Market Update from our meeting with Doug Duncan

In the real estate market there is a learning curve virtually every day.  At RE/MAX Gateway, we do everything we can to keep our agents and our clients updated so they can give the best advice or help our valued clients make the right the decisions when leasing, buying, selling, or investing in real estate.   To that end, we were honored to have Fannie Mae’s Chief Economist, Doug Duncan as our special guest at our quarterly meeting.  We had an open dialogue which covered many topics from foreclosures and short sales to the recent stimulus packages approved through our government. 

Doug spoke about the economy as a whole and noted that the Washington Metropolitan area is rare where a lot of the media statistics and commentary does not apply to this region as it does on the national level. He mentioned that the Case-Shiller Index is not accurate where their data is over weighted with “fringe properties”, not the normal properties we see today in real estate transactions.

In the case of “timing the market”, he said that if you have time to wait for interest rates to go down, then you are a speculator and are only speculating rather than getting in the game of real estate. The question is how many speculators are successful? If your finances are in place, the payment works, the house works…buy the house. There is no reason to wait. Rates are not going to get down past 4%, so this is the time to buy.

The stimulus package provides us with a huge deficit where the government is borrowing from public funds in order to promote consumption with the economy. If people spend more, the economy will be stimulated, but as Doug mentioned, how will these funds be repaid? The answer is threefold: raise taxes, curb government spending, or inflation. Raising taxes never works, the government won’t curb spending, so the only answer that Doug could predict would be inflation in order to reduce the real value of the debts we are accruing.

Homeownership is at 67.5% nationally, that is down from 69.3% (an estimated 1.1 million households) in 2008… a definite sign that home ownership had greatly reduced due to the rise in foreclosures. The government’s plan to reduce or wipe out the mortgage interest deduction option on our taxes returns, according to Doug’s personal opinion, will cause more people to choose lower priced, smaller homes and cause the upper bracket homes to sit on the market longer. It will not affect homeownership rates, but will more than likely cause higher priced homes to sit on the market a little longer while waiting for buyers who do not necessarily need to rely on the mortgage interest deduction.

Lastly, people are saving more. There is no doubt that consumer confidence levels are down at this point in time. Doug noted that in the last quarter of 2008, the savings rate for consumers was 3.6%. That is the highest level of savings since WWII. People are nervous, paying down their debts and saving for what is to come. Therefore, since people are saving their money, instead of spending it, how do we get money back into the economy to stimulate it and make it grow? That was a challenge he posed to us and reminded us that we needed find balance with the spending and saving aspects of the economy as well as take back our buying power from foreign investors, so that we have a more manageable economy.

Again, now remains one of the best times to buy in most of our lifetimes – prices are low, rates are at historic lows, and although inventory levels are down, there are still great homes available for sale.  Contact us today to learn more!