In the past two weeks, several housing headlines caught the eyes of many. MarketWatch printed “Thinking of selling your home? Do it before 2020, economists say”. Citing housing experts, Zillow released a Home Price Expectation Survey where it is predicted that the Next recession will begin in 2020. CoreLogic reported “More than half of US housing markets were overvalued in April”. Chief economist of NAR warned the current run-up in home prices is not sustainable, which is then echoed by a separate study and yet another bearish headline of unsustainable home price gains by Black Knight.
Not trying to be a downer here, but these chorus of consistent headlines are the elephant in the room and hard to ignore. So let’s address it.
But first, let’s give credit where credit is due. Once again, our consumers called it first, before the experts did. As part of ValueInsured’s Modern Homebuyer Survey, Americans have been sharing warning predictions on unsustainable home prices since last fall. In the latest Q2 2018 quarterly survey, conducted in early April, when asked to predict how long the current bullish housing market would last, and if and when a housing correction could begin, 68% Americans, including homeowners, believe a correction would occur by 2020. In fact, 34% Americans believe a housing correction will begin within the next twelve months, with 11% who believe a correction has already begun in their local market.
Some may be surprised that everyday Americans could outsmart the experts, but they really shouldn’t be. While experts and economists look at computer modeling and spreadsheets that report on sales data gathered in the past tense, locals have their ears to the ground and see what happens in real time. They attend open houses, they see how many for-sale signs go up on their block and how long it takes for them to come down, and they talk to their neighbors.
In fact, current homeowners are often the most dialed-in, and have repeatedly demonstrated the most reservation in the current home-price run-up. In two of the hottest housing markets, homeowners have expressed the most pessimism about the inevitability of a correction. 79% of all surveyed homeowners in California and 80% in Texas believe a housing correction will hit their local market within two years. In Texas, 44% of all existing homeowners actually believe a housing correction is already under way in their market or will happen this year. As a seasoned realtor in CA recently told us, while first-time homebuyers tend to be more optimistic and more focused on the upsides, experienced homeowners are often more cautious. They know 7-10 year market cycles are real, and they often have been caught in both the top end and the bottom of a cycle; some may have even sustained losses personally.
In the heat of an exciting bull market, it is easy to forget that while Seattle, Austin and Atlanta may have been rewarding to real estate investors in recent years, half of the country is just beginning to recover from the last housing crisis, and some have still more ground to make up. In the need to constantly provide new news, this is not appealing for most experts to focus on, but the memories – and financial sacrifices – are still fresh to some homeowners.
We promised solutions earlier and here they are: in Down Payment Protection and Equity Protection. Unlike in the last correction, homebuyers and homeowners now have the option to lock in their current home value at market peak, and have their losses covered and reimbursed back to them if their market corrects later. Expert warnings from multiple sources are here, and consumers seem to already know, so why not finally to address it?