If you’re wondering what to expect, I’m here to answer your questions. In this video, Mary Bartos from the Bartos Group and Cheryl Stokes with New American Funding give us a 2020 update and then share their prediction for what we can expect from the housing market in 2022.
Mary Bartos:
Hello, hello. We have missed you. It’s Mary Bartos and Cheryl Stokes. And Cheryl, we missed our November market update.
Cheryl Stokes:
I know, but Thanksgiving and it was crazy busy.
Mary Bartos:
Cheryl didn’t happen to mention she was super sick. But having said that, we’re going to get right into these slides because we missed you in November. And so we haven’t really given an update since October, so let’s go ahead and pull up the slides. And so for December we have, what’s happening with foreclosures? Cheryl, everyone is talking about it, aren’t they?
Cheryl Stokes:
They are, we have been talking for months about is this all going to fall apart? And as you can see here, just like we’ve been saying since August, the forbearances keep going further and further and further down, they’re the lowest they’ve been really in years so we’re in great shape.
Mary Bartos:
Yep. Values of home have gone up, people have been able to get out of the struggles and we don’t take those lightly at all. But in October, Cheryl, we had just broken the 2 million at mark at 1.7 million forbearances and now we’re down under the 1 million. And as you said, record, record lows. What’s happening out there with the headlines? They’re meant to terrify, not clarify, right?
Cheryl Stokes:
Right. We see these headlines and we think something awful is going to happen and then you and I get all the calls, “What’s going to happen to the market? Because everything’s going to fall apart.” But that’s not the case.
Mary Bartos:
No. And I actually put this slide up on my Instagram, if you follow me on Mary Bartos on Facebook and Instagram, and it went up with a poll to say is there going to be this ability, are you waiting for foreclosures to buy? And it was interesting because they were almost exactly reversed. It’s a 50/50 split on Instagram/ and on Facebook, Cheryl, it was 80% no and 10% yes, which I thought was interesting.
Cheryl Stokes:
Yep.
Mary Bartos:
So with that said, can you read this quote here by Rick?
Cheryl Stokes:
I sure can, “The fact that foreclosure starts declined despite hundreds of thousands of borrowers exiting the CARES Act mortgage forbearance program over the last few months is very encouraging. It suggests that forbearance equals foreclosure,” that narrative was absolutely incorrect and that’s what we’re seeing in all of the numbers.
Mary Bartos:
Yeah. Which is a real blessing and awesome.
Cheryl Stokes:
That’s what we want, right.
Mary Bartos:
Awesome. So if we don’t have this flood of inventory coming, Cheryl, let’s talk about the next thing that’s near and dear to your heart, right? Interest rates.
Cheryl Stokes:
Right.
Mary Bartos:
So what are you thinking as a mortgage lender in this area? From New American Finance, if I might add.
Cheryl Stokes:
So we’ve been saying all along that the rates may start to tick up a little bit. They have been going up and down over the last few months, but they haven’t gone up dramatically and they seem to have settled out each time. And of course, the feds spoke yesterday and they’re going to increase some tapering and they said that they might have some interest rate hikes next year. But again, we’re not looking at dramatic increases in the rates. And even with increases, we have to remember that just two short years ago, the rates were a lot higher than they are now. People seem to forget that.
Mary Bartos:
Brings us to our next slide, right?
Cheryl Stokes:
Exactly. So you see where we are now in 2021, but look at 2018. 2018 we were really talking about how great the rates were. They were awesome, they were 4%, they’re still historically low. Many of us remember when they were 13, many of us remember not that long ago when they were seven. So even if there’s a slight uptick, we are still historically low on rates and house buying is still affordable/
Mary Bartos:
Which I love to hear that because yes, prices have gone up, but you can afford more with a lower interest rate/
Cheryl Stokes:
Correct. You have a lower interest rate and frankly payroll is going up as well.
Mary Bartos:
Yeah, without a doubt. Now, this, I found interesting, Cheryl, home sales not impacted by the rising mortgage rates. Check this out through the years since ’89.
Cheryl Stokes:
Yep. So if you look at that 8%, 7%, houses still sold, people still need to have a place to live, people are still growing families and want to be in a home versus an apartment. We have talked about this before, but we are at the point for millennials that they are at their biggest buying years in age group. And they are the largest group, just like the baby boomers were. Demand’s not going to go away regardless of the rate. And if we’re still well below 5, 6, 7 that it was before, we’re still going to have that high demand.
Mary Bartos:
Well, and to that point, Cheryl, housing in general, rents have gone up, I swear they’ve almost doubled.
Cheryl Stokes:
They have doubled. And I’ve heard cases of bidding wars on rent.
Mary Bartos:
Which is ridiculous. We have some new staff that moved to the area that are looking for rents and it is just crazy. One of our builders had to get a two bedroom kind of really small, no elevator for 3,500 a month, right? Walking distance to the beach, but not anything great, right?
Cheryl Stokes:
Right. And with these historically low rates and all of the options out there for you regarding down payment, that type of thing, in most cases, not every case, but many, many, many, the majority of people would be better off making a purchase and be paying less for something that they would be building equity in than renting.
Mary Bartos:
Well said. Well said. So what does our friend Mark Fleming have to say, who’s chief economist of First American?
Cheryl Stokes:
So Mark says, “Context matters for purchase demand. The economy is improving and millennials continue to age into their prime home buying years in large numbers, so the context remains good for the housing market.” And that’s really what I was talking about on the prior slide. The economy is improving, the rates are still going to be historically low. Payroll is going up, housing starts are going up and are still in high demand. Jobless claims are going down. Everything in the market is showing that it’s going to be a positive economy for home buying.
Mary Bartos:
Yeah. And we’re hearing that for not just 2022, 3 to five years. So if you’re waiting for that market to crash, you’re going to put your dreams on hold for quite some time. But let’s talk about 2022. What does that look like, Cheryl? These forecasts are across the board for home price forecast increases, average price of 5.2%. Last year I think it was around 7% that they were saying, and our area increased by 40 to 50%. I think we got our biggest hike then, but at the end of the day, analysts are saying it’s about 5.2%. Really inventory is going to be the measuring stick, the switch that we’re going to need to flip here.
Cheryl Stokes:
Right. That will be the determining factor because if the shortage remains such that there’s not enough there, then again, we’re going to get some higher increases than that average, just like we did last year. But even if we stick at the average, if you’re expecting a 5%, five to 7% increase in value year over year, that’s a tremendous investment.
Mary Bartos:
Yes. On the average price homes that we have in our area for sure. So mortgage rate projections, talk about those.
Cheryl Stokes:
Well, these are projections, but as you know, and as I just discussed, the fed spoke yesterday, these projections are just that, they’re projections. We project that the rates are going to go up some next year, but I don’t think we can really quantify what those are going to be to be perfectly honest. But I think they’re still going to be historically low and they’re still going to be affordable for buyers.
Mary Bartos:
Yeah. I mean, goodness, under 4%? We saw, what, in ’18, it was four to five?
Cheryl Stokes:
Right. And yeah. So I think it’s very difficult to read these projections and say that’s where we’re going to be, these are standard projections because we don’t know from quarter to quarter really what’s happening with the economy. We just know that they’re expecting a slight rise.
Mary Bartos:
One of the things that’s interesting on this slide is every quarter it’s increasing. Now we know that they go up and down, but the thought is that the further we go into the year, the more interest mortgage rates go down.
Cheryl Stokes:
Right, and they said they might increase rates three times next year so that would fall into each quarter. But at the same time, you’ll notice on these projections they’re not increasing by a lot. It’s really going to depend on the other indicators as we go through the quarters next year. If inflation ends and decreases as they’re projecting, that’s going to affect the rates and maybe we’re not going to have those higher rates.
Mary Bartos:
Yeah. That’d be great. We don’t have a crystal ball for sure.
Cheryl Stokes:
Exactly.
Mary Bartos:
So this is interesting, home sales forecast to increase this year and will perform well again in 2022, right? So this was from a while ago and what they were saying in 2020, and Cheryl check this out, this is how many we sold in 2020. We don’t have the numbers out yet for 2021 but look at what MBA is saying about, again, increase in home sales. That’s only if we can get inventory.
Cheryl Stokes:
Correct.
Mary Bartos:
But everyone is saying that we’re going to do it above what we did in 2020 and it looks very similar except for MBA in 2022. So analysts are analysts, we can only say, we don’t have a crystal ball. But Cheryl, all indications show that housing is going to be strong this year and beyond.
Cheryl Stokes:
Absolutely. And new housing starts, the builder outlook increased this month over 1%, new housing starts increased and the backlog of homes planned for purchase but not yet built increased as well. So to me, that’s an indicator that demand is still there and the builders are getting backed up because they have such high demand. You have a supply chain, you have how fast can you build a home in reality, you have employee issues. But that demand’s going to remain. And what that tells me is not only are you going to have a year that is good next year for purchases, but it also tells me that existing home sales might be where that is because it takes so long to build a home. A lot of people are going to want to buy an existing home, a resale because they can get into that home faster.
Mary Bartos:
Without a doubt. And a couple episodes of Really Mary ago, I interviewed Mike Bone who’s the area manager for D. R. Horton in this area and they’ve got a pretty progressive way of releasing properties, but they are so backed up. Windows are taking six months, which is ridiculous, right? And they can’t price it because the prices go up. So they’re waiting until they get it in the ground and really kind of frame up before they price.
Cheryl Stokes:
Right, and it’s hard for a buyer, they can’t lock in a rate, they can’t determine their true viability and qualifying if they’re going to be 18 months out. There are a lot of things where you’re just on hold and with a wing and a prayer, everything will work out with new construction, whereas buying existing homes, you kind of know everything you need to know at the get go, and you can move forward with a home purchase.
Mary Bartos:
Absolutely. Well, that brings us to our next point of what’s happening in our area. And these are produced by InfoSparks, which comes out of the Naples Board of Realtor, the market data. And this is year over year in 2021. And the arrows to the right of them, when we did our last housing update in October, these arrows are either up or down. So new listings are down from what they were in October, are down from year over year 22.2%. Huge inventory issue. Average close price is up 31.3% and we are up since October. Move that forward to homes for sale, since October we’re further down, but we’re at 73.9% year over year reduction. Cheryl, if someone has thought about moving, I would submit, is it time to move? I would say, yes, the prices are-
Cheryl Stokes:
Absolutely.
Mary Bartos:
We aren’t being told there’s going to be a huge increase. So if you’re holding onto that home because you’re waiting for that huge increase, or if you just don’t know where you’re going to go, we can help you. You want to work with a realtor, Bartos Group is somebody that can help you through that process because we go and look at off market properties. But at the end of the day, if you want to be somewhere different, don’t put it off because there are so many variables that are going to really potentially impact you in the future.
Cheryl Stokes:
That’s absolutely the case. The prices I think are going to continue to go up. Inventory is going to continue to be tight. So if you’re considering it, you should at least be out there looking, have your foot in a pond, so to speak, and be getting an idea of what’s going on because you never know when the right opportunity might hit and if you’re not even attempting it, it could pass you by.
Mary Bartos:
Yep. You know, Cheryl, you guys have some really creative ways of helping people buy in this crazy market. And maybe in a future episode of Really Mary or another time, we’ll talk about some of those crazy ways. But I think minimally, if you’re looking to buy and you’re going to get a mortgage, you definitely want to work with Cheryl, just because of the fact that she’s very creative in what she can do to help you get through this process with a tight inventory, what you’re going to have to do. If you have a house to sell, maybe we can do a bridge alone, things like that. Cheryl’s super creative.
Cheryl Stokes:
Well, thank you. And as you know from the work that we’ve done together, it’s my mission always to make sure that I find the right financial path for my clients. And I am blessed to work for a company that has lots of options so I’m not stuck in one route to get someone approved for a purchase. I have many, many ways I can go and I spend a lot of time talking to them and make sure that it’s something that makes financial sense for them.
Mary Bartos:
I love that. Well, Cheryl, I’m going to cut us off because we have a goal of getting this pinched back under 20 minutes. We’re there today, maybe next month we’ll do under 15 and maybe we can get it under 10. I don’t know, but until next time, I’m Mary Bartos with the Bartos Group of Premier Plus Realty and my cohort and co-host is…
Cheryl Stokes:
Cheryl Stokes, New American Funding.
Mary Bartos:
And at the end of the day, we look forward to making sure what your choice is for the future that we can help you get there. Ciao.
Cheryl Stokes:
Ciao.
