The CRASH already happened?!
The much alluded to LOOMING house market crash seems to have come and gone.?I would say without much ado but there was actually lots of drama and talk of it.?It’s just that only a few people realized it was actually already happening.?The crash that was going to be the end all be all of us all – the crash that has been hanging over our head from even before the pandemic when folks thought prices were too high.?There has been heightened fuss and concern about this CRASH for years.
This week, Bloomberg published an article stating we are back on the upswing.?They didn’t call it a crash per se.?They used the words “severe contraction.”?Regardless, I’m very excited to share with you all that you in fact survived - we all survived - the housing crash.
Do you think I’m getting ahead of myself here??
Well let’s see.
I think we’ve already bottomed out because while we did see a time frame when prices were dropping, when buyers had a lot of negotiating power, when the demand for homes fizzled – I don’t see that anymore.?I am personally experiencing and noticing with my clients less negotiating power for buyers as interest rates come down.?The data shows significant increases in mortgage applications.?This means that even the slightest improvements to affordability, through interest rates, bring back quite a few buyers. So this is a key indicator that we are headed back up in real estate activity.?Interest rates have peaked and even the Fed rate hikes are likely almost done.?Speculation points to next week being the last rate hike. I don’t think it’s unsafe to bet that it will only be 25 bps.
There are also some pretty important upticks on other housing data.?New home sales were up 9.3% in March - the highest they’ve been in 13 months.?Even new construction projects are trending back up over the past two months. Resales aren’t too hot, probably because homeowners feel trapped in their low interest rates and aren’t listing their homes to sell even if they want to.?I should clarify though, when I say not too hot, they are still up 11% comparing March to January.
CoreLogic was predicting a little less than 1 percent drop on the home price index in February.?Instead, the Case Shiller price index showed a teeny tiny increase in all 20 surveyed cities.?So I’m actually not being outlandish, for once, when I say that the housing market has bottomed out and we are on our way back up.?We “crashed” and now prices are ticking back up.
In fact some people are now looking to the real estate market to save America from a “hard landing” or in other words, full blown recession.?Back in 2007, an economist named Edward Leamer wrote a paper titled “Housing IS the business cycle.”?He directed us to watch housing starts as “the best forward looking indicator” of the economy cycle and possibility of an oncoming recession.?While housing is of course part of the GDP, Leamer pointed out that only 4.6% of the GDP growth from 1947 to 2007 was from residential investment.?However, he reasoned that weakness in housing is a critical part of recessions.?Except for the recessions of 1953 and 2001, problems in that space have contributed to 26% of the economic weakness in the year before 8 of our last recessions.?So the fact that we are seeing building strength in our industry right now is how the housing market might bail out the whole economy.
In these market updates I’ve directed you to watch the labor market closely – especially as it remained remarkably, like almost oddly, strong despite a year of very aggressive rate hikes.?This is probably the only remaining risk to housing.?If the majority remains employed, able to make their mortgage payments, able to buy and sell real estate – we are pretty much out of the woods.
In other news!
Many of you are familiar with the fundraising event I put on twice a year called the Future is Female.?This has traditionally been a panel of real estate investors who share their stories and their tips for getting involved in real estate investing.?It’s always a very inspiring evening and we also raise quite a bit of money for the Women and Children’s Center of the Sierra.?It’s an event by women, to educate and empower women while benefiting local women.
The only pitfall was that while we would get the whole room very jazzed and inspired and motivated to learn more about real estate investing, we’d leave them on a bit of a cliffhanger about what do to next.?So we are changing that.?The event on May 18th will start with that same motivational panel but then dive into quick workshops to provide you with the tactics, the how tos.?And we’ve included some time to network, ask questions and build your real estate power team.?
Typically this event takes place at my bro’d out office, but it’s getting an upgrade in that respect too.?We’ll be at the beautiful Virgil on Thursday, May 18th from 2-6pm though you can also join us virtually from anywhere. I hope to see you all there – whether you pee standing up or sitting down – this event is for everyone and it’s a great cause that everyone can feel good about supporting.?I’ll put a link here for you to grab a ticket. 100% of those proceeds benefit the?Women and Children's Center of the Sierra.