2021 Economic Update (My Notes) – Thanks to Ben Kinney for the powerpoint slides!!
When inflation rises, the FED increases % rates to control it. Right now FED has vowed to keep rates low until 2023.
GDP – everything we and the government buy/invest in. Basically the value of our economy. In 2020 the government pumped trillions of dollars into the economy thru PPP, stimulus checks, unemployment benefits, Operation Warp Speed, etc. GDP was 31.4% in Q2 2020!
Contractions only happened twice in 2009 and 2020.
In 2009 30-40% of all spending was related to housing!
Houses are still “affordable” because incomes have been going up & interest rates are at historic lows.
Understand “average” vs median. Median means 50% were higher, and 50% lower than the median #.
In 2020, 40% of homebuyers were 1st time homebuyers.
There is a serious inventory problem right now, with less than 2 months of inventory. In many Seattle neighborhoods, it’s even worse with less than 1 month of inventory. A balanced market is 4-6 months of inventory.
Buyers that are wanting to wait to save up for a larger downpayment, or wait for prices to decrease will be in for a rude awakening. Most buyers cannot save money fast enough. Right now money/ capital is very cheap. If % rates increased from 3% to 5%, that would make a house/mortgage 20% more expensive. % rates have increased this year 0.5%, which is a 5% increase.
Our advice: Just jump in, and buy whatever your current budget allows you to. If you wait, it will be too late. You can always sell in the future and buy a different house. Home values are increasing fast, and % rates will go up too.
New construction has finally broken above the 1 million mark, but analysts still think demand is closer to 3x’s that. I’ve been working with several buyers looking to buy a new home, and every home is getting 5-6 offers. So that makes me think we are not even close to fulfilling the current demand for housing right now.
Is this market the same as 2008? Most analysts say no because lending in 2021 is stricter than ever. Only buyers with solid financials are getting approved for loans. There are more robust lending policies in-place now.
Is there going to be a massive wave of Foreclosures when the moratorium is lifted in July? Most sellers have a healthy amount of equity in their homes, especially in 2021 with home values increasing so quickly. The average homeowner has $194,000 in equity! Many analysts think sellers that could not make their mortgage payments b/c of COVID and have applied for forbearance with their lenders will be able to keep their homes. The lenders could just add an additional 6 months of payments to the loan instead of foreclosure. …Or that seller could just sell their home in this crazy market and possibly make a profit.
How can we help you build and manage your wealth in real estate? Now might be the perfect time to diversify and buy more real estate.
Do you know someone that’s thinking about Selling? We have buyers looking in almost every neighborhood and can help them do an “off-market” deal. We have completed 3 already this year. We can write up the contracts for both parties and help facilitate a smooth Closing, at very reasonable prices.
Our Relax-Remodeling service has created some amazing results for our sellers. We pay for everything upfront, project manage, determine the scope of work, do in-house staging & design, we really are full-service. Our last remodel cost the seller about $30,000 but they netted $245K more on their home sale!