Robert Reffkin was recently on Squawk on the Street talking about the housing market. Last Wednesday, the Federal Reserve decided to pause the continued interest rate hikes they started imposing late Spring of 2022. With over 10 interest rate hikes in the past year, Jerome Powell has finally acknowledged that Inflation has been easing but the job is not done. Therefore, there remains a cloud over the economy on if the Federal reserve will increase rates one more time before the end of the year.
But Mr. Reffkin, Founder and CEO of Compass, mentioned that there will always be the 5 D's that continue the cyclical Real Estate Market:
- Diapers - People start families, requiring them to move up, regardless of interest rates. If you have a 1-bedroom condo and have a child, although the baby can stay in the room for the first year, eventually they need their own space. Not to mention, the number of toys and a desired yard to let them get their wiggles out.
- Diplomas - Students graduate and need a place to live. Although they often think of themselves as penniless, the amount of financing options to purchase homes, (Refer to our last blog regarding down payment option) they can buy as they begin their career in the Big City.
- Diamonds - Maybe two people who get married both bought places while they were single through one of those great financing options we have revealed in other blogs. If that is the case, more often than not they will desire to purchase something together. Even more likely, they will keep one as an investment property while selling the other to buy something bigger for the two of them and their future family.
- Divorce - Unfortunately, with the rate of divorces hovering around 50% of all households, there will always be inventory due to this unfortunate situation.
- Death - Although no one wants to address it, it is a part of life and often times involves the sale of a home. Whether it is the parents, and the property is in a Trust for the children; there was no Will, and the property is now in Probate; or there was an untimely passing requiring the next to kin to sell the property, a death usually results in the sale of a property.
Although a lot of these situations are sad and difficult on families, they do keep inventory at a moderate level. When inventory is low, houses still sell because with no supply and greater demand, a bidding war will ensue.
To watch Robert Reffin's interview, click on The 5 D's