The blog post several paragraphs down is compliments of my website host and because no one has a crystal ball and because everyone (well almost everyone!) wants to know what is going to happen with housing prices, I thought I'd post it.
I've been avidly reading about home prices national wide and wondering how the activity (or lack thereof!) around the country will affect the Sun Valley real estate market.
According to an article in The Wall Street Journal by Laura Kusisto "the housing market is losing momentum. Home prices roses at a frantic pace for most of the past two years, growing significantly faster than both incomes and inflation."
Ben Casselman in The New York Times wrote, "Homebuyers are reaching a breaking point after years of break-neck price increases that far exceeded income gains." Further, he stated that "Asking prices are being cut in hot housing markets, such as New York, Seattle, and San Fransisco."
Amanda Fung in Yahoo.com wrote, "Economists have already called a "peak" in many housing-market indicators. Home sales have dropped 3% since last year, and when the number of houses sold drops, it usually means that prices will fall soon, too."
The good news is that James Briggs in The Indianapolis Star wrote, "The housing market is far healthier now that it was before the last downturn. You might have a harder time buying or selling a home in the coming months, but you're probably not going to find yourself hopelessly underwater on a mortgage."
How will the national housing market affect Idaho?
As Boise’s Downtown’s skyline continues to change, expect more interest from regional, national and international investors. Idaho Statesman file photo.
The U.S. Census Bureau's announced that Idaho is the fastest-growing state in the nation.
According to Nicole Blanchard with The Idaho Statesman, Boise is the fastest growing area in the nation and Forbes magazine says Boise will continue growing. For the complete article, please click here.
My take-home from these articles? Yes, we can expect a "shift" in the nation-wide real estate market. What I am wondering is will the "shift" of people to Idaho help offset any downward pressure on real estate? Like anything, time will tell.
HERE'S THE BLOG FROM MY WEBSITE HOST, PLACESTER:
Experts are predicting a recession to hit around 2020. With the right preparation, however, you can turn the coming challenges into real estate opportunities.
The current economic expansion officially began in the summer of 2009 and is now the second longest period of uninterrupted growth in American history. For the near term, economists expect it will continue.
Certain known risks that can slow the economy — changes to the federal interest rate policy and trade disputes, for instance — have yet to dramatically shift the market.
However, the national economy tends to run in cycles of boom and bust over the long term, and many financial experts are predicting some sort of correction over the next two years.
Real estate brokers who prepare for this change ahead of time will be better positioned to not just survive but actually gain market share.
How a Recession Will Affect Housing
Some define a recession as a period of at least two consecutive quarters in which the economy is in decline, but, as the National Bureau of Economic Activity notes, many factors can come into play, including Gross Domestic Product (GDP), Gross Domestic Income (GDI) and the depth of economic activity decline. Therefore, recessions don’t always involve two consecutive quarters of decline. As economic activity slows, both businesses and consumers cut back, causing the contraction to spiral.
When there are large-scale job losses, some homeowners may choose to sell their homes or lose their homes to foreclosure when they fail to keep up with monthly payments. When these losses are concentrated in certain communities, it can cause an imbalance between supply and demand, leading to falling prices and home values. When home prices drop below what people owe on their properties, foreclosures, short sales and REOs further depress the market.
Compounding the issue, people choose to stay in the same home for longer periods of time, thus negatively affecting both housing supply and demand. All of these factors converge to cause fewer closings and a drop in business for brokerages and their agents.
What Economists Predict
Financial experts have differing opinions on what could trigger the next recession. While the housing bubble drove the last recession, lending has remained fairly conservative over this economic recovery and other factors may be more likely to trigger the next downturn.
“Housing affordability is a critical issue in nearly every market across the country, and while much remains unknown about the precise path of the U.S. economy in the years ahead, another housing market crisis is unlikely to be a central protagonist in the next nationwide downturn,” says Terrazas.
Nevertheless, the experts are in basic agreement that they expect it will begin sometime around the turn of the next decade (2020) and that it will have the following effects. See infographic for Zillow’s survey and predictions of 100+ real estate experts and economists.
In the face of financial uncertainty, businesses and consumers will curtail their spending, which will lead to higher unemployment, further hampering economic activity.
The Federal Reserve would likely respond by lowering interest rates, while Congress and the Executive Branch could respond through fiscal stimulus spending. However, with rates not far above historic lows despite recent increases and public expenditures already at record highs, there may be less room for economic intervention.
As businesses and households fail to meet their financial obligations, lenders will be forced to absorb the losses, which will cause them to raise their criteria for making loans and tighten credit.
Recessions have had varying effects on the housing market. The economic downturn of 2001 caused little disruption in home sales nationally, though they had a significant effect in some of the most exposed regional markets. On the other hand, the recession of 2008 touched nearly all regions across the nation. Housing prices plummeted and the number of transactions dropped by half of what they had been before the downturn.
It’s likely that another recession will have some effect on housing. In areas with substantial job losses, home values could drop. For agents in those areas, this will likely lead to a significant decrease in income and many will leave real estate to pursue other work.
Faced with uncertainty, brokers who want to survive and even grow during the coming downturn must plan now. Those who wait until their local market has turned will find themselves reacting in the midst of a crisis with little time to begin making needed operational changes.
Here are several courses of action to consider in preparing for a downturn.
As a result of the 2008 recession, membership in the National Association of Realtors (NAR) decreased by approximately 255,000, from more than 1.3 million to 999,824. And according to the National Census Bureau, the number of brokers shrunk by about 21% with revenues dropping nearly 23%.
Time to Take Action - Advice to Real Estate Brokers and Agents
Stick with what’s working now. Nobody can say for sure when the next recession is supposed to happen — in fact, it may not happen at all. Former Federal Reserve Chairwoman Janet Yellen once said that market expansions don’t die of old age.
NAR Chief Economist Lawrence Yun dismisses concerns about a significant slowdown and whether the housing market has peaked. Rather, he believes the slowdown will affect the country’s most overheated real estate markets in 2018 due to insufficient supply and rapidly rising home prices versus weak buyer demand, which has historically been a more reliable indicator of a slowdown trend.
Many brokers will continue with business-as-usual until they see significant signs that a downturn has actually begun. Many real estate agencies survived the lean years of 2011 and 2012 by cutting back their operations to a survival level.
Of course, if another collapse of the housing market does occur, a brokerage may not stay in business long enough to come up with a plan to make the necessary changes.
Flex toward the future now. In the last downturn, brokerages that were able to pivot quickly to meet clients’ evolving needs survived, and in many cases, gained market share.
Agile brokers will not only use the best technology and proven workflows to gain efficiency in today’s housing market, but they’ll use the same strategic thinking when planning for multiple contingencies. As a result, their partners, agents and staff will know what to do when conditions begin to change.
During the last housing downturn, many firms survived by slashing their operating expenses, beginning with their marketing budgets. However, brokerages that anticipated a changing market had already built financial reserves earmarked for marketing. As unprepared brokerages withdrew their media presence, the forward-thinking brokerages stepped into the vacuum and actually grew their market share. Similarly, residential rental firms set aside cash to buy houses at deep discounts at the bottom of the market.
Agents should also start talking to their clients and spheres of influence now, proactively reminding them that they’re here to help them plan for any future real estate needs. Arming clients with data to understand today’s market conditions and local trends will help both agent and client plan accordingly while positioning the agent as an educated, real estate advisor and expert.
Of course, in a contracting real estate market, the client’s needs will change too. Those listing their houses will need agents with creativity and tenacity to help them sell in a market heavily tilted toward buyers. Financial institutions will need agents with expertise in foreclosed properties. And buyers considering REOs will need an experienced professional to help them find the best value and guide them through this kind of purchase process.
Finally, sellers will require creative solutions for homes that simply aren’t selling, including the option of renting out until the market is more favorable. The brokerage that’s prepared to offer these recession-specific services can turn a tough market into new solutions.
“Real estate professionals are in the best position to know how healthy their local economy is. Having spent years immersing themselves in their targeted area, they may be the first to sense when things are changing.”