Bryan:

Hello and welcome back to Change and the Market, your weekly look at the changing real estate market. I'm your host, Bryan, joined as always by our resident real estate expert, Chris Masiello. Chris, how are you doing today?

Chris:

Hey, Bryan. How are you? Hello to our community.

Bryan:

Doing good myself. Very excited to get into this episode. Let's jump right into it. You have a bit of an update. You were on a research excursion last week, so you've come back to share your information with us. So, what do you have for us today?

Chris:

So, I was very fortunate last week to be part of a private economic review from the investment bank Goldman Sachs. And you know, what's great about working with people like that is that they really give you forward-leaning information. Right? You know, a lot of times you look at economic data and you're really looking in the rearview mirror in this particular case; it's a little bit of rearview mirror, but it's also projecting forward and it gives you the opportunity to plan.

And that's one of the things that, of course, my role in the organization is about strategic planning, and kind of leaning into the future. So if everyone could bear with me a little bit, I'm just gonna kind of go through my notes and share with you my takeaways from our meeting last week.

So interestingly enough, the Federal Reserve is probably not done raising interest rates. They still have this view where they are somewhere between a 2 and 4% inflation target. So we're probably not going to see a still reserve rate. We're probably going to see rates go up maybe another half a point, maybe three-quarters of a point. No one's quite sure yet.

All that said, inflation has gone down from 9% to 6%. So the raising of interest rates and trying to cool off the economy, at least from the Federal Reserve's perspective—kind of parenthetically to that, there is there's a lot of sentiment that the Federal Reserve is way off the mark.

Nevertheless, they still control interest rates, so that inflation is slowing down and will probably continue to slow down, with a caveat that the labor markets are still really hot, because everyone's scrambling for talent. So let's talk about how will that affect housing. Interest rates going up a little bit makes it a little bit more expensive to borrow, although most of the interest rate hikes have already been factored into the market a little bit.

And we're still seeing mortgage products—five, seven-year adjustable rate mortgages under six. So there are still options other than a straight 30-year, which might be high sixes to low sevens. One of the things with rates moving around a little bit is that it does slow down the rate of appreciation.

So we're kind of accumulating an affordability factor. Housing prices aren't necessarily going down, but we're accumulating more affordability the longer that we stay in this holding pattern, which I thought was an interesting way to look at it. So the general perspective on housing is very bullish, that the market housing market is going to continue to be strong.

We're hampered a lot by inventory, of course, which is a perennial discussion. But generally, housing prices—and eventually affordability—will come back into line. And because we're in this kind of in-between period where we're still getting appreciation, we're just not getting it at meteoric rates or, you know, 15 to 20% a year.

If you take a look at what's happened in the last three years, housing prices have gone up, in some cases almost 50% or so. So there's still a lot of margin and profitability in housing, we're just slowing down the rate of appreciation. And again, the longer that we're in this hike environment—which isn't anticipated to last a long time like it did in the seventies or the eighties, when it lasted for years.

It's not really anticipated to last that long. We're accumulating some affordability with housing prices not going up as much. What was also interesting was the backdrop of why the housing market remains really solid and robust. They offered three different perspectives on it. One is that household balance sheets—which is basically the cash and debt that the American household has—is probably the strongest it's ever been.

The second reason is that there isn't any negative equity in their house and in people's housing values, like we experienced back in the '08 Great Recession. Everyone's still very much in positive equity and it will continue to be that way. It is really not anticipated that markets are going to collapse in any way like they did in '08.

And then thirdly—which, you know, as practitioners, we in the real estate industry are familiar with—is that underwriting and lending standards have been very high, the highest rate that they have ever been. And it's precluded people getting into the housing market who might be either a little credit-challenged or might need a little bit of time to continue to build their financial responsibility.

And I might have mentioned this in another episode, but the average credit score for a homebuyer right now is 778. It's the highest it's ever been. So there are really good fundamentals and good underpinnings for the housing cycle and the market. We're just super inventory-challenged. And I know, you know—we talked about this last week—that the battle cry right now is April.

April is when I'm going to put my house on the market. You know, no matter who I talked to, I talked to our agents and managers and all that, all of them and even sellers—and they say the same. They say the same thing. And of course, the stronger opportunity is now, but in any event, that was kind of the upshot of the economic meeting. And it was really good, so I think it's all good for housing.

Bryan:

Fantastic. Well, continuing on that topic of research, let's get into what kind of advice you have for people in the industry. And it is on that same topic of research, so why don't you expand on that?

Chris:

I think you have to do your own research. And again, you can look at economic data, historic economic data, and of course, it has some relevance. But you have to do your own research and I think one of the things is—don't listen to the news, just like I don't listen to it, because of the sensationalism. Do your own research.

Or in this case, I'm doing the research for people, so you're getting it not third or fourth-hand. You're really getting it secondhand and becoming your own expert in your own voice. I think that's really critical. Be the expert in your own voice. You can take information from somebody like me or other sources and synthesize it into language that you're comfortable with.

Bryan:

So again, continuing in that once more, I think that ties directly into the advice you had for everybody here on how to become their own expert—you had a good tool for that. So I want to go ahead and share that.

Chris:

Now for many people who know me well, I have I talk about this a lot. I operate almost exclusively in a retail news blackout. I don't watch retail news, radio, TV—doesn't matter what it is. What I do, though, is I have an app that you can get in any one of the app stores called Flipboard and it allows you to go in and choose your news feeds.

So, for instance, for me, it's business and finance. I like archeology, history, psychology, wellness, those types of things. And you can go in, you just checkbox what you want for newsfeeds and you'll get it from all different sources. You'll get it from Forbes, you'll get it from CNN, we'll get it from lifestyle magazines. You'll get it from all health magazines, you'll get it from everywhere.

And then that allows you to go into one app and you're choosing the news that you want to hear. You're just not randomly bombarded with news. The other piece to it is that it allows you to go through and really decide, well, what really do I like?

What do I really want to read and what do I want to expose myself to? Because let's face it, most retail news is based on sensationalism, that's how they sell it. That's how they raise dollars, by selling airtime. And with this, you can control your own intake of information, because all that information has energy to it and a lot of it is not the best.

So if you can control that, then that gives you more time and a filter to digest and then synthesize the information that you're getting. And that would be my recommendation for Flipboard. And it's a cool app. Simple. What I do is I'll take breaks during the day and I'll take 10 minutes and just go through the app, see what I want to read.

A lot of times I share a lot of that with people in the organization. It's called News Elimination. I call it blackout, the technical term is news elimination. So I would challenge everyone to do a two-week news elimination period. Download Flipboard and get your information in a more controlled fashion.

Bryan:

Interesting. Definitely interesting. I'll have to give it a try myself. I had never heard of Flipboard, but it sounds interesting, because yeah, it is easy to get bombarded and overwhelmed by the amount of news and information out there. So being able to curate that into something that I'm more interested in and that I think I'll get more value out of it is something that seems really valuable to me.

So awesome advice as usual, Chris. That's going to do it for this week's episode of Change and the Market. As always, if you're enjoying our show, make sure you follow, subscribe, or like us, wherever you're watching or listening, and come back next week for another brand-new episode of Change and the Market.

Chris:

Good to be with everybody. Take care.

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The Masiello Group is a second-generation family company that has been a trailblazer in New England real estate since 1966. With now more than 35 offices throughout northern New England, we're the largest residential real estate firm north of Boston to offer a complete suite of home services, including buying, selling, mortgage, title, insurance, relocation, and more.

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