Doom & Bloom: Economic Impacts on Residential Real Estate

Hans Wydler

Doom & Bloom: Economic Impacts on Residential Real Estate

Last week, we attended Compass' annual conference in Atlanta. It was a great opportunity to network with the top agents across the country and compare notes. 

We also heard a presentation from Jason Schenker, a top economist and Chairman of the Futurist Institute.

Jason had a 77-slide deck on the economic state of the world and frankly, the outlook was bleak. 

Jason covered Cold War 2.0, raging global inflation, teetering emerging market economies choking on debt, trouble in Taiwan, and looming global energy and food shortages. That all being said, 5 of the 77 slides actually had some positive news for residential real estate and encouraging implications for future home values. 

 

Here's a quick summary:

 

1. Mortgage Credit Never Looked So Good (Q2 2022)

We managed to learn something during the 2008/2009 financial meltdown, and the credit worthiness of home owners is the strongest it's been, with the majority of homeowners having credit scores of 760+. Delinquencies are also near record lows. This means the chances of distressed sales tanking the market is highly unlikely.

2. The U.S. Labor Force was at an all time high in August 2022

Strong home sales are highly correlated to jobs. Strong job markets sustain real estate demand.

3. Business confidence has fallen sharply

Already plagued by tight inventory, waning builder confidence will further constrain inventory levels in the coming couple of years. Housing starts for single family homes, for example, dropped nearly 19% year over year in September according to the U.S. Census. Less supply also supports home values.

4. The Everything Selloff

Stocks, bonds, gold and crypto have all dropped in value this year. The one exception is the US Dollar. 

Global investors are looking for safe havens to park their cash, and the US dollar is still perceived to be the safest bet in town, despite 8-9% domestic inflation rate here in the U.S.
 
Think about it. Global cash is pouring into the US, and during periods of high inflation, folks want to invest their wealth in hard assets. If you ask me, sounds like residential real estate is a good home for your cash (see what I did there?).

In short, inflation and rising interest rates are certainly impacting the number of homes being sold, but we expect homes to be a relatively excellent store of wealth in the months and years ahead.


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Wydler Brothers have been selling residential real estate for over 20 years in the DC metro area. Along the way, they’ve achieved numerous awards and recognitions, including being recognized as “The Most Innovative Real Estate Agent in America” (Inman, 2014), written several articles for The Washington Post, authored a book, “Inside the Sell”, co-founded a real estate tech company which sold to Move, Inc. in 2013, and built Wydler Brothers into a highly respected boutique brokerage with 70 agents and employees which they sold to Compass in 2019. Currently, Wydler Brothers is among the top 3 teams in the DMV and was the #1 Compass Team in 2022.

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