More and more economists are predicting a recession is imminent as the result of the pullback in the economy caused by COVID-19. According to the National Bureau of Economic Research:
“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
Bill McBride, the founder of Calculated Risk, believes we are already in a recession:
“With the sudden economic stop, and with many states shutting down by closing down schools, bars and restaurants…my view is the US economy is now in a recession (started in March 2020), and GDP will decline sharply in Q2. The length of the recession will depend on the course of the pandemic.”
How deep will it go?
No one knows for sure. It depends on how long it takes to beat this virus. Goldman Sachsanticipates we will see a difficult first half of the year, but the economy will recover in the second half (see below):
Goldman Sachs GDP Forecast
Goldman also projects we’ll have “further strong gains in early 2021.”
This aligns with the projection from Wells Fargo Investment Institute:
“Once the virus infection rate peaks, we expect a recovery to gain momentum into the final quarter of the year and especially into 2021.”
Again, no one knows for sure how long the pandemic will last. The hope is that it will resolve sometime over the next several months. Most agree that when it does, the economy will regain its strength quickly.
*QUARTER 1 DATA FROM GOLDMAN SACHS WAS UPDATED FROM 0% TO -0.2% ON 3/17/20 AFTER THE INITIAL RELEASE.
Bottom Line
This virus is not only impacting the physical health of Americans, but also the financial health of the nation. The sooner we beat it, the sooner our lives will return to normal.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
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 Agencyannounced 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 Pressreported:
“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.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
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.
Goldman Sachs GDP Forecast
Both 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):
Home Price Change During Last 5 Recessions
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.
“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.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
The residential real estate market has come roaring out of the gates in 2020. Compared to this time last year, the number of buyers looking for a home is up 20%, and the number of home sales is up almost 10%. The increase in purchasing activity has caused home price appreciation to begin reaccelerating. Many analysts have boosted their projections for price appreciation this year.
Whenever home prices begin to increase, there’s an immediate concern about how that will impact the ability Americans have to purchase a home. That thinking is understandable. We must, however, realize that price is not the only element to the affordability equation. Mark Fleming, Chief Economist at First American, recently explained:
“When demand increases for a scarce (limited or low supply) good, prices will rise faster. The difference between houses and other goods is that we buy them with a mortgage. So, it’s not the actual price that matters, but the price relative to purchasing power.”
While home prices have risen recently, mortgage interest rates have fallen rather dramatically. At the beginning of last year, the 30-year fixed-rate mortgage stood at 4.46%. Today, that number stands over a full percentage point lower.
How does a lower mortgage rate impact your monthly mortgage payment?
Michael Hyman, a research data specialist for the National Association of Realtors (NAR), explained in a recent report that, even though home values have increased over the last year, the monthly cost of owning a home has decreased:
“With lower mortgage rates compared to one year ago, the payment as a percentage of income fell to 15.5%…from 17.1% a year ago.”
When purchasing a home, the price is not as important as its cost. Today, the monthly expense (cost) of purchasing the same house you could have purchased last year would be less. Or, you could purchase a more expensive home for the same monthly expense.
Fleming, looking at all aspects of the affordability equation (prices, wages, and mortgage rates), calculated the actual numbers in a recent blog post:
“Low mortgage rates and income growth triggered a 13.5% increase in house-buying power compared with a year ago.”
Since wages have increased and mortgage rates have dropped to historically low levels, this is a great time to buy your first home or move up to the home of your dreams. As Tendayi Kapfidze, Chief Economist at LendingTree, recently advised:
“If you are in a point in your life where you’re considering buying a home today, it’s a better time to buy than 10 years ago. If you can get a mortgage, you’re getting much lower interest rates, and it enables you to afford more.”
Bottom Line
Whether you’ve considered becoming a homeowner for the first time or have decided to sell your home and buy one that better suits your current lifestyle, now is a great time to get together and discuss your options.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Don’t forget to set your clocks forward this Sunday, March 8 at 2:00 AM EST in observance of Daylight Saving Time, unless you’re a resident of Arizona or Hawaii!
Every hour in the United States, 568 homes are sold and median home values rise by $1.92.
As we “spring forward” this year, let’s get together to see how you can take advantage of every hour in the housing market.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Impact of the Coronavirus on the U.S. Housing Market
Impact of the Coronavirus on the U.S. Housing Market
The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect on various markets, let’s also acknowledge the true impact it continues to have on lives and families around the world.
With all this uncertainty, how do you make powerful and confident decisions in regard to your real estate plans?
“At the very least, the coronavirus could cause some people to put home sales on hold.”
While this is an understandable approach, it is important to balance that with how it may end up costing you in the long run. If you’re considering buying or selling a home, it is key to educate yourself so that you can take thoughtful and intentional next steps for your future.
For example, when there’s fear in the world, we see lower mortgage interest rates as investors flee stocks for the safety of U.S. bonds. This connection should be considered when making real estate decisions.
“The Fed’s action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed rate mortgage.”
This is exactly what we’re experiencing right now as mortgage interest rates hover at the lowest levels in the history of the housing market.
Bottom Line
The full impact of the Coronavirus is still not yet known. It is in times like these that working with an informed and educated real estate professional can make all the difference in the world.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Unlike last year, the residential real estate market kicked off 2020 with a bang! In their latest Monthly Mortgage Monitor, Black Knight proclaimed:
“The housing market is heating entering 2020 and recent rate declines could continue that trend, a sharp contrast to the strong cooling that was seen at this same time last year.”
Zillowrevealed they’re also seeing a robust beginning to the year. Jeff Tucker, Zillow Economist, said:
“Our first look at 2020 data suggests that we could see the most competitive home shopping season in years, as buyers are already competing over…homes for sale.”
Buying demand is very strong. The latest Showing Index from ShowingTime reported a 20.2% year-over-year increase in purchaser traffic across the country, the sixth consecutive month of nationwide growth, and the largest increase in the history of the index.
The even better news is that buyers are not just looking. The latest Existing Home Sales Report from the National Association of Realtors (NAR) showed that closed sales increased 9.6% from a year ago.
This increase in overall activity has caused Zelman & Associates to increase their projection for home price appreciation in 2020 from 3.7% to 4.7%.
Are we headed for another housing crash like we had last decade?
Whenever price appreciation begins to accelerate, the fear of the last housing boom and bust creeps into the minds of the American population. The pain felt during the last housing crash scarred us deeply, and understandably so. The crash led us into the Great Recession of 2008.
If we take a closer look, however, we can see the current situation is nothing like it was in the last decade. As an example, let’s look at price appreciation for the six years prior to the last boom (2006) and compare it to the last six years:
Annual Home Price Appreciation
There’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did leading up to the housing crash.
Today, the strength of the housing market is actually helping prevent a setback in the overall economy. In a recent post, Odeta Kushi, Deputy Chief Economist for First American explained:
“While the housing crisis is still fresh on the minds of many, and was the catalyst of the Great Recession, the U.S. housing market has weathered all other recessions since 1980. With the exception of the Great Recession, house price appreciation hardly skipped a beat and year-over-year existing-home sales growth barely declined in all the other previous recessions in the last 40 years…In 2020, we argue the housing market is more likely poised to help stave off recession than fall victim to it.”
Bottom Line
The year has started off very nicely for the residential housing market. If you’re thinking of buying or selling, now may be the time to get together to discuss your options.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Portrait of an excited woman reading good news in a letter at home
Portrait of an excited woman reading good news in a letter at home
If you’re looking to buy a home in 2020, have you thought about putting your tax refund toward a down payment? Homeownership may be one step closer than you think if you spend your dollars wisely this year.
Based on data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $2,962 when filing their taxes this year.
The map below shows the average tax refund Americans received last year by state:
Average Tax Return by State
According to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. Truth be told, a 20% down payment is not always required to buy a home, even though that’s a common misconception about homebuying. Veterans Affairs Loans allow many veterans to purchase a home with 0% down.
How can my tax refund help?
If you’re a first-time buyer, your tax refund may cover more of a down payment than you ever thought possible.
If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average tax refund:
What Percentage of a 3% Down Payment to Buy a House is Covered by the Tax Return
The darker the blue, the closer your tax refund gets you to homeownership in one of these programs. Maybe this is the year to plan ahead and put your tax refund toward a down payment on a home.
Bottom Line
Saving for a down payment can seem like a daunting task, but the more you know about what’s required, the more prepared you’ll be to make the best decision for you and your family. This tax season, your refund could be your key to homeownership.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Stressed millennial married couple sitting at the desk at home use laptop checking documents unpaid bills, taxes, due debt, bank account balance. Bankruptcy lack of money financial problems concept
Stressed millennial married couple sitting at the desk at home use laptop checking documents unpaid bills, taxes, due debt, bank account balance. Bankruptcy lack of money financial problems concept
Rising home prices coupled with the current inventory in today’s market may cause some homeowners to consider selling their homes on their own (known in the industry as a For Sale By Owner). However, a FSBO might be hard to execute well for the vast majority of sellers.
Here are the top 5 reasons not to FSBO:
1. Online Strategy for Prospective Purchasers
Studies have shown that 93% of buyers search online for a home. That’s a pretty staggering number! Most real estate agents have an Internet strategy to promote the sale of your home. Do you?
2. Results Come from the Internet
According to NAR, here’s where buyers found the homes they actually purchased:
55% on the Internet
28% from a Real Estate Agent
10% Other
6% from a Yard Sign
1% from Newspapers
The days of selling your house by putting up a sign in your yard or placing an ad in the paper are long gone. Having a strong Internet strategy is crucial.
3. There Are Too Many People to Negotiate With
Here’s a list of some of the people with whom you must be prepared to negotiate if you decide to FSBO:
The buyer, who wants the best deal possible
The buyer’s agent, who solely represents the best interest of the buyer
The buyer’s attorney (in some parts of the country)
The home inspection companies, which work for the buyer and will almost always find some problems with the house
The appraiser, if there is a question of value
4. FSBOing Has Become Increasingly Difficult
The paperwork involved in buying or selling a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.
5. You Net More Money When Using an Agent
Many homeowners believe they’ll save the real estate commission by selling on their own, but the seller and buyer can’t both save the commission.
A report by Zillow revealed that FSBOs are inclined to do so because they believe it will save money (46 percent cite this among their top three reasons), but they don’t actually save anything, and eventually end up listing with an agent.
The same report revealed that,
“While 36% of sellers that (at first) attempted to sell their homes on their own, only 11 percent of sellers—in other words, less than a third…actually sold without an agent.”
It appears working with a real estate professional is the best answer.
Bottom Line
Before you decide to take on the challenges of selling your house on your own, let’s get together to discuss your needs.
Contact us: PHP Houses 142 W Lakeview Ave Unit 1030 Lake Mary, FL 32746 Ph: (407) 519-0719 Fax: (407) 205-1951 email: info@phphouses.com
