Blog with MAE Capital

Real Estate Summer Lull or Something Else?

August 5th, 2021 2:14 PM by Gregg Mower

“ I heard the market was red hot and homes are selling for more than the asking price”  this is what we are hearing daily from our clients.   Is this true anymore or is something else going on now?     All you hear on the TV and Radio is that the Real Estate Market is red hot, but is this really true?  In my 37 years in the Real Estate and Mortgage business, I have never seen a market quite like this one we are experiencing.  I also hold a degree in economics and have not seen anything like this in history. So what’s going on, one minute things are going crazy with low interest rates and more buyers than sellers.  The next minute everything slows down.  

This is happening across the board, interest rates are still at historic lows, but it appears everyone that has had the opportunity to refinance and take advantage of the low rates has done sone so.  Or is it that, like COVID, we are about to experience a second wave of people refinancing and buying homes.  We have never seen such a market in the past so there is no real model to judge this on.   But we have seen a dramatic slow down in home buying and refinancing over the last 3 months.  In California, they lifted the mask mandate, and it appears those that have been locked down decided to all go on vacation at the same time.   

We generally see a summer lull in Real Estate, however, this one is far more pronounced than ever before.   It has me and others asking if this lull is just that or is it something else?  I do see this as the market seeking an equilibrium point, not an all-out bust.  I have seen big news in the markets before and the way the markets tend to react to this is by over-correcting on both sides.  I would liken this to stretching a rubber band and letting it go, it will spring up then back down then reach an equilibrium point.  Right now, in the real estate market, we are seeing a bounce down or a slowdown after it was super-heated.

Another factor that we have not seen before is that California was shut down for 15 months and people were told to stay inside and not travel.  In a normal year, people would travel all time of the year but the last year and a half have been far from normal.  What we saw during the pandemic was people staying home not traveling, so when they were told they could now go out and about they did and they are still are taking vacations and traveling not thinking about Real Estate or their mortgages.   Couple that with their kids being out of school they are taking full advantage of the time they have out of their houses seeing family they have not seen in months and enjoying the outdoors while the weather is good.  

Understanding how humans think is a big part of economics.  So as schools reopen in August and kids head back to the classrooms that will leave the parents back home and working with the time to think about their living situation and their financial situation.  Coupled with low-interest rates that the Federal Reserve says they are keeping low until 2023 I believe that the Real Estate market will pick up again by the end of August and into September, but it will not be at the pace we saw during the height of the pandemic thus the bounce.  Another interesting phenomenon that will be discontinued in September is the extra $300 a week in unemployment benefits.  This will send people back to the workforce, but will the economy be able to accept all of these long-term unemployed folks that took advantage of the system?  As an employer, I would not hire an able-bodied person who chose to stay on government assistance rather than work as that shows me laziness and I think this will be a big issue in the high-end job market.  Entry-level jobs like Walmart, retail jobs, and restaurant workers will be happy to take these folks back into the workforce as those workers can easily be replaced if they don’t work out.  But I digress, those entry-level workers will not be homebuyers in the immediate future but having them back in the workforce will allow management and owners to realize a better income level so those folks will be the benefactor of the ability to purchase real estate.  So my crystal ball says that by September we should start to see Real Estate pick back up for all the reasons that are not the standard reasons for Real Estate to boom or bust.  To get started today and beat the rest of the crowd call one of our Real Estate Professionals to get pre-approved for a home loan and start your search as new listings hit the market you will be there first.  If you have been waiting for your credit score to improve before refinancing start now ahead of the crowd Interest Rates are still in the 2’s and 3’s.   Call MAE Capital Real Estate and Loan to get started at 916-672-6130.


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