How Long Will This Last?

The resilient resists shocks and stays the same; the antifragile gets better and better.

• Antifragile, Nassim Nicholas Taleb

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We often hear,  “This Market is CRAZY!!”

To which, I’ll reply “Crazy Good? Or Crazy Bad?”

The answer depends on who you are.

In his book Gamechangers: The Unfounded Fears and Future Prosperity of the Residential Real Estate Industry, our friend Steve Murray of REAL Trends outlined the agents of the future into two groups:

1. Facilitators – performing a low-value role as processors of transactions
2. Counselors – creating additional value through knowledge, experience, and superior market insight

For the Counselors, this market is crazy good!  

For the Facilitators… meh, time will tell.  

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How long will this last?

A couple of months ago, we wrote an article titled What Goes Up Must Come Down… or Must it? There, we outlined why we believe this market will likely continue far beyond 2021. 

As a quick refresher on what we covered in-depth in that article, what drives the real estate market is simple supply and demand economics.

Excess demand continues to come from:

1. Affordability – via low rates and economic stimulus
2. Demographics – millennials in peak buying years
3. Migration – many states, particularly in the south and midwest continue to experience net positive migration.

Lack of Supply Continues.  

When supply remains below 4 months of available inventory, prices will continue to rise.  Nationally, the current supply of inventory is 2 months.

According to last week’s Existing Home Sales Report from NAR:

Properties typically remained on the market for 18 days in March, down from 20 days in February and from 29 days in March 2020. Eighty-three percent of the homes sold in March 2021 were on the market for less than a month.

What about rising rates?

 If you’re thinking rising rates will put a damper on demand, not so fast.  The Fed continues to hold short-term interest rates near zero, while Freddie Mac projects… 

…the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.

While higher mortgage rates will help slow the pace of home sales and moderate house price growth, we expect overall housing market activity will remain robust. Our forecast has total home sales, the sum of new and existing home sales, at 7.1 million in 2021, falling to 6.7 million in 2022. House price growth will also moderate in our forecast, averaging 6.6% nationally in 2021, slowing to 4.4% in 2022.

What about Forbearances?

According to the Mortgage Bankers Association, only 4.49% of all loans are currently in forbearance.  The MBA also noted that nearly 50% of borrowers who have entered forbearance have already exited.  Our colleague, Steve Harney, wrote a solid article on this topic on his blog.  And, recently, the Federal Housing Finance Agency extended forbearance options to August 31, 2022.  

To summarize.  It’s a non-event.

The Icing on the Stimulus Cake

 Earlier this week, Housing Wire reported new proposed legislation, dubbed the First-Time Homebuyer Act. The bill would provide a tax credit for first-time homebuyers of up to 10% of the purchase price, or $15,000.  It’s a familiar tune from your 5 DISC changer, circa 2008-2009.  Get more details on that here.

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Based on all of that, what should you do?

Let’s go back to Antifragility.  As Taleb notes in his book (which is a grind of a read), things that are fragile crack under pressure.  Things that are resilient stay the same under pressure (with much energy burned).  Things that are antifragile THRIVE under difficult conditions.

Building an Antifragile business starts with an assessment we call the Holes in the Boat exercise. 

Every business has holes; the parts of the business that we’ve held together with duct tape, bubble gum, grit, or luck.  

Here are the questions to ask yourself:

1. What holes do I know my business has?
2. How would I determine what holes I don’t know my business has? (hint, ask an MEC Coach)
3. What holes, if not plugged, expose my business to additional threats?
4. What holes, if not plugged, will prevent me from gaining market share?
5. What holes, if not plugged, could put me out of business?

A “Crazy Market” (whether crazy good, or crazy bad) tends to cause people to focus solely on what’s in front of them.  They get caught on the hamster wheel.  

As bestselling author Susan Scott says, we succeed or fail gradually, then suddenly.

Here’s what we’d recommend:

1. Hire an MEC Coach (if you haven’t already). 
2. Analyze and feverishly plug the holes in the boat.
3. Invest NOW in the people, systems, and tools that your business will need in the next 3-5 years.  Capital is your competitive weapon.

How long is this going to last?  A while.  Let’s capitalize on it.

Be Elite!

Bill + Debbie