Real Estate Update 12/5/2019

Mortgages

Mortgage application volume decreased 9.2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The week’s results also include an adjustment for the Thanksgiving holiday. Refinance weakness caused the overall drop. Those applications fell 16% for the week but were 61% higher than the same week a year ago. (CNBC)

GDP

In 2000, just before the Bush tax cuts and a recession, U.S. governments collected 28.3% of GDP in taxes. Today that figure has dropped to 24.3% of GDP in 2018, the 4th lowest in the OECD and down from 26.8% a year earlier and 25.9% in 2016. (WSJ)

Housing Projections

Realtor.com predicts sales of existing homes will fall 1.8% compared with 2019. Home prices will flatten nationally, increasing just 0.8% annually, but in 25% of the 100 largest metropolitan markets, prices will fall. These include Chicago, Dallas, Las Vegas, Miami, St. Louis, Detroit, and San Francisco. Millennials will dominate the housing market, accounting for 50% of all mortgages by spring, according to the forecast. Just short of 5 million millennials will turn 30, which is when many people buy their first home, and the oldest will turn 39.

According to its 2019 U.S. Vacation Home Counties Report, between 2013 to 2018, the median sales price in vacation home counties increased at a slightly higher pace of 36% compared to the pace of increase of all existing and new homes sold, at 31%. (NAR)

National Home Prices

National home prices increased 3.5% year over year in October 2019 and are forecast to increase by 5.4% from October 2019 to October 2020. The October 2019 HPI gain was down from the October 2018 gain of 5.2% and was up a bit from the September 2019 gain of 3.3%. Home prices have been increasing year over year in a narrow range of 3.2% to 3.5% over the past six months, indicating that the rate of home price growth is leveling off. (CORELOGIC)

As a percentage of disposable income, we have the lowest debt service to income obligations in 40 years in the USA. (JP MORGAN)

Decanters And Diamonds

Just like Compass is a diversified company with a portfolio of different territories around the USA, agents too should be wary of being 100% focused on just one price-point. Yes of course we would all like to sell the most expensive real estate on earth: wouldn’t it be wonderful if we could sell three $100 million homes per year? HAH! Dream on….

The reality is that you can sell a broad variety of price-points within an area and apply a similar quality of service and expertise to all of them. I do think its wise to have some element of specialization, but being focused on one price-point alone exposes you to higher risk when that price-point market declines or goes into hybernation. I recall a top agent at a brokerage I worked with many years ago who hardly ever sold ‘expensive’ properties. She described herself as a ‘volume broker’…..and boy, did she sell volume! But every now and then she too would sell a property at a price-point outside of her ‘sweet-spot’. Don’t fear selling a higher or lower price-point: we are all capable of learning. And if its more comofortable, you can always partner with someone more specialized in this other price-point. Adding a team member who does so is an option too.

Mixing it up a little can make life more interesting. It can also mitigate your risk exposure to just one market. Remember: Tiffany sells a $200 decanter and a $2 million diamond ring in the same store. That diamond ring looks no less important because of the decanter!