Buyers Waiting for Prices to Come Down Will Be Disappointed

“Some buyers were waiting for the next recession, thinking home prices would fall again – but recessions aren’t created equal. The latest downturn exposed those myths.”- FloridaRealtors.org
 By: Russ Wiles

NEW YORK – The current economic downtown has been odd in so many ways. Why shouldn’t it expose some economic myths and misconceptions as unreliable, if not outright untrue?

When it comes to understanding the relationships involving home prices, bank deposits, interest rates and unemployment, many disconnects arise. Here are a few:

High unemployment and home prices

You might think that as the nation’s unemployment rate has spiked during this social-distancing recession, that would put pressure on home prices, forcing some owners to miss payments and discouraging buyers.

So far, that hasn’t been apparent. Home prices were up 2.5% on average this year through April, according to S&P CoreLogic Case-Shiller.

Low interest rates, which make homes more affordable, are one factor supporting prices. Also, stimulus and other government payments have enabled millions of Americans to meet their obligations. Plus, the economic slump has lasted only about four months so far, so the full impact may not have been felt yet. If the economy recovers strongly from here, negative housing fallout might not materialize in a big way.

Still, it does seem like the other shoe could drop. Fitch Ratings, the credit-rating agency, currently sees home prices nationally as 6.1% overvalued based on recent price increases, heightened unemployment and the possibility of lower incomes and rents. Values are most frothy in Nevada, Idaho, North Dakota, Texas and Arizona, Fitch said.

The degree to which housing might become more overvalued depends on the future path of unemployment and personal incomes, said Suzanne Mistretta, a Fitch senior director.

The company sees the U.S. unemployment rate easing to 7.8% next year from an average 10.3% in 2020. Though not approaching overvaluation levels of 20%-plus from 2005 to 2007, housing still could reach its highest level of overvaluation in a decade, Fitch warned.

Federal deficits and interest rates

Many people used to assume widening federal deficits would exert a crowding-out effect, pushing interest rates higher as the supply of debt mushroomed and private savings were siphoned from other investments. Few people seem to be focused on this connection anymore, given that interest rates keep dropping while Washington’s borrowing needs continue unabated.

One explanation for why the link doesn’t seem to work is the lack of inflation, as inflation and long-term interest rates tend to move together.

Another is the preference among investors for owning government bonds, which carry high credit ratings, during periods of heightened uncertainty. When things get tough, investors get nervous. They snap up government bonds with preservation of capital, not yield, as the primary goal.

As the Tax Foundation noted in a 2016 report, some economists had been suggesting that budget deficits reduce economic growth by boosting interest rates and diverting private saving toward the purchase of government debt. But in practice, “It has been hard to find an empirical link between deficits and increased interest rates or reduced investment,” the group concluded.

Rates are even lower, and deficits higher, today.

Low yields and deposit accounts

You would think that with bank deposit accounts, money-market mutual funds and other risk-averse instruments yielding next to nothing, investors would be ready to move their money elsewhere. But so far, millions of people are willing to accept virtually no yield so long as their assets remain safe.

Bank deposits spiked by $1.2 trillion in the first quarter, the most recent figure tracked by the Federal Deposit Insurance Corp. That was nearly four times the size of any other quarterly deposit gain over the past decade. Americans also have been flocking to money-market funds and other risk-averse instruments. Money-fund assets are up more than $1 trillion so far this year, reports Money Fund Intelligence newsletter.

It’s not like risky stock-market investments have been faring all that poorly. The broad market was up roughly 43% from its recent low in late March through July 9. But for a lot of people, safety reigns supreme – and they’re willing to pay a price for it, in low returns.

College graduates and layoffs

Before the recession, the vast majority of people with bachelor’s degrees who wanted jobs could get them. As recently as March, the national unemployment rate for college graduates was 2.5%. That was well below comparable figures for less-educated Americans, such as the 4.4% rate for people with only a high school diploma.

College graduates also typically earn more – $1,248 a week on average for holders of bachelor’s degrees only, compared with $746 for those with a high school diploma only, according to a May update by the Bureau of Labor Statistics.

However, that picture has changed a bit amid this coronavirus-induced economic slump. The unemployment rate for college grads more than tripled overnight to 8.4% in April and 7.4% in May before easing to 6.9% in June, according to the Department of Labor.

That’s still well below comparable rates for less-educated groups, such as the 12.1% June unemployment rate for high-school graduates. (The department also tracks workers based on whether they have some high school attainment and some college.)

Still, it lays to rest, at least temporarily, the notion that college graduates are immune from layoffs or other career bumps, especially amid an economic backdrop as strange as this one has been.

Saving money during recessions

You might think now would be a tough time to save money. During recessions and other periods of high unemployment, more people are financially stressed, the reasoning goes. It would be the time for many individuals to lean on their savings to help make ends meet.

That might be the case for a lot of people, but it certainly doesn’t tell the whole story. The nation’s savings rate often has climbed during recessions, and while real-time numbers aren’t available yet, that could be the case again.

Part of this might reflect a reluctance or lack of opportunity to spend money. Think how much you have saved in recent months by eating at home rather than at restaurants, not taking vacations and so on. Perhaps many people also are making a genuine effort to get their budgets under control by putting off various types of spending.

It’s not just individuals, either. A March survey of corporate finance officers conducted by the Association for Financial Professionals noted the largest increase in three years of businesses holding short-term investments at banks.

 

https://www.floridarealtors.org/news-media/news-articles/2020/07/buyers-waiting-prices-come-down-will-be-disappointed

Come out in support of The Annual Delray Beach Home Tour!

Join us as we support the important work of The Achievement Center for Children and Families. Click Here for more Information about The Achievement Center for Children and Families.

Now in its 19th year, the Delray Beach Home Tour draws hundreds of guests from all over South Florida and beyond for an exclusive tour through some of Delray Beach’s most distinctive residences. Guests enjoy a leisurely day of exploring unique residences, a catered luncheon and trolley service between homes. With over 600 attendees, 100 volunteers, and dozens of community supporters, this well-orchestrated signature event raises much-needed funds for the Achievement Centers for Children & Families. This year’s Home Tour will be in the Lake Ida Neighborhood of Delray Beach and features a wide variety of architectural styles and design elements that provide home decorating enthusiasts an inside look into the world of distinctive Delray living.

Delray Beach Update- January


Click Play and Watch our Delray Beach – January Monthly Update video!

Noreen on Delray Morning Live!

Noreen Payne was the first guest of 2020 on the weekly Delray Morning Live show! Click play to hear Noreen talk about the new diverse and dynamic board members this year on the Delray Beach Chamber. She is Chairman of the Board and shares exactly why she decided to become involved in the Chamber and hints at some exciting new things to come!

Photos: City of Atlantis 26th Annual Holiday on Wheels Golf Cart Parade

On December 10th, Amy and her son Dillon were honored to serve as judges for the 26th Annual Holiday on Wheels Golf Cart Parade in their home City of Atlantis!

The fun kicked off around 5:30 where the decorated carts assembled in the Atlantis Country Club parking lot. After a delicious dinner organized by the City, and events for the kids (they brought in snow!), the police escorted parade “floats” 😉 through the city.

From their festive driveway parties, neighbors watched the carts go by. The highlight may have been the gold cart, from which participants through candy to the spectators.

The parade concluded at the Atlantis Municipal Complex, and the judges awarded prizes for the best carts. The Holiday Homes (decorating contest) were also awarded here!

Shout-out the Atlantis Police Department for their support and facilitation! We always appreciate our officers, who escort those in the parade around the City and block off streets for the protection of all who are enjoying the parade!

Enjoy some photos below!

  

   

City of Atlantis, Florida – 2018 Holiday Season Events

One of the things we love the most about the City of Atlantis, Florida (where we live, work, and play!) is the sense of community. And it’s rarely more evident than around the December holidays! Here’s a run-down of the best events:

The City of Atlantis 10th Annual Holiday Homes Decorating Contest is almost here!

(Now through December 9, 2018)

 

Between Thanksgiving and the December 9 event, many of our neighbors have decided to go “all out” in decorating their homes for the contest – and it’s pretty spectacular!

Judges are ready to vote and awards will be given out following our City of Atlantis Golf Cart Parade. (More on that in the next section!)

… Speaking of The City of Atlantis Golf Cart Parade – I am super-excited to announce that my son Dillon and I were asked to serve as judges this year!… (so be nice to us! 😉 We are excited to participate and look forward to awarding the top golf carts for their decorating and creativity skills!  (We will add photos to this post after the event, too!)

 

The 26th Annual Holiday on Wheels Golf Cart Parade

(Monday December 10, 2018)

 

Schedule:

5:30 – Gathering of the decorated carts in the Atlantis Country Club parking lot.

If you want to enter your cart in the parade, please arrive in time to have your photo taken prior to having dinner!

5:30 – 7:00 – Food & beverages served at Atlantis Country Club: Chicken, hamburgers, hot dogs, potato salad, cole slaw, baked beans, coffee, soda and cookies. Cash bar.

7:00 – Parade begins at the Atlantis Country Club: If you are not in the parade – just put a chair in your driveway, pour a glass of wine and enjoy the parade – get ready to grab the treats that the golf cart parade attendees throw to the

spectators!

8:30 – Parade ends at the Atlantis Municipal Complex.

8:45 – Prizes are awarded for the best carts – and winners of the Holiday Homes!

 

Thank you to the City of Atlantis Police Department!

We always appreciate our Atlantis Police Department who escorts those in the parade around the City and block off streets for the protection of all who are enjoying the parade! So, a big shout out to them!

 

City of Atlantis Christmas Tree Bonfire

(January 13th , 2019)

 

What do you do with your Christmas Tree after Christmas? You put it outside your home for the City of Atlantis to pick up for our City’s Christmas Tree Bonfire on January 13th! The city and club provide hot dogs, smores and more. And yes they always have a bar, too! It’s all quite festive! See you there!