Love, Money + Real Estate #008
Stock Market Slump, Rising Mortgage Rates, Condo Reserves and a Question About When to Hire an Agent
Like most of you, I woke up to the news that the stock market was slumping again. As of this writing, NASDAQ is -10% for the year and about even with a year ago. The S&P 500 has bounced back from its recent slump and is -5% in 2022 and up almost 18% from a year ago.
These sorts of ups and downs can be exhilarating (if you’re the sort who thinks jumping out of an airplane is just another day at the office) or frightening - especially if you’re nearing retirement or are watching the market on a daily basis. But if we’ve learned anything over the past 15 years, cash has to go somewhere. And, over the long haul, stocks are a winning hand.
If you don’t have a long time horizon, then take some of the extraordinary gains of the past few years off the table and rebalance. If you’re nearing or are in retirement, and are worried about what you’re going to live on, consider selling some of your equities, paying the taxes and putting it into something that will generate guaranteed income. Trust me: You’ll sleep better.
Home Values’ Rocket-like Rise in 2021
If you’re a homeowner, you’re probably pretty happy right now. The total value of U.S. homes surged 18.6% ($6 trillion) in the past year. That’s the largest gain on record since 2001. Of course, if you live in Austin, TX and you’re a homeowner, you’re especially happy. Redfin’s report revealed that home values in that city surged nearly 40% in the past year!
You’re also happy if you live in one of the following:
Cape Coral, FL (+36.9%)
Grand Rapids, MI (+33.1%)
North Port-Sarasota, FL (31.9%)
Raleigh, NC (+29.4%)
Las Vegas (+29.1%)
Salt Lake City (+28.4%)
Tampa, FL (+28.3%)
Tough times if you’re a renter
If you’re an investor, you’re also happy: rents are surging. If you’re a renter, these are very tough times indeed. In its December Rental Report, Realtor.com reported that U.S. rents grew 5.3x faster in 2021 than 2020, up 10.1%.
“The surge in housing values during the pandemic has widened the gap between homeowners and renters in America. Homeowners have seen their wealth increase significantly over the past year, while renters have missed out on those gains and are now grappling with rent inflation,” said Redfin Chief Economist Daryl Fairweather. “The silver lining is that housing values didn’t just climb in large affluent cities. Homeowners in rural America, who don’t normally see substantial home-value increases, also reaped the benefits of a booming housing market.”
Don’t expect double-digit housing value growth in 2022
Redfin forecasts that home price growth will slow to an annual rate of 7% by the end of 2022, as mortgage rates rise through the year to land at around 4% for a 30-year fixed-rate loan.
In fact, as interest rates rise, some markets could see home values stabilize, or even fall. Researchers from Florida Atlantic University and Florida International University said Boise, Idaho is the nation’s most overvalued market, where buyers pay about 77% more than they should. Florida has 7 of the 33 most inflated housing markets, including Lakeland (#12) and Tampa (#14). Miami is the least overvalued market in Florida, according to the study.
More Real Estate Matters
Realtor.com says the U.S. median list price is up nearly 12% YOY, but new listings are down 7%. Active inventory is down 28% from a year ago and is consistently falling short of historic levels, creating challenges for first-time buyers and sellers (who sell and then want to buy a different home).
Where are Millennials living? They’re the largest group of home buyers (measured by the percent of mortgages offered). According to LendingTree, Denver, Seattle and Boston are the most popular cities for Millennial buyers. Where don’t Millennials want to live? Miami, Jacksonville, and Tampa.
Clever, a real estate data company, reports that 92% of Millennial home buyers have some sort of debt, with 71% carry at least $10,000 in debt. Also surprising? One in six Millennials would offer $100,000 or more above asking to win their dream home.
Finally, Redfin reports that the share of home buyers looking to relocate is near the pandemic peak. Nationwide, 31.2% want to live elsewhere. Just don’t look at Boise. Or, anywhere near Ojai, CA.
Wondering what to get your sweetheart for Valentines Day?
Get ready to dig deep. New research from LendingTree says Americans will spend 44% more on Valentine’s Day than last year, or about $208 vs. $144 last year. Who spends the most? Couples who have been together for one or two years ($247) or those who earn at least $100,000 ($413).
And for those who aren’t quite there yet, here’s a thought
Buy crypto. It might just make you a hot commodity on the dating scene.
A recent widow used her late husband’s life insurance proceeds to pay off the remaining mortgage on their home. Now, she’s wondering what happens if she can’t find the deed.
She inherited her mom’s house in Charlottesville and has been renting it out for awhile. When should she hire an agent to sell it?
Why do sellers back out of a contract? Here’s a host of reasons.
Why add financial wellness as a benefit? Here are 3 reasons.
Got a special assessment? This insurance policy might help in limited circumstances.
And, the other side of the story: Can a buyer cancel a purchase agreement?
And then there’s this: You pay off your mortgage and the next week, your house burns down. What happens if the wrong people and/or entities are still named on the insurance policy? Why it’s important to review and update your homeowners insurance policy.
WGN Radio - This Week in Wealth
Each week, I co-host a show on investing, retirement planning, and other odds and ends about the world of money with Tom Fortino, an RIA who founded the Alpha Wealth Group, based in Oakbrook. We spend a lot of time talking about 401k conversions and how to build guaranteed income plan in retirement. The show is called This Week in Wealth and as of December, we were #1 in our timeslot. Admittedly, 6:30a on Sunday mornings isn’t exactly setting the world on fire, but our audience is growing month by month.
Why don’t you join us? And, catch up on past episodes via the podcast. Streaming on WGNRadio.com or AM720 in Chicago.
On a personal note…
I think everyone is getting itchy. We had longtime friends over for dinner a few weeks ago, and when we asked how they were, they said, “Grouchy.” That works, too.
I’m doing a few things to help pass the time until life returns to normal: I’m cooking more, trying to get outside every day, doing a little more traveling, and trying to work more normal hours (my day is never 9 to 5, but I’m trying to cut back from my usual 10 to 12 hours a day of office time).
Are you done with the pandemic? What are you doing to feel more like yourself?
Feel free to leave a comment or drop me a note. Thanks for reading, and have a great weekend.
P.S. If you’re a public relations or media pro and want to chat about a company you represent, content or influencer work, or need a kick-ass speech for a conference, feel free to reach out to me directly.