How to Answer the Tough Questions

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

How to Answer the Tough Questions

 

 

BLINK!  And the market's changed.  It happens all the time.  A market moves from hot, with homes selling in days, often for more than list price to ice cold, seemingly over night.  Price cuts take hold, days-on-market (DOM) increases and home owners and sellers are often wondering what happened?

 

 

In the mortgage world, rates shift each and every day, sometimes drastically.  Last week it was REFI BOOM HERE WE COME!  And by Friday, lenders were wondering if rates would ever stop increasing (they did)

 

 

Perhaps the most popular term in the real estate community last year was "Shift".  In recent weeks, it's been "Recession".  In both cases, the real theme underlying the terms is "Change".  How is the market changing?  What does it mean for consumers and real estate professionals?  These aren't easy questions to answer, primarily because most of the people in the thick of it don't know the answers.

 

 

None of us have a crystal ball - some of us (those in the real estate and mortgage industries) don't have a clue.  Some have our heads in the sand.  Others have an idea - I'd like to think I know as well as anyone where things are headed, but the reality is, all I have to go from are experience, data, and what I see.  And that's what's driving the conversations I'm having.

 

 

In the lending world, when a client says "but I've heard there's a recession so we're going to hold off on buying", I go back to the data.  I educate them on history, economics, and what is most likely to happen.  We talk about reality, and strip the conversation of emotion.

 

 

The reality, supported by massive amounts of data, is that regardless of economic conditions, home ownership is usually a good idea.  In today's market, it's a great idea.  Look at this image - it shows home values, nationwide, with the shaded bars being periods HOME VALUESof recession.  While the value trend is down, it remains positive in every recession with the exception of the Great Recession (which was caused by a housing bubble and extremely out-of-whack supply VS demand).  The only other time home values went down was for a very slight blip in the early 90's, before rising again for 15 years straight.  

 

 

Home appreciation may slow, but while other investments (think 401k funds, stocks, etc) typically go negative in recession, home values continue to climb, just more slowly.  Don't believe me?  You don't have to.  But the data is the data.  

 

 

But what about the dip that accompanied the Great Recession?  Well, that's a different blog for a different day, but in short involves factors that are nothing like those we see today.  Birth-death rates, the effect of Roe V Wade on the demand of entry level housing in the early-mid 2000s, piss-poor underwriting standards on mortgage products, the repeal of Glass-Steagall, the greed of home builders who either didn't see it coming or didn't care to, and the birth of their McMansions.  It was a perfect storm, really, and nothing like today's market.  Just look at supply of housing - in 2006 it peaked, far outgrowing demand (household formations), and today, it's far more in line with historical averages, with a larger than average demographic reaching home ownership age (the millenials) - that means the housing shortage is expected to continue, and the data supports it.  That's more good news for home values.  Bad news for those "waiting for the dip".

 

housing formations

 

What if there's a recession?  It's a fair question with a lot of uncertain answers.  Who knows what will happen to jobs, wages, the extension of credit, and other areas.  But if there's a recession, housing is as good a place as any to put your money - historically, when the economy's in the red, housing stays in the black.  Based on the data, this time should be no different.

 

 

PS - in a recession, interest rates tend to drop too, as if we needed an added housing bonus!

 

 

 

Questions about home buying or the marketplace?  Reach out and ask an expert here!  We're always happy to answer the tough questions and offer advice.

close

Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Peter Mohylsky 09/22/2019 05:19 AM
  2. Jill Sackler 09/22/2019 08:00 AM
Topic:
Home Buying
Groups:
The Lounge at Active Rain
"Whacked"!!!
Bananatude
Bartender, Make it a Double
ActiveRain Contests
Tags:
home values
recession
economy

Spam prevention
Show All Comments
Ambassador
3,904,033
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

John- what a wonderful educational and informative post for all of us looking for answers. The facts are there. Some might want to interpret them in their own way but 2+2 will always equal 4. I agree with what Debe Maxwell, CRS said. 

Sep 17, 2019 06:40 PM #6
Ambassador
3,904,033
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

                            

Sep 21, 2019 06:09 PM #7
Rainmaker
5,042,833
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, John Meussner you've provided great data and thoughts here....but the bottom line is no matter what the market may be, people will always need a roof over their head and THAT'S CALLED BUSINESS....NEW BUSINESS FOR MANY.

Sep 22, 2019 05:05 AM #8
Rainmaker
593,931
Peter Mohylsky
PrimeSouth Properties - Santa Rosa Beach, FL
Let me help you find your path to the beach.

The market is healthy with great fundamentals.  Thanks for sharing your data.  Love it.

Sep 22, 2019 05:18 AM #9
Ambassador
1,869,221
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Excellent job with this challenge, John. I agree with your takeaway too. 

Sep 22, 2019 07:31 AM #10
Rainmaker
755,982
Jill Sackler
Charles Rutenberg Realty Inc. 516-575-7500 - Long Beach, NY
LI South Shore Real Estate - Broker Associate

Wonderful post! This is so clear and concise. The message is positive. "historically, when the economy's in the red, housing stays in the black."

Sep 22, 2019 07:57 AM #11
Rainmaker
3,639,643
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning John. You did a nice job with this. The easy answer is directly.

Sep 22, 2019 08:14 AM #12
Rainmaker
443,482
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Good morning John. Great article! I tell clients that trying to time the market is a fools errand. If you need a home buy one, if you need to sell then sell

Sep 22, 2019 08:20 AM #13
Ambassador
4,016,283
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi John:

Great read here. Paying attention to the data is important, not the stories or the dire predictions without facts and data to back them up. Will things shift? You bet, they already are and have been. But that's always the case, it's just not always noteworthy, or noticeable.

Jeff

Sep 22, 2019 09:10 AM #14
Rainmaker
786,165
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Always love it when we can point to data and ask what do you think? Great post and a clear, well stated arguement.

Sep 22, 2019 10:16 AM #15
Rainmaker
3,833,374
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening John Meussner ,

Great entry into the contest. Bottom line no matter what happens I agree with Barbara Todaro ..everyone needs a roof over their head and real estate usually is always the wisest investment.

Sep 22, 2019 06:21 PM #16
Rainmaker
526,225
Hella M. Rothwell, Broker/Realtor®
Carmel by the Sea, CA
Rothwell Realty Inc. CA#01968433 Carmel-by-the-Sea

John Meussner - There are some nervous buyers in my market, but they are also short sighted. Where better than to put your money into real estate? Especially since everyone needs a roof over our heads. Renting is just not an option in our area. Prices are sky high.

Sep 22, 2019 10:17 PM #17
Rainmaker
185,546
John Henry
John Henry Masterworks Design International, Inc. - Orlando, FL
Residential Architect, Luxury Custom Home Design

Excellent discourse on rates and recessionary signals.  Thank you!

Sep 23, 2019 11:10 AM #18
Rainmaker
411,385
Graziella Bruner
NCS Premier Real Estate - Detroit, MI
Associate Broker - Serving Wayne & Oakland County

Excellent presentation on facts!  Stick to the facts and not the stories is what I always say.  Great and awesome post!

Sep 24, 2019 12:53 PM #19
Rainmaker
2,036,914
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Fort Worth, TX
Selling Homes Changing Lives

John Meussner - Thanks to Jill Sackler who re-blogged your post I got to read and acquire pearls of wisdom! The only thing I couldn't understand is why hasn't this post been featured on ActiveRain? If it were up to me, you'd be seeing gold stars now!

Thanks, John.

Sep 25, 2019 08:35 AM #20
Rainmaker
1,946,902
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning John Meussner -  we certainly can never expect a sure thing and you point on handling and preparing for change is a good one.  As I mentioned in my blog, think in the long run and strategically.  The overall direction in homes is up over a long period.

Oct 05, 2019 03:39 AM #21
Rainmaker
3,364,961
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi John - things change.  Often in a split-second. 

Oct 05, 2019 06:47 AM #22
Ambassador
4,016,283
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi John:

I came back fro another read after I saw Carol feature it...this IS the kind of information we have to shared to educate buyers and sellers so they can make their own decisions.

Jeff

Oct 05, 2019 12:29 PM #23
Rainmaker
185,546
John Henry
John Henry Masterworks Design International, Inc. - Orlando, FL
Residential Architect, Luxury Custom Home Design

Good one, read this again.  Thanks for including this, Carol.

Oct 05, 2019 12:49 PM #24
Rainmaker
1,238,177
Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi John Meussner,

It is always best to know who your audience is and tailor answers to fit their needs and concerns.

Oct 07, 2019 07:24 AM #25
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Ambassador
896,647

John Meussner

#MortgageMadeEasy Walnut Creek, CA 484-680-4852
Ask an Expert!
*
*
*
*
Spam prevention