requirement’ for large sums is already changing.  Already we are seeing 100% financing coming back into favor.  Eight months ago an offer with 100% financing would not have made it to consideration.  No way.  But now, yep, that type of financing is back, going back to normal; NOT crashing.

Second, if the first line of buyers falls out, then the second line steps up.  These will be buyers who still won’t have big sums of discretionary money but will be able to make the larger payments caused by higher rates.  This is a change in the buyer demographic, NOT a crash.

Price ranges of purchased homes will change.  Around here, there aren’t many homes with a 2 or 3 in the first number.  In fact, most often the first-time-buyer price starts with a 4.  They’re selling, but not to folks who don’t have some savings or excellent credit, or both.  In my area, median home price has gone UP.  This is NOT a crash; it is a change.

Next, parents stepping up to help kids buy a first home are stepping back.  Why? Because their investment/retirement nest egg has shrunk due to a falling stock market.  Does this take the kids out of the market?  Not necessarily, but it will surely change the buyers’ target price point.  Change, NOT crash.

Some home LIST PRICES are ‘reduced’.  I see that every day when I look at my market.  That’s because agents are used to pricing in a RISING market, which is one of the factors to price a home to sell.  The market isn’t rising, GENERALLY speaking, so prices can’t just be pushed up in the expectation that the value will rise by the time of offer.  A good agent knows that you look at many factors to price a home and you can’t just use the plug-and-chug market analysis online.  There are MANY factors to consider in pricing. Today, pricing is a real challenge in a market in what I call ‘flux’.  But expecting to price high is no longer a given.  That is a change, NOT a crash.

Next, more people will elect not to sell because…where are they going to go?  This is a huge factor in my market, but a good agent can find you a place.  A GOOD agent.  But this factor is also a change; it is NOT a crash.  And by the way, fewer sellers listing homes increases the dearth of homes to sell, making it harder for buyers to find a home.  These folks STILL need a place to live.  And, builders will benefit from ‘existing home sellers’ electing to sit tight.

And by the way,  a GOOD agent will help clients figure out how to stay put if that benefits the client, by helping them to decide on home improvements or hiring help for lawn care.  Particularly for what I lovingly call my ‘super seniors’, this is key.  I love my super seniors and THEIR wellbeing is of utmost importance to me.   That was a rabbit trail, folks.

Back on track:  Interest rates that fueled a blazing hot and in my opinion, unbalanced market, were NOT normal.  What we are seeing now is a return to normal.  It is unfortunate that the steep rise in loan payments keeps some people out of their ‘comfort zone’ with respect to living conditions, but this is still not a crash.  And if clients have to buy a less than ‘standard’ home for themselves, they can always bring the home up to their standards over time. Not a crash, folks.  A change.

I wish with all my heart that our so-called ‘news’ was actually true, but it is not. If you don’t know that by now, you’ve been living under a rock.  Take a deep breath, calm down and adjust your sails. That’s what we are ALL doing, in all areas of life, not just real estate.  And remember this:  A home you buy and bring up to better standards will be worth more when you sell.  A silver lining, folks.  

And can I just say this again?  PA-LEASE look at houses online that you think you would buy so you have a clue what the market in your destination looks like.  Don’t tell us agents that you want an acre, three stories, granite and stainless on a cup-de-sac for 180 thousand.  Please don’t.  That is a fairy tale.

I’m Brenda; I’m a GOOD agent an I would love to talk with you.  You can find me at Coldwell Banker Advantage in Wake Forest NC, online, or call me.  Or text.  Or email.  But you won’t find me on Facebook. That’s a hint.