Spring 2021 Market Update

It’s been more than a year since I’ve sent out a personal email, so why not make my first update in 2021 be on April Fools Day (see below for something you may not know about this date)?  It was basically a year ago today that the world seemed to turn upside down, and in April’s Fools fashion, played a giant prank on all of us with a virus that we are still trying to figure out.  Life as we knew it changed, and in many ways will never be the same.  So what does that look like right now, at least from a financial and real estate perspective, and how have things changed over the past year?

Rates   After reaching a peak of almost 5% in mid-2018, the 30 year fixed rate steadily dropped throughout 2019.  By late 2019, many who purchased in 2018 were looking at refinancing.  Then Covid hit and the Fed did what the Fed has always done (at least in my 30 years of originating mortgages) and that was to instigate measures to lower rates to help stimulate an economy that just got hit in the head by a 2X4.  We saw unprecedented rates as the 30 year fixed rate dipped down to a low point of 2.5%.  As you can assume, this brought a massive wave of refinancing and millions of customers have been able to lower their monthly payments and set themselves up with a very healthy budget.  Now that we are seeing improvements to the economy and we have a new administration in the White House, we are finally seeing the pendulum swinging back to a little higher rate environment.  Currently the 30 year fixed rate is in the 3.25% range.  So we are well off the lowest levels, but still in a very comfortable range for anyone buying a home right now.

Real Estate  Values are up.  CoreLogic reports mortgage-carrying homeowners saw their equity grow by more than $1.5 trillion in 2020 compared to 2019--an average gain of $26,300 per homeowner for the year!  Contracts are being written at 10% above listing price, buyers are agreeing to pay the difference between appraisal and offer price out of pocket, buyers are paying title, and the chances of getting contracts accepted with a contingency are remote.  If you are a seller, you are golden.  If you are a buyer, you are likely in for a bumpy road.  Many have given up on the possibility of finding an existing property and are turning to new construction – often times to simply avoid the hassles of the search (and builders are much more likely to accept a contingent contract since it will take a while to build and they figure if the deal falls through for some reason, there will be another buyer ready to snap up the property when complete).  And the number of people moving to the Nashville area is still mindboggling – great for our economy, but an additional challenge for local buyers.  I’ve been working in this real estate market for 30+ years and have never seen a higher demand than what we have currently.

Financial Markets  Here is a snapshot of the Dow Jones Industrial Average () over the past year.  On April 1st a year ago, the Dow was right at 21,000.  A year later we are over 32,000.  That means if you invested $100,000 a year ago in a mutual fund that simply mirrored the DJIA, you’d have $150,000 today.

This is another one of the huge drivers of the demand for real estate in our market.  While the low rates are still the number one force behind the surge in the real estate markets, the added investable cash created by the past year’s run up in the financial markets has buyers feeling much more optimistic about their ability to buy a more expensive house – they have more money to be able to do it thanks to this recent bull market!

Other than coronavirus, we also learned new terms in the past year like forbearance, stimulus checks and PPP.  The “powers that be” get a pat on the back for once again spending money we don’t have, jeopardizing the financial security of our country (we now have a national debt of ~$28 TRILLION), to get us back on track today.  Not sure I consider that a success, but the economy is rolling again.  We lost greats like Kobe Bryant, Kirk Douglas, John Lewis, Chadwick Boseman, Gale Sayers, Ruth Bader Ginsburg, Mac Davis, Sean Connery, Eddie Van Halen, Alex Trabek and Chuck Yeager, just to name a few of my favorites.  I do think we continue to make strides as an American people in eliminating barriers – particularly those based on color and sex.  At least I hope so.  So like any other, it’s been a year that saw many successes and failures.  But unlike most, it is certainly a year we will never forget.

Likely Origin of April Fools' Day

Some historians speculate that April Fools’ Day dates back to 1582, when France switched from the Julian calendar to the Gregorian calendar, as called for by the Council of Trent in 1563. In the Julian Calendar, as in the Hindu calendar, the new year began with the spring equinox around April 1. 

People who were slow to get the news or failed to recognize that the start of the new year had moved to January 1 and continued to celebrate it during the last week of March through April 1 became the butt of jokes and hoaxes and were called “April fools.” These pranks included having paper fish placed on their backs and being referred to as “poisson d’avril” (April fish), said to symbolize a young, easily caught fish and a gullible person.

And now you know…..