Editor’s Note: Hal Cranmer has had a wild past. Born in India, he’s lived all over the world and started his working life as an Air Force Special Operations and Commercial airline pilot. After 9/11 brought him down from the clouds, he entered the corporate world and rose to the level of running a $36M machining plant. Yet from 2006 on, he caught the passion for real estate investing. He flipped a bunch of houses in Minneapolis and still owns several multifamily rentals there. Lately, he is into assisted living, and owns 5 assisted living homes in the Phoenix area. He loves to follow real estate trends, both locally and nationally.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Cranmer provides us with his own unique, lively and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out our other super-helpful Market News Updates. For now, enjoy...
From Hal Cranmer...
Did you know that the United States is underbuilt when it comes to housing options?
According to the Global Chief Economist at Arch Mortgage Insurance, Dr. Ralph De Franco,:
“There are one to two million fewer units out there than there should
be based on population growth.”
This claim is supported by different real estate professionals...
The chief economist of Realtor.com, Danielle Hale, says that this situation may not change any time soon. According to her, buyers in many urban areas cause the prices to increase and affect the overall affordability factor through bidding wars and multiple offers.
In many markets, both millennials and baby boomers have fewer options when it comes to choosing a home.
The CEO of RE/MAX, Adam Contos, published the RE/MAX National Housing Report. He evaluated the real estate market for this year’s spring season. He says:
"The Spring home buying season is one of the most competitive we’ve seen in years, as the demand for homes continues to exceed supply in most regions of the country. We’re keeping an eye on a number of factors like the pace of single-family home construction and mortgage applications to better predict how tight the housing market could get."
The Managing Partner of the Resource Group at RE/MAX Leaders in Denver, Kerron Strokes, added that the 2018 spring will be affected by:
-
Inventory shortfalls
-
An increase in home prices
-
A higher interest rate environment
All 3 factors affect the long-term costs for home buyers.
For example, the number of home buyers in Seattle, Washington, has drastically increased since 2017, while the number of homes on the market has remained relatively limited. As a result, buyers are having trouble purchasing a home in competitive markets.
And, the increase in interest rates has not dampened demand very significantly in many areas of the country… yet.
Good News or Bad News?
It’s a mix of both. It actually depends on how you look at it...
The bad news is the buyers won’t have enough houses to choose from. And they might have to let go of the ‘house of their dreams’ and narrow down their choices. On the flip side, sellers are definitely winning the game.
The good news is that with the increase in home prices, the real estate industry is looking strong. We’re waiting to see how interest rates affect the market if they continue to go up.
As you can see from this graph, housing prices continued to go up as interest rates rose around 2008. Until the prices came crashing down. Then interest rates followed.
According to real estate experts, buyers shouldn’t expect this situation to change any time soon. Many times, however, the experts tend to be wrong. Here is Ben Bernanke, Chairman of the Federal Reserve, on June 9, 2008:
"The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."
If you’re looking to buy a house this year, remember that all markets are local. And do your DUE diligence:
-
Know what you want. Become an expert in your area. And learn to spot trends.
-
If the deal doesn’t make sense, don’t pull the trigger.
With this cut-throat competition, there’s nothing wrong with keeping your powder dry. But if you see a great deal, jump on it quickly. Quick profits can be made in times like these. Just mitigate your risk on the backside.
Also have all your ducks in a row. In these days of multiple offers, you have to be ready to close quickly, without any hiccups:
-
Be organized in how you analyze the deal
-
Know the area better than your competition
-
Become friends with all the people who can bring you deals and treat them well
-
Have the financial wherewithal to execute when a deal comes to you
Doing those 4 things will put you ahead of the competition in any market.
Your thoughts?
What do you think about the United States being underbuilt? Share your thoughts of what your area is experiencing. Let us know in the comments below.
Hal Cranmer
Hal Cranmer has had a wild past. Born in India, he’s lived all over the world and started his working life as an Air Force Special Operations and Commercial airline pilot. After 9/11 brought him down from the clouds, he entered the corporate world and rose to the level of running a $36M machining plant. Yet from 2006 on, he caught the passion for real estate investing. He flipped a bunch of houses in Minneapolis and still owns several multifamily rentals there. Lately, he is into assisted living, and owns 5 assisted living homes in the Phoenix area. He loves to follow real estate trends, both locally and nationally.