78% of community bank executives expect the housing market to crash by 2026.

Ben Winck and Andy Klersz Oct. 13, 2021 10:46 am

I’ve been continually asked, are we in a Housing Bubble? AND The Real Estate Market is going to crash! Let’s drill down on this topic, and I might add, this is not 2008! There are NO apples and oranges to compare from! I honestly believe we are on sound ground, no real worries! I listened to our experts and was preparing in 2007-8.

Let’s look at the convictions in my research, yes we certainty have speculation and the “Social Media Buzz!” A recent pod cast by Nick Baily CEO for RE/MAX International invites two key note speakers to weigh in on all the uncertainty, the panic driven market, and what’s the real story!

Chief economist Dr Lawrence Yun National Assoc. of Realtors

Dr. Lawrence Yun

                Indications from the Federal; reserve is tapering, means buying less mortgage loan securities This means the mortgage industries must find other buyers, is it Wall Street. Chinese Government, Teacher’s pension fund! They need to find buyers that the Federal reserve is not purchasing. This will require paying higher interest rates. This will trickle down to the consumer.

                If interest rates decline in two years or three years, That’s not necessarily good news. It means we have some economic damage.  “Recession, Job Losses!” 

Question is, “will we see homes that may experience loss in value?

Ward Morrison

Ward Morrison answers this by saying “we may see a decrease in appreciation but not decrease in value. Factors that weigh in on this are the 72 million in Millennials, Gen Z behind them is 68 million! Millennials are in their prime home buying cycle. Gen Z is going to enter it soon, so Supply and demand will be leaning towards demand.  Families are going to form, their going to want houses, and Ward doesn’t believe we’ll see a decrease in some markets.  Perhaps a decrease in appreciation will continue to be driven by these markets.

                The Gen Z will eventually be moving away from mom and dad and want their own housing, it may be different than what we may relate to, and the market will accommodate their demand. We are 6 million houses behind in construction. How is this going to impact us?

“Social media BUZZ!”

 From @SMHatLibs         April 22 2021 a Mortgage Banker and Realtor for 25 years, I’ve studied the financial markets closely. It is my prediction the housing bubble will pop again in September 2022. If you have property to sell in the next 10 years, do it before next summer and let someone else hold the bag. 

Lawrence’s reply to this is, “we do not have those risky, sublime mortgages, in this housing cycle as we did in this last cycle. In 2005, 2006 etc. we were lending to people that did NOT have sufficient income and we didn’t ask for supportive history for why they qualified to step into a mortgage!”

 In this cycle we have sound buyers, we are also in a job market with better positions, saving rates are increasing, equities been increasing in home ownership, there’s a lot of sound positives that are going to keep a bubble from happening.

Ivy Zelman

Ivy Zelman who spoke at Inman Connect in Las Vegas.     “It’s the incremental buyer that you need to worry about,” she said.  “Realtor’s need to convince the existing prospective seller that now is a good time to sell. If (clients) thought (they) could double what they paid, that opportunity is going to start to compress.  “Zelman does a great job on prediction of housing!”

Lawrence suggests In terms of expecting the huge price gain or doubling in home values in a short duration of three to five years, that’s not going to happen, we’ll see more of a 3 to 5% growth.  One interesting thing to watch when inflation begins to remain stubbornly high, some people say well that means higher interest rates. Certainly, higher interest rates will pop in home prices but what’s important to note, when inflation occurs rents rise. Because of rise in rents that provides a good buffer room for home prices to remain stable. We saw this in the early 1980’s when mortgage rates were rising very fast home sales did go down. Home values held on because the rents were rising. As an economist it’s not a good thing but if one wants to hedge against inflation, if one is worried about inflation best place to go is real estate.

Blessings are coming @Dxron2

                Housing bubble. The lower the interest rate goes the closer it gets to bursting….then there is the 2.5 million homes behind on their mortgage payments who will be foreclosed upon some time in 2022!

Lawrence reminds us that mortgage forbearance was near 5 million and is only around 2 million today. Mortgage delinquency rose similarly however this occurred when we lost 20 MILLION during the lockdown. People with no jobs, restaurants closed, a divergence people not paying mortgages but virtually no foreclosures. We had 5 million in mortgage forbearance. Today’s number is 2 million. It’s his opinion the forbearance rage will go down to 1 million in a few months.  Their mind set is, I want to keep my home, and I will get a job and the lenders are working with them. Lawrence notes, foreclosures will arise because we know the nature of the economy is always disruptive. Importantly note, there are ready buyers, whether it’s first-time buyers, the millennial generation looking for that starter home, to real estate investors who are just sniffing around for any foreclosure properties to come on to the market. So these properties will not linger on the market and will be snatched up quickly.

                Ward agrees that he does not believe that’s going to happen, the savings rate has been high during this period of time, and perhaps not making their payments out of choice not necessity and believes the forbearance gave them an opportunity to set aside some payments, and not like in the 3008 crisis, they have a lot of equity in their homes and haven’t been using their home as an ATM!  A harsh way to call it, however he believes they’re NOT going to walk away from equity. Last time we had a lot of short sales, and does not foresee that happening like Lawrence related to. Mortgage restrictions are tight to people really who really can’t afford to buy.

We do still have 33% believe we will have a crash eventually, 51% believe it will normalize, and 16% say we are not in a bubble.

Ward in conclusion, be educated by a professional, when rates start to pick up, understand rates are still at historic lows and it’s not necessary to panic buy, and to shop smart. Begin shopping for the best mortgage rates with the mortgage broker you feel comfortable with, so you can compete against the cash buyer out there. It’s important to work with an educated Realtor and Mortgage broker that meets your needs with all the new changes that are going to happen.

Keep in mind the multiple offer environment is subsiding and will eventually disappear. It’s also important to understand if your selling, that those 20 offers are going to become one or two offers and if priced right will be the one or two you should be looking at. 

Lawrence in conclusion.  We have a labor shortage across the country weather construction workers, warehouse workers, at the restaurants, hotels everywhere except Realtors, we continue to see the rise in the number of realtors enter the profession. Maybe some people have the wrong notion that it’s a glamorous profession. They put on nice clothes and sells a home maybe this is the perception, but the reality is it’s a very tough business and we know 20% do exceptionally well and 80 percent, well it’s a extreme challenge! So don’t be that 80 percent who believe they can do this. Educate yourselves, place your license with a reputable broker, and be that 20 percent that protects their client’s best interest.

According to Florida Atlantic and Florida International University research, properties in South Florida were valued over 80% more in 2007 than their long-term price trend. The overvaluation is now 18%. The experts say South Florida homes are overvalued, but not as much as other counties.

“We keep rising, yet we are still low. This is a far cry from 15 years ago, says Ken H Johnson, an economist at Florida Atlantic University. The moderate overvaluation implies that buyers and sellers learnt about the property collapse more than a decade ago. The market does not appear to be headed for a severe recession, as in 2008, when houses in the collapse phase were undervalued by at least 28%.

Mike Pappas

The researchers predict a housing market peak and price stabilization.  When home values start to fall, interest rates will play a role, says Keyes Company president Mike Pappas. As interest rates climb, some purchasers will exit the market.

South Florida is the state’s least inflated housing market. Tampa is about 38% overvalued, Fort Myers is 34%, and Jacksonville is 28%. The researchers looked at 100 of the country’s largest metro areas to see which are overvalued based on past pricing trends and which should be.

Eli Beracha

Nationally, Boise, Idaho; Austin, Texas; Ogden and Provo, Utah; and Phoenix appear to be nearing price peaks, suggesting eventual price stabilization. Those places are also among the priciest. According to Eli Beracha, head of Florida International University’s Hollo School of Real Estate, buying in an overpriced market can lead to long-term financial losses.

“Reselling a house at a profit when values settle is difficult.”

Other research shows a market cooling from hot to warm. expects South Florida home prices will rise roughly 6% over the next year, indicating a market recovery after a year of extraordinary price surge.

Ward Morrison President  of Motto Franchising, LLC  First Real Estate Mortgage Franchise in the Nation   Estimates interest rates rise to  4% for 2022.  It’s not in stone and should not impact home buyers.

 Eli Beracha, head of Florida International University’s Hollo School of Real Estate, Buying in an overpriced market can lead to long-term financial losses. expects South Florida home prices will rise roughly 6% over the next year

Ken H Johnson, an economist at Florida Atlantic University! “We keep rising, yet we are still low. This is a far cry from 15 years ago.”

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