Tag: Lawrence Yun

NAR Economist Lawrence Yun Says ‘The Housing Recession Is Over’

In a July 27th article on realtor.com, the National Association of Realtors’ chief economist, Lawrence Yun, was quoted as saying, “The recovery has not taken place, but the housing recession is over. The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply.”

“The West—the country’s most expensive region—will see reduced prices, while the more affordable Midwest region is likely to see a small positive increase,” Yun was quoted as saying in the article.

Yun’s analysis was based on June statistics, but I can see some evidence of his statement in my own experience. My newest listing in Lakewood, featured last week for $700,000, went under contract in three days amid competing offers for $720,000, leading to cancelation of the open house scheduled for day 4.

Another listing, a $1,250,000 ranch in north Golden, also went under contract last week for just below its listing price.

The fact remains that the increase in mortgage interest rates has many sellers holding onto their current home even though they’d like to move. If you had a 2.9% mortgage on your current home, you’d want to stay put rather than give it up and buy a replacement home with a 7% mortgage, right? The industry refers to homeowners in that situation as “rate-locked.”

Builders of new homes are benefiting from the low inventory of existing homes for sale. The sale of new homes surged in May and declined in June, but the trend is still upward. Buyers like buying a new home because, in addition to being new, they can usually be purchased without a bidding war.

Yun, of course, is quoting national statistics, but you and I know that all real estate is local, so I created the chart below using the tools available to me on REcolorado, Denver’s MLS, looking only at listings within 18 miles of downtown Denver.

Current inventory compares favorably with previous years in that chart, although pending and closed sales are down significantly. Values are still high, with the price per finished square foot near last July’s high.

Forecasters, me included, were surprised at the strength of the current real estate market.  We thought a true recession was in the cards, but in fact the market remains quite strong. I can only attribute the market’s performance to the large number of buyers still in the market and the continued low unemployment rate.

What will the market be like as we move into fall and winter?  Stay tuned, because I don’t want to venture a guess!

Experts Differ on What 2023 Will Bring in Terms of the Real Estate and Mortgage Markets

Real estate and mortgage professionals are coming to grips with how the market changed in 2022, but they’re holding back on predictions for the market in 2023.

On the national level, Lawrence Yun, NAR chief economist, predicts home prices will remain stable and the sales of existing homes will decline by 6.8%. He identified ten markets that will outperform other metro areas, and all ten of them are in the southeast.

“Half of the country may experience small price gains, while the other half may see slight price declines,” Yun said.

Here in the Denver market, the Denver Metro Association of Realtors (DMAR) issues a monthly market trends report. In its latest report, it pointed out that while there is a steady month-over-month decline in the average sold price, the year-over-year sold prices remain higher.

“Without a doubt, the Denver Metro housing market is changing, but the question on everyone’s mind is how long this change will last and what to expect next year,” commented Libby Levinson-Katz, Chair of the DMAR Market Trends Committee and a metro Denver Realtor®. “Most of the answers are tied directly to when we will see relief from increasing mortgage rates that have more than doubled since January… While we expect to see the Denver real estate market continue to change through 2023 due to interest rates and inventory woes, it has continued to show strength and stability.” 

As I highlighted above, a lot depends on the direction of mortgage rates, and predictions of where rates are headed are few and varied, because there are so many factors.

For example, will the Federal Reserve’s increases in the Fed Funds rate continue, and for how long? Will it cause a recession? Will unemployment increase and inflation abate?  What’s the future of the war in Ukraine and its impact on the US and world economy? What will energy cost in 2023?

Personally, I have no predictions to offer. What I know for sure is that people will still want to sell, and there will always be buyers ready to buy. We continue to see new listings come on the market. As always, some listings will be priced wisely and will sell quickly, but most will be overpriced and will sit on the market, slowly reducing their prices until they sell, expire, or are withdrawn from the MLS.

There may even be bidding wars on homes that are priced right. For example, I just sold a home in Applewood which we priced at $895,000 and sold to one of three bidders within a week for over $900,000. But we’re not perfect. Other listings have languished on the market and only sold once we reduced the price sufficiently to attract a buyer.

Recommended Video: Are We in a Housing Bubble?  

This is a question that seems to be on everyone’s mind, especially after a year which has seen double digit appreciation in home prices.

Finally, I found a focused discussion on this topic by highly knowledgeable persons that I can recommend. Here’s a YouTube link for that discussion. The panelists are Nick Bailey, president of Re/Max, LLC, Lawrence Yun, chief economist for the National Association of Realtors, and Ward Morrison, president of a mortgage franchising frim. The consensus of these experts is that 2022 will see most appreciation (3 to 5%, says Yun) but no crash. The main reason is the imbalance of supply and demand and mortgage rates projected to be no higher than 4%, which is still quite low.

The record job growth is also a critical factor. Foreclosures will remain low because only 2% of homeowners have negative equity. Watch the 28-minute video on our blog. You’ll learn a lot, as I did.

Why Real Estate Won’t Crash Like It Did Before

Many buyers and sellers of real estate are wondering whether we’ll see the kind of crash in real estate values that we saw in the Great Recession of 2008 onward. Experts agree that we will not.

In an April 22nd post, realtor.com explained that circumstances this time are quite different from then. Reasons cited by realtor.com’s economist, Danielle Hale, include the following:

First, the 2008 crash was created by a rash of bad mortgages — a situation that was remedied because of that crash. Second, there was an oversupply of houses for sale, whereas today there is an undersupply.

According to the realtor.com post, “There are simply too many would-be buyers out there: millennials eager to put down roots and start families, folks who lost their homes during the last recession and want to buy another property, and boomers looking to downsize.”

Lawrence Yun, chief economist at the National Association of Realtors, predicts that home sales will pick up again quickly and that prices will not fall.  He sees the luxury market taking the biggest hit, largely because the buyers of those homes may have lots of financial liquidity, but it is in stocks which they don’t want to sell while prices are low.

Also, widespread mortgage forbearance will prevent the surge in foreclosures we saw before.