The R Word

Weekly, if not daily, we are being bombarded by fear, through information, of an economic recession. It is the focus of most media outlets, as well as political commentators, journalists and man-about-town conversations alike. And in our industry, this draws innate parallels to the effects this would have on the housing market. This unnecessary and unhealthy fear (as well as an unfounded one) scares buyers and sellers, as well as agents because we all want to be lucrative and make the best moves at the best time possible. Anyone who knows me knows, I’m not a “the sky is falling, THE SKY IS FALLING!!!!” type person, and this particular situation is no exception.

I understand that this is the time, given the history of the rise and fall of the market and economy, that a recession would take place, but a decade of economic growth isn’t a necessary warning sign for imminent, sharp or impending decline. For instance, we’re still experiencing record-low unemployment rates, solid corporate profits, high wages, record home equity and a decent stock market. And on top of everything else, we’ve been spending like crazy and getting help with tax cuts. The natural conclusion with these indicators does not seem to be a cut in the federal funds by the Federal Reserve, and yet, that is exactly what happened!!

This was somewhat mind boggling to me, as everything I read and researched seemed to indicate a discrepancy between the action of the Federal Reserve and the state of economic affairs, until I read the statement by Jerome Powell (Chair of the Federal Reserve). He stated: “Weak global growth, trade policy uncertainty, and muted inflation have prompted [us] to adjust [our] assessment of the appropriate path of interest rates.”  Suddenly, it all became clear that this action by the Federal Reserve was not in direct response to the state of the current economy, but instead, was based on the Trump Trade War with China and Europe. My conclusion after researching further is that the cut in rates is just a preemptive strike to cushion the economy from a global slowdown and continuing trade tensions.

And, “although the federal funds rate is not supposed to have anything to do with mortgage rates, it does directly affect the 10-year treasury yield. Like it or not, mortgage rates are directly affected by the 10-year treasury. For instance, as yields on the 10-year Treasury notes rise, so do the interest rates on 10- to 15-year loans, such as the 15-year fixed-rate mortgages. Investors who buy bonds are looking for the best rate with the lowest return. If the rate on the Treasury note drops, then the rates on other, less safe investments can also fall and remain competitive.”  (The Balance, 10-Year US Treasury Note)

So, what is our responsibility to our clients, with this string of information? What should we be doing? Well, call all your contacts!! Pick up the phone and don’t stop until all your connections know the actual state of the market and the economy. And when you call, tell everyone that the money is almost free. Around this time last year, the 10-year note was right around 3, with mortgage interest rates close to 5%. Today, the 10-year note is under 1.5 and some lending companies are locking in rates as low as 3.5%. The numbers aren’t wrong and what this means is everyone who has even the slightest interest in buying should buy now while rates are this low. And sellers should sell because buyers are back in the market, which affects supply and demand.

The excitement of where the housing market is and could be should be exciting to each and every one of you. While some people are preparing for the worst, we should be taking the facts and giving them to everyone we know so they can make educated decisions about their purchases and plans for purchases in the current state, as well as the future. You are not bothering anyone— you are bringing awareness to the people you care about to make sure that if they’re waiting to buy or sell, they should start doing so now. Create a buzz!! Focus on the factual numbers in the market and reassure clients who might be skeptical. Start a dialogue and, worst case scenario, people do their own research and due diligence and they find out the same truths about the state of the marketing industry that you have.

In a media frenzy, where the bend is to disorient us, let’s remain laser focused and remember our job and do our due diligence for all of our clients, so they can make the best, most informed decisions for them. This is critical information that buyers and sellers should have access to so they can make the easiest decision in an industry that can sometimes be hard to gauge. Rely on your knowledge, the numbers and the proof of what is being shown and prove to your clients, both current and potential, that you are the right person for the job!

We are in an exciting time in the industry, as long we don’t fall prey to some of the media hype. We are all capable of thriving during a lucrative and exceptional market and economy. The business is there for the taking— don’t be afraid to put yourself, and your knowledge, out there.

About Harout Keuroghlian

After working with, and for, many different real estate firms, it became apparent to Harout that there was a major disconnect between what consumers needed/wanted and the service that was being provided to them. It was upon this realization that Harout founded and opened JohnHart Real Estate; and as the CEO/Principal Broker he has continued to break from the norm and redefine real estate with an insatiable appetite to give his clients the service and attention they deserve.

1 comments

Great explanation Sir!
What I’ve been telling all my clients for the past a few months now.
I believe mainstream media is doing a disservice to the people in misleading them about the facts.
And since election year is coming up it’s all politicized. One other indicator I look at is inventory vs. demand. I don’t see rise in inventory saturation in the RE market(which would be one of the main indicator of the R-word). It’s just not there. There is more demand than supply. Consumer confidence is HIGH. Stock market going down 800 BP is not a big deal given the fact in 2016 the Dow Jones was at 18,000 and today it is at 26,000. China trade war has to happen for far too many reasons then the economy. It is for National Security as well. Will we pay for it financially? Perhaps, but one thing we may not realize we’ve been paying for it for over 20 years, by China draining our economy by stealing our companies, hence our jobs and most importantly stealing our intellectual property. Which is far more damage to us then 500 Billion trade deficit we have with China yearly. There a 100’s and 1000’s of stories of these facts.
The fact remains the US is #1 economy in the world, and other nations need us. Make no mistake China is no fool their goal is to dominate the world technologically(look up Chinas 5G technology),financially and militarily. So trade war is not just about trade it is about putting rains on China, almost like closing the valve slowly to stop the draining process which will create a fair playing field and bring China to reality.
That’s my 2 cents worth.

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