Home Radio Segments Real Estate Round-up The Surprising Ways Self Driving Cars Will Change Our World

The Surprising Ways Self Driving Cars Will Change Our World

Terry Story, Self Driving Cars

With Terry Story, 29-year veteran Real Estate Agent with Keller Williams in Boca Raton, FL

Housing Trends For 2018

As we move into 2018, Steve asks Terry to lay out her housing and mortgage predictions for the year ahead.  Terry starts with home prices, which are expected to continue to rise in 2018 but at a pace that will likely be a little slower than 2017.  The reason for the deceleration in home price gains is a predicted increase in housing supply tied to expectations of a sharp rise in new single-family home constructions in the coming year.  So, it appears 2018 may be the year when home builders finally address Steve’s perplexity at why they hadn’t stepped in to build and satisfy demand over the past few years!

New Construction Skewed To Higher End

Adding a note of realism, Terry reminds us that the builders are in it to make a profit.  With land prices up, construction labor in short supply, and the increased cost of regulations and permits, the cost of new construction has skyrocketed over the past few years.  As a result, builders won’t be building lower-end homes but will focus on developing more profitable, higher-end properties.

As an aside, Steve wonders how new construction impacts realtors.  Terry sees it as a positive because builders cooperate with local realtors to bring potential buyers to new construction sites, while realtors still guide buyers in the home buying process.

Mortgage Rates Should Uptick—But Hard To Predict

With reports of a slight uptick in inflation, Terry knows mortgage interest rates will eventually rise but isn’t sure when because of the many factors that impact interest rates.  Analysts expect rates to rise to about 4.7% by the end of 2018, up from about 4% currently.  Steve settles for a projection of a 0.75% rise, with the caveat that forecasting rates is hard to do and reminds us that the gurus have been very wrong about rates over the past five years.

Impact On Home Affordability

With home prices and interest rates set to rise, affordability will decline a little, with buyers either paying less for a house or buying a smaller house or continuing to rent.

On the positive side, Steve notes that rising home prices could result in more home equity loans.  Terry already sees this trend where people aren’t moving out and are taking out home equity loans to remodel or renovate.

Self Driving Cars!!!

Switching gears, no pun intended, with major car manufacturers planning either fully autonomous vehicles or ones capable of navigating highways on their own, Steve wants to understand the impact self driving cars may have on the real estate industry.

Terry believes Jetson-esque self-driving cars may significantly reduce parking needs, and this freed-up parking space could be used to add more housing or office space, depending on the zoning.

She sees self driving cars becoming a reality sometime in our lifetimes and believes their impact may be more far-reaching than we can imagine, just as most of us never imagined the impact cellphones and the Internet would have on our lives.  Self driving cars and their use by companies such as Lyft, could reduce the number of cars per household and free up garage space for other uses, and even lead to new homes without garages in many cases.

Steve envisions more mixed-use neighborhood streets, more walking and biking, more parks and more housing/office space, for a Walt Disney view of the future.

No one knows what the future holds, but the wide-scale use of self driving cars, 10 to 20 years from now, will surely change the entire landscape of real estate as we know it!

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.

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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 is a 29-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: So housing and mortgage trends are moving in a particular direction, and you’ve noted some housing trends that we can expect in 2018. What are they?

Terry Story: Well, let’s start with home pricing. We’re anticipating that they’re going to de-accelerate a little bit. Basically, what that means is the prices are not going to be rising as high as they have been.

Steve Pomeranz: Yeah, yeah

Terry Story: So the rate of accelerating and appreciation will start to pull back a little bit, the question is why. One of the factors, Steve, is home construction. Economists expect the construction of single-family homes is going to rise sharply in 2018. So when you have an increase of supply, it’s going to pull down the price a little bit.

Steve Pomeranz: We’ve been talking about this for ages. And I’ve been asking the question almost every week, why aren’t the home builders building? Why aren’t the home builders building, because what the heck? If they see demand, I didn’t understand that. But I guess 2018 maybe the time for that.

Terry Story: Yeah, and a lot of it, the sad part about the new construction is the builders are in there to make a profit. So they have to find a sweet number that’s going to make sense to them. And unfortunately, it’s not the lower end home building, it’s more in the higher priced property.

Because the cost of land has gone up, the cost of labor and all of that put together. And then we talked about this before, the cost of regulations. The red-tape that they have to pay to get through the process of building a new home. That’s all skyrocketed over the last few years.

Steve Pomeranz: So, if builders are building new units, what does that do to agents like yourself?

Terry Story: Well, in my particular area, we don’t see a whole lot of it in my surrounding area. But to be very honest with you, the homebuilders cooperate with most realtors. So as an agent, we can bring them to these new construction places and still represent and work with the buyer to make sure that they’re making a sound decision in their home buying process.

Steve Pomeranz: Yeah, that’s a good idea. All right, what about mortgage rates? I mean, we’re starting to see a slight uptick in inflation. We haven’t seen that reflected in the bond market yet, but the expectations are that interest rates are going to rise next year. How much are they expecting and what is that going to do to the mortgage rate?

Terry Story: You know it’s going to to rise, it’s hard to say what it’s going to go to. You know HomePro’s prices rose 6.3% in 2016.

Steve Pomeranz: Yeah.

Terry Story: They’re on track to exceed 6% in 2017. But we’ve talked about this year after year after year. There are so many factors that play into where interest rates are going to go. Some analysts are expecting to see the interest rates go up to 4.7% by the end of 2018.

Steve Pomeranz: I think they’re at 4% right now, so let’s call it three-quarters of 1% rise. Now I want to put a caveat here because forecasting interest rates is incredibly hard to do because we’ve expected higher interest rates for the last five years.

Terry Story: Yeah.

Steve Pomeranz: And all the gurus who tell us what’s going to happen have been wrong, wrong, wrong about this.

So I just want to put out that, you know, any number that we throw here is just conjecture. But what does it mean for the affordability, Terry? If prices are rising by 4%, the cost of a mortgage is rising by three-quarters of 1%, how is that going to affect the buyer?

Terry Story: Well, basically, you know, the buyer is going to be able to afford less house, which means a couple of things. You can either pay less for a house, or you’re going to buy a smaller house than what you had anticipated.

Steve Pomeranz: I guess you’ll continue to rent or something too

Terry Story: Right, or you can continue to rent. So, there’s going to be a little bit of an impact. And we’re not talking large numbers but any kind of increase does affect the affordability.

Steve Pomeranz: On the positive side, those who own homes already are going to have more equity in their homes.

And that means that they can perhaps borrow some of that equity out of their homes and it gives the economy a little bit more spending power.

Terry Story: That’s right and what we’re seeing a trend, Steve, is people are taking their equities. And they’re deciding that they don’t want to move, they want to stay in their home, and they’re renovating it.

So if you’ve got equity in the house, you can pull out an equity line of credit and put money back into the house.

Steve Pomeranz: Okay, no pun intended, but I really want to change gears here—and I say no pun intended—because we’re going to be talking about self-driving cars and the effect, or the impact, that they may have on the real estate industry.

This is fascinating, tell us about it.

Terry Story: Yeah it is kind of interesting, I don’t think much about this. But a lot of the major manufacturers like Ford, Volvo, BMW are planning to manufacture either full autonomous vehicles, or one capable of navigating highways on their own. So the question is they do something like that, how is that going to impact the real estate world?

Well, it will, if you think about it, Steve. Take our own community of Boca Raton. If all of the sudden we’ve got George Jetson-like cars going around, taking us like, over, bringing us to our offices, and so on and so forth. You’ve got a footprint of the downtown area, where there is a lot of parking and you don’t need all that parking space.

So what are they going to do with all those parking spaces? They’ll turn them into probably more housing.

Steve Pomeranz: More rentals?

Terry Story: Yeah, and if, and again, this isn’t happening next week. This is kind of like when we talked about the Internet, you know the birth of the Internet. We never thought there would be computers and cell phones and so on, and so forth.

But this is coming sometime in our lifetime. And you also take into account our own homes. Let’s say you have a two-car garage, well, you’re not…you don’t have a need for two cars any more.

Steve Pomeranz: Yeah.

Terry Story: You’re goingto start turning those into man-caves or workout rooms or what have you.

So I think we’re going to see a change in the real estate industry, and I think you might even see homes no longer built with garages. They’re anticipating that.

Steve Pomeranz: Well, the thing, too, is maybe the neighborhood that has typical streets—because you need a car to drive down those streets—maybe that’s going to look different as well. Maybe these are going to be more like urban areas. Well, urban areas have streets, but like these mixed-use areas, where a lot of you doing a lot of biking, a lot of walking, there’s a lot more parks. I think this is the Walt Disney view of the future by the way.

Terry Story: Right.

Steve Pomeranz: Because it never really always turns out that way. But the idea is that if you’re no longer driving in the future, maybe it’s 10, 15, 20 years from now, the whole landscape of real estate is going to change. It’s really fascinating. Well, the future is uncertain, but we know one thing for certain, Terry, and that is, that people can find you at terrystory.com.

Again, I’ve been talking with Terry Story, a 29-year veteran with Keller Williams located in Boca Raton, Florida. Thanks for joining us, Terry.

Terry Story: Thanks for having me, Steve.