Speaker 1:
Savvy investors know that the “R” word, or recession, is looming. But, if you’ve been a real estate owner, your response is, “Who cares?”
Why? “Cuz this is NOT a housing market recession.
You see, there’s been five recessions over the last 40 years. One of them, in 2008, was the real estate global financial crisis. That was a true housing market recession.
But, the other four recessions where economic crises. So, here are the four reasons why I believe this upcoming recession is not going to hurt real estate, and should not be classified as a housing market recession.
Number one: supply and demand. Right now, inventory is low. That means supply is low. So, guess what? Prices should be fine for the next couple years. Common economic theory says when you have low supply of products or services, prices should remain stable. I’ve been tracking South Florida inventory since pre-pandemic. Back in late 2019 there was about 54,000 properties for sale. It bottomed in January 2022 at 14,485. That’s a drop of 73%. Inventory now sits at 29,500. Although that’s a rise of about 105% this year, supply is still down about 45% from pre-pandemic levels.
Number two: lending institutions are healthy. They’re no longer giving out 0%, zero down, loans. In today’s market you need to get qualified. Better yet, you must get pre-approved in order to play ball with all the cash buyers out there.
Number three: home ownership equity is the highest it’s ever been. Proving this is not gong to be a housing market recession, reports vary. For example, in Florida, the average equity is near $65k. But on a national level it’s almost $30k as you see in the chart below.
And number four: mortgage debt service, as a percentage of income, is the lowest it’s ever been. The chart below shows the last 30 years. This is a strong signal that housing is strong
In summary:
- Supply is still off by almost 50% in the last 42 months
- Banks and lending institutions are healthy
- Home owners has more equity than they’ve had in the last 30 years
- Home owners debt service is the lowest in the last 30 years.
- Extra – demand remains strong
These are real estate fundamentals. It’s based on economic principles of supply and demand. AS you can see, our housing market is strong. The notion that a housing market recession is coming, is media hype.
What should be told is the inflation narrative. The Federal Reserve is doing everything it can to reduce inflation by increase the Federal Funds rate. By doing so, it’s breaking wall street, lowing employment levels and causing havoc to our economy.
Housing market recession – no. Inflation / economic recession – you bet.
4 Reasons Why This Will Not be a Housing Market Recession
Savvy investors aren’t buying into the idea that the coming recession is not a housing market recession. The data shows otherwise.
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