NAR Chief Economist- 2023 Outlook

And our chief economist Lawrence Yun, said his name, Lawrence Yoon.

Some people say Yun Yan. You say, you say young.

And you say Yun. But Lawrence Yun is the chief economist for NAR. He’s very smart. He’s very personable. You could email him. You could probably even call him. And he would be more than happy to to chat with you.

Sweet. I’m going to do that then. But I think he’s very insightful. I think his he’s pretty spot on most of the time. And some key takeaways from last week being in D.C..

He did say that, you know, a few things. Housing kept the economy afloat as home prices rose and the buyer demand intensified. He did predict that the housing market will slow with the with interest rates. Obviously, we all believe that that’s going to happen.

So the housing market itself in terms of units would slow. I believe being the case. So this is all part of his 2023 outlook.  

And what he forecasts and what he forecasts he did, he you know, there was a lot of talk about inflation. And he did feel that for the next 18 months to to 24 months, you know, inflation is going to remain elevated. I mean, it’s it’s not going to it’s not going to change. It’s going to take time. But he does feel that, you know, 18 months to 24 months. So within two years for inflation.

Yeah. And I’m on record saying that I thought inflation might get almost to 20% next year and then taper off to that 8 to 12% range the following year. And then we’d get back to something kind of normal.

Yeah. At what. Eight, eight and a half percent right now. But I see a bunch of things continuing to collide together and housing prices just keep getting out of control and supply items and then China shutting down for anything they can because they realize that if they shut down, it doesn’t really matter because they’ll just get higher prices later. Right. And they’re in charge of things.

And I think we have stuff going on over in Ukraine and supply issues there and then gas prices and then diesel and getting related and then all of a sudden that stops stacking up and we have this and then we have a food crisis with what’s going on with the poor.

I mean, there’s there’s baby food shortages. There’s, you know, Starbucks has a shortage on milk. What will we do?  

I know you can’t even get oil based paint anymore.

Paint these random things that you don’t think about. But, you know, buckle up. It’s going to be around for a while. And, you know, where it affects us is the, you know, a median home purchase, right? So if you have a client buying a home in the median price range, I mean, it could impact them 300 to $400 a month.

And that’s pretty significant. You know, when you when you think about this is what they qualified for and then now it’s 3 to $400 a month. And that’s a good reminder that if you have somebody that has had a pre-approval or a mortgage approval in the last 30 days. For 60 days. You should have them re pull that because it could really affect their approval. Right. With these these changes that are happening happening so frequently.

You know, in this chart right here that we have pulled off here is a really good one because what he has is the unit sales and then the price of the home and then the dollar volume in which that grew right and is forecast is for a decreasing but less sales, but higher prices.

Higher price. So he has an 8% price appreciation. And, you know, so and then 4% the next year, which are which are really high regardless, right. I mean, that’s going back to 2020 level, but that’s still pretty darn high and that stacked upon another number.

And when all of a sudden you start taking these numbers and you stack them one upon each other and you have so if you think about a 10% gain and then a 10% the next year, but then that’s it’s 10% of the whole number that you just gained as well. And then 10% again. Now it’s, you know, when you compound it and you just continue to add those numbers on top of each other, you have a real serious number you do in which it’s gaining.

And, you know, a little bit of a slowdown. I’ll give builders an opportunity to to catch up. But the supply and the pricing is still really high.

So yeah, I just see so many of them getting out of the market in general of selling direct to consumer. I know because you’re selling direct to, you know, to REITs and hedge funds and they’re going right to a rental community. Just there’s so many different factors here and with all the people want to diversify and get out of other countries and other currencies and put their money into the dollar.

You know, imagine if you’re happen to be an exporter like China, right? And you’re sending your money over here and you want to keep it denominated in dollars and you have an option to invest in, you know, the Federal Reserve at this super low rate, or you can buy real estate and you buy real estate instead and then you own a physical asset, right? That’s a way better thing.

And I think that you’re going to see continued purchasing and bidding up of prices because people are wanting to have their money in dollars in times of uncertainty and then actually in physical assets. So I think you’re going to see the US become more of a haven for real estate because of that.

And you can hide money here, you can put it here, you can have it in money and get it out of your other country, but have it denominated in dollars and have it where somebody can’t physically kind of take it from you. Right. And then it’s there, you know, and we hear from a lot of people that, is this the right time to buy? I’m scared. I can’t. All these things, if you have the means to purchase, I mean, I believe this. You should look at home buying as a long term investment. Right? This is an investment.

It’s a long term investment. And if you have the ability to invest in real estate and start your portfolio with your own personal home, absolutely. You should do it. What are you waiting? What are you waiting for? Because you think about the people who waited until now.

I mean, you just never know what’s going to happen. And so maybe rates come back down to this crazy 3%, 4% or whatever. And they will and they will refinance it. I mean, I don’t know.

That’s I can’t wait for the interest rate to drop, but then to pay 100,000 more for the same product doesn’t really help.

And so you should want to pay the current price. Let it go up to 100,000, except today’s current rate. And then, like you’re saying, refinancing.

And yeah, maybe that will slow down at some point. It’s not going to continue to just go nuts, but you’re going to always continue to be building wealth and build equity in something.

So I’ve talked about how hard it is to build wealth and to save money. Right. And the amount of money and equity that people have have earned in the last couple of years, just in their house alone, it’s just like mind boggling. People are like, I could never have saved this much money in my life. And they’re all in the circle of like, what do I do? So I have a suggestion and I want to try this one out.

All right. So I previously spoke about a 40 or a 50 year mortgage, and I thought that was a good idea. So I want to suggest that the mortgage that you take out. Should not be tied to your property. But it should be tied to you. Okay. So why are we consistently doing remote and new mortgages where we start over on a property? And why is it tied to that specifically?

Because we wrote these mortgages and you qualified for it and so did the property. Right? But then you can have it where it’s qualifying consumable, which means that the next person assumes it. So then they qualify and assume it.

So why can’t the new property be property a snowmobile and swap it from property to property and then that would solve the next problem. So Lawrence Yun, this goes out to you. I would like to have property consumable mortgages where you move them from property to property so you don’t continue to start over.

I mean, Americans can actually build equity and we go to a 40 or 50 year qualifying, qualifying consumable, but property qualifying consumable and move from property to property where people can actually build wealth and pay it off over their lifetime. And you would start with this $500,000 million mortgage, whatever this number is, right? And you pay it off over time, but you can move it from property to property as long as the property is worth it. And why wouldn’t that work?

And then you’d stay deeper into your mortgage. So let’s do something that’s right for the people. The bank wants the asset. Yeah, I mean, it totally works. I mean, you’re willing to change it to a new person. Why not change it to a new property? Lawrence We’ll talk.

Help him out. Lawrence Yeah.

That also brings up an I thought that I had about over the last several years, we started to see more suitable loans. So with the interest rates being low, that can really be a selling point.

It could be, but they had to assume it at the same spot where you are. So for example, yeah, they got to put a ton down to match.

Up frequently, you know? I don’t know. It might be something to look at. Most loans are now qualifying consumable, but you do have to bring them to the same exact balance where they’re currently.

Yeah. So if things got a little shaky and say somebody had an adjustable or had that estimable rate.  

And the other person is putting down a certain amount of money. You could look into that. I’d say it’s a.

Good way guarantee that higher price point sale. Right. If they can then keep it at the lower rate.

Yeah. So look at that. And that would be an interesting question to start to ask your sellers or your buyers. Yeah. And then at what rate and what amount, what balance. And then ask the other question is, could you get could your buyers get to that number in those situations. And maybe that’s interesting to somebody, but it allows them to see the real value in that loan that they currently have. Mm hmm. All right. Great talk.

Episode Links

Starbucks , Ukraine , NAR , chief economist, Mike Acquisto , Shana Acquisto , TNT 

Episode Recorded Live on YouTube 05.13.22

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