Hey everyone, Eric Bibel with the Bibel team at NEO Home Loans. And today I want to talk to you about a market update and a housing forecast for the new year, 2022. If you like the information that you’re seeing here today, and you’d like to see more of it, please subscribe, comment, share, more interaction, more opportunity to get this message out.

[Timestamp: 00:28]

So here we are three months into 2022, and there has been a tremendous amount of movement, from COVID to geopolitical chaos, down to inflation and essentially everything in between. Really, the questions that we’re harboring from our clients, our referral partners, and just people out and about is, what does this all mean for housing and the market? And that’s a great question. Very valid question. What we’ve seen in the start of the new year is that more mortgage rates have climbed at an exponential rate.

[Timestamp: 01:04]

We have broken 4% in almost all products, 4% for a 30 year fixed. When really as little as six months ago, we were in the low threes, high twos. So, a significant change. And that is really on the backs of what we’ve seen coming out of the pandemic around inflation, around the cost of goods, rapid run up in the demand, coupled with supply issues, and not to mention the geopolitical concerns, conflict between Ukraine and Russia, and what that’s done in our domestic markets. And again, where it all sounds as doom and gloom, there is still a phenomenal opportunity within our market to get in while rates are still very favorable. And really before we start to see prices, continue their March up and ascent into new highs. So with that, what I want to gather and cover here today is around where things stand in the current context, and really what the duration of the year is to look like from both a housing forecast as well as an interest rate update in speculation of where things will look to go.

[Timestamp: 02:18]

So I’ll start with the housing aspect, because that’s a lot of the questions we’re fielding as a team and as an organization, on a day by day basis. And it really is, you know, the questions that keep coming up are, one, is now still a good time to buy? And also, is now still a good time to sell? And the answer to both those questions are yes, and here is why. So right now, from a buyer’s perspective, now is still a good time to buy. And the answer again, yes. The reason behind that is that rates are still historically low. So as I just said in the beginning of this clip, rates have have broken into the 4% category. If we look to history as our best point of context over the last 60 years, the historic average rate of interest is just over 6%.

[Timestamp: 03:08]

We’re talking about rates still in the low fours. I remember when I bought my first home 12 years ago, my rate was 4.75, and I was elated for that interest rate. So, still a phenomenal opportunity with rates where they are. More importantly is around expectations from an evaluation standpoint, meaning what homes will do from an appreciation standpoint. As of today, we’re seeing some of the lowest inventory of available homes for sale we have ever seen as a country, and more specifically here within Southern California. That being said, and why it’s meaningful to this context as a buyer now, this crisis is not going away overnight. We are not going to see a trove of new inventory hit market. So being resolved and being strong within your convictions to press forward.

[Timestamp: 03:56]

If you are a buyer in this market, even though it has been a challenge in getting an offer accepted, getting an offer presented, stay the course. We do not expect–and it’s not just myself it is very, very formidable minds within the industry–expect to continue to see housing prices rise. And it doesn’t look like there will be any decline for the foreseeable future. And again, that’s centered under a number of contexts. One, interest rates being as low as they are, two, demand being as high as it is. The number of willing and able bodies to purchase properties is near all time highs. And you couple in the fact that inventory is so depressed, meaning the available homes for sale is essentially non-existent. We’ve seen some pockets of Southern California and other parts of the country year over year, be down 70 plus percent in available homes for sale. It’s not going away overnight. So with that simple supply and demand takes over from an economic standpoint in that it is truly a phenomenal time and opportunity to purchase.

[Timestamp: 05:08]

And two, on the flip side of that is the opportunity to sell. If you are a seller in this market, there is so much opportunity. Right now, what we’re seeing from an offer presentation for each home, that hits market we’re seeing in here in San Diego alone, an average of six offers within the first week of the home being [listed]. What does that mean for you? There is a trove of people that are looking to purchase in our market. So here you have a very, very hot commodity as a seller with high demand. So the opportunity to take advantage of selling at top dollar, with again, still runway behind the scenes, if you’re forecasting down the road. But the ability to sell at top dollar, sell in a shortened window, and really get in and out before having to deal with multiple people coming through the property. So, it is a phenomenal opportunity for sellers, as it is for buyers.

[Timestamp: 06:05]

Where we see this going. I don’t see, and again, not just myself, but very formidable minds within our industry, and the economic landscape. We don’t see this in any territory for any type of correction in housing. And it’s really centered around those components, high demand, low supply. We know builders are not building at the levels they have been in years past. I mean, you’re looking at today’s current context, new building inventory is that a 13 year low. People are staying in their homes longer. So the available resale properties are at near lows as well. So those two factors combined. And there is still a high concentration of qualified buyers. That in and of itself, and the fact that there is no demand, housing is not poised for a correction.

[Timestamp: 06:59]

So really a very, very strong stance. I am highly convicted in that we will continue to see prices run and rise for the foreseeable future. Second part that I want to touch on is around interest rates and what interest rates are doing, what we expect them to do, and really what to expect through the duration of this year. As I mentioned on the onset of this clip, that interest rates have really ascended up sharply to start the new year. What we’ve seen over the past really three months of 2022 is rates climb as much as a percent and a half off their lows of 2021. And that’s, you know, as I mentioned earlier, centered around Covid, us coming out of COVID as a nation, and inflationary concerns. So, the value of our dollar and what that dollar actually yields from a cost perspective. And now, as of recently the turmoil abroad, the geopolitical conflict.

[Timestamp: 07:54]

All of this has kind of been a run up in the mortgage interest rate space where we’ve seen now rates climb at a very rapid rate. As we start to gain footing, I do firmly expect that rates will balance and we’ll start to see a more normal market, where we’re not seeing these massive whip saws where, you know, one day rates move a quarter percent up and the following day, they down almost a half percent. And that cycle just continues to go vicious as any financial market responds to the current market conditions, volatility, if you want to call it. So as we start to gain our footing in COVID, as COVID restrictions, start to be pulled back, inflation gets addressed by our monetary policy, so through the federal reserve, and the conflict abroad starts to taper down, we should see rates level.

[Timestamp: 08:51]

Now, forecasting really long term, looking to the duration of 2022 into 2023. I am calling that interest rates are going to challenge all time lows, and that’s really on the crux of a recession. We hear recession, as consumers, we’re trained, doom and gloom. And, don’t want to downplay the severity of a recession, but at the end of the day mortgage interest rates and housing have historically benefited from recessionary indicators. So with that said, as we start to see a contraction within our economic landscape, and we very well may be in one as we speak, as a recession is defined as two consecutive quarters of negative or retracted gross domestic products or output. Mortgage and housing has historically benefited in those types of phenomenon. So again, where I don’t want to sound like the doom and gloom individual, because that is absolutely not the case.

[Timestamp: 09:55]

I am very strongly convicted that it is a phenomenal time within our industry, despite the lack of inventory. What we’re seeing from a product expansion standpoint is, we just had a guest come today and speak about non-qualified mortgages. We’re seeing rapid advancement in that space. So availability of credit is rebalancing. We’re starting to see more homes come on market. But we are in still a phenomenal time to purchase and sell. If you have additional questions or would like to know more about what we have here today, please reach out. My team and I would love the opportunity to thank you for watching.

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