Thanks Christina America's housing market was flourishing amid the pandemic
and now some economists believe the US has entered a
housing recession. Home sales have started to drop when
not accounting for the pandemic existing home sales in July
reached their lowest level since November of 2015. And
fear is growing that this decline could negatively impact the
broader economy. Joining me now is nick bailey president
and Ceo of the real estate company Remax. Thank
you so much for being here. My first question
for you is what do you think do you believe
we are in a housing recession? Well, thanks
for having us. Um First off, I think
the most important thing to note of what's happening with
this market is we're really returning to some level of
balance. I mean the reality is we've had 100
and 25 consecutive months of run up in pricing.
We've had a an extreme seller's market like we've never
seen in history, double digit pricing appreciation across most
of the country and that's not sustainable year over year
over year. And so buyers have put been been
put in a position to have a lot of pressure
in the last couple of years competing offers multiple bids
and buyers are starting to see some relief. There's
more inventory and as sales slow a bit it is
allowing buyers to have more choice and the competitive bidding
is not as strong. So it's actually providing a
little bit of relief for buyers but we're gonna return
to some level of equilibrium. Yeah, you make
a good point because I think it's true it is
tough comparables and there are a number of factors that
were unprecedented when we think about the pandemic and the
effect that it's had on the housing market. But
recent data shows there has been a pullback in new
home listings. So what do you think has led
to this? And what advice would you be giving
to would be home buyers and sellers in this moment
? Well, I think the favorable rates over the
last couple of years is there were people that maybe
didn't have to buy or sell but chose that they
wanted to because the scenario was advantageous for them.
What we're looking at today is regardless of the economy
, inflation, interest rates up and down. There's
something that happens every single year which is houses are
bought and sold. And so we feel very confident
that that will continue to happen. It's just people
are looking at some of the details around affordability and
look at interest rates as an example. We've only
been talking about the 30 year fixed rate right now
at around 5.5% up a little bit over last week
. But yet at the same time, there are
alternate mortgage products. And so if you're a buyer
out there, don't just look at the 30 year
fixed, it depends on your situation, adjustable rate
rate, mortgages like the 51 arm, 71 arm
, those are great options with a lower rate that's
more competitive F. H. A loans first time
home buyer and so what we're seeing now is products
like that in the mortgage market where more than 35%
of the market pre pandemic. They dropped to single
digits during the pandemic because the 30 year fixed was
so competitive. So there are other options out there
that we need to talk about that are typically part
of a more balanced market. I'm glad that you
mentioned mortgage products that are alternatives right now because affordability
is a big topic. Whenever we discuss this,
mortgage rates also still remain high although not as high
as they were during their peak. Earlier this year
rates were at historically low levels in 22, 20
and 20, during the pandemic. How do you
think the current mortgage rates play into fears about a
housing recession and could the rates ever drop down to
where they were at the beginning of the pandemic?
And I kind of know what you're going to say
before you say, it but I just had to
ask no it's a good question. I think two
things are happening with buyers and rates, One is
buyers are saying I need to get in now and
purchase before maybe they go up even further. And
then I think that there are some buyers that are
saying let's wait and see certainly as far as the
economy is concerned, every lever is being pressed to
slow down inflation And housing is generally between 15 and
18% of GDP? And so there could be a
scenario in which inflation uh comes under control at a
much faster rate, which there are early signs that
that's happening and rates could even go down to be
more competitive. But we have to also look at
a four or five or 6% rate on the scale
of over the last 20 or 30 years is still
competitive. And here's what we find at the end
of the day, buyers are less concerned about the
exact number of the rate and they're really worried about
do I have enough down payment? Uh And can
I afford the monthly payment? And so there is
going to be um Buyers taking a look not only
at rate, but just affordability. And that has
thrown off buyers with the huge jump in price appreciation
over the last couple of years, their rate was
certainly more competitive, but they were having to over
pay$50, more than ask price on a home
. And that changed their payment. And so ultimately
, I think we're seeing buyers are getting a realistic
look of, do I have the right down payment
. Can I afford the monthly payment? And there's
alternative mortgage products out there than the 30 year fixed
? And that's going to continue to be a big
driver of the housing industry moving forward well and to
piggyback on that, what do you see for the
future of the housing industry when we look, you
know, year three years, five years down the
line, are you seeing data coming in that's showing
that a lot of these buyers are moving to other
states and kind of spreading the wealth in order to
find more affordable options. We are seeing that.
And you look at some of the home sale search
sites even last year, approximately 30 for 36% scent
of people were searching for homes outside of their state
. That's up to 40% in the first quarter of
this year. It's it's gone up even over the
last two years. And I think what that data
indicates is that that People have choice on where they
live and where they work. And the idea of
having flexibility of working for a company that's not just
30 minutes from where you live, is here to
stay. And I think as long as that's the
case, it is going to offer people more options
to find some more affordable markets. But we're going
to return to real estate is local. I was
asked last year what mark, it's hot and it's
the first time in my nearly three decades. I
said almost every market was hot and I think what
we're looking at now is we are going back to
a very much localized market where you see the Midwest
sits in generally a 2-5% price appreciation. You see
some of the coastlines that come up faster. They
cool faster. But we're returning to parts of the
country, are returning to more stabilization and well,
we will see house prices adjust accordingly. So interesting
. That's Nick, bailey, president and Ceo of
re max. Thank you so much for joining us
here on cheddar news.