A New Perspective: A sacrificial lamb? | Real Estate Advice

Words of wisdom for wild and ‘wooly’ times in the real estate market

The personal stories of one Realtor’s battles and triumphs in the highly-competitive Bay Area Real Estate Market, seeking to illuminate and humanize the very real ups-and-downs of homeownership.

“As the world battles high inflation fueled by a combination of excess cheap capital, intense pent-up demand mixed with supply-chain shortages, continue COVID outbreaks, health-related labor disruptions, energy under-investment, an ongoing Russia-Ukraine war, and rising interest rates, etc, the FED is looking at housing as one of the key drivers of inflation that needs to be slowed or stopped.

In many areas of the country (indeed, globally) rising home-purchase and rental prices have risen at levels that are clearly unsustainable (double-digit home price escalations are a key driver of inflation). By hiking rates faster – than at any time in history (!) – the Fed’s mission appears to be working, as estimates are now that activity could drop around 25%, cooling prices substantially . . . . In fact, softening sales are happening already but they will only register much later on due to lag times in reporting closed sales.

So here’s the skinny:

The ENTIRE housing sector is taking a beating. Yes, COMPASS’ stock price is down sharply, but we are far from alone (Coldwell Banker, Better Homes & Gardens, Sothebys, Century 21, Corcoran, etc. are all experiencing dramatic drops.) Douglas Elliman is down about 52% off its highs in just 8 months since debuting at the end of 2021, REDFIN is down 87%, EXP down 78%, and even powerhouse ZILLOW is down 82% off its highs. Elliman’s net income dropped 74% and transaction volume was down about 10% in Q2, 2022. Let’s also not forget that 2021 was a record-shattering, exceptional year of historical proportions. Comparing anything to 2021 can be tough (and rough).

Here is one notable irony:

Large, institutional buyers are armed with TENS OF BILLIONS of dollars to quickly purchase any properties that may go into distress or appear as ‘good buys.’ They’ll also jump in and buy new stock from builders anxious to move inventory that’s sitting. (The much higher rental returns make these purchases even more appealing than a year ago.) But let’s also understand that Investor/institutional capital may minimize opportunities for ‘regular buyers’ to buy at reduced pricing – which works against the ultimate goal of the FED. 

So we have to ask:

Is housing the sacrificial lamb . . . or are regular homeowners? Will this policy hurt those most who supposedly it’s trying to help? Is it helpful to force people into renting because they have even fewer buying options? While this policy may help lower inflation, its long-term consequences could make home affordability EVEN worse. Add in new construction, already cut by 10%, at a time when we should be ramping UP construction to catch up with the absurd decade of under-building and the effect is fewer homes . . . .

Hopefully, sanity prevails. To anyone hesitating to buy right now because they expect future big bargains – think again. Maybe right now is the best time ever to get in…..($2,500/month in rent over 60 years = $1.8 million spent on rent checks……without ANY inflation)”

(Thank you Leonard for this clear and concise market snapshot!)

​How can we help you?

Julie Gardner & Sarah Abel | Compass Realty

Not just Realtors, but consultants in all things house and home, we’re here to educate, explore, examine and refer . . . In short, you may count on us to take care of your home as if it were our own and anyone who knows us, knows we take pretty darn good care of our homes.

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