YOU MUST READ OR LISTEN TO THIS!!!!!
This conversation with David Stevens, Former Assistant Secretary of Housing and Federal Housing Commissioner for HUD, was shared with us by a partner in our luxury real estate network.
This is the real estate conversation you need to hear!
David served as an economist in the Obama White House during the Great Recession and had a lead role in the administration’s housing policy. Interviewed by Skye Michiels, he offers data backed insights into the coming real estate market that we don’t often hear.
The Big Takeaway!
David shows that we are about to see the biggest home purchase spree this nation has ever had. The median age for home buyers is 34. The volume of mid 20yrs old to 34 yrs old is the biggest bubble of demand for home buying. The data says so. This and other insights should make every buyer, seller, investor, and homeowner sleep better at night!
Read below or listen to this BRILLIANT INTERVIEW!
(Video jumps to the pertinent portion)
Excerpted transcript:
“I’m going to tell you guys I do this a lot of speeches for real estate firms but I’m normally showing a presentation. You guys are on the front doorsteps of what’s going to be one of the biggest purchase sprees that this nation has ever seen! I think people shake their heads when I say this, it’s not a conjecture, it’s not the guest work, it’s demographics. If you take few take the distribution of all the Americans in the United States using Census Bureau data, and so many economists are using this slide, they make it themselves, but they all look the same. The peak year, the median age for the first time homebuyers in this country is age 34. If you look at 34-year-olds if put the whole distribution of America kind of there’s a little bubble and then it tails down where older people are going aging out. The volume of Americans who are coming into age 34, 33,32, 31 all the way into the mid 20s, it’s the biggest bubble of demand that this nation will have ever seen for homebuying. I know the people want to like say I don’t think so or whatever it’s all I do is look at data and data says we’re going to get through this!
“Why do we feel so bad right now? Because of Powell. The Fed is tightening, it’s called quantitative tightening. The fed raising rates to slow down an overheated economy. We are almost done. I have three articles I could send it to you afterwards from Forbes and Bloomberg. I’m writing an article about this now for publication, but we’re on the tail end of this quantitative tightening. In fact, when the Fed meets the end of the month, they’re probably only going to raise a quarter. So they’ve been going 75 basis points at a time then 50 was the last round. This is likely only going to be a quarter and then the question is, will they do another one at the end of February early March? I think they’ll be done personally. I think the economy has already slowed so dramatically that the data will show that to them. BUT, mark my words, the moment the Fed says QT is over, money is going to flood into the bond markets in the United States!! People aren’t buying mortgage-backed securities right now and they’re not buying a ton of treasuries because they don’t know what yields are going to do and as long as the Fed is tickering with yields, there’s no confidence, we call it convexity. There’s no competence in the duration of how long any bonds going to stick around or mortgage backed security might refinance because rates are going to come down. The moment the Fed announces done then Powell announces he’s done. Then money’s going to start flooding into the bond markets. That creates more demand. That means the price of mortgage bonds go up and the yield corresponding yields go down. So just like you’ve seen rates come down from the 7% highs to around 6% today, wherever they are bumping around, I can assure you, if you look at normalized margins, by the end of the year we should have rates somewhere around and 5.4 to 5.2 based on today’s 10 year treasury rate and the demographics of demand will be back in and they’ll be coming out of the woodwork to buy homes and you’ll be back to the same problem.
“Many of you are already still there, we never left it, but we’ll be back to that same seller’s market challenge where there’s not enough inventory and that’s not a solvable problem short run, and you’re going to need to have a non-contingent full price cash offer or whatever you can put in place to avoid and wipe away as much of the competition as possible when you put those offers in. So your frustrations around inventory will remain. But sometimes people try to tell me by repeat of 2008. Whoever says that doesn’t understand demographics and market movers and it’s just a non-comparison. This is almost over, I think the second half of this year we are going to start seeing an increase in purchase demand.
“Next year purchased demand purchase transactions are going to be significantly higher than this year and the following year as well. I could share with you several forecasts from Lawrence Young from Nar or Mike Frat and Tony from NBA or Duncan from Fannie May. All these economists, everybody’s saying the exact same thing about the market because they know the core variables of supply and demand, which is what drives our business.”
Let’s talk real estate!
