Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
To say that 5780 was an unprecedented year would still fall short of genuinely describing all that we have endured these past few months. The COVID-19 pandemic has disrupted all facets of life – economically, medically, psychologically, emotionally, spiritually, and financially – the likes of which no one has experienced in their lifetimes. No market wizard could have foreseen how most of 2020 turned out, nor can anyone adequately predict how the remainder of the year might conclude.
I was honored last week when I was invited to pen an article in a major real estate publication, the Mid-Atlantic Real Estate Journal, requesting my year-end forecasts for the residential real estate and mortgage markets. Despite my over two decades entrenched in these industries, I was hesitant and didn’t want to fall prey by attempting to speculate how the markets will act over the next few months. Having experienced first-hand the tumultuous market downturn during the great recession of 2008, steered through the sub-prime mortgage market crash in the late ‘90s, and navigated through the many real estate booms, busts, and bubbles – I thought I had seen it all. However, nothing I have experienced is comparable to what we have seen in 2020.
I am somewhat comfortable, however, addressing some of the concerns that are starting to surface about an overheated residential real estate market. Some analysts are beginning to talk about pockets of “bubbles” across the U.S., and voicing concerns about what next year will look like due to an inflated real estate market. While it is impossible to predict what the new year will bring, I did want to highlight some vital data that I see on the frontline that should dispel many fears about a market decline.
Amongst many other favorable market news, this week we received a report from the National Association of Realtors that showed U.S home sales surged to their highest level ever, last seen 14 years ago. Record-low mortgage rates and a pandemic-fueled migration out of large congested cities have fueled unparalleled housing demand in suburban and low-density areas. The 10.5% increase in monthly home sales set a new record, as did the 22 days that the average home stayed on the market before getting an accepted offer. All of this record activity is being achieved despite continued limitations on home inventory. The number of homes available for sale dropped 19% year-over-year, on already depressed figures. In 2006 when we last saw these record numbers, inventory levels were double what they are today. Most real-time data show that we have a healthy home-buying market and one where we will continue to see a strong demand into next year.
CoreLogic, a leading provider of consumer, financial, and property data, analytics reported that 2Q-2020 showed a 6.6% increase in homeowner equity. The average homeowner gained approximately $10,000 of equity in their home this past quarter between home appreciation and mortgage amortization reductions. What is more impressive is that about 50% of the houses in the U.S. that have mortgages have more than 40% equity available. These levels pale in comparison to what we saw after the rapid real estate rise in 2006-2007 before the markets crashed. This confirms that if there is a crisis that threatens housing, most homeowners would be in a position to sell and still make a hefty profit. Should that occur, the market will gobble up these homes with ease.
There is a story I recently heard that took place during a time of great financial turmoil. The stock market collapsed, and many people lost fortunes. The wealthy Yosef Weinberg z’l of Jerusalem remained utterly relaxed. The holy Slonimer Rebbe, known as the Birkas Avraham zt’l asked him how he could stay so calm when all the other wealthy people were panicking and trying to figure out what will be with their financial future? He replied, “My net gains (i.e., my income for the year) already occurred this past Rosh Hashanah and Yom Kippur.” The Birkas Avraham was very impressed with his answer. Again, it is impossible to predict what the upcoming year will bring. I do know, however, that to ensure the best outcome in 5781, we have a few days remaining – and a Yom Kippur – which will surely help us seal our fate for an amazing year ahead.
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