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The Housing Market Is Positioned to Help the Economy Recover [INFOGRAPHIC]

The Housing Market Is Positioned to Help the Economy Recover | Simplifying The Market

Some Highlights

  • Expert insights are painting a bright future for housing when the economy bounces back – and it will.
  • We may be facing challenging economic times today, but the housing market is poised to help the economy recover, not drag it down.
  • Let’s connect to make sure you’re informed and ready when it’s time to make your move.
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Looking to the Future: What the Experts Are Saying

As our lives, our businesses, and the world we live in change day by day, we’re all left wondering how long this will last. How long will we feel the effects of the coronavirus? How deep will the impact go? The human toll may forever change families, but the economic impact will rebound with a cycle of downturn followed by economic expansion like we’ve seen play out in the U.S. economy many times over.

Here’s a look at what leading experts and current research indicate about the economic impact we’ll likely see as a result of the coronavirus. It starts with a forecast of U.S. Gross Domestic Product (GDP).

According to Investopedia:

“Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country’s economic health.”

When looking at GDP (the measure of our country’s economic health), a survey of three leading financial institutions shows a projected sharp decline followed by a steep rebound in the second half of this year:Looking to the Future: What the Experts Are Saying | Simplifying The MarketA recent study from John Burns Consulting also notes that past pandemics have also created V-Shaped Economic Recoveries like the ones noted above, and they had minimal impact on housing prices. This certainly gives hope and optimism for what is to come as the crisis passes.

With this historical analysis in mind, many business owners are also optimistic for a bright economic return. A recent PricewaterhouseCoopers survey shows this confidence, noting 66% of surveyed business owners feel their companies will return to normal business rhythms within a month of the pandemic passing, and 90% feel they should be back to normal operation 1 to 3 months after:Looking to the Future: What the Experts Are Saying | Simplifying The MarketFrom expert financial institutions to business leaders across the country, we can clearly see that the anticipation of a quick return to normal once the current crisis subsides is not too far away. In essence, this won’t last forever, and we will get back to growth-mode. We’ve got this.

Bottom Line

Lives and businesses are being impacted by the coronavirus, but experts do see a light at the end of the tunnel. As the economy slows down due to the health crisis, we can take guidance and advice from experts that this too will pass.

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The #1 Thing You Can Do Now to Position Yourself to Buy a Home This Year

The last few weeks and months have caused a major health crisis throughout the world, leading to a pause in the U.S. economy as businesses and consumers work to slow the spread of the coronavirus. The rapid spread of the virus has been compared to prior pandemics and outbreaks not seen in many years. It also has consumers remembering the economic slowdown of 2008 that was caused by a housing crash. This economic slowdown, however, is very different from 2008.

One thing the experts are saying is that while we’ll see a swift decline in economic activity in the second quarter, we’ll begin a sharp rebound in the second half of this year. According to John Burns Consulting:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some very cutting-edge search engine analysis by our Information Management team showed the current slowdown is playing out similarly thus far.” 

Given this situation, if you’re thinking about buying a home this year, the best thing you can do right now is use this time to get pre-approved for a mortgage, which you can do from the comfort of your home. Pre-approval will help you better understand how much you can afford so that you can confidently do the following two things when you’re ready to buy:

1. Gain a Competitive Advantage

Today’s low inventory, like we’ve seen recently and will continue to see, means homebuyers need every advantage they can get to make a strong offer and close the deal. Being pre-approved shows the sellers you’re serious about buying a home, which is always a plus in your corner.

2. Accelerate the Homebuying Process

Pre-approval can also speed-up the homebuying process so you can move faster when you’re ready to make an offer. Being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams.

Bottom Line

Pre-approval is the best thing you can do right now to be in a stronger position to buy a home when you’re ready. Let’s connect today to get the process started.

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The Economic Impact of Buying a Home

We’re in a changing real estate market, and life, in general, is changing too – from how we grocery shop and meal prep to the ways we can interact with our friends and neighbors. Even practices for engaging with agents, lenders, and all of the players involved in a real estate transaction are changing to a virtual format. What isn’t changing, however, is one key thing that can drive the local economy: buying a home.

We’re all being impacted in different ways by the effects of the coronavirus. If you’re in a position to buy a home today, know that you’re a major economic force in your neighborhood. And while we all wait patiently for the current pandemic to pass, there are a lot of things you can do in the meantime to keep your home search on track.

Every year the National Association of Realtors (NAR) shares a report that notes the full economic impact of home sales. This report summarizes:

“The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”

Here’s the breakdown of how the average home sale boosts the economy:The Economic Impact of Buying a Home | Simplifying The MarketWhen you buy a home, you’re making an impact. You’re fulfilling your need for shelter and a place to live, and you’re also generating jobs and income for the appraiser, the loan officer, the title company, the real estate agent, and many more contributors to the process. For every person or business that you work with throughout the transaction, there’s also likely a team behind the scenes making it all happen, so the effort multiplies substantially. As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the extra labor it requires to build the home.

The report also breaks down the average economic impact by state:The Economic Impact of Buying a Home | Simplifying The MarketAs a buyer, you have an essential need for a home – and you can make an essential impact with homeownership, too. That need for shelter, comfort, and a safe place to live will always be alive and well. And whenever you’re able to act on that need, whether now or later, you’ll truly be creating gains for you, your family, local business professionals, and the overall economy.

Bottom Line

Whenever you purchase a home, you’re an economic driver. Even if you’re not ready or able to make a move now, there are things you can do to keep your own process moving forward so you’re set when the time is right for you. Let’s connect to keep your home search – and your local contributions – on track.

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The Best Advice Does Not Mean Perfect Advice

The angst caused by the coronavirus has most people on edge regarding both their health and financial situations. It’s at times like these when we want exact information about anything we’re doing – even the correct protocol for grocery shopping. That information brings knowledge, and this gives us a sense of relief and comfort.

If you’re thinking about buying or selling a home today, the same need for information is very real. But, because it’s such a big step in our lives, that desire for clear information is even greater in the homebuying or selling process. Given the current level of overall anxiety, we want that advice to be truly perfect. The challenge is, no one can give you “perfect” advice. Experts can, however, give you the best advice possible.

Let’s say you need an attorney, so you seek out an expert in the type of law required for your case. When you go to her office, she won’t immediately tell you how the case is going to end or how the judge or jury will rule. If she could, that would be perfect advice. What a good attorney can do, however, is discuss with you the most effective strategies you can take. She may recommend one or two approaches she believes will be best for your case.

She’ll then leave you to make the decision on which option you want to pursue. Once you decide, she can help you put a plan together based on the facts at hand. She’ll help you achieve the best possible resolution and make whatever modifications in the strategy are necessary to guarantee that outcome. That’s an example of the best advice possible.

The role of a real estate professional is just like the role of the lawyer. An agent can’t give you perfect advice because it’s impossible to know exactly what’s going to happen throughout the transaction – especially in this market.

An agent can, however, give you the best advice possible based on the information and situation at hand, guiding you through the process to help you make the necessary adjustments and best decisions along the way. An agent will get you the best offer available. That’s exactly what you want and deserve.

Bottom Line

If you’re thinking of buying or selling, contact a local real estate professional to make sure you get the best advice possible.

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What You Can Do to Keep Your Dream of Homeownership Moving Forward [INFOGRAPHIC]

What You Can Do to Keep Your Dream of Homeownership Moving Forward [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Don’t put your homeownership plans on hold just because you’re stuck inside.
  • There are several things you can do right now to keep your home search moving forward.
  • Connect with an agent, learn about resource programs for things like down payments, and get pre-approved today.
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Don’t Let Frightening Headlines Scare You

There’s a lot of anxiety right now regarding the coronavirus pandemic. The health situation must be addressed quickly, and many are concerned about the impact on the economy as well.

Amidst all this anxiety, anyone with a megaphone – from the mainstream media to a lone blogger – has realized that bad news sells. Unfortunately, we will continue to see a rash of horrifying headlines over the next few months. Let’s make sure we aren’t paralyzed by a headline before we get the full story.

When it comes to the health issue, you should look to the Centers for Disease Control and Prevention (CDC) or the World Health Organization (WHO) for the most reliable information.

Finding reliable resources with information on the economic impact of the virus is more difficult. For this reason, it’s important to shed some light on the situation. There are already alarmist headlines starting to appear. Here are two such examples surfacing this week.

1. Goldman Sachs Forecasts the Largest Drop in GDP in Almost 100 Years

It sounds like Armageddon. Though the headline is true, it doesn’t reflect the full essence of the Goldman Sachs forecast. The projection is actually that we’ll have a tough first half of the year, but the economy will bounce back nicely in the second half; GDP will be up 12% in the third quarter and up another 10% in the fourth.

This aligns with research from John Burns Consulting involving pandemics, the economy, and home values. They concluded:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some very cutting-edge search engine analysis by our Information Management team showed the current slowdown is playing out similarly thus far.”

The economy will suffer for the next few months, but then it will recover. That’s certainly not Armageddon.

2. Fed President Predicts 30% Unemployment!

That statement was made by James Bullard, President of the Federal Reserve Bank of St. Louis. What Bullard actually said was it “could” reach 30%. But let’s look at what else he said in the same Bloomberg News interview:

“This is a planned, organized partial shutdown of the U.S. economy in the second quarter,” Bullard said. “The overall goal is to keep everyone, households and businesses, whole” with government support.

According to Bloomberg, he also went on to say:

“I would see the third quarter as a transitional quarter” with the fourth quarter and first quarter next year as “quite robust” as Americans make up for lost spending. “Those quarters might be boom quarters,” he said.

Again, Bullard agrees we will have a tough first half and rebound quickly.

Bottom Line

There’s a lot of misinformation out there. If you want the best advice on what’s happening in the current housing market, let’s talk today.

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A Recession Does Not Equal a Housing Crisis [INFOGRAPHIC]

A Recession Does Not Equal a Housing Crisis | Simplifying The Market

Some Highlights

  • The COVID-19 pandemic is causing an economic slowdown.
  • The good news is, home values actually increased in 3 of the last 5 U.S. recessions and decreased by less than 2% in the 4th.
  • All things considered, an economic slowdown does not equal a housing crisis, and this will not be a repeat of 2008.
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Are We About to See a New Wave of Foreclosures?

With all of the havoc being caused by COVID-19, many are concerned we may see a new wave of foreclosures. Restaurants, airlines, hotels, and many other industries are furloughing workers or dramatically cutting their hours. Without a job, many homeowners are wondering how they’ll be able to afford their mortgage payments.

In spite of this, there are actually many reasons we won’t see a surge in the number of foreclosures like we did during the housing crash over ten years ago. Here are just a few of those reasons:

The Government Learned its Lesson the Last Time

During the previous housing crash, the government was slow to recognize the challenges homeowners were having and waited too long to grant relief. Today, action is being taken swiftly. Just this week:

  • The Federal Housing Administration indicated it is enacting an “immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages” for the next 60 days.
  • The Federal Housing Finance Agency announced it is directing Fannie Mae and Freddie Mac to suspend foreclosures and evictions for “at least 60 days.”

Homeowners Learned their Lesson the Last Time

When the housing market was going strong in the early 2000s, homeowners gained a tremendous amount of equity in their homes. Many began to tap into that equity. Some started to use their homes as ATM machines to purchase luxury items like cars, jet-skis, and lavish vacations. When prices dipped, many found themselves in a negative equity situation (where the mortgage was greater than the value of their homes). Some just walked away, leaving the banks with no other option but to foreclose on their properties.

Today, the home equity situation in America is vastly different. From 2005-2007, homeowners cashed out $824 billion worth of home equity by refinancing. In the last three years, they cashed out only $232 billion, less than one-third of that amount. That has led to:

  • 37% of homes in America having no mortgage at all
  • Of the remaining 63%, more than 1 in 4 having over 50% equity

Even if prices dip (and most experts are not predicting that they will), most homeowners will still have vast amounts of value in their homes and will not walk away from that money.

There Will Be Help Available to Individuals and Small Businesses

The government is aware of the financial pain this virus has caused and will continue to cause. Yesterday, the Associated Press reported:

“In a memorandum, Treasury proposed two $250 billion cash infusions to individuals: A first set of checks issued starting April 6, with a second wave in mid-May. The amounts would depend on income and family size.”

The plan also recommends $300 billion for small businesses.

Bottom Line

These are not going to be easy times. However, the lessons learned from the last crisis have Americans better prepared to weather the financial storm. For those who can’t, help is on the way.

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Three Reasons Why This Is Not a Housing Crisis

In times of uncertainty, one of the best things we can do to ease our fears is to educate ourselves with research, facts, and data. Digging into past experiences by reviewing historical trends and understanding the peaks and valleys of what’s come before us is one of the many ways we can confidently evaluate any situation. With concerns of a global recession on everyone’s minds today, it’s important to take an objective look at what has transpired over the years and how the housing market has successfully weathered these storms.

1. The Market Today Is Vastly Different from 2008

We all remember 2008. This is not 2008. Today’s market conditions are far from the time when housing was a key factor that triggered a recession. From easy-to-access mortgages to skyrocketing home price appreciation, a surplus of inventory, excessive equity-tapping, and more – we’re not where we were 12 years ago. None of those factors are in play today. Rest assured, housing is not a catalyst that could spiral us back to that time or place.

According to Danielle Hale, Chief Economist at Realtor.com, if there is a recession:

“It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow. I would expect this to be milder. There’s no dysfunction in the banking system, we don’t have many households who are overleveraged with their mortgage payments and are potentially in trouble.”

In addition, the Goldman Sachs GDP Forecast released this week indicates that although there is no growth anticipated immediately, gains are forecasted heading into the second half of this year and getting even stronger in early 2021.Three Reasons Why This Is Not a Housing Crisis | Simplifying The MarketBoth of these expert sources indicate this is a momentary event in time, not a collapse of the financial industry. It is a drop that will rebound quickly, a stark difference to the crash of 2008 that failed to get back to a sense of normal for almost four years. Although it poses plenty of near-term financial challenges, a potential recession this year is not a repeat of the long-term housing market crash we remember all too well.

2. A Recession Does Not Equal a Housing Crisis

Next, take a look at the past five recessions in U.S. history. Home values actually appreciated in three of them. It is true that they sank by almost 20% during the last recession, but as we’ve identified above, 2008 presented different circumstances. In the four previous recessions, home values depreciated only once (by less than 2%). In the other three, residential real estate values increased by 3.5%, 6.1%, and 6.6% (see below):Three Reasons Why This Is Not a Housing Crisis | Simplifying The Market

3. We Can Be Confident About What We Know

Concerns about the global impact COVID-19 will have on the economy are real. And they’re scary, as the health and wellness of our friends, families, and loved ones are high on everyone’s emotional radar.

According to Bloomberg,

“Several economists made clear that the extent of the economic wreckage will depend on factors such as how long the virus lasts, whether governments will loosen fiscal policy enough and can markets avoid freezing up.”

That said, we can be confident that, while we don’t know the exact impact the virus will have on the housing market, we do know that housing isn’t the driver.

The reasons we move – marriage, children, job changes, retirement, etc. – are steadfast parts of life. As noted in a recent piece in the New York Times, “Everyone needs someplace to live.” That won’t change.

Bottom Line

Concerns about a recession are real, but housing isn’t the driver. If you have questions about what it means for your family’s homebuying or selling plans, let’s connect to discuss your needs.