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19
May

Housing Market Positioned to Bring Back the Economy

Housing Market Positioned to Bring Back the Economy | MyKCM

All eyes are on the American economy. As it goes, so does the world economy. With states beginning to reopen, the question becomes: which sectors of the economy will drive its recovery? There seems to be a growing consensus that the housing market is positioned to be that driving force, the tailwind that is necessary. Some may question that assertion as they look back on the last recession in 2008 when housing was the anchor to the economy – holding it back from sailing forward. But even then, the overall economy did not begin to recover until the real estate market started to regain its strength. This time, the housing market was in great shape when the virus hit. As Mark Fleming, Chief Economist of First Americanrecently explained:

“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”

Fleming is not the only economist who believes this. Last week, Dr. Frank Nothaft, Chief Economist for CoreLogic, (@DrFrankNothaft) tweeted:

“For the first 6 decades after WWII, the housing sector led the rest of the economy out of each recession. Expect it to do so this time as well.”

And, Robert Dietz, Chief Economist for the National Association of Home Builders, in an economic update last week explained:

“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt…Based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”

Bottom Line

Every time a home is sold it has a tremendous financial impact on local economies. As the real estate market continues its recovery, it will act as a strong tailwind to the overall national economy.
« #1 Financial Benefit of Homeownership: Family Wealth
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

05
May

Confused About the Economic Recovery? Here’s Why.

Confused About the Economic Recovery? Here’s Why. | MyKCM
Confused About the Economic Recovery? Here’s Why. | MyKCM

As we continue to work through the health crisis that plagues this country, more and more conversations are turning to economic recovery. While we look for signs that we’ve reached a plateau in cases of COVID-19, the concern and fear of what will happen as businesses open up again is on all of our minds. This causes confusion about what an economic recovery will look like. With this in mind, it’s important to understand how economists are using three types of sciences to formulate their forecasts and to work toward clearer answers.

  1. Business Science – How has the economy rebounded from similar slowdowns in the past?
  2. Health Science – When will COVID-19 be under control? Will there be another flareup of the virus this fall?
  3. People Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).

Sam Khater, Chief Economist at Freddie Mac, says:

“Although the uncertainty of the crisis means forecasts of economic activity are more unclear than usual, we expect that most of the economic damage from the virus will be contained to the first half of the year. Going forward, we should see a recovery starting in the second half of 2020.”

This past week, the Bureau of Economic Analysis released the advanced estimate for Gross Domestic Product (GDP) for the first quarter of 2020. That estimate came in at -4.8%. It was a clear indicator showing how the U.S. economy slowed as businesses shut down and consumers retreated to their homes in fear of the health crisis and of contracting COVID-19.Experts agree that the second quarter of 2020 will be an even greater slowdown, a sign more businesses are feeling the effects of this health crisis. The same experts, however, project businesses will rebound, and a recovery will start to happen in the second half of this year.

Bottom Line

As time goes on, we’ll have more clarity around what the true economic recovery will look like, and we’ll have more information on the sciences that will affect it. As the nation’s economy comes back to life and businesses embrace new waves of innovation to serve their customers, the American spirit of grit, growth, and prosperity will be alive and well

30
Apr

Why the Housing Market Is a Powerful Economic Driver

Why the Housing Market Is a Powerful Economic Driver | MyKCM

With businesses starting to slowly open back up again in some parts of the country, it’s important to understand how housing can have a major impact on the recovery of the U.S. economy. As we’ve mentioned before, buying a home is a driving financial force in this process. Today, many analysts believe one of the first things we’ll be able to safely bring back is the home building sector, creating more jobs and impacting local neighborhoods in a big way. According to Robert Dietz in The Eye on Housing:

 “The pace of new home sales will post significant declines during the second quarter due to the impacts of higher unemployment and shutdown effects of much of the U.S. economy, including elements of the real estate sector in certain markets. However, given the momentum housing construction held at the start of 2020, the housing industry will help lead the economy in the eventual recovery.”

The National Association of Home Builders (NAHB) notes the impact new construction can have on the job market:

“Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees for all levels of government to support police, firefighters and schools, according to NAHB’s National Impact of Home Building and Remodeling report.”

These employment opportunities, along with the home purchase, drive the economy in a major way. The National Association of Realtors (NAR) recently shared 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.”

Why the Housing Market Is a Powerful Economic Driver | MyKCM

Here’s the breakdown of how the average home sale boosts the economy:As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the sheer number of workers it requires to design, build, equip, and finalize the sale of the home. The NAHB paints a clear picture of these roles:

“The NAHB model shows that job creation through housing is broad-based. Building new homes and apartments generates jobs in industries that produce lumber, concrete, lighting fixtures, heating equipment and other products that go into a home remodeling project. Other jobs are generated in the process of transporting, storing and selling these products.
Additional jobs are generated for professionals such as architects, engineers, real estate agents, lawyers and accountants who provide services to home builders, home buyers and remodelers.”

Why the Housing Market Is a Powerful Economic Driver | MyKCM

The same NAR report also breaks down the average economic impact by state:On an emotional level, what’s most important for today’s consumers to feel confident about is the safety component that goes into the process. Mitigating the risk of essential personnel at this moment in time is more crucial than ever as we all aim to reduce the spread of the coronavirus. Fortunately, the NAHB has put immense effort into a plan that prioritizes the health and safety of home builders and contractors:

“This is why NAHB and construction industry partners have developed a Coronavirus Preparedness and Response Plan specifically tailored to construction job sites. The plan is customizable and covers areas that include manager and worker responsibilities, job site protective measures, cleaning and disinfecting, responding to exposure incidents, and OSHA record-keeping requirements.”

Bottom Line

Buying a home is a substantial economic driver today, and when new construction picks back up again, it will be an even stronger recovery force throughout the country. If you’re in a position to buy a home this year, you can have a significant impact on your local neighborhoods and safely make the move you’ve been waiting for. It’s a win-win.

29
Apr

Buying a Home Right Now: Easy? No. Smart? Yes.

Buying a Home Right Now: Easy? No. Smart? Yes. | MyKCM

Through all the volatility in the economy right now, some have put their search for a home on hold, yet others have not. According to ShowingTime, the real estate industry’s leading showing management technology provider, buyers have started to reappear over the last several weeks. In the latest report, they revealed:

“The March ShowingTime Showing Index® recorded the first nationwide drop in showing traffic in eight months as communities responded to COVID-19. Early April data show signs of an upswing, however.”

Why would people be setting appointments to look at prospective homes when the process of purchasing a home has become more difficult with shelter-in-place orders throughout the country?

Here are three reasons for this uptick in activity:

1. Some people need to move. Whether because of a death in the family, a new birth, divorce, financial hardship, or a job transfer, some families need to make a move as quickly as possible.

2. Real estate agents across the country have become very innovative, utilizing technology that allows purchasers to virtually:

  • View homes
  • Meet with mortgage professionals
  • Consult with their agent throughout the process

All of this can happen within the required safety protocols, so real estate professionals are continuing to help families make important moves.

3. Buyers understand that mortgage rates are a key component when determining their monthly mortgage payments. Mortgage interest rates are very close to all-time lows and afford today’s purchaser the opportunity to save tens of thousands of dollars over the lifetime of the loan.

Buying a Home Right Now: Easy? No. Smart? Yes. | MyKCM

Looking closely at the third reason, we can see that there’s a big difference between purchasing a house last December and purchasing one now (see chart below):

Bottom Line

Many families have decided not to postpone their plans to purchase a home, even in these difficult times. If you need to make a move, let’s connect today so you have a trusted advisor’s to safely and professionally guide you through the process.

23
Apr

Uncertainty Abounds in the Search for Economic Recovery Timetable

Uncertainty Abounds in the Search for Economic Recovery Timetable | MyKCM

Earlier this week, we discussed how most projections from financial institutions are calling for a quick V-shaped recovery from this economic downturn, and there’s research on previous post-pandemic recoveries to support that expectation.

In addition, we noted how there are some in the business community who believe we may instead be headed for a U-shaped recovery, where the return to previous levels of economic success won’t occur until the middle of next year. Yesterday, Reuters released a poll of U.S. and European economists which revealed that most surveyed are now leaning more toward a U-shaped recovery.

Here are the results of that poll:Uncertainty Abounds in the Search for Economic Recovery Timetable | MyKCM

Why the disparity in thinking among different groups of economic experts?

The current situation makes it extremely difficult to project the future of the economy. Analysts normally look at economic data and compare it to previous slowdowns to create their projections. This situation, however, is anything but normal.

Today, analysts must incorporate data from three different sciences into their recovery equation:

1. Business Science – How has the economy rebounded from similar slowdowns in the past?

2. Health Science – When will COVID-19 be under control? Will there be another flareup of the virus this fall?

3. Social Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).

The challenge of accurately combining the three sciences into a single projection has created uncertainty, and it has led to a wide range of opinions on the timing of the recovery.

Bottom Line

Right now, the vast majority of economists and analysts believe a full recovery will take anywhere from 6-18 months. No one truly knows the exact timetable, but it will be coming.

26
Mar

Don’t Let Frightening Headlines Scare You

Don’t Let Frightening Headlines Scare You | MyKCM

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.

03
Mar

How Much “Housing Wealth” Can You Build in a Decade?

How Much “Housing Wealth” Can You Build in a Decade? | MyKCM

Earlier this month, the National Association of Realtors (NAR) released a special study titled Single-Family Home Price Gains by Years of Tenure. The study estimates median home price appreciation over the last 30 years based on the length of homeownership.

Below are three graphs depicting the most important data revealed in the study.

How much have home prices increased?

One of the first measures of the financial benefits of homeownership is the net worth (in the form of equity) an owner can build over time. The study showed the average increase in home values based on how long homeowners stayed in a home.
How Much “Housing Wealth” Can You Build in a Decade? | MyKCM

What was the percentage of appreciation?

Another way to look at this is by the percentage increase in value over time, called appreciation:How Much “Housing Wealth” Can You Build in a Decade? | MyKCM

Was this appreciation consistent throughout the country?

Today, when we think of markets that have done well over the last decade, we have a tendency to think about San Francisco, San Diego, Seattle, and other West Coast cities. Though it is true the West Region showed the highest price growth over the last three decades, we can see how every region of the country did quite well in ten-year increments:How Much “Housing Wealth” Can You Build in a Decade? | MyKCMThis data validates the claim that homeownership is great for building wealth. The importance of this information was highlighted in the study’s first sentence:

“Homeownership is an important source of wealth creation, enabling current homeowners and succeeding generations to move up the economic ladder.”

Bottom Line

Homeownership has many financial and non-financial benefits. The accumulation of “housing wealth” through increased equity is a major one. If you’re thinking of buying a home for the first time or moving up to your dream home, the sooner you make the move, the sooner your net worth will begin to grow.

03
Mar

How Interest Rates Can Impact Your Monthly Housing Payments

How Interest Rates Can Impact Your Monthly Housing Payments | MyKCM

Spring is right around the corner, so flowers are starting to bloom, and many potential home buyers are getting ready to step into the market. If you’re thinking of buying this season, here’s how mortgage interest rates are working in your favor.

Freddie Mac explains:

If you’re in the market to buy a home, today’s average mortgage rates are something to celebrate compared to almost any year since 1971…

Mortgage rates change frequently. Over the last 45 years, they have ranged from a high of 18.63% (1981) to a low of 3.31% (2012). While it’s not likely that the average 30-year fixed mortgage rate will return to its record low, the current average rate of 3.45% is pretty close — all to your advantage.”

To put this in perspective, the following chart from the same article shows how average mortgage rates by decade have impacted the approximate monthly payment of a $200,000 home over time:How Interest Rates Can Impact Your Monthly Housing Payments | MyKCMClearly, when rates are low – like they are today – qualified buyers can benefit significantly over time.

Keep in mind, if interest rates go up, this can push many potential home buyers out of the market. The National Association of Home Builders (NAHB) notes:

“Prospective home buyers are also adversely affected when interest rates rise. NAHB’s priced-out estimates show that, depending on the starting rate, a quarter-point increase in the rate of 3.75% on a 30-year fixed rate mortgage can price over 1.3 million U.S. households out of the market for the median-priced new home.”

Bottom Line

You certainly don’t want to be priced out of the market this year, and waiting may mean a significant change in your potential mortgage payment should rates start to rise. If your financial situation allows, now may be a great time to lock in at a low mortgage rate to benefit greatly over the lifetime of your loan.

28
Feb

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1br/1ba over 800 sq.ft  $340,000

Don’t miss this opportunity to live close to the beach in a wonderful complex with tons of amenities!

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28
Feb

10 Steps to Buying a Home

10 Steps to Buying a Home [INFOGRAPHIC] | MyKCM

Some Highlights:

  • If you’re thinking of buying a home and you’re not sure where to start, you’re not alone.
  • Here’s a guide with 10 simple steps to follow in the homebuying process.
  • Be sure to work with a trusted real estate professional to find out the specifics of what to do in your local area.