Sunday, December 10, 2023

Merry Christmas and local housing

by RAPHAEL BARTA Contributing Writer
| December 11, 2022 1:00 AM

Good thing Christmas comes at the end of the year. No matter what the previous 11 months handed us, when Thanksgiving weekend kicks off the holiday season we can’t help but feel like better things lie ahead.

Bonner County was lucky this year as the gloomy low gray cloud cover of November gave way to a mood-altering soft white snow cover. In the retail industry, there is a marked uptick in spending habits when snow falls. This is because psychologically the snow triggers subconscious childhood memories, and we somehow just feel … good. And after these past 11 months, it’s time we all started feeling more cheerful.

2022 will go down in history as the Year of Change. A housing market that had been rolling along hit the wall, and all kinds of chaotic forces were unleashed and are still playing out. No pundits, analysts, economists, politicians, government entities or industry participants got it right, and we find ourselves now at a crossroads with both sellers and buyers MIA. It’s as if somebody put sand in the gearbox and the whole thing came to a screeching halt.

It’s a very weird environment where opposing forces have equal sway with no clear direction or outcomes. For example, everyone agrees we need more housing stock, especially in the more affordable price ranges, but apparently homebuilder sentiment is at all-time lows, and they’re not building any new homes right now. The population is growing and the Gen X and Z crowd and millennials all need to get out of their parents’ basement, but there’s very limited demand and listings are beginning to pile up. Or not piling up, because sellers can’t make sense of the market either and are unwilling to trade their 2% mortgage for a 7% mortgage.

The Federal Reserve can’t make up its mind about further interest rate increases, and inflation has proven to be more entrenched than the Fed’s heavy-handed methods can eliminate. No wonder everything has come to this catatonic state. The Grinch must be smiling somewhere. But it’s a wonderful life, and Christmas season has come just in time when we badly need a positive boost to soothe over all this turbulence. So deck the halls, pour another egg nog with brandy, and let’s come up with The Santa Real Estate List. (not as exciting perhaps as the glossy catalogues and promotional emails we get every day from retailers, but this is supposed to be a real estate centric article).

To wit:

federal and state government programs to fund infrastructure like sewer and water distribution systems and new roads

The elimination of restrictive zoning ordinances and time-consuming permitting procedures

A stable interest rate environment. It doesn’t have to be abnormally low just steady enough to not create anxiety

A level playing field for real people that need a house for a home, not speculators and investors looking to just make money

No more supply chain disruptions for the essential components that go into building a house

An increase in young men & young women wanting a career in construction

Banks that actually want to lend money for a home purchase and make the process quick and user-friendly

Smart Growth initiatives that allow for density but still protect the essential character of the community

Homes and apartments for rent that the worker-bees who make this place work can afford and enjoy

What lies ahead.

The market paralysis will not last. When 2023 rolls around, it will be time for action. If you are going to be involved in a real estate decision in the next few months, what do you do, what should you expect? One part of the decision will be based on your objectives, your aptitude for risk, the urgency of your motivation. If you can afford to be patient and see how the overall economy fares, then waiting and watching is a good strategy. If you cannot control the timing, and you must either sell or buy, then you have to embrace the current market, not the pre-pandemic market and not the hyper pandemic market.

What happened in the rearview mirror is irrelevant. In today’s world, there is no shortage of data: information is everywhere and readily available to anyone. Making sense of all this information is the challenge. I devour research reports, economic forecasts, data sets. I have a master’s degree in finance. I ought to know what’s going on. But I have never seen such a range of possible outcomes with really smart and sophisticated people all assessing the same information. Two of the largest banks in the United States, Goldman Sachs and Morgan Stanley, differ completely on their economic projections for 2023. How can the average person understand what to do if these organizations full of genius types cannot agree?

One drawback of these reports is that they tend to be of a national scope, the 30,000 foot level. And in painting with a broad brush, they miss the critical nuances that comprise our Bonner County market. All real estate is local. (If you want to buy a rental property in Austin or a second home in Phoenix, then get a hold of the excellent market analyses for those particular markets).

In making an informed decision for a local setting, we often rely on the availability heuristic, which is forming a judgment based on the information closest to us (that’s a gross simplification of a fascinating topic). The reliance on “what we know” often creates a bias because we are influenced by that pesky historical data (“my neighbor sold his house for X dollars 18 months ago.”). We are more easily convinced by anecdotal evidence, by a story, than by statistics. But it is equally dangerous to rely only on statistics because these can be interpreted in vastly different ways. As is the case with most good decisions, the sweet spot is a synthesis of your brain and your heart.

Bonner County is not in an over-build situation. Filings at the courthouse for foreclosure delinquencies are very low. The tsunami of out-of-state buyers that drove prices to crazy heights has ebbed. Sellers are slowly becoming more realistic about pricing and about presentation, about concessions (paying closing costs, repair allowances etc.) This community is still a remarkable place to live Life. This is what a normal market looks like, and until Santa fulfills my Wish List above, this is reality. Thank you all for a wonderful learning year. I wish everyone great health and Peace.

Raphael Barta is an associate broker with an active practice in residential, vacant land, and commercial/investment properties.

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