The least “recession-proof” cities

We all saw the fed rate hike coming this week. Another 0.75%. We all know this is a necessary step to curb inflation. Now, understandably, this makes a lot of buyers wary about the rise in mortgage rates. However, when you start talking to lenders, you realize they’re actually not that bad, especially if you have a relationship with your bank or take the time to compare lenders.

Case in point: I was speaking to someone earlier today who’s refinancing with a 10-year interest-only loan and they’re cashing out the equity on their house. Long story short, they’re getting 3.8% interest because they shopped around and have a relationship with their bank.

At the end of the day, it’s all about supply and demand right now. Demand has dropped, so some lenders have lowered their rates in hopes of scoring more business. Tell your clients to shop around. You never know what they’ll get!

– David

Buying activity declined in June

Source: Unsplash

It looks like homebuyers took some time off in June. According to the NAR, pending contracts experienced the biggest drop since the start of the pandemic (March-April 2020).

  • Pending home sales fell 8.6% in June, compared to the expected decline of just 1%

  • Transactions are down 20% YoY, with the West experiencing the sharpest drop

  • The NAR now expects home sales will decline by 13% in 2022

Our take

We still have impossibly low inventory and that is clearly affecting home sales. We’re not surprised to see these numbers. Also, historically, summer months are almost always quieter. People go on vacation, they enjoy family time, and they’re getting ready for back-to-school season. We’ll be interested to see what happens in the market when the buying season picks up again this fall.

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The least "recession-proof" cities

Source: MarketWatch

Redfin’s recent analysis of 98 major metros ranked their recession risk score from 0-100 (with zero being most resilient). They based their report on a few factors, including local price volatility, price growth, and average debt-to-income ratio of local residents.

These are the Top 10 cities most susceptible to a housing downturn in a potential recession:

  1. Riverside, CA

  2. Boise, ID

  3. Cape Coral, FL

  4. North Port, FL

  5. Las Vegas, NV

  6. Sacramento, CA

  7. Bakersfield, CA

  8. Phoenix, AZ

  9. Tucson, AZ

  10. Tampa, FL

Our take

Even though we’re bordering on an official recession, that doesn’t mean your business has to slow down. It’s a great time for buyers because they can finally start negotiating again. We haven’t sat at the negotiating table in two years. Now we’ve got room to get our buyers a really great price and favorable terms. That’s a win-win and a huge opportunity for us agents.

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Key points from the NAR's Chief Economist

Source: Unsplash

Last week, Lawrence Yun, the chief economist for the NAR, met with the Senate Committee on Banking, Housing, and Urban Affairs to talk about all things real estate. Specifically, he addressed today’s affordability crisis, inventory deficit, and rising mortgage rates.

Here are the key points Yun made in his Senate Committee address:

  • Today’s sky-high prices are largely due to the pandemic’s lingering effects, nationwide underinvestment and development, and rising mortgage rates

  • Rate increases alone have already added about $800 a month to the median-priced monthly house payment

  • A national price drop isn’t likely. Some markets may see short-term drops, but prices are likely to continue rising for years to come.

  • Inventory is growing, but not nearly fast enough to cover our shortage of 6,000,000 homes

Our take

Until the supply of homes really starts to grow again, prices just aren’t going to improve much nationwide. To us, this further demonstrates the current strength of real estate. Even in a recession, even after the pandemic, real estate remains highly valuable and in demand.

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The news that just missed the cut

Source: Google Housing

Foundation Plans

Advice from James and David to win the day

Want to succeed as an agent this year and beyond? Watch out for the three biggest rookie mistakes:

  1. Undervaluing prospecting. There’s absolutely no way around it–99% of your success in this business comes down to building your leads list. Until you’ve built up a solid local reputation, we promise your phone won’t ring by itself!

  2. Not knowing how to market their listings. Relying on the MLS just isn’t enough in this market. You’ve got to have incredible pictures, a knack for writing descriptions, a targeted social media strategy, email marketing, lots of open houses, and a network of agents who will share your listings. That’s how you make real moves!

  3. Skimping on follow-ups. We love the phrase, “The fortune is in the follow-up.” It’s so true. The relationships you build will pay off for years to come, through referrals and repeat business. The better you get at following up, the more these relationships will pay off.


You ask, James and David answer!

Q: How do you communicate inflation to your buyers and sellers? Does it change how you sell homes?

Michelle, The Blueprint reader, New York

A: Inflation is good if you’re taking out a mortgage because, in a nutshell, inflation makes our dollars worth less, right? As inflation grows, your buyer’s loan essentially becomes smaller and smaller. When our buyers worry about buying during times of inflation, we let them know they’re getting more for their money when they buy right now.

James & David

We’ll be back next week with another answer to a real reader question. Submit yours here!

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

Source: Rocket Mortgage

Remember, there will always be ups and downs in every industry, but given the volatility in the economy and the world, real estate has actually been a relatively consistent business. You’re in the right place at the right time.

See you on Tuesday.

– James and David

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