Is it a SHIFT?

By
Mortgage and Lending with Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, NMLS #138061 MMCD #1141
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The Real Estate Market SHIFT

 

     Have you seen the market SHIFT? Can you feel the SHIFT? How are you handling the SHIFT? These are questions that have popped up frequently amongst the real estate community in the past few months. Realtors are wondering why homes, recently selling in 1-2 days, are now taking 2-4 weeks or longer to move. Why buyers, who not long ago were willing to bid to the moon and stars to get a home, are backing off of overpriced listings or buying altogether.

 

 

     I'd argue that rather than a SHIFT, we're actually amidst normal market movement. The market is behaving as it should with all factors being considered. Let's look at the following facts before going any further:

 

 

  • US wage growth in total has risen 3+ (but in most markets, sub-5)% over the past few years
  • Real Estate appreciation has looked more like 6, 8, even 10+% in some markets
  • Yield spreads are nearly inverted
  • Unemployment is nearly non-existent

 

 

     So what do these things have to do with a SHIFT? Well, at the most basic starting point, if homes are becoming 10% more expensive each year, and wages are only going up 3%, something's gotta give. At some point, with that trend continuing, no one would be able to buy a home. However, people need to sell homes for various reasons - relocation, growing families, aging, and other reasons force sales. With gross appreciation comes a shrinking buyer pool - that is, people who are willing, but more importantly, able, to buy. With employment rates at historic highs, markets about as good as they can get (we're near the tipping point toward recession based on several economic and data metrics), and outside forces limiting supply chain for new homes (permit issues, cost of land, lack of available credit), there's not much that could be done to sustain the market of the past 48 months- in short, people would need to make more money, or home prices would need to come down. If you haven't noticed, employers aren't quick to increase wages.

 

 

     What about the last 2 bullet points? Historically, every time there's a yield curve inversion (that is, shorter term investments become less affordable than longer term investments - in mortgage speak, your rate on a 30 year fixed mortgage is better than a 5- or 7-year ARM), there's a recession. Every time unemployment rates hit a trough, there's a recession. Right now, we have both. This isn't the first time. It won't be the last. It's not a SHIFT. It's market movement.

 

 

     What can you do to stop the 'SHIFT'? That's the easy part: nothing. But that's not bad news. In every recession, and in every market, there's opportunity. The next phase of the market will be no different. Especially for those who went through the last 'SHIFT' (the ride into, and phoenix-like rising from, the Great Recession). It's not about dealing with a change to the market place. It's about positioning yourself WITH the change in the marketplace.

 

 

     Consumer education is more important today than it ever has been. Slowing depreciation, a potential recession, rising interest rates, and peak home vales are all things that can scare the hell out of prospective buyers - until you show them that buying real estate is one of THE BEST investments you can make, ever. Even when factoring in the great recession, historical data indicates a 5%+ gain on home equity year over year. Buying a home for the short term? Risky. Buying a home long term? One of the safest bets you can make. Buying right before home values crash? Not a big deal, as long as you hold the home until the market moves into it's next phase (the comfortable, steady growth we saw from 2012-2016). Buying real estate is a smart move. It's not an opinion, it's a fact backed by plenty of data.

 

 

     As with most market turns, sellers enjoyed a short window of insanity among buyers. Listing agents reaped the rewards. Buyers agents hit wall after wall of frustration along with their clients. But now that is changing. Rates are still ridiculously low. Home values, even if they fall, will return to where they are and likely higher (note: the big rises are dips are nearly always in the coastal regions. Similar trends are seen in smaller markets, but to a much lesser level). But it's not a SHIFT, it's just the market doing what the market does - ebbs and flows. Crests and troughs. For those of us working in industries where trends can have a great influence on income and even the viability of our business, we're in a period that's a blessing and a curse. The curse for many is that it's getting harder. You've got to work to sell a home. You've got to work to find buyers. You've got to be an expert advisor, not just someone who passed a test to get a license. For those that already are, the blessing is that the competition pool is about to shrink. The wannabes, the fly-by-night "professionals", and those who act in good times like the part will never end? They'll all be gone soon. For those left standing, it won't be easy, but for them, it never is. It's always hard work, and it'll continue, but for those who have positioned themselves well, the SHIFT is going to bring about opportunity many in the industry have never before had.

 

 

The market is always in SHIFT. When times are good and easy, people don't want to talk about it. Their success is a result of their work, not the market. But when the going gets tough in the marketplace, a SHIFT is blamed. There is no shift. There's just the marketplace doing what the marketplace does - everchanging, and being ripe for opportunity for those who have the foresight to stay a step ahead.

 

Want to work with a lender that's ahead of the game, and capable of offering the best mortgage experience regardless of the market?  Reach out today at 484.680.4852 or through our website.

 

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Fred Griffin presently on Leave of Absence 09/17/2018 05:25 PM
  2. Amanda S. Davidson 09/21/2018 05:43 AM
  3. Gita Bantwal 10/13/2018 04:29 AM
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Rainmaker
257,428
Sandra Paulow
Aspen Properties, Inc. - Pinetop Lakeside, AZ
REALTOR, Associate Broker, GRI, SFR

Every market is different. I am not seeing as many buyers as in the past.  I am in a second home market and with accelerating home prices, it is scaring them off.  Low inventory is a contributing factor too. That pushes prices up and our buyers are wary of that. They are not willing to put themselves in the position of being upside down again. Homes are selling, just slower than we would like.  Something does have to give, I just hope the give doesn't put us in the same position we were in ten years ago. 

Sep 17, 2018 07:24 PM #21
Rainer
255,280
Richard Foster
Nevada Perfect Homes - Henderson, NV
Broker Owner, BS, ABR/M, CREN, CRS, GRI, RRG, SFR

Shifts are easy to see, if you pay attention that is . . . When you see days on market increasing, or decreasing, depending on the shift . . . There is a change coming.

A healthy market, for the most part is 30-60 days . . . Sorter and it is a seller's market, longer and it is a buyer's market. Just closely track your average time on market . . . That will give you a great idea of where your market is, and where it is heading.

Sep 17, 2018 09:08 PM #22
Rainmaker
2,725,894
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

There is always kind of a shift at least in five year periods. To be expected.

Sep 17, 2018 10:18 PM #23
Rainmaker
436,129
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

We are seeing a shift ... started a few weeks ago.  Buyers are still buying, but not feeling intimidated or pushed into overpriced inventory. Sellers are struggling with the hesitation in the market and tend to think it's the agent doing something wrong rather than re-evaluating their overpriced property.

Sep 17, 2018 10:42 PM #24
Rainmaker
527,744
Jon Quist
REALTY EXECUTIVES TUCSON ELITE - Tucson, AZ
Tucson's BUYERS ONLY Realtor since 1996

I can't speak to a shift. My biggest problem is very low inventory. Hard to do much of anything if you literally have trouble putting together a one day list of home candidates. And I'm not just referring to 'cheaper' homes either.

Sep 17, 2018 11:01 PM #25
Rainer
7,285
Jose Al Artigas
Gaffs Realty Company - Port Orange, FL
Making a positive difference peoples lives

This is by far one of the best posts and true information I have seen in a long time. Especially the "Wannabees and Fly By Night Professionals". You nailed it it John. Real estate is very competitive. Many who obtain their license never realize the work and commitment involved in our profession. As a result they go back to watching how easy it is on HGTV. Every day produces challenges. The pro's that rise above strive and work hard to resolve and attack issues, serve their customer, and build a long term relationship with the people they serve. The true pros love what they do and serve with integrity earning their reward. Money is just one part of the equation.

Sep 18, 2018 06:07 AM #26
Rainmaker
622,198
Mike McCann - Nebraska Farm Land Broker
Mike McCann - Broker, Mach1 Realty Farmland Broker-Auctioneer Serving Rural Nebraska - Kearney, NE
Farm Land For Sale 308-627-3700 or 800-241-3940

Hi John Meussner Great article.  As others have mentioned along with you...shift is inevitable.  

I can remember the day when 90 days was the low average. 

I have always beena firm believer that some folks are just listing to see what they can get and if they can get an unrealistic number...will sell.   

As with all real estate...price versus condition versus location versus selling season all figure into the equation with other factors as well.

Which leads me to this thought:  School started a few weeks ago.  Families tend to stay put during the school year.  They might move if a home is in the same school district or neighborhood school, but are reluctant to pull a student right after the first of the school year. Over the decades I have seen this happen countless times.

Thanks again for a great article.

Sep 18, 2018 06:19 AM #27
Rainer
4,600
Beverly Cannon Jones
PARKS - Hendersonville, TN
Real Estate Agent Serving Nashville, TN

Hi, John Meussner, great article with your perspective and insight.  I'm meeting with some sellers in the morning to update them on the market activity since we listed their home 30 days ago and I'll be referencing this article.  I've been in business for 17 years and, yes, the market always has twists and turns.  I've heard Charles Edsell speak with MarketGra[hics Research Group and he said that 2020 will be the year!! 

Thank you!  You mentioned a webinar in a previous post.  Could you send that to me?  Beverly@SearchingForAHome.com

 

Thank you for your article!!  Make it a great day!!!

Sep 18, 2018 08:43 AM #28
Rainmaker
364,136
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

Yes, change is inevitable; something had to give.

Sep 19, 2018 09:24 AM #29
Rainmaker
80,182
Karen Simms
Century 21 Arizona Foothills - Queen Creek, AZ
Horse Property Specialist

Great post!  Market changes are normal and agents need to stay ahead of the curve.

Sep 19, 2018 08:51 PM #30
Rainmaker
324,891
Dana Basiliere
Rossi & Riina Real Estate - Williston, VT
Making deals "Happen"

Well said!  I tell buyers it is a long term investment. There are points in the ebb and flow cycles that you mention where short term gain can be had however it should not be planned on.  Nice analysis. 

Sep 20, 2018 06:20 AM #31
Rainmaker
493,537
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

I agree that residential real estate is an excellent investment. I think next year will be key as to market shift--when prices go way up for consumer goods due to the trade wars. Many pp who want to buy can't--due to wages not keeping up with inflation

Sep 20, 2018 09:00 AM #32
Rainmaker
96,081
Eileen Begley
Coldwell Banker, DelMonte - Carmel, CA
Monterey Real Estate

Definitely noticing a shift/market normalization in my area. You have to price it right or it sits. Then the price "adjustments" start. STill low on inventory but buyers are pickier anyway. And you are right  - any change can mean more opportunities!

Sep 20, 2018 08:11 PM #33
Ambassador
3,150,371
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

I've been talking to my sellers about this very thing, John! It's something that is a constant in our business. As the market shifts and so do we!

And, yes, it's ALWAYS a great time to invest in real estate.

Happy Friday!

 

Sep 21, 2018 05:58 AM #34
Rainmaker
1,826,644
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good afternoon John - your analysis is thoughtful and I believe correct. This is normal and nothing like 2008 is present. 

Sep 21, 2018 10:30 AM #35
Rainmaker
782,279
Kevin Mackessy
Blue Olive Properties, LLC - Highlands Ranch, CO
Dedicated. Qualified. Local.

Great information from someone on the ground.  Posts like these are easy to provide to sellers who are dumbfounded right now, wondering where the buyers went and the action of summer passing them by.  We as professionals are in the know, and the news takes too long to catch up.  It is interesting that you are seeing the same sort of shift in California that we are in Denver.  

Sep 21, 2018 12:11 PM #36
Rainmaker
1,948,042
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

John Meussner - I can always count on you for timely information. I see the shift has begun here too at the end of June. Short sales and foreclosures is not something I enjoy but I survived before and I'll have to work hard to make things work. We are in the people business and knowledge is power. Compassion for people is what we do to keep them calm and help those who need it most.  Please continue to keep us abreast of any new findings.

You're so appreciated!

Sep 22, 2018 02:38 PM #37
Rainmaker
3,162,969
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Markets shift....and it is sooo local ...what is true in one part of a county may not be in another.

Sep 24, 2018 06:45 AM #38
Rainer
24,333
EnCourage Realty
Houston, TX
"Be.Do.Have.Give."

well change is always good :)

Oct 10, 2018 08:35 PM #39
Rainmaker
2,803,342
James Dray
Fathom Realty AR LLC - Bentonville, AR
Exceptional Agents, Outstanding Results

Morning John.

I've seen a slow down in our area.  They are still moving, just not as fast as a few months ago.

 

Oct 13, 2018 05:09 AM #40
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