Albuquerque Real Estate News: 3 Things to Keep in mind
(Transcript Snippet): “Tracy:
So switching gears along the same vein, right? You were sharing with me a CNBC story saying Google is reporting that the hottest trends, some of the hottest trending searches right now regarding homes is when is the housing market going to crash?
Tego:
So get this Tracy that search has spiked 2450% in the past month. And it it’s interesting right
Tracy:
Along with other phrases that are similar, like why is the market so hot and how much over asking price should I offer on my home in 2021? So it’s interesting. Those are the spikes on Google searches, which you know, I completely understand. Yeah,
Tego:
Yeah. You know, it there, one of the things that, that happens and I know listeners to Kiva get this is that NEWS media will take something. It’s a very none, well, no, no. Yeah. The non, but, but it’s, it can be a trigger for people, a very emotional, you know, the housing thing, a lot of kids that are not kids now lived through the crash of 2008. Right. And so now they’re millennials right now, they’re getting into that, you know, maybe buying a home or maybe, you know, thinking about buying a home, they lived through that. They watched their parents go through that in 2008. So, you know, I understand that the angst that is out there, but what I was saying is, is Kiva listeners understand that news media will take something and, and try to create a story where maybe there isn’t a story, but obviously there’s a story there because people are curious.
Tego:
It’s like, how, how can this market be so hot? And when is it going to stop? We know it’s going to stop the question is, is it going to be just a slow coast to a stop or is it going to be a screeching halt? And, and my feeling right now is it’s, it’s going to continue at this pace for a while. Cause there’s no signs of anything, anything changing Tracy and, and a couple things just to talk about. So there’s three things that we want to keep in mind. And if you don’t see these in the stories that are talking about how there’s a, a home bubble building and it thought market’s going to crash, then they’re not telling you the whole story. And there’s one other thing too, that I’ll throw in here. But, but the first one is home price appreciation leading up to 2007, Tracy, it was like 10% average over the four years leading up to 2007, eight in the last four years now, today it’s been closer to 6%. So we haven’t had quite the acceleration in home price appreciation that did back then. The other one, Tracy, you could speak to this. I know, you know, this really well is, is the way lending standards have been now in the last, well, literally 10, 12 years versus the way they were back,
Tracy:
Right? The default risk now is so much lower than it was back in the 2000 early two thousands. Right? When now, now the products are very careful to make sure that the borrowers can afford the payment, that they have stability, that their credit score shows that they’re credit worthy. They’re good at paying their bills and being responsible. So the product risk is lower and the borrower risk is lower because the products aren’t available that allow people that shouldn’t be getting okay,
Tego:
Well, it’s those really aggressive what we call products, meaning loan products like adjustable rate mortgages, right? With the teaser rate that, that like, you know, for one year it would be 2%. And then all of a sudden it jumps up, you know, a couple of years later that got a lot of people in trouble in 2000,
Tracy:
Because when it jumped up, they couldn’t afford the payment anymore. And there are still adjustable rates, but why would somebody do that to go with the rates so low, right? Why not just lock in that low rate for 20 or 30, or
Tego:
The other thing you said was borrow or risk and borrow, or that’s always a tough word is you know, again, we, we know back in the day Tracy people were getting mortgages probably. Well, let’s just be honest, probably they probably shouldn’t have been getting mortgages. We know that that’s not happening today. That hasn’t happened in the last 12 years. I mean, you, if you haven’t applied for a mortgage in the last 10 years and you may, and maybe you did back, you know, in Oh, Oh three Oh four Oh five, it’s different, you know, you have to really prove your income, prove your ability to repay the mortgage. The other thing that’s happening is a lot of homes got purchased back in the day as a speculation. We’re not seeing that today. Most people that are buying homes today are buying homes to live in w the thing that’s interesting as a lot of people in, in just a side note on that, we’re seeing a lot of people that own rental properties, Tracy, that may be, you know, decided to keep it. They’re not really property investors. They just happen to have a home. They didn’t want to sell it. They didn’t like the market when they moved and they’ve been renting, but we’ve seen a lot of those people now putting those homes on the market, which is it’s actually hurt our rental market a lot from, from an inventory level as well. Right. Because it’s so strong,
Tracy:
Right. They’re saying, Hey, I’m finally at a place where I feel like I can make some money off that rental property and sell it because it’s not my passion. So we are seeing that for sure. So just two
Tego:
Other things I want to play. The third one is the, the, the number of homes for sale. W needless to say, if you’ve been paying attention at all, there are very few homes actually on the market for sale right now, very, very low it’s sub 700 homes on the market, in the greater Albuquerque area right now. Almost it, it hit almost 600. I think it’s gone up a little bit this week. I’ll know on Monday, if, when I get my, my new stats, I think we might be getting a little bit of buildup, which would be great. But just to put that in perspective, in 2007, when the market tanked, we had about 5,000 homes on the market, we have 700. Today
Tracy:
Is a huge indicator Tego, of how quickly the market could slow down, or the prices could come down. They just can’t when you’re at that inventory.
Tego:
Well, you know, it’s a supply demand, supply demand, right? It’s economics one Oh one,
Tracy:
A market shift for it to turn downward would take a long time just because we couldn’t get 4,000 houses on the market tomorrow.
Tego:
The fourth thing I wanted to bring up, which wasn’t on my list here, but I came to my mind is important when we’re, when we’re looking at, or looking at stories about the housing market, are they talking about the demographic trends? You know, what’s happening with the millennial group right now is a big deal. That’s a huge population. That’s moving through these age groups now that are right in their home PRI or prime home buying age. Right. And so you can’t, you can’t stop that. People want to start homes.
Tracy:
People want a home and they want ownership and they want to build your wealth there. Yeah, it’s, it’s interesting to go because again, what we’re seeing with that group is they don’t want the starter home. They’re buying like their second home as their first home, right. They’re not going and buying the cheapest home in a neighborhood. They can afford, they’re waiting until they can afford a home that they’re going to want to be in for a long time. And that’s part of, you know, w w their age too, right. They kind of skipped that first home, and now they’re buying the second home. Interesting.
Tego:
The thing I would say to people, if you’re, you know, watching the market and you kind of want to see that the two things that I’m watching really closely are the number of homes on the market, the inventory level and I’m watching interest rates, you know, if interest rates get up over 4% I think that will cause a little bit of a pullback in the market, even though they’re even know there’s still a bunch of people that want them,
Tracy:
You know, what it’s going to affect Tego is the people who were in that 200,000 price range that we’re kind of trying to get their first home. Those homes don’t exist in Albuquerque anymore, but very few and a lot of competition granted. But those people, if the interest rates go up 1% that rise in what their monthly payment could be, could price them out of the market. Yeah. But 4%, 5% for most borrowers that are buying 300, 400, $500,000 houses. It’s not going to matter. It’s for those entry level people where an extra $20 a month on a mortgage is going to start to push their limit. Right. Yep. Yep. Yep.
Tego:
You know, I just want to say one thing, if anybody’s listening and they’re going well, what about all of forbearance? What about the foreclosure rush it’s coming? We don’t have to time to get into that. My, my take my feeling on that. And most of the experts that I’m following and listening to is there just doesn’t appear to be there. There, isn’t going to be this big flood. And, and I did a couple of videos on that already, so I won’t go into that, but there just isn’t.