The Unstoppable Force Meets The Immovable Object

09/19/23 • 44 min

Rise Of The Professional with Matt Hudson

The Colorado economy is strong and the real estate market remains healthy for reasons we've discussed in the past, even though volume of activity is as low as we've ever seen for a population of this size.

However, there is a market condition Matt and Adam discuss in this Podcast that cannot be ignored. They make reference to the physics question, "what happens when an unstoppable force meets an immovable object?"
The unstoppable force in real estate is inflationary pressure and monetary policy plaguing the national economy. Will sustained inflation continue to drive interest rates higher? Will the Federal Reserve be force to continue to raise the overnight rates? And if so, does this ultiamtely create economic slow down and job loss that cools buyer activity in real estate even further, potentially to some tipping point?

And the immovable object is the bedrock of real estate stability right now, 76% of homeowners have an interest rate and payment on their current home they absolutely love. This is keeping inventory low and that low supply ultatmely is what is keeping prices elevated.

Will this real estate health continue? Matt and Adam acknowledge the complexity of this question and work to provide the listener an answer with specific recommendations of how to protect yourself in an economy that feels more than a little shaky.

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Previous Episode

2023 Mid-Year Colorado Real Estate Update

In this episode we affirm for the listener that we are right on track with expected 2023 real estate market conditions. Our only miss was anticipating interest rates to hit the mid to high 5% range, as we currently sit closer to 7% on a 30 year fixed.
There are two reasons for higher interest rates, which we address in this episode along with current market and economic conditions indicative of a rate decline in the coming months. If rates do drop, we likely see a surge in buyer activity.
We discuss the seasonal changes currently observable in the market. Headlines will speak of catastrophe as values are declining. But values decline every year from July through year end. All market conditions point to a strong, stable market now driven by lifestyle changes of marriages and births, death and divorce, job changes and lifestyle desire, versus cheap capital of 2020 through early 2022.
The 2023 Colorado real estate market is set up to end strong, priming for a stable, appreciating 2024 market that likely sees more homes hit the market and more buyer activity than 2023.

Next Episode

Important Updates and Guidance Regarding Colorado Real Estate, Interest Rates and Economy

This episode was recorded only days before the most recent war in Isreal began. Matt and Adam discuss the necessity of some "black swan" event occuring to shift the US economy, such as a another pandemic, lock downs, or war. We don't know that war in Isreal will lead to a major social or economic event in the United States. But we can see that conditions exist around the world as ingredients for change that may cause rapid shifts here at home. Most likely those rapid shifts would include lower interest rates, which would spike real estate buyer activity and drive home values even higher.
In this eposide Matt and Adam move fast in explaining current real estate market conditions in the Colorado market and use the word "judicious" in providing guidance to buyers and sellers. 2023 is the slowest year in real estate, most likely since the great depression. And prices continue to rise. Why? Real estate appears a strong bet. What is it we see in market conditions that have us remain positive about stability?
Where might interst rates be headed and how should a real estate buyer or seller be thinking right now?
Matt and Adam recommend long term thinking. Any real estate purchase should be a minimum 3 year buy and hold to be most prudent. Note-there has not been a value decline of American real estate more than 2 years in a row, since the great depression. The great depression saw real estate lose only 7% value over a 4 year period. What hurt homeowners at that time was variable rate mortgages and declining wages.
Home buyers should have money in reserve, a payment that is comfortable right now, relative job security and minimize descretionary purchases unless you are in a position that is incredibly financially comfortable.
If you need to move due to circumstances of life such as marriage, divorce, births, jobs or death, have confidence that real estate is simply the best performing asset class in the history of western civilization (Read the rate of return of everything https://www.frbsf.org/economic-research/wp-content/uploads/sites/4/wp2017-25.pdf).