There’s barely a news cycle that goes by without someone trying to pin down what’s happening in the housing market.
One thing’s for sure, though, the option to work remotely has had an impact on housing markets, according to Brad Phillips, a senior vice president for American Mortgage Service Co., based in Cincinnati.
Phillips recently was in the Tampa Bay region to give a talk at a breakfast meeting of the North Tampa Bay Chamber of Commerce.
“Working from home caused a mass migration in a lot of cities. You didn’t have to live in California anymore, to work in California,” Phillips said.
Besides giving people more personal freedom, it also had an impact on housing costs, he said.
For instance, Phillips said: “Austin has the great California migration. What occurred there was so many Californians came in — they’re used to paying $1 million for a 750-square-foot apartment — so when they came in and found a house, which was overpriced, it was still a great deal.
“They started buying up everything in Austin, which was causing the Austin population to have to press out. They couldn’t afford to keep up,” he said.
With the shift to remote work, homebuyers found themselves in a new dynamic.
“You are no longer competing with local salaries,” Phillips said.
Consumers also can choose where they prefer to live, not just close to where they work, he said.
In Tampa, he said, “there was a youth boom down here. You guys were second or third, in the fastest-growing under-28 crowd.”
He thinks nostalgia played a role.
“Those kids came down, and visited grandma and grandpa. They have the memories of the excitement level of this area, and Florida, in general.
“So, what happens when they can live anywhere they want?
“They came. And, they came in droves,” he said.
Prices in different markets also have been influenced by foreign investors, who have driven up prices in places such as New York and California, which has prompted consumers from California to move to Texas or Montana, while New Yorkers move to Florida.
Phillips talked about other impacts on home prices and availability.
There was a point in recent years when the housing market faced “the perfect storm,” he said. Housing inventory was low, interest rates were low, building material costs shot up and supply chain issues slowed construction, he said.
When a house hit the market, bidding wars broke out.
“At the time, it looks great. It feels wonderful — especially, if you’re a person selling a home,” he said. Some sellers were getting 15 offers in 5 minutes, and they were all over list price.
But that situation is not a good thing for the housing market, overall, Phillips said.
He expects negative impacts from those sales to become apparent over time.
“People bought homes that they just didn’t know. There were a lot of ‘as-is’ purchases,” he explained.
“The mortgages themselves did not bend. We were too regulated after ’08 and ’10. And, I can tell you that though regulation is tough, 1000% warranted, and a great thing that it occurred.”
But Phillips added: “The appraisals started going haywire again, not needing them, getting property inspection waivers.
“There’s going to be a mass amount of people that got burned. They just don’t even know it,” he said. “They have overpaid, in most cases. They have maybe bought a property that was not up to par to what we, or someone else, would deem suitable.”
Prices dipping, houses staying on market longer
Phillips said the housing market is beginning to stabilize.
“We have three straight months that we’ve had an increase in listings. That means houses aren’t going off the market as quickly as they possibly could,” he said.
Plus, listed houses have been dropping their prices.
Sellers may view that as a negative, but overall, it’s a positive, because it indicates that the market is shifting back into alignment, Phillips said.
Looking forward, he said, “expect a period of slow.”
“Those home values can’t drop 50% overnight. They’ve got to come down 8%, 11%, the rest of this year. They’ll need to drop about 8 (%) or 10% next year. Then, (interest) rates will have stabilized. That will help,” he said.
As more houses come online and prices stabilize, buyers have better opportunities to shop for the house that they want, Phillips said.
Experts are predicting that 2025 will be a buyers’ market, he added.
“It’s going to be poised to take off again and it’s going to be exciting,” Phillips said, then, it’s likely something will happen to slow it down again.
“You never stay on top, you never stay on bottom,” Phillips said.
While people may have overpaid for their homes recently, he still thinks a home purchase is a good investment — if the buyer can hold onto it long enough to ride out any economic storms.
“If you look at it as a long-term play, mortgage is still the financial right decision in the grand scheme of things,” Phillips said.
Published September 21, 2022