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Liniger on rates, Realtors and reporting

Dave Liniger

Dave Liniger


  • Mortgage rates last year were half the historical average for the past 40 years.
  • Dave Liniger doesn’t fear the impact rising rates could have on home sales.
  • Liniger sees an increasingly sensationalistic U.S. press.

In the 40 years since Dave Liniger co-founded RE/MAX, the average mortgage interest rate has been 7.8 percent.

Last year, the rate was less half of that, falling to the lowest level in memory.

So what happens to the home-sales market if interest rates revert to the mean and are much higher than they are today? Does the demand for homes wither, as homeowners are loathe to part with their beloved rates below 4 percent.

No, Liniger said last week, during a wide-ranging interview with InsideRealEstateNews.com, in which he addressed everything from coming back from a near-death experience a year earlier, the challenges of building a gigantic real estate franchise company, to his perspective on the current housing market.

“Interest rates are important, but not as important to the housing market as people think,” said the 67-year-old Liniger, who this week is attending the annual RE/MAX conference in Las Vegas. Condoleezza Rice, the former Secretary of State for President George W. Bush and a University of Denver graduate, is the keynote speaker at the event, which draws thousands of RE/MAX agents from around the world.

“Consumer confidence is much more important than interest rates,” Liniger continued. “If mortgage rates rose to 7 percent or 8 percent over the next few years, that would be OK if people were secure in their jobs and feel like they have an opportunity to continue to make more money at work.”

Rates, however, may not return to their historical levels.

Tom Thibodeau, professor of Global Real Estate Markets and Academic Director at the CU Real Estate Center in Boulder, last week at an economic forecast sponsored by Kentwood Real Estate, said that he expects interest rates to remain low for the long-term.

“And by that, I mean my lifetime,” Thiboedeau said. He said the U.S., with $16 trillion in debt, will do everything possible to keep rates as low as possible. He noted that last year the inflation rate was only 1 percent to 1.5 percent. Typically, the government wants to raise interest rates to slay the inflation dragon.

Liniger said while the average mortgage rate since he launched RE/MAX in Denver in 1973 was 7.8 percent, compared with about 3.4 percent last year, homes continued to sell even when rates were sky high.

“Remember, in the early ‘80s, mortgage rates were in the 15 percent and 16 percent range,” Liniger said. “People still bought homes and then refinanced when rates came back down.”

With the dramatic drop in mortgage rates, homeowners have continued to refinance, he said.

As rates have spiraled down, a lot of homeowners have refinanced three or four times,” Liniger said. “But some of them are still underwater on their homes. That is, their homes are not worth as much as their mortgages. There is no way most people are going to sell their homes for a loss, especially when their mortgage payments are so low.”

That has led to what is believed to be the fewest number of unsold homes on the market in the Denver area since the 1970s.

“Denver has a huge shortage of homes, as do other parts of the country,” Liniger said. “Demand for housing is strong, which is causing values to rise.”

He also said demographics will favor home buying in the future.

“The number of kids living at home with their parents has seemed to have peaked, thank God, which means they will be head out and buying their first place,” Liniger said.

“There is a lot of pent-up demand for housing right now and that is going to continue,” Liniger said. “Legal immigration is going to have a powerful influence on that.”

Liniger said that the media has been playing a big role in the “sky is falling” mentality about home sales.

The American press is becoming as sensational as the European and British press,” Liniger said. “The news motto is: If it bleeds, it leads.”

The day he spoke with InsideRealEstateNews.com, there was a story about someone firing at a Maserati from a Range Rover SUV in Las Vegas.

“You watch the coverage of this and you would think it is not safe to go out on the Strip, or it is not safe to be walking on our streets,” Liniger said. “It is just sensationalism. Even the Wall Street Journal now runs these stupid headlines. Much has been made about this concept of 500 channels available on TV. With so much news 24-7, there is this monster to feed, so they fill it with sensational and irresponsible crap.”

A number of years ago, Liniger displayed various covers of TIME Magazine on a screen at a RE/MAX conference, each one predicting the death of the American Dream of owning a home.

“Everyone kind of nodded their heads, and then I flashed the dates on covers, 1973, 1982, 1987 and so on. It was 40 years of predicting the end of the the real estate market.”

Not that Liniger is pollyannish about real estate.

“People used to think that real estate only goes one way – up,” Liniger. “But it ebbs and flows. We saw the crash coming.”

He noted that in 2005 and 2006, he and Margaret Kelly, the CEO of RE/MAX, were warning about a housing bubble on national TV programs and in the national and local press.

“I had RE/MAX agents all across the country yelling at me. Dave, you’ve got to stop saying this. People are going to stop buying if you keep talking that way. I was like, you’re an idiot if you think you can keep buying homes and keep flipping them to an even bigger fool. If you are going to buy a home and live in it for five or 10 or 15 years and raise your family there, you will be fine. If you are buying a home as a piggy bank to make a quick buck, you are probably going to get burned.”

Does that mean Realtors who said, “it’s always a good time to buy,” were part of the problem that led to the worst housing crisis since the Great Depression?

“Look, agents are always going to sell homes to people who want to buy homes in any market. Lenders are always going to make loans to people who want to buy homes and can qualify. Builders are going to construct homes for people who want a new home.

“The thing you have to remember is that the market is never as good as people who make money selling a home say it is. And it is never as bad as people who say the market is nothing but doom and gloom and will never recover. The truth is some place in the middle.”

Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.