Love's Real Stories

I attended a big high-level conference in Washington, D.C. where people-in-the-know delivered the news on the U.S. economy. Bankers, investors, and government representatives were rubbing elbows, shaking hands, and generally having a great time. When real estate became the subject of discussion I jumped right in with both ears.

For all the participation I contributed, I might as well have been miles away. Truth be told, I was indeed miles away. I was in California, staring at my computer screen witnessing the goings-on in Washington, D.C., via a “webinar.” I (and many others I assume) loomed above the conference in a sort of cyber-gallery, watching the bigwigs hobnob.

The real estate portion of the conference boiled down to this:

Real Estate isn’t as hot as it’s been cracked up to be. Reports of double-digit price increases are true, and people have been expressing worries of another housing bubble, but set those worries aside.

“We are of the view that housing is continuing to grow, but we are not of the view that it is robust,” said the FHA guy. He said real estate is not the economic driver it was a decade ago. Yes, home prices have moved upward quickly, but those gains are just a bounce-back from the severe drops of the recent past. Home builders are on the scene buying lots and building, but they’re going about it cautiously. Building-related jobs are a slow-grow, and land-buying is minimal, so construction hasn’t been the big economic driver we might expect. He said when construction picks up momentum, it still won’t hit the frenzy of the boom years; jobs will be fewer than might be expected, too.

Rising interest rates will not shut down housing and economic recovery. Fannie Mae economists did a study recently on the correlation between a sharp increase in mortgage interest rates and rising home prices. Their study shows there is little relationship there. When interest rates go up, the number of home sales may go down, but prices are still likely to keep rising.

As a result of their study they were also very confident-sounding in making this prediction: “We don’t necessarily expect interest rates to surge again, and we don’t think any rate rises will be as sudden as we‘ve seen.”

It is a really great time to buy. Even though housing prices have bounced up from their floor of a few years ago, they are still down. Even though interest rates have moved up recently, they are still extremely low compared to historic norms. Buyers have it good.

The American Dream is alive. Homeownership rates have fallen significantly from the boom years, and after the financial crisis, some prognosticators predicted America would become a predominately rental society. But the economists at this conference say many people who are renters now are the same people who lost their homes in foreclosure and short sales, and those people will buy again. In our society, the drive to become a homeowner remains unchanged.

I returned home from the conference without difficulty, and overall it was a good journey. It’s handy when you can leave your seat, open your own refrigerator, and sing out loud, while still hobnobbing with the bigwigs.