Troy Hinds, Realtor - Collective Real Estate

09/03/2021

07/31/2021

7 REASONS WE’RE NOT IN A REAL ESTATE BUBBLE

A LOOK AHEAD - Looking ahead to the second half of the year, the pace of home sales may decline and mortgage rates may rise. But those changes should be gradual, rather than bursting a bubble. As
Jewgieniew says, “Brokers should be looking forward to the future and remember not to be short-sighted. Be sure to have money set aside, especially as there are less and less transactions, and be disciplined with your spending.”

Source:https://www.mysccar.org/.../Pages%20from%20RT-News_0621.pdf

07/31/2021

7 REASONS WE’RE NOT IN A REAL ESTATE BUBBLE

#7 GREATER EQUITY - Rising home prices and greater savings rates have increased equity for millions of U.S. owners. A first quarter report from ATTOM Data Solutions, found that one in three of the 55.8 million mortgaged homes was “equity-rich,” with loans 50 percent or less of estimated market value.

On the other side of the equation, just 2.6 million mortgaged homes were considered seriously underwater, combined loans at least 25% more than the value. In addition, distressed sales — including bank-owned (REO) sales, third-party foreclosure auction sales and short sales — accounted for just 5.8% of sales, the smallest percentage since 2003 and dramatically below the 42.2% in the first quarter of 2009.

Source:https://www.mysccar.org/.../Pages%20from%20RT-News_0621.pdf

07/31/2021

7 REASONS WE’RE NOT IN A REAL ESTATE BUBBLE

#6 TIGHT CREDIT - Risky credit practices in the early 2000s were a leading cause of the last housing bubble. Back then, lenders offered loans with “nothing down,” adjustable rates or balloon payments and easy terms to borrowers with marginal credit ratings.

At that time, risky loans comprised about 40 percent of the mortgage market, according to a Morgan Stanley report. Currently, those loans are only 2 percent of the market.

Source:https://www.mysccar.org/.../Pages%20from%20RT-News_0621.pdf

07/31/2021

7 REASONS WE’RE NOT IN A REAL ESTATE BUBBLE

#5 LOW MORTGAGE RATES - While mortgage rates have begun creeping up, there are no signs of a spike that could bring the home financing process to a halt. “Real estate professionals should prepare their clients for rates to potentially hit 4%, while reassuring them that this is still ridiculously low,” says Jewgieniew.

This spring, the Federal Reserve is supporting the housing market by keeping short-term rates low for borrowers — a practice it intends to follow until 2022 at least. The Fed is also purchasing agency mortgage-backed securities (MBS) to stabilize the lending market. Again, there is no sign of a bubble caused by home financing policies.

Source:https://www.mysccar.org/.../Pages%20from%20RT-News_0621.pdf

07/31/2021

7 REASONS WE’RE NOT IN A REAL ESTATE BUBBLE

#4 RETURN OF INTERNATIONAL DEMAND - As the COVID-19 pandemic recedes, international travel and home purchases will pick up later in the year. In many states, buyers from Canada, Europe, Asia and the Middle East have sought vacation homes, primary residences and investment properties in the U.S. That global demand for homes — many from all-cash buyers — can buoy many U.S. markets.

“There is still a huge influx of foreign capital pouring into the United States as we’re still one of the most stable and attractive countries in the world,” says Jewgieniew. “Now is the time for real estate professionals to create new relationships and networks and grow their opportunities to connect with international clients.”

Source:https://www.mysccar.org/.../Pages%20from%20RT-News_0621.pdf

07/31/2021

7 REASONS WE’RE NOT IN A REAL ESTATE BUBBLE

#3 FAVORABLE DEMOGRAPHICS - Nearly 5 million millennials will be turning 30 this year, with similar numbers coming in 2022. A significant percentage are looking to buy homes and condominiums—a big change in the market compared with five years ago.

In fact, millennials are expected to continue to drive the nation’s real estate market for the next decade, spurring demand for starter and move up homes. Again, strong demand for homes is one of the main reasons a market bubble appears unlikely.

Source:https://www.mysccar.org/upload/files/Pages%20from%20RT-News_0621.pdf

07/31/2021

7 REASONS WE’RE NOT IN A REAL ESTATE BUBBLE

#2 LACK OF SUPPLY - Currently, the U.S. housing market is 3.8 million single-family homes short of demand, according to a recent analysis from Freddie Mac. A low level of new home construction over the past three years has increased that shortfall, which was estimated at 2.5 million units in 2018.

New housing starts are rising this spring, but the supply of new homes is projected to remain well below demand. In March, housing starts reached a seasonally adjusted annual rate of 1.739 million units, the highest level since June 2006. Doug Duncan, chief economist for Fannie Mae, says production may decline later this year as homebuilders face supply constraints, such as increasing prices of lumber and other materials.

Overall, the Mortgage Bankers Association (MBA) forecasts single family housing starts to be around 1.134 million, increasing to 1.165 million single-family homes in 2022 and 1.210 million in 2023. That gradual increase in production will help to ease the current shortage.

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