What does the housing drop mean for the local economy?

My first 10 years in the business world were spent in the home furnishings textile industry. We would always figure out how big or small of a line to come out with for the following season based on how robust the housing market forecast was. (See the last 4 years of housing sales in the month of June) More on that in a moment.

Last weekend I had my Kramer driving on the edge moment with my new EV. First of all, I love my EV! When you go EV, the world gets kinda weird. You see a high gas price and fill up (charge) for free at some station and think to yourself, thank goodness that’s not me anymore. You feel like you are in an exclusive club although the Tesla people seem like the superior ones. I got my $7,500 credit since it was a few months back. My Mom (who warned me about getting an EV) I thought was just dumb. The only issue was it took forever to get my fast charger installed at the house. I purchased the Jaguar I Pace Crossover and it only has a 220-mile range. While it’s fine most of the year, it’s not great for long drives. Plugging in at the wall (level 1) only gives me 2-3 miles per hour of charge so I did not have a full tank. Anyhow, on a recent shopping trip my wife said let’s take the Jag since we need the cargo space. I was a bit nervous but there were chargers at IKEA at Sunrise and on the Turnpike so why not.

Some non-electric car took one of the spaces at IKEA (the jerk) and I could not charge. We still had 60 miles left so I figured I’d just do it on the turnpike rest stop. I miscalculated! OH NO! My Mom was right, and I shouldn’t have gotten the EV!!!! I’m the dumb one . I thought there was a station closer, but it was all the way to West Palm Beach. 24 miles left on the EV dashboard and 19 miles to go to rest stop. With 10 miles left to the rest stop, everything started shutting down. Lights, AC, even top speed. 7 miles left on the dash and 4 miles to go (the mile count is off with everything on). I’m in complete panic (Jade our daughter is now freaking out in the back), but we pulled in with 2 miles to spare. Plenty of super-fast chargers and we made it. BIG PHEW!!!!. My Mother-In-Law slept soundly through the whole thing in the back seat.

In a normal world, my EV charger for the house would have been installed a month ago and I would have been fully charged when we left on our trip. Supply chain problems and getting a qualified electrician to come out to the house have backed things up. However, the electrician (I have a great one at a reasonable price if you need one for this btw) told me that for the first time in over a year, his schedule is clearing. Other businesses have finally started loosening up as well. A sign of things to come in the job market was when I put an ad out for an administration sales position. I thought I’d have no applicants and shockingly was flooded with them. Lots from the mortgage and tile industry as refinances stopped and 30% less closings mean 30% less work.

If you take it a step further, and go back to my experience in the fabric drapery industry, we projected that if there were lots of housing starts, than 9 months from now (how long it takes to build a home), there would be lots of demand to fill those homes up with drapes. It’s the same for tons of products. Furniture, lighting, cutlery, bathmats, televisions… you name it. As housing goes so goes the rest of the economy. Some of what we are seeing from a housing slowdown has not reached that far out. Lots of new homes that were ordered a year ago have not been completed yet. Those after products are still in high demand, but as we get further down the line, those industries just like next seasons drapery projections should be lower. Not drastic changes, but it’s good in that industries will catch up on the supply problems that are plaguing it right now.

This is not the big short market where sales crashed to 805 transactions in June of 2008. Prices have maintained and sales are at 2020 levels. Inflation is also causing a natural catch up on prices in a way meaning that if home prices don’t go up, prices really are dropping since they are not rising with the rate of inflation. Nationally it’s been reported that we have an inventory housing shortage because there just wasn’t enough building going on in the decade following 2006. Locally, it’s even worse as we are completely out of land east of I95 and the Turnpike. Builders are also shelving some products north and west of here.

As a business owner, in housing, we are seeing more normalcy. Our sales at Echo Fine Properties as a company are up from last year due to high growth within Echo. Inventory overall is still extremely low and demand of people moving to Florida is high. Other industries are already following suit and that should ease some pricing and supply chains throughout. All of this is healthy and was bound to occur in the post pandemic world. My best forecast is that we will see similar volume to 2019 numbers through the rest of the year. Equilibrium will have caught up more with all industries and demand of natural buyers, renters, and relocations (with low new construction supply) will mean for a solid 2023. The offseason (now) has historically been the best time to buy as there are less bidding wars and more time to negotiate due to less buyers in town. Understanding seasonality and using it to your advantage is key. Like planning my EV charge, it’s best to plan and charge up ahead of schedule before the frenzy and panic buying starts.

Jeff Lichtenstein is owner and broker of Echo Fine Properties, a luxury real estate brokerage selling real estate in Jupiter and homes in Palm Beach Gardens, Florida. He has 20 years of real estate experience, has closed over 1,000 transactions, and manages over 70 agents in a non-traditional model of real estate that mimics a traditional business model. Some publications he has been quoted in.

Feel free to ask him a question directly at [email protected] including a complimentary real valuation of your home.

Posted in Finance, Jeff's Journal, Market Updates & Statistics, Real Estate Tips on August 19, 2022 at 10:52 am.

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40Days | 67%

Active InventoryAI

5,257 Homes | 54%

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What does the housing drop mean for the local economy?