By Sondra Barrett, President and the Board of Directors of NAIBRS
March 15, 2020 Newsletter
We live in uncertain times. We are bombarded with news of Coronavirus spreading in every continent except Antarctica. We are certainly going to break 100,000 infected and 3,000 mortalities….and quite frankly, it is terrifying. I’ve talked to so many friends, relatives and colleagues on how the virus has gone from a remote risk to a local concern. There are comparisons to the Spanish Flu of 1918. Most are shocked at 51 million fatalities caused by the pandemic virus. Many are more shocked when you think our world population was much less than today 102 years ago (less than 2 billion vs almost 8 billion today).
I’ve been thinking about what this will do to our real estate industry…one of the core engines of driving our US economy. Thus, I am writing to you about what our thoughts are on the impact of Coronavirus on our real estate business.
Home prices still remain strong.
Most markets in the US are still going up. There is over 3.3M shortage of housing inventory (per Freddie Mac) and we all keenly understand that homes go up over time. History has shown blips (like a major recession) but prices tend to go up. After all population grows, but land availability does not. Coronavirus will be contained and will be under control as the world if focused on the solution, versus denial and assigning blame.
The Fed Takes Action as a Response to the Impact of Coronavirus
With concerns on an economic slow down, the fed dropped rates 50bps. What this means for us…mortgage rates fell to incredibly low amounts…low 3% range for 30 Year Fixed and some cases below 3% for 15 Year Fixed. This means our clients can afford more house. For example, if rate is lower by 1%, this improves monthly payment by 12%. Your buyers (with prequalification from solid lenders) can buy more homes and save money.
Take a look at this chart of 10-year treasury rates, which are closely linked to mortgage rates.
10-Year US Treasury Rates
Many of you are thinking….are 10-year treasury rate and mortgage rates really connected? Yes, they are very much tied together as the next chart shows how tight they follow each other!
Looks like there is a positive correlation!
What to do Now
By being in a digital work environment, we have advantages available today.
Our New Construction Specialist classes for designation are online.
Proposed Properties LLC has its new construction discovery sessions available on Zoom tele-conferencing.
Be positive– if you look worried then your clients will be worried.
Some Beacons of Hope
Tom Truong, 2019 national president of AREAA believes “We remain confident in the housing market and are optimistic that the combined countermeasures including lower interest rates and high homebuyer demand will make 2020 an outstanding year for our industry!”
Asa Fleming, president of NC Association of Realtors with 47,000 agents states “The demand for housing is extremely strong in my state, and I hear similar feedback from other states.
Per Treasury Secretary Steven Mnuchin, the Treasury Department expects to continue “limited and tailored government support” of Fannie Mae and Freddie Mac after their departure from federal conservatorship. “Stability in the housing finance system is crucial, and there should be no disruption to the market as a result of Treasury’s recommended administrative reforms.”
Jim Pesavento, director of NAIBRS states “We have faced more challenges in our lifetime and this too will pass.”
The Ultimate Advice
There will always be a possibility of a global risk that affects our assets. Just look at the stock market with daily drops where many 401K values are dropping like a rock. However, people don’t live in their 401Ks…they live in their homes.
You can’t change how fast we will find a cure…but you can choose to take advantage of incredibly low mortgage rates and get into your dream home.
Life is too short to stop living. Like all storms, Coronavirus will come to pass and we will be back on the steady road to wealth creation for our clients.
Since being launched in the fall of 2017, the National Association of Independent Homebuilders and Remodelers has always had strong ties to the real estate community, and other professionals critical to the housing industry. Although rooted in the education and support of builders and remodelers, these other key service providers in the housing industry ecosystem have been essential components in NAIHBR as an organization. In an effort to recognize their contribution to the NAIHBR organization, the National Association of Independent Home Builders and Remodelers has been renamed The National Association of Independent Builders and Real-Estate Services, or NAIBRS!
This change has also been made to be more inclusive of real estate agents, lenders, title companies and other service providers that are key to the housing industry. And the change goes well beyond the name alone. NAIBRS will now be hosting classes and connecting members to other educational sessions for several of these specific groups to educate and promote the housing and contracting business, as well and create a more seamless and transparent experience for consumers.
Housing is a critical component of the US economy. For every single-family home built, 3 full time jobs are created. In additional, there is a significant economic lift and increased stability when new homes are constructed in a neighborhood. We are proud to be a part of this effort and support the housing industry.
To commemorate this change in our membership and organizational scope, NAIBRS will be offering new members a FREE year of membership in the organization until August 31st, 2019. That is a $49.95 value! Invite your friends and colleagues to join NAIBRS, and become a part of the movement that will promote and support the housing initiative in your community.
Two of NAIHBR’s core values are investing in the development of communities and giving back, especially to assist those that have worked hard to achieve the dream of home ownership. No organization embodies this mission more than Habitat for Humanity. Their goals of financial education, homeowner preparedness, assistance to those in need of housing, and community development are aligned with NAIHBR’s core values of how to “do good” in a community.
Together, we can all rebuild and rejuvenate our communities and create an impact that will benefit our neighborhoods and the families that live there for generations to come. Habitat for Humanity – Welcome to the NAIHBR family!
by Jim Pesavento, Director at NAIHBR
The American real estate market is facing major changes as it rolls into the second half of 2017. Consumers, their preferences, and the property inventory to satisfy market need are all changing faster than ever before, all culminating in a unique market opportunity not seen in over 20 years.
Millennials will make up 33% of homebuyers in 2017. This number is rising every day, and soon a majority of home sales will be to this new generation of buyers. This group of buyers is well educated, savvy, and resourceful. Their preferences in real estate generally lie in either new construction, or a property that has been recently renovated. Unfortunately, the condition of the majority of housing stock is not at this post-renovated level and therefore not an ideal option for these buyers.
Despite utilization of the internet for the purposes of home shopping and research, more buyers than ever before are using the services of a real estate professional (Marketwatch, March, 2017). Statistically, 85% of young boomers, 87% of generation X buyers and 89% of millennials used the services of a real estate agent in 2016. So, despite the technological advances, the trend is toward using Realtors more in the future, not less.
Builders broke ground on 784,000 single-family homes in 2016. Forecasts indicate an increase of 9-10 % in 2017, as well as 2018. A normal level of new home construction production would satisfy the market need, sustain population growth and replace older and obsolete homes. This number of needed new homes is estimated to be 1.3 million per year, and we are currently building at only 60% of that number. There is clearly a new housing shortage, and it is pacing to get worse long before it gets better. This is compounded by the fact that smaller builders cannot keep up with the demand, as speculative construction is capital intensive.
Much like these unique conditions create an unprecedented opportunity for the players in this space, NAIHBR offers the platform to bring the builders, agents and vendors together to create a synergistic relationship that can meet market demand and greatly benefit those that participate along the way. It is our pleasure to take this journey with you, and we welcome you to the NAIHBR family.
Jim has spent over two decades in the real estate business as a builder, Realtor and as a mortgage broker. Jim brings a wealth of knowledge to NAIHBR. He lives in Illinois with his wife and 2 children.
The National Association of Independent Home Builders and Remodelers (NAIHBR) made national press with an announcement by National MI of their sponsorship of NAIHBR's Chicago Leadership events. The announcement was picked up by several national news channels including Yahoo Finance. NAIHBR's Chicago area events are scheduled for August 29th and 30th at the Regency Tower in Oak Brook Il and 401 N. Michigan Ave. in Downtown Chicago respectively. The events are Realtor partner focused with speaking sessions focused on ways Realtors can leverage new contruction and renovation programs throuh NAIHBR and it's financial parnters to grow their businesses and improve local communities. For additional information on the leadership events and registration, please visit the NAIHBR events page.