DON’T FREAK OUT
We’ve been saying the growth we’ve been seeing is unsustainable. We are going to see a market correction over the next couple months. Here’s what to look for over the next couple of months, why it’s actually positive, and some differences between this year and 2008.
WHAT TO LOOK FOR?
I want everyone to start paying more attention to the year over year numbers as opposed to the month over month. The month to month numbers are going to be scary for a minute. For example the Reno/Sparks Median Sales Price dropped 1.5% from May to June; however, it’s still up 16% from June last year! Let’s look at another one. Price per square foot average dropped 2.1% month over month, but we are still up 15.4% year over hear. We knew we were in an inflated market that couldn’t sustain. We just could not continue growing at that ridiculous rate month to month. As you can see, it’s very easy to make this changing market look scary. In my opinion, the media will look at these numbers and use scary headlines as clickbait. “HOME VALUES DROP 1.5% IN ONE MONTH” or “PRICE REDUCTIONS PLAGUE RENO REAL ESTATE” are just a couple I can come up with off the top of my head. As long as the YOY numbers are still in the green we are fine.
THIS IS A GOOD THING?
This is a good thing for us! I know it doesn’t sound like it, but believe me. If we can get back to a balanced market over the next 4 months with a YOY value increase of around 5%, I’ll be happy. That is sustainable. This would definitely be a positive for home buyers who have been beat up over the last 3 years. We will have much more inventory (already at 2.7 months supply) for the buyers to choose from. It’s a positive for home sellers who won’t have to leave their homes for 3 days while the line to show the house wraps around the block. Realtors will have to work harder to price property. Long gone are the days where we can throw a number up on the MLS and wait for the 15 offers. In the meantime, we are all going to have to come to some realizations. Unless the house is priced perfectly and it’s in great shape, it will sit on the market for over 2 weeks before getting an offer. Sellers are going to have to accept that. Buyers are going to have to accept that rates in the 2’s and 3’s are gone. If you can get a rate in the 6’s right now, you’re doing fine. Realtors and lenders are going to have to realize that they have to start negotiating seller credits for buyers rate buy-downs.
The sooner we come to these realizations, the sooner we can all get back to a balanced marketT.
WHY THIS ISN’T 2008 ALL OVER AGAIN
I’ve read some pretty crazy stats over the last couple of weeks. I’m trying to stay away from the scary click-bait articles mentioned above. Here’s what I found:
- American’s FICO scores are UP. Borrowers have an average credit score of 751 (much higher than the times of The Great Recession.
- Tappable equity (equity homeowners have above 20%) is at a record high of $11T nationwide.
- A quarter of homeowners were underwater during the last recession. Today that number is basically non-existent. Only 2.5% of borrowers have less than 10% equity.
- Fewer ARMs out there expecting payments than prior to the meltdown in 2007/2008
- Only 3% of mortgages are past due.
Take a look at these stats below and please let me know if you’re stressed out or scared about what’s to come. Never hesitate to call me for advice on what your next steps should be. I’m here for you.