First of all, I need to disclose that I am not a financial analyst, certified financial planner, attorney, appraiser, or anything else that would suggest this is anything other than my personal opinion as a Real Estate Agent in Palm Beach County.
That being said, I am concerned that the macro economic outlook for our real estate market is not as good as the prior years. Last time it was the real estate market that took out the stock market. This time, I fear, it could be a combination of financial markets that cause a correction (or possibly a collapse) of the South Florida housing prices.
https://www.foxbusiness.com/economy/more-evidence-housing-market-weakening
In a recent report, the National Association of Realtors® stated that in September 2018 there was a reduction in house sales resulting in the “lowest existing home sales level since November 2015”, said Lawrence Yun, NAR chief economist.Locally speaking, single family year over year September closed sales were down 6.1% in West Palm Beach, 31.3% in Jupiter, and 23.1% in North Palm Beach; while it was up 13.2% for the Palm Beach Gardens area, according to the RAPB + GFLR Association.
https://www.nar.realtor/newsroom/existing-home-sales-decline-across-the-country-in-september
As a Real Estate Agent, I would like to share some of my concerns about the state of the local housing market:
Rising interest rates – The Fed usually breaks something when it starts raising rates. This leads to affordability for mortgage holders to go down and buyers are approved for lower loan amounts. I am seeing current interest rates coming in at around the 5% level on 30 year fixed rate loans.
Tariffs– The Asian and emerging markets seem to be in a freefall. In today’s world economy, what happens in China, doesn’t stay in China.
Europe– Brexit, Italy’s budget, Germany’s political troubles, etc… What happens in Europe, doesn’t stay in Europe.
Currency exchange rates – A Strong dollar and weak international currencies make it very expensive for International buyers to afford U.S. stocks and U.S. real estate.
Pension Funds – Most of the World’s pension funds are grossly underfunded. From what I’ve read, most of them are basing their budget and forecasting stability on an unrealistic rate of return. In the past two years, it hasn’t seemed to be a problem because they made substantial returns on their investments. I believe that a substantial correction or prolonged bear market could push some of them off the cliff.
Buyer sentiment – Working with buyers recently, I’ve noticed quite a bit of concern with the amount of “house they get for the money”. Fewer first time buyers are willing to pull the trigger and, it seems, that the ones that are making offers are doing it out of necessity.
Market Support Levels Broken - Recent downturns in the stock market have seen the major indexes break through their key support levels. Every day we hear the financial pundits saying “Buy the Dip” and “This time is Different”, the thing is, they never say “Sell, it’s time to get out”!
https://www.zerohedge.com/news/2018-10-24/eight-reasons-financial-crisis-coming
A smart agent will be using this time to put some money into the rainy day fund, work even harder and be ready for opportunities to arise. Eventually, the less talented, less committed agents and part time agents will go bust and go back to their previous careers. A culling of the heard will be good for the careers of great agents that can stay solvent and GRIND in lean times. There will be opportunities to make great investments, gain market share, hire talented people and come out stronger on the other side.
