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April
16

Think This Is a Housing Crisis? Think Again. | MyKCM

With all of the unanswered questions caused by COVID-19 and the economic slowdown we're experiencing across the country today, many are asking if the housing market is in trouble. For those who remember 2008, it's logical to ask that question.

Many of us experienced financial hardships, lost homes, and were out of work during the Great Recession – the recession that started with a housing and mortgage crisis. Today, we face a very different challenge: an external health crisis that has caused a pause in much of the economy and a major shutdown of many parts of the country.

Let's look at five things we know about today's housing market that were different in 2008.

1. Appreciation

When we look at appreciation in the visual below, there's a big difference between the 6 years prior to the housing crash and the most recent 6-year period of time. Leading up to the crash, we had much higher appreciation in this country than we see today. In fact, the highest level of appreciation most recently is below the lowest level we saw leading up to the crash. Prices have been rising lately, but not at the rate they were climbing back when we had runaway appreciation.Think This Is a Housing Crisis? Think Again. | MyKCM

2. Mortgage Credit

The Mortgage Credit Availability Index is a monthly measure by the Mortgage Bankers Association that gauges the level of difficulty to secure a loan. The higher the index, the easier it is to get a loan; the lower the index, the harder. Today we're nowhere near the levels seen before the housing crash when it was very easy to get approved for a mortgage. After the crash, however, lending standards tightened and have remained that way leading up to today.Think This Is a Housing Crisis? Think Again. | MyKCM

3. Number of Homes for Sale

One of the causes of the housing crash in 2008 was an oversupply of homes for sale. Today, as shown in the next image, we see a much different picture. We don't have enough homes on the market for the number of people who want to buy them. Across the country, we have less than 6 months of inventory, an undersupply of homes available for interested buyers.Think This Is a Housing Crisis? Think Again. | MyKCM

4. Use of Home Equity

The chart below shows the difference in how people are accessing the equity in their homes today as compared to 2008. In 2008, consumers were harvesting equity from their homes (through cash-out refinances) and using it to finance their lifestyles. Today, consumers are treating the equity in their homes much more cautiously.Think This Is a Housing Crisis? Think Again. | MyKCM

5. Home Equity Today

Today, 53.8% of homes across the country have at least 50% equity. In 2008, homeowners walked away when they owed more than what their homes were worth. With the equity homeowners have now, they're much less likely to walk away from their homes.Think This Is a Housing Crisis? Think Again. | MyKCM

Bottom Line

The COVID-19 crisis is causing different challenges across the country than the ones we faced in 2008. Back then, we had a housing crisis; today, we face a health crisis. What we know now is that housing is in a much stronger position today than it was in 2008. It is no longer the center of the economic slowdown. Rather, it could be just what helps pull us out of the downturn.

 


We encourage you to reach out to our expert agents to discuss your unique buying or selling situation. We're here for you!

April
13

Recession? Yes. Housing Crash? No.

Recession? Yes. Housing Crash? No. | MyKCM

With over 90% of Americans now under a shelter-in-place order, many experts are warning that the American economy is heading toward a recession, if it's not in one already. What does that mean to the residential real estate market?

What is a recession?

According to the National Bureau of Economic Research:

"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

COVID-19 hit the pause button on the American economy in the middle of March. Goldman Sachs, JP Morgan, and Morgan Stanley are all calling for a deep dive in the economy in the second quarter of this year. Though we may not yet be in a recession by the technical definition of the word today, most believe history will show we were in one from April to June.

Does that mean we're headed for another housing crash?

Many fear a recession will mean a repeat of the housing crash that occurred during the Great Recession of 2006-2008. The past, however, shows us that most recessions do not adversely impact home values. Doug Brien, CEO of Mynd Property Management, explains:

"With the exception of two recessions, the Great Recession from 2007-2009, & the Gulf War recession from 1990-1991, no other recessions have impacted the U.S. housing market, according to Freddie Mac Home Price Index data collected from 1975 to 2018."

CoreLogic, in a second study of the last five recessions, found the same. Here's a graph of their findings:Recession? Yes. Housing Crash? No. | MyKCM

What are the experts saying this time?

This is what three economic leaders are saying about the housing connection to this recession:

Robert Dietz, Chief Economist with NAHB

"The housing sector enters this recession underbuilt rather than overbuilt…That means as the economy rebounds - which it will at some stage - housing is set to help lead the way out."

Ali Wolf, Chief Economist with Meyers Research

"Last time housing led the recession…This time it's poised to bring us out. This is the Great Recession for leisure, hospitality, trade and transportation in that this recession will feel as bad as the Great Recession did to housing."

John Burns, founder of John Burns Consulting, also revealed that his firm's research concluded that recessions caused by a pandemic usually do not significantly impact home values:

"Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices)."

Bottom Line

If we're not in a recession yet, we're about to be in one. This time, however, housing will be the sector that leads the economic recovery.

April
10

Looking to the Future: What the Experts Are Saying

Looking to the Future: What the Experts Are Saying | MyKCM

As our lives, our businesses, and the world we live in change day by day, we're all left wondering how long this will last. How long will we feel the effects of the coronavirus? How deep will the impact go? The human toll may forever change families, but the economic impact will rebound with a cycle of downturn followed by economic expansion like we've seen play out in the U.S. economy many times over.

Here's a look at what leading experts and current research indicate about the economic impact we'll likely see as a result of the coronavirus. It starts with a forecast of U.S. Gross Domestic Product (GDP).

According to Investopedia:

"Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country's economic health."

When looking at GDP (the measure of our country's economic health), a survey of three leading financial institutions shows a projected sharp decline followed by a steep rebound in the second half of this year:Looking to the Future: What the Experts Are Saying | MyKCMA recent study from John Burns Consulting also notes that past pandemics have also created V-Shaped Economic Recoveries like the ones noted above, and they had minimal impact on housing prices. This certainly gives hope and optimism for what is to come as the crisis passes.

With this historical analysis in mind, many business owners are also optimistic for a bright economic return. A recent PricewaterhouseCoopers survey shows this confidence, noting 66% of surveyed business owners feel their companies will return to normal business rhythms within a month of the pandemic passing, and 90% feel they should be back to normal operation 1 to 3 months after:Looking to the Future: What the Experts Are Saying | MyKCMFrom expert financial institutions to business leaders across the country, we can clearly see that the anticipation of a quick return to normal once the current crisis subsides is not too far away. In essence, this won't last forever, and we will get back to growth-mode. We've got this.

Bottom Line

Lives and businesses are being impacted by the coronavirus, but experts do see a light at the end of the tunnel. As the economy slows down due to the health crisis, we can take guidance and advice from experts that this too will pass.

March
24

Economic Slowdown: What the Experts Are Saying

Economic Slowdown: What the Experts Are Saying | MyKCM

More and more economists are predicting a recession is imminent as the result of the pullback in the economy caused by COVID-19. According to the National Bureau of Economic Research:

"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

Bill McBride, the founder of Calculated Riskbelieves we are already in a recession:

"With the sudden economic stop, and with many states shutting down by closing down schools, bars and restaurants…my view is the US economy is now in a recession (started in March 2020), and GDP will decline sharply in Q2. The length of the recession will depend on the course of the pandemic."

How deep will it go?

No one knows for sure. It depends on how long it takes to beat this virus. Goldman Sachs anticipates we will see a difficult first half of the year, but the economy will recover in the second half (see below):Economic Slowdown: What the Experts Are Saying | MyKCMGoldman also projects we'll have "further strong gains in early 2021."

This aligns with the projection from Wells Fargo Investment Institute:

"Once the virus infection rate peaks, we expect a recovery to gain momentum into the final quarter of the year and especially into 2021."

Again, no one knows for sure how long the pandemic will last. The hope is that it will resolve sometime over the next several months. Most agree that when it does, the economy will regain its strength quickly.

*QUARTER 1 DATA FROM GOLDMAN SACHS WAS UPDATED FROM 0% TO -0.2% ON 3/17/20 AFTER THE INITIAL RELEASE.

Bottom Line

This virus is not only impacting the physical health of Americans, but also the financial health of the nation. The sooner we beat it, the sooner our lives will return to normal.

March
19

Three Reasons Why This Is Not a Housing Crisis

Three Reasons Why This Is Not a Housing Crisis | MyKCM

In times of uncertainty, one of the best things we can do to ease our fears is to educate ourselves with research, facts, and data. Digging into past experiences by reviewing historical trends and understanding the peaks and valleys of what's come before us is one of the many ways we can confidently evaluate any situation. With concerns of a global recession on everyone's minds today, it's important to take an objective look at what has transpired over the years and how the housing market has successfully weathered these storms.

1. The Market Today Is Vastly Different from 2008

We all remember 2008. This is not 2008. Today's market conditions are far from the time when housing was a key factor that triggered a recession. From easy-to-access mortgages to skyrocketing home price appreciation, a surplus of inventory, excessive equity-tapping, and more – we're not where we were 12 years ago. None of those factors are in play today. Rest assured, housing is not a catalyst that could spiral us back to that time or place.

According to Danielle Hale, Chief Economist at Realtor.com, if there is a recession:

"It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow. I would expect this to be milder. There's no dysfunction in the banking system, we don't have many households who are overleveraged with their mortgage payments and are potentially in trouble."

In addition, the Goldman Sachs GDP Forecast released this week indicates that although there is no growth anticipated immediately, gains are forecasted heading into the second half of this year and getting even stronger in early 2021.Three Reasons Why This Is Not a Housing Crisis | MyKCMBoth of these expert sources indicate this is a momentary event in time, not a collapse of the financial industry. It is a drop that will rebound quickly, a stark difference to the crash of 2008 that failed to get back to a sense of normal for almost four years. Although it poses plenty of near-term financial challenges, a potential recession this year is not a repeat of the long-term housing market crash we remember all too well.

2. A Recession Does Not Equal a Housing Crisis

Next, take a look at the past five recessions in U.S. history. Home values actually appreciated in three of them. It is true that they sank by almost 20% during the last recession, but as we've identified above, 2008 presented different circumstances. In the four previous recessions, home values depreciated only once (by less than 2%). In the other three, residential real estate values increased by 3.5%, 6.1%, and 6.6% (see below):Three Reasons Why This Is Not a Housing Crisis | MyKCM

3. We Can Be Confident About What We Know

Concerns about the global impact COVID-19 will have on the economy are real. And they're scary, as the health and wellness of our friends, families, and loved ones are high on everyone's emotional radar.

According to Bloomberg,

"Several economists made clear that the extent of the economic wreckage will depend on factors such as how long the virus lasts, whether governments will loosen fiscal policy enough and can markets avoid freezing up."

That said, we can be confident that, while we don't know the exact impact the virus will have on the housing market, we do know that housing isn't the driver.

The reasons we move – marriage, children, job changes, retirement, etc. – are steadfast parts of life. As noted in a recent piece in the New York Times, "Everyone needs someplace to live." That won't change.

Bottom Line

Concerns about a recession are real, but housing isn't the driver. If you have questions about what it means for your family's homebuying or selling plans, let's connect to discuss your needs.

March
11

We understand if you want to take a break from buying or selling a home during the coronavirus outbreak, and give the virus time to run its course. That's your decision, and we respect it.  We will keep you informed about what's happening in the market in the meantime, and will be prepared to help you when you're ready to get back in.

But if you do wish to continue the process of buying or selling your home, we are ready and able to assist you. As we write this in mid-March, healthy people are not being advised to self-quarantine unless they are in "hot zones" or have pre-existing conditions that make them particularly susceptible to the coronavirus – if they are over 60 years old or have heart or lung problems.  So for most of you, there's no reason you can't continue to look for a home, or keep your home on the market.

 

Indeed, we believe that this market presents some unique opportunities for buyers and sellers:

 

  • Buyers:  Rates are actually at their lowest level in at least 50 years. As we write this, our buyer clients are securing 30—year fixed rate mortgages for 3.5%, and adjustables under 3%.  And with some buyers taking a break, competition is down, which should reduce multiple-offer situations and make it a little easier now to get your offer accepted.

 

  • Sellers: With some sellers taking their homes off the market, you have less competition for the buyers who are out there. And lower rates tend to bolster home prices for sellers, since buyers can afford a little more house for the same monthly payment.

 

Of course, if you do want to stay in the market, you should take some fundamental precautions to protect yourself:

 

  1. Wash your hands – and other hygienic practices

Soap is the very best preventative for communicating the virus, so use it.  Wash your hands regularly, for at least 20 seconds, with soap and water.  If you can't wash your hands, the next best thing is to use an anti-bacterial wipe or gel (at least 60% alcohol) both before and after you come into contact with other people, objects, or surfaces. And try to avoid touching your eyes, nose, and mouth with unwashed hands. If you sneeze or cough, do it into a tissue, then throw away the tissue, then wash your hands or wipe them down.

 

  1. Keep your distance – even from your agent!

You don't need to hide in your basement, but you should try to keep a "social distance" from others when working, shopping, socializing. Give yourself 5-6 feet of distance from other people if possible, and avoid large groups of people. And that goes for greetings — no kissing, hugging, handshakes. Even the elbow shake is probably not a good idea. Instead, try the "heartfelt" gesture: both hands over your heart and a nod of your head to the person you're greeting.

 

  1. Use videoconferencing as much as possible.

You and your agent – and anyone else you're working with on your transaction –should try to communicate as much as possible by videoconference rather than in-person meetings, just to limit the amount of interaction you have with other people.  if you are all on iPhones, you can easily do a Facetime meeting. And if you are all on Facebook, then Facebook Messenger has an easy-to-use video conferencing tool.  But you can also use any number of apps and services for video, including Whatsapp, Snapchat, Skype, and Zoom.

 

  1.  Stagger the closing.

Talk to your attorneys about setting up staggered closings to avoid requiring all the parties to be in the room at the same time. You need to sign papers and fulfil some other closing functions, but you don't necessarily need to do that with the other side present.

 

  1. Take precautions on showings and open houses.

At this point, we see no reason to discontinue showings or open houses so long as you follow fundamental distancing and hygienic protocols.  Try to follow these guidelines:

  • Keep your distance, even if it seems unfriendly.
  • Remember: no shaking hands when you meet!
  • Drive your own car to showings, rather than traveling with the agent in his or her car.
  • Minimize touching of surfaces in houses.
  • Bring paper towels with you, and use a clean paper towel or tissue to hold when you open doors or touch surfaces. .
  • Try to wipe down every surface or handle after the showing or open house.
  • Try to wash or wipe down your hands on the way in, and the way out.
  • At the open house, keep your distance from other visitors, and let the hosting agent sign you in rather than handle a clipboard or tablet.

  1. Buy some disposable gloves

if you can get some disposable gloves, keep them in your car for when you go on showings.  Put on a pair when you go into the house, and then strip them off and throw them away when you leave. It's a good way to avoid touching any surfaces with your bare hands.

 

  1.  Stay home if you're not feeling well!

All this applies ONLY if you're feeling okay.  If you're not feeling well with any kind of cough or fever, stay home. At this point, you probably have a normal flu or some common cold, but don't take chances. Call your doctor and otherwise get help. But if you're not well, you shouldn't be out looking at houses, or having someone come to see your home for sale.

 

NOTE: If you are high-risk, then stay home!

Everything we've said here applies only to healthy people who are not in a high-risk category.  If you are over 60, or have pre-existing heart or lung problems, you should probably be limiting your outside contacts as much as possible to reduce your chances of catching the virus. If you do need to go out, then take extra precautions and be extremely careful.

 

The Masiello Group Cares! 

February
27

2019 Chocolate Benefit Spectacular – Sanford, ME

Steve Brunette and Heath Taylor from the Taylor and Brunette Team teamed up with Great East Title partner, Danielle DeFelice as one of the sponsors for the 2019 Chocolate Benefit Spectacular on February 2, 2019. 750 pieces of chocolates were donated by the local chocolate experts at R&R Chocolates. The event helps benefit the Sanford Backpack Program which provides meas for kids on the weekends. The event raised $34,000, allowing for 7,000 backpacks to filled, which will provide over 140,000 meals for the kids. 

Congratulations and great job to the team for taking home the "Best Presentation" for their booth.

Click here to find out more about the Sanford Backpack Program.

 

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