Over the next few days there will be (yet another) large gathering of real estate and finance professionals discussing the present and future state of the market. This particular gathering is going down in San Francisco. While I’m not sure anyone would be so bold as to make definitive predictions about our market’s future, a few of the experts did offer up some interesting, albeit non-earth-shattering thoughts.
The first and most encouraging prognostication has to do with mortgage interest rates. Most of the experts strongly felt that we’re going to enjoy these rates at least through next year. Amy Brandt, CEO of Vantium Capital expects that we’ll see some significant increases next summer. This is certainly good news for folks who are either sitting on the fence or are saving for that down payment. While there are certainly no guarantees in someone’s opinion, at least the folks watching the market and the financial world are on the same page.
The other topic was related to the government’s involvement in the mortgage financing sector. The prediction being that we won’t see the federal presence in this arena going away anytime soon. Part of the reason is there is currently no private entity large enough to step in. Just to put this into perspective, the federal government lent banks $7.7 trillion during the housing crisis. For you English majors out there, that was trillion with a “t”. I’m not really able to wrap my brain around that number so for easy math, that is $24,624 for every many, woman and child in the U.S. Hope that helps you as well. I think we can understand now why nobody else currently has the deep pockets to step in and take over that kind of debt.
The final presentiment (yes, that’s my final “p” word) offered up some confidence for not only real estate as a solid investment, but also other hard assets like oil and gold. The expectation is that those assets will continue to be solid investments regardless of how long it takes the economy to return to an environment of stable, long-lasting growth. It is no secret the reason we were put in this mess is because of major problems in the financial sector. The re-tooling of that system is not a quick-fix and is the main reason for the slow, but steady strengthening of our markets.
As real estate professionals, we need to be acutely aware of the mortgage financing part of every transaction. More often than not, the deal is relying on the buyer’s financial ability to pay but can also hinge on the sale of the buyer’s home and countless other factors. Since banks are looking more closely at every transaction, it is incumbent on the agents to understand the title, the deed and to be aware of any glitches with the property that could throw a wrench in the works. During the many weeks of pre-license class for real estate, our instructor would always shout the mantra (when getting a new listing) “read the deed, read the deed, read the deed!”. This responsibility is also shared with the seller, since they are typically more aware of every little detail of the home. Working closely with your agent can ensure there are fewer surprises along the way.
Ignoring our personal or political views on the presence of the federal government in the mortgage world, it is refreshing and encouraging to see that, at least at this conference, there seems to be a consensus of optimism towards the economy and the real estate market. We talked a couple weeks ago about the trend towards smaller and more efficient houses and I think this trend speaks towards a cautious optimism among home buyers. They are ready to buy and are excited about home ownership, but are not going to spend beyond their means or needs. This seems to be the trend of the “Millennials” or the “echo-boomers”. (In general, those folks born in the 80’s and early 90’s.)
Many of these echo-boomers are also trending towards making sacrifices now for the purpose of saving for a home purchase in the future. Taking on room-mates, staying in rental housing for longer periods and even choosing housing based on proximity to public transportation or employment seem to be a few of the trends of this group of about 80 million. This is also an Internet generation without exception. They will find your rental or for-sale listing online, they will look at pictures and videos online and they will be looking for information through social sharing sites like Facebook, Twitter, Instagram and others. It is a ripe and ready market and confidence is building.
Speaking of “echo-boomers” and on a bit of a personal note, we are mourning the passing of my good friend’s dog Boo. She was a fantastic dog and one of the two that I took care of while house-sitting for them. An Airedale terrier, Boo was smart, active, loving and protective of her little sister “Echo”. She loved to run around their large wooded lot and chase chipmunks and every other little creature that encroached on “her” land. Our entire ski patrol family loved her and will miss her.