“There’s a 55% increase in the American dream.”
Again and again, Lawrence Yun, chief economist of the National Association of Realtors, hammered home that point in a speech Wednesday morning during NAR’s legislative meeting at National Harbor, Maryland.
Yun’s 55% figure was arrived at by subtracting the monthly mortgage payment of a home bought for $400,000 at a 3% mortgage rate from a $480,000 home, purchased at the roughly present 5.1% mortgage rate.
The home bought at the 3% interest rate, the level of interest paid at this time last year, translates to a $1,686 monthly payment on a 30-year mortgage. The $480,000 home, which factors in the level of year-over-year home appreciation, pencils out to a $2,606 monthly payment.
Yun’s example was part of an at times dour morning of sessions at the Realtor’s yearly legislative conference that is set to conclude Friday with a meeting of the organization’s sprawling Board of Directors. Already, the trade group, which often spends more annually on federal lobbying expenditures than any other organization, acknowledged that tax credit and grant measures to improve home inventory are likely headed nowhere fast in Congress.
“People will be squeezed out,” said Yun, NAR’s chief economist since 2008. Specifically, Yun predicted a 9% decline from the about seven million existing and new home sales in 2021.
The economist also predicted home prices would continue to rise, as demand – whether it be from more people entering traditional homebuying age or the rise of work from home – shows no signs of going down, and inflation continues to rise.
In looking at problems and possible solutions, Yun went big. He cheekily included a PowerPoint slide called, “Who stole the American dream?” that featured pictures of Joe Biden, Vladmir Putin, Federal Reserve Chairman Jerome Powell, and logos of gasoline companies.
Gas soared 48% in the past year, Yun said, citing federal data on consumer costs.
“It hurts our members far more than the general population,” the economist claimed, as real estate agents must travel from place to place for home showings and viewings.
“How do we get our oil prices lower? We have to increase supply,” Yun said, shortly thereafter adding: “Even though we have sky-high oil prices, America is not drilling as much” as the country should.
“So long as we don’t drill,” he added, inflation problems will persist. The economist did state, “We all love clean energy,” quipping to audience laughter that an electric car is like a golf cart because it’s quiet.
U.S. oil drilling has actually soared 62% year-over-year, according to Baker Hughes, an oilfield services company.
Oil drilling thoughts aside, Yun expressed a frustration that agents have echoed throughout the event.
Some people not in real estate mistakenly assume that agents are reaping the reward of skyrocketing prices, said Felicia Mares, an agent in Oakland who spoke at a morning session.
In fact, Mares said, it is extraordinarily stressful right now to do deals and work with buyers spooked by escalating prices. In the Bay Area, homes are going 30% over listing price, the agent said.
The still escalating prices in the Bay is notable, given the much-publicized trend of tech workers able to work from home and moving out of Northern California. The trend sparked chatter among agents that prices in markets like Spokane, Washington are going up because of this migration.
“I know a lot of you have experienced people from my state moving to yours,” Mares said to laughter. “And I’m sorry about that.”