- Q&A with Lane Hornung.
- Hornung is CEO and founder of 8z Real Estate.
- There is much to be thankful for in the housing market.
Mortgage rates remain near historic lows. Home values are rising, but the rapid rates of appreciation are moderating. The economy is picking up.
Given that Thanksgiving is right around the corner, Lane Hornung, founder and CEO of 8z Real Estate, and John Rebchook of InsideRealEstateNews, are going to continue the tradition of talking about what consumers can be thankful for this holiday season.
Unlike some years, this year it doesn’t take too much effort to dig into portions of the housing market that are as inviting as a turkey dinner and pumpkin pie.
John: Let’s start with interest rates that are surprisingly low.
Lane: No one predicted that a year ago, myself included. That said, most economists think they are more likely to rise in 2015 than to fall or even stay the same. Who knows? Maybe everyone will be wrong again, and a year from now we’ll still be talking about how low they’ve remained.
John: Still, low rates are a nice treat for buyers.
Lane: It’s nice to have low interest rates and home values that are up. That’s really a win-win for buyers and sellers, since they both see a benefit.
John: Please, elaborate.
Lane: What do sellers care about? Getting a high price for their homes. What buyers really care about is that they can afford their monthly payment. They care about their purchasing power. With interest rates so low, they have much more purchasing power, even though prices are up.
John: When we talked about what consumers could be thankful for during the Great Recession, it seemed a bit like we were pulling on a wishbone and hoping we ended up with the big piece. Now, it seems more like a distant memory.
Lane: Consumers don’t make the biggest purchase of their lives if they are worried about their jobs. We can all be thankful that the underlying economy is stronger today. We are seeing positive job growth and lower unemployment, especially in places like Colorado and Northern California.
John: Any silver lining to the low inventory numbers?
Lane: I think the market is trending in a way that sellers realize now is a great time to list their homes. Also, builders are stepping up to the plate and offering new homes which is helping to alleviate the inventory shortage. And they aren’t just in outlying suburban locations. Increasingly, builders are taking on redevelopment projects in some of the most sought-after neighborhoods in the inner core.
John: How about Millennials? Some people said they don’t share the American Dream of homeownership.
Lane: Or, the story goes, they can’t afford to buy a home. Anecdotally, at 8z we are selling a lot of homes to Millennials. I am thankful for that, not just because I am in the business. I like that because I think savvy young people who buy a home today are setting themselves up well for the future. Owning a home has been, and will remain, one of the best long-term methods of building a solid financial base and ultimately a prosperous life.
John: Speaking of that, one thing that has gone largely unnoticed is that the inflation rate is 1.7 percent and home prices in places like Denver have been rising 6-7 percent and even more in places like California.
Lane: That is a huge differential and means homeowners are accruing real, not nominal, gains in their personal net worth. I’m guessing that people have never experienced such a big differential between home price appreciation and the inflation rate. One in which housing is outpacing inflation by 4 or 5 percentage points.
John: What else can we be thankful for, Lane?
Lane: In Colorado, the market has passed its previous peak, as we head for the second record year in a row. In Northern California, and many other places across the country, home values are nearing where they were at the peak based on some nice appreciation this year. And that means many homeowners are more secure in life, and I am thankful for that.
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 Co. and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.