With Terry Story, a 30-year veteran with Keller Williams located in Boca Raton, FL
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2019 Housing Forecast
As 2018 draws to a close, Real Estate Round-Up looks at the 2019 housing forecast, the outlook for mortgage rates, and millennial home buying, and answers a listener’s question on what to do with a real estate inheritance.
According to realtor.com, rising mortgage interest rates may make things difficult for buyers and sellers. As a result, the inventory of homes should rise modestly, making it less of a seller’s market.
In her own practice, Terry Story has seen inventory levels double, with listings up from normal levels of 12 to about 25 currently. She reminds us that a lot of what happens in real estate is influenced by local factors. In Terry’s domain, several sellers are listing because they want to downsize their homes, with only a few looking to scale up.
Home Price Growth Expected To Slow
According to realtor.com’s 2019 housing forecast, home price growth will continue to slow, with an increase of just 2.2% forecast for 2019. Terry sees this retraction of price gains as a healthy early sign of a shift from a seller’s to a buyer’s market. It also answers her prayers for greater housing inventory.
This retraction in price, Steve notes, is healthy for the real estate market because it keeps prices from reaching bubble valuations.
Millennial Buyers On The Rise
In its 2019 housing forecast, realtor.com sees millennials accounting for 45% of mortgages in 2019 as they form families, need more room, and want good schools and family-friendly neighborhoods. In parallel, it has gotten easier to get a mortgage now, with as little as 3% down for those with excellent credit. Baby boomers are now taking a back seat to millennials in the housing market.
Last week, Federal Reserve Chairman Jerome Powell signaled that the Fed was going to go slow on Fed Funds rate increases, which are basically short-term rates. Mortgage rates, though, are based on the 10-year Treasury bond yield, which has dropped from a high of 3.22 in November to 2.85% as of 12/07/2018.
The housing sector is happy about this because lower rates make homes more affordable and spur home buying, or at the very least do not dampen home sales.
Real Estate Survival Guide
Switching gears to the Real Estate Survival Guide, Steve answers a question posed by Gary Singer. He asks:
“I inherited a house.
What do I do now?”
Famously, the singer Aretha Franklin died without a will, leaving an $80 million fortune and multiple properties. Franklin’s sons appointed her niece to be executor of the estate. Yet, her situation was an example of how family feuds and other problems can erupt when inheritances aren’t clearly defined or when an executor may be in over his/her head.
In Gary’s case, should he keep the house, rent it, or sell it? The answer isn’t easy. With the housing market reasonably healthy, selling is probably a good idea because it liquidates the house to cash, which can be evenly distributed and inheritors can then go their separate ways. This cash can be used to pay medical bills, college tuitions, outstanding debt, etc.
If Gary keeps the house, he’ll have to maintain it and worry about renting it or paying someone else to manage the property, with everyone sharing in the expense. This can get tricky if some family members aren’t financially capable.
On the other hand, as if often the case, if one family member wants to buy the house, Steve strongly recommends that you first have it independently appraised so everyone gets a fair shake.
There’s also the question of whether one renovates the house to get a better price and to sell it more quickly. All of these are very tricky issues. So if you find yourself in this situation, make sure you have a good financial advisor, ideally with real estate experience.
For more on the 2019 housing forecast, tune into Steve Pomeranz’s Real Estate Round-Up every week.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent, Terry Story. Terry’s a 30-year veteran with Keller Williams located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: It’s kind of the year end, and we like to look ahead.
Terry Story: Yep.
Steve Pomeranz: We do that in the market and we say, what are stocks going to look like next year and so on, bonds. What is the fearless forecast for real estate in 2019?
Terry Story: Well, according to realtor.com, rising interest rates in home prices are going to make it more difficult for buyers and sellers, or challenges.
Steve Pomeranz: All right, well, tell me something I don’t know [LAUGH].
Terry Story: I know, you asked the question, I’m reading the answer.
Steve Pomeranz: [LAUGH] All right, so, yeah.
Terry Story: We’re going to see modest inventory gains.
Steve Pomeranz: Okay, you’re actually seeing some of that now-
Terry Story: Absolutely.
Steve Pomeranz: In your own practice, tell us about that.
Terry Story: So basically, well, my inventory at the level has doubled, so to me that’s an early sign.
Steve Pomeranz: Meaning what, your listings have gone up?
Terry Story: The number of listings that I’ve taken.
Steve Pomeranz: So how many listings do you generally have on average?
Terry Story: On average that aren’t pending or under contract?
Steve Pomeranz: Kind of normal.
Terry Story: Normal, I’d say 12.
Steve Pomeranz: 12, and so how many do you have now?
Terry Story: 25.
Steve Pomeranz: So there’s a huge bump there, something’s going on.
Terry Story: So yeah, I would say. Real estate is local, so you always have to because a lot of the things that we talk about are national.
Steve Pomeranz: Yeah, of course.
Terry Story: Regional, and then it really, what’s going on in your little world, that hyper-local.
Steve Pomeranz: Okay, but let me ask a specific question then. These people that are listing with you, are they doing it for the typical reasons? They’re moving, they’re downsizing, or is anybody saying to you, we feel like the market’s topping out here, we’ve been waiting?
Terry Story: Yeah, that’s an interesting question because I question that myself, and I ask people. And everyone has a reason. And, honestly, I took a dozen listings in the last couple weeks, so of those all, a variety of answers.
Steve Pomeranz: Okay.
Terry Story: Downsizing, some people are upsizing. Mostly, the trend that I saw was downsizing.
Steve Pomeranz: Yeah.
Terry Story: Which concurs with the information that we had researched to do the radio show this week
Steve Pomeranz: Yeah.
Terry Story: We’re seeing people looking to downsize. Now there’s always those first-time home buyers, and there’s a ton of them looking to-
Steve Pomeranz: Yeah, I think mllennials are playing a much more important role now in the purchasing side of things.
Terry Story: Absolutely, but I’d say for the most part, it was predominantly downsizing.
Steve Pomeranz: Okay, so according to realtor.com, home price growth will continue to slow and they’re forecasting at an increase of only 2.2%.
Terry Story: Right, so that’s a retraction of price gain. This is not a complete shift from a seller’s market to a buyer’s market, which some people, I’m hearing people chat about it. I’ve seen different newspaper articles. It takes a little time for that to really happen, but it has to retract first, and that’s what we’re seeing. You’re going to see an increase of inventory, which we’re seeing, and you’re going to start to see prices retract.
Steve Pomeranz: So let’s say there’s positive growth and then there’s negative growth. That’s an oxymoron, but the idea here is that the rate of growth is decelerating.
Terry Story: That’s right. And this is actually really healthy for the real estate market.
Steve Pomeranz: Yes, it is.
Terry Story: We need this.
Steve Pomeranz: Yeah.
Terry Story: We were praying for more inventory as agents and now we’re getting it.
Steve Pomeranz: Yeah, that’s right.
Terry Story: [LAUGH] We’re never happy.
Steve Pomeranz: I know you’re never happy, I know, and their homes are somewhat less affordable, there’s going to be this transition period. But the bottom line is if prices keep rising well above the economic case that can be made for affordability.
Terry Story: Right.
Steve Pomeranz: Then you’re entering into bubble territory.
Terry Story: Right.
Steve Pomeranz: And then bad things will happen after that.
Terry Story: Exactly, so this is very very healthy, this is a good thing.
Steve Pomeranz: It also says here that-
Terry Story: Welcome.
Steve Pomeranz: Pardon me?
Terry Story: It’s a welcome.
Steve Pomeranz: A welcome thing. It also says here that millennials will account for 45% of mortgages in 2019, versus 70% for boomers. So the boomers are, I guess they’re kind of taking their money, or they’ve accumulated money, they’re not taking on as many mortgages. And now millennials are coming in behind them and doing kind of the normal American thing.
Terry Story: Millennial thing. [LAUGH]
Steve Pomeranz: [LAUGH] Well, they’re forming families.
Terry Story: Yeah.
Steve Pomeranz: And their families are growing and they need more room.
Terry Story: Exactly, and getting a mortgage has gotten a lot easier. We have not swung to the crazy days of, you have a pulse you get a mortgage, but we are seeing a loosening up of the restrictions on obtaining a finance, so that’s-
Steve Pomeranz: Yeah, we’ve talked about that, it’s easier.
Terry Story: Right.
Steve Pomeranz: Now we have all expected interest rates to rise. Last week the Federal Reserve Chairman Powell announced that basically, they’re going to cool it a little bit on the rise, but those are short-term rates. The market itself, the mortgage market, is based kind of on the ten-year treasury.
Terry Story: Right.
Steve Pomeranz: So that rate has actually come down, it’s approaching 3% now.
Terry Story: The interest rates came back up, were pulled back a little bit too, so.
Steve Pomeranz: So this idea that interest rates are screaming forward and going much higher much faster, basically, that idea did not play out, it stopped in its tracks, and actually rates are coming down a little bit now, so that’s good.
Terry Story: It’s all healthy.
Steve Pomeranz: It’s all healthy.
Terry Story: It’s welcome the change.
Steve Pomeranz: I know you love people who buy and you love people who sell.
Terry Story: Love all people that do anything with real estate. [LAUGH]
Steve Pomeranz: If you’ve got more listings and it’s more affordable to buyers, that’s a beautiful thing.
Terry Story: Absolutely, win-win for everyone.
Steve Pomeranz: All right, let’s change gears here and talk about my favorite segment, which is the Real Estate Survival Guide. And Gary Singer from the Sun Sentinel posts these questions and answers, and we love to read them. So here’s one: “I inherited a house. What do I do now? Aretha Franklin died without a will, leaving an $80 million fortune and multiple properties. Although Franklin’s sons appointed her niece to be executor of the estate, the situation shows how family feuds and other problems can potentially result when inheritance portions aren’t clearly defined or when an executor may be in over their head.” So let’s talk about some decisions that the family has to make and an executor might face.
Terry Story: Right.
Steve Pomeranz: So do you keep it, do you rent it, or do you sell it?
Terry Story: I see this all the time and it’s-
Steve Pomeranz: Tough.
Terry Story: I see more family feuds.
Steve Pomeranz: I know, it’s tough.
Terry Story: It’s really, really, really tough. And the key is you’ve got to remove the emotions from it, you have to make sound, rational decisions based on facts.
Steve Pomeranz: If you’re in a healthy market, selling is probably a good idea because it liquidates it to cash, cash can be evenly distributed, people can then go their own way. Medical bills can be paid, all the debts can be tied up and everything. If you keep it, it’s got problems because now you have to maintain it. You have to rent it. You have to have someone there who’s responsible for managing the properties and-
Terry Story: And you all have to share in that expense.
Steve Pomeranz: And you have to share in that expense and that can get kind of-
Terry Story: Right.
Steve Pomeranz: Dicey.
Terry Story: It can get very dicey if other family members aren’t financially capable of doing that.
Steve Pomeranz: What if one family member wants to buy it? You’d better get a proper evaluation-
Terry Story: Right.
Steve Pomeranz: Right, that’s appraisal.
Terry Story: Get an appraisal by two appraisers.
Steve Pomeranz: Because everybody’s going to get really mad at you.
Terry Story: Calculate the average and-
Steve Pomeranz: [LAUGH] That’s for sure.
Terry Story: Yep.
Steve Pomeranz: And do you repair? Do you renovate? Do you keep it furnished or unfurnished, depending upon what was in there to begin with? All of these issues are very, very tricky to deal with. So if you find yourself in this situation, make sure that you know you’ve got a good guide, someone who’s real-estate experienced and a good financial adviser to help guide you through that.
Terry Story: Absolutely.
Steve Pomeranz: All right, My guest, as always, is Terry Story, a 30-year veteran with Keller Williams located in Boca Raton. And she can be found at terrystory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.
