Think-Realty-Magazine-April-2018

COVER STORY

LIVE EVENT May 18-19, 2018 Memphis, TN

LAWRENCE YUN

“There are really two things that will help on the inventory side of things,” Yun said. “One is for builders to just build more, which could enable more renters to purchase homes or enable more homeowners to sell their existing homes and trade in their current equity for a larger home, or ‘trade up.’ When that happens, current existing homeowners will release their home onto the market, providing the inventory that is needed in the starter- home layer of housing inventory. “The second thing that will likely start to happen in 2018 that will assist with the inventory issue is that real estate investors may start to unload some of their large rental portfolios,” he went on. “It is not a measurable trend as yet, but it’s quite possible rent growth will begin to slow down in the coming months [while appreciation continues to rise] and investors will benefit from selling off some of their portfolios. That would certainly be a welcome development.” Yun said despite popular opinion stating that the only solution to expanding the housing inventory is to build at the most affordable level of housing, conventionally referred to as “starter homes,” to him, the issue is one of price points. “Builders will do their due diligence, look at market conditions, and build what they can sell for a profit that buyers will buy,” he said. “When builders do their due diligence, they fill those missing gaps. Where land is plentiful and more affordable, there will be opportunity at entry-level homes and in other sectors.” Yun added areas with less regulation on building allow developers to gain confidence, fund projects, purchase land, and increase inventory. “Local governments can also play a critical role in getting builders into a market in this way,” he said.

You’re Invited to the 2018 Memphis in May Real Estate Investment Summit and Tour of Homes

Lawrence Yun joined the NAR as a senior economist in 2000, then took on the chief economist position in 2008.

Friday, May 18 Education and BBQ

Saturday, May19 Bus Tour

LOOKING FORWARD TO A “NEWNORMAL” Lastly, Yun discussed a common term cropping up in housing market discussions lately: the “new normal.” The term itself is not new, but it became ubiquitous in the wake of the housing and financial meltdowns in the mid-2000s and during the resulting global recession. Notably, some economists have begun to speculate that U.S. housing might be entering a positive “new normal” because lending requirements are relatively conservative, the mortgage market seems largely insulated from catastrophes such as the flood of foreclosures involved in the last national housing crash, and the U.S. economy is trending in a positive, growth-oriented direction. Some analysts have gone so far as to say housing might, in fact, become less cyclical than has been the conventional norm thanks to these stabilizing trends. Yun, however, stated that the conclusions cannot be quite so simple. “First, every housing cycle is unique,” he said. “The subprime bubble and crash was unique in terms of lenders not checking credit scores. Clearly that will not be repeated, at least we would hope,

in the foreseeable future and hopefully never. But the current cycle is also unique. Underwriting standards remain, in my perspective, overly stringent. The price increases we have been observing so far are not anything resembling a bubble and are also fundamentally different from what happened in 2005 and 2006. “However, home builders have not been building the way they were for the 10 consecutive years leading up to the last crash during this cycle. That is impacting the market with consistently low inventory. Is that a ‘new normal?’ Yes, as of now, but it will change as the year progresses. There could be policy changes with Fannie Mae and Freddie Mac that change the accessibility of mortgage loans for homebuyers. There could be more new construction. You could characterize this is a new normal, or you could say that this housing cycle is characterized by a solid foundation with historically low foreclosure rates and healthier homeowners.” •

9am - Learn from the top professionals in the turnkey industry. Speakers will include local market experts, local property management, investment lenders, and much more. 4pm - Join us for a VIP experience at the 2018 WORLD CHAMPIONSH P BARBECUE COOKING CONTEST on the Mighty Mississippi River.

9am - Guests will board a luxury bus to tour the hottest markets in Memphis, TN and visit homes under renovation, new construction houses, and fully renovated properties, all available for purchase. Our team will personally walk you through the properties and will be standing by to answer any questions.

MEMPHIS INVESTMENTS

VIP Experience at the Barbecue Championship

Tour of Homes

Live Educational Event

Carole VanSickle Ellis is the editor of Think Realty Magazine. She can be reached at cellis@thinkrealty.com.

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