U.S. stocks plunged, capping the worst week for the S&P 500 since March, as President Trump pressed his trade war with China and new economic data—including monthly U.S. jobs data—inflamed fears that growth has peaked. The Dow sank more than 500 points, bringing its drop for the four-day trading week to more than 1,000, and the S&P finished the week down 4.6 percent.
What does this mean for the real Estate market? What is going on in the market right now?
Three months ago the sellers market ended a four year run. As always, the prices started to dip after the peak. Pretty normal a
nd fully expected. The problem that we have, is that most of the buyers have never seen a normal cycle. They only saw one cycle, and this cycle ended in a Real Estate crash combined with a stock market crash. This time is different. This time we have a normal cycle end and a normal dip after the peak. The problem that we have experienced lately however is that the stock market has tanked this past month. This is scaring the devil out of the buyers. They are deathly afraid that we are experiencing another 2007 crash. WE ARE NOT. I do expect another 5 to 7% drop before we level off, but not a crash.
For 3 weeks the market completely stopped. Buyers have been sitting on the sidelines, waiting to see if we are going into another "Great recession". This past week however the buyers seem to be loosening up. They are starting to realize that we are having a normal dip in the Real Estate market and not a crash. They are starting to realize that the stock market is simply correcting itself. They have seen interest rates take a dip and are starting to buy again. This week I got offers on nearly every single listing that I have. Hallelujah -Turning out to be a good Christmas after all.
Merry Christmas everyone,
Timothy and Alam
December 11, 2018
Interest rates have ticked down a quarter percent this past week.
Buyers are taking advantage of the drop in interest rates and are making offers. Even at Christmas time.
December 11, 2018
Average U.S. Mortgage Rates
Rates edged up, with the national average holding at around 4.71%. Check out Freddie Mac’s graph below, revealing average mortgage rate trends over the last 12 months.
JVM Lending Rates: Edging Up From Last Week
Below are 6 scenarios and their related rate quotes. Feel free to request additional scenarios from our team at any time.
October 11, 2018
Home prices have steadily gone up. Buyers have had an extremely difficult time with this. Homes have become more and more unaffordable these past four years. As you can see from the graph below, interest rates are the straw that broke the camels back. High prices and high interest rates have killed our sellers market. Home values have not started coming down significantly yet however, which is the shining star.
October 3, 2018
SELLERS: The Real Estate market goes in what is referred to as 7 year cycles. No one knows why it works this way, it just does. Let me explain. For the past 50 years we have seen a repeating trend. We will have a buyers market for approximately 5 to 7 years. During this 7 year period prices will stay flat. Then all of a sudden we will get a sellers market. During the sellers market the prices will skyrocket. Usually 30 to 50%. These sellers markets will usually last 2 to 4 years. Unlike the stock market or individual stocks, Real Estate can only go as high as people can afford. This is not rocket science.
I like to joke that Apple has not really invented anything new for ten years but the stock keeps going up from the momentum. We do not have that luxury in Real Estate. In a normal sellers market, prices will go up just so high, and then stop. As you have noticed in the past month, this end of a sellers market is just as abrupt as the beginning. At the beginning of this sellers market (Four years ago) I saw financial statements from the buyer with enough money to have 30% down. Reserves, money to cover shortfalls in the appraisal, and still have stocks and cash left. Over the past three years however I have watched those reserves get smaller and smaller.
This year I have seen buyers get down to the bare bones, cashing in their 401k's to get the down payment. Buyers just cannot pay the high prices that we are expecting from our listings anymore. Now- add in interest rate increases and poof. Buyers just cannot close the deal and the sellers market ends. NOW WHAT? At the end of every sellers market we usually drop an average of 11%. We are starting to experience this now. Home prices have topped out. With a few exceptions we are not getting multiple offers anymore and are actually having to negotiate terms with the buyers. The buyers are still there. All of my listings are being tagged as hot homes in both Zillow and Redfin.
Buyers are wanting to buy, but the buyers are afraid. The average buyer in Fremont has only seen one cycle; that cycle ended in a major crash. Buyers are afraid to be "That guy" who bought at the peak and saw the market crash afterwards. Market crashes We have only experienced two major crashes in history. 1989 and 2006. Both times the banks gave phony loans which created a fake market. THIS IS NOT THE CASE NOW. Both crashes were caused because buyers had nothing invested in the home (No down payment), and were willing to walk away. This time it is different.
Buyers have had to put down a minimum of 20%. Have excellent credit and high incomes to get a loan. These new homeowners are NOT going to walk away from their home because it comes down 10%. Therefore the market will definitely not crash. CONCLUSION If you are thinking of selling then you should consider it now, for obvious reasons. If you are thinking of buying then you should also consider it now, since interest rates are going up, and going up fast. Interest rates are everything!
September 26, 2018