Real Estate Crash is OVER... (At least in Massachusetts)
The Party is over for the “Real Estate Market is Going to Crash” folks
Sorry. For all of you “The Real Estate Market is Going to Crash” doom and gloom folks, it’s time for you to collect your belongs, and put on your jacket, because the party is about over.
Don’t believe me, okay. Let’s talk some data… But first,
Hi, it’s Jeff Chubb. I am a retired investment banker, turned real estate agent that has sold more than a 1,000 homes and am one of the top agents in the state of Massachusetts. If you have questions about the market or are thinking about making a move, then I would love to chat with you. Visit me at: www.YouTubeRealEstateAgent.com.
So it looks like this is going to be more of a small minor correction then a crash. And yes, it is important to say that it depends on location. Some markets are going to perform better then others.
But these doom and gloom folks have been saying the entire market was going to crash for close to a year now… Which I have never gotten. Could you imagine if a meteorologist got on TV telling you that the average temperature in the U.S today was going to be 64 degrees.
That would be stupid. But all of these media folks just can’t comprehend that like the weather… Real estate is also local.
So, what happened for me to come out and start screaming from the rooftop.
The financial markets are now fully pricing in a quarter-point interest rate hike in February as Inflation slows.
Not a half point. A quarter point.
That means that the tightening is coming to an end. The toughest days are behind us as we head into our most active market where demand naturally increases.
Why is the FED slowing down? Why are markets cheering? It’s because inflation is starting to cool. The softer Producer Price Index and Retail Sales have helped make this a forgone conclusion with now multiple FED chairs coming out calling for a quarter point hike.
All that hype… All that doom and gloom. Yes, some markets did get crushed. Those were the markets that were seeing just stupid gains. They crashed and will still see some more crashing back to reality.
The institutional buyers who were much of the leading causes for these crazy prices have now gotten their butts kicked, and have left the space and are licking their wounds. With that in mind… I personally hope that interest rates go no where near those lows that we saw previously.
Oh, you still don’t believe me. Well take a look at this article I saw this morning “Is the housing market recession nearing a demand trough? Experts detect a little rise in activity”.
If only these people watched my weekly updates! I have been talking about this for the last couple weeks, then again mentioned the pickup this week. Buyers are back.
So, for our market in Massachusetts… My fear has now become a snap back to the crazy days. Remember, I have been saying that our market is fragile… And I have meant it.
When you compare our inventory levels to the last 17 years… We currently have the third lowest amount of inventory. Dare I say… Third lowest in history due to inventory levels not really be tracked all that well before the MLS migrated over to the internet.
Inventory is low. Even a small rush in buyer demand could tip this thing real quickly.
It’s like the real estate market is Rocky in Rocky Four. I mean, it just took the FEDs best punches. Literally blow after blow after blow for 12 months. And like Rocky, the Real Estate Market fell to the Canvas… But it took the FEDs best shots and got right back up.
So the million dollar question becomes will I change my prediction that the average home price in Massachusetts won’t go up or down substantially and will be a flat year?
Nope. And here is why.
The FED wild card is about to be removed. But we now still have the economy wildcard.
How bad will this recession be? Microsoft just announced they were laying off 10,000 people yesterday. This is after huge layoffs at Goldman Sachs, Google and Amazon. Companies are trimming and most likely have only really started their employment trims.
And so far, these jobs have been white collar jobs. And this trend is expected to continue. With the service sector still being so tight on labor, it is expected that this will be a White-Collar Job recession. But the issue lies in that the trickle-down effect.
I tried to find the article that I read some time ago where one white collar job layoff will affect 3 to 5 blue collar jobs. I couldn’t find it. But it does make sense. Generally speaking, they have more disposable income. If they have no job, then they aren’t buying cars and may have to lay off the cleaning person which will have a lag effect, but it will affect the economy.
Also, if people are seeing their neighbors get laid off, then they may be more cautious in their own buying habits. Especially in big purchases like houses and cars.
So yes. I will almost certainly say there will be no housing crash… Here in Massachusetts that is. I know there are some other markets and parts of the country that are going through some pain, but the good news is that the end may be near.
It’s looking like more and more the case that the best time to buy was yesterday… And the second best time might be now… Because when interest rates start coming down, that’s when the dam could break and we could right back to where we started.
5-4-3-2-1… And cue the “Affordability” folks. I hate to tell you, but housing got cheaper last year. Factor in the inflation rate and housing affordability increased. And if you don’t think factoring in the inflation rate makes sense then I invite you to look up how they get to the GDP growth calculation. And if the average inflation stays in the 3 to 4% range in 2023 with housing prices staying flat… That means housing affordability will only get better.
I appreciate you considering subscribing and am curious to know what are your thoughts? Put them in the comments section below. Has your view changed in the recent weeks?
And if you are thinking about buying or selling a home, then I invite you to reach out to me… I would love to chat and help you if I can! My information is in the description below.
Until next time!