Optimism is Contagious

In a recent interview for “Housing News Report”, Jonathan Smoke – Chief Economist at Realtor.com – says that, “2016 will be our best year since 2006, but also our most normal year since 2000. We’ve lived through 15 years of abnormal trends, and after working off the negative effects of the housing bust, we’re finally seeing signs of more normal conditions.” What? Is this man psychic? How does he know this? While I’m confident Old Smokey (I’m pretty sure that was his nickname back in college) is a pretty smart guy and he didn’t get his job as Chief Economist on his looks alone, let’s look at some of the factors he most likely reviewed to make his feel-good statement.

According to Freddie Mac, fixed-rate 30-year prime mortgages were priced at 3.87% at the end of 2014 and 3.96% for the week of Dec. 24, 2015. At the end of 2014, there were MANY people predicting that rates would be at 5% or higher by the end of 2015. If only there were some way to bet on things like this. Hmmm.

What were some of the things that kept the interest rates in check and should continue to keep them in check, you might ask. Here are just a few:

• Uncle Sam’s Drunken Cousins: Last year, there was a lot of negative interest in the European and Asian markets – this meant there were boatloads of capital available to underwrite U.S. mortgages.
• Suntans & Treehugging: With warmer weather and more people driving more fuel-efficient cars, oil demand has been significantly reduced – and with more sustainable, renewable energy options becoming available, demand for oil should continue to stay below levels we’re used to seeing. While this is a huge problem for energy producers, it’s a major boon for U.S. consumers. This means more disposable income for you and me.

And for the BIGGEST reason Mr. Smoke and others are optimistic:

• The White House Lease is Up: Yes, it’s an election year. While we all have to put up with listening to people who have never held a regular job tell us how they’re going to improve our lives better than the two cats standing on either side of them in a debate, there’s a silver lining to all of that – everyone and their dog who has ANYTHING to do with the economy moves heaven and earth to NOT rock the boat while the country chooses who’s going to be the Next American Idle.

This should be a VERY GOOD year to sell real estate: stable interest rates (fingers crossed), more disposable income, and rent prices rising faster than house prices – too bad yesterday’s Super Bowl 50 loser didn’t have a scouting report this good!