A Robust Housing Market For Years To Come
David H. Stevens, CMB - Advisor to the GMM Board of Directors
Two questions continue to be asked of me. The first is, should I worry about rising prices and wait for the market to slow? The second is, is there a risk of a housing bubble like the Great Recession of 2008? The answer to both questions is, no! Housing prices are not on a verge of weakening and the housing economy of today does not compare in, any way, to the 2008 recession.
Let's start with the basics. Home price appreciation is strong across the country. And yes, it is too strong. As Core Logic reported recently, home prices for May of this year were 15.4% higher than May of last year. In fact, there is no state in the nation that showed a decline in prices.
In my almost forty years in the real estate and mortgage finance business, there have been a variety of cycles that have impacted housing. From the oil patch crisis in the eighties, the dot com bubble of 2000, to the Great Recession of 2008, and the most incredible year we just completed, homeowners, housing, and mortgage finance have seen its ups and downs.
The truth behind these market changes is that facts and data matter to markets. Housing is different from other goods and services. Yes, housing is about shelter and that makes it a national treasure that Presidents from both parties have highlighted over the many decades past, but it is far more than that. Housing is the single greatest contributor to wealth in America and when you combine that with the proper market conditions, the ability to build long-term, sustainable, intergenerational wealth can be accelerated.
2021 however is an entirely different time for thinking about homebuyer opportunities. Interest rates are at or near historic lows, which will make mortgages more affordable than ever. The demographics of the millennial generation hitting peak buying years is driving enormous demand. And mortgages are being underwritten to the safest standards in history thanks to laws passed this past decade. The fact is that the only barrier to entry is being able to find that home to buy, but if you can get a hold of one, chances are you are in for some wonderful long-term opportunity.
Some ask, what does this mean looking forward? Can the market stay strong? The answer from virtually every economist is that there is little downside risk in real estate. We are at one of those unique inflection points in housing where all the stars align, and as GDP expectations are extremely positive for a post pandemic recovery in the economy, it might only look better as we set our sights ahead. 
So the opportunity here is clear, and facts do matter, but owning a home is more than just facts and numbers. It provides stability for a family to raise their kids in the same schools and neighborhood without leases expiring. Unlike renting, you can paint your home any color you like and you can modify, decorate, and more to fit your family’s needs. You also won’t experience rising house payments in the same way as renting simply because a fixed-rate loan locks in most of your costs while rent rates rise over time.
Yes, we have had many cycles in housing over the decades, but for those that understand wealth creation, demographics, rate cycles, and the confluences that result from these data points, 2021 looks to be a truly remarkable year for the homeowner
Millennial Home Buyers Leaning on Baby Boomer Parents
Thanks to high demand and limited supply, home prices continue to rise, leading to Millennials purchasing homes at lower rates and later in life than prior generations. They are also turning to older generations for help. According to a study from Legal & General, a financial services company, 43% of people under 35 received aid from parents or other family members when buying a home. With home prices over 16% higher than last year (the most significant gain in 30 years), Millennials' high rates of student loan debt, and Baby Boomers controlling 53% of the wealth in the U.S., it seems to make sense. Baby Boomer parents feel that a home is a secure investment and a way to ensure the longevity of their incomes. Experts indicate they expect to see these gifts from parents continue to rise as long as home prices remain high and tax laws don't change.
The Team USA Real Estate @ RE/MAX Executives 
Posted by Abuzar Waleed on
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