Marc Cuniberti The housing market is toast.
Or at least I thought so until just last week a friend told me they sold their house in 4 days.
Although my friend offed her house in blistering speed, the FEDs multi-decade ultra-low interest rates as it pertains to puffing up the real estate market is likely at the beginning of the end.
The last real estate blow-up of 2008 should have decimated the realtor profession and actually started to, but then the foreclosure tsunami hit America. The wave of foreclosure resales made a windfall of profits for the agencies whose “deal” is to facilitate the deal.
Simply put, in 2008 it looked as if the real estate markets was about to weed out about a zillion sales agents as homes prices imploded, but then the industry started hawking at foreclosure bargain prices the very same real estate they so feverishly hawked for full price just a few years earlier. A true example of making lemonade from lemons courtesy of the banking system.
No, it wasn’t a great time to sell in 2008, but it was a great time to be foreclosed on, and that meant selling all those previously “sold” homes now in foreclosure was about to become very good business. Why let a good crisis go to waste right?
Fast forward to today with interest rates skyrocketing, and 30-year mortgages rising to ridiculous rates, it is likely neither a good time to sell nor a good time to buy, which flies in the face of what we’ve been told for decades. It also flies in the face of my friend’s experience, but as I said, I think it’s the beginning of the end. The last domino to fall being homes prices, that one just hasn’t been hit yet.
But the facts speak for themselves:
Sales of previously owned homes fell nearly 6% in July compared with June, and sales dropped about 20% from the same month a year ago, according to the National Association of Realtors. “In terms of economic impact we are surely in a housing recession because builders are not building,” said Lawrence Yun, chief economist for the Realtors. One in 5 sellers in August dropped their asking price, according to Realtor.com. The average home sold for less than its list price for the first time in over 17 months during the four-week period ended Aug. 28, according to a report by Redfin.
Making matters worse was Fed Chief Jerome Powell in a sobering 8-minute speech at the annual Federal Reserve meeting on September 26th all but guaranteeing higher rates will follow with what he called more “pain” for the economy.
For the housing market, that pain won’t be easy foreclosures sales juiced up by Fed-hammered, ultra-low interest rates this time around. It’s more like a no-holds-barred, in-your-face, uppercut to the economy and the housing market with historic interest rate increases the likes that have not been seen since the 80’s.
Like I said at the start of this news article, “the real estate market is probably toast” and there are no white knights wearing Federal Reserve hats that are coming to the rescue with ultra-low interest rates and ridiculous loan forgiveness programs like all other previous housing crashes.
I have a lot of real estate agent friends and acquaintances and I have to warn that the pecking you may hear in the months to follow will not be typewriters hammering out new sales contracts. Instead, it will be the 2008/2009 chickens finally finding their way home to roost in a cratering market.
With no Federal Reserve to lower rates again thanks to the free money inflation brought to you by decades of overspending politicians, the foreclosure signs this time around unfortunately will likely be on the real estate agency offices in just about every county of the country.
“Watching the markets so you don’t have to”
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(As mentioned please use the below disclaimer exactly) THANKS (Regulations)
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, SDSU, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. 530-559-1214
