The opinions reflected in this blog entry are those only of Gerri Willis and do not reflect the opinions of Better Homes and Gardens® Real Estate.
You may recognize Gerri Willis from Fox Business Network (FBN) as the host of “The Willis Report,” a primetime program that covers the leading financial and political stories of the day and their impact on consumers.
Prior to joining FBN, Gerri served as the personal finance editor for CNN Business News and hosted the weekly half-hour program entitled “Your Bottom Line,” which focused on ways to save Americans money and the economy’s effects on personal finance.
Below are questions provided to Gerri by the FOX Business Network to obtain Gerri’s thoughts on the state of the housing market, how the housing market has changed since the financial crisis and her outlook over the next five years.
- How has the housing market changed since the Financial Crisis in 2008? [FBN]
[Gerri] The housing market is changing – and for the better. Foreclosures have tanked, prices are up and, in some markets there are even bidding wars taking place. These days, the debate on business news channels like Fox Business is whether a new real estate bubble is forming, not whether the market is still going down.
Low interest rates and low prices have encouraged buyers to line up. To be sure, a significant number of these buyers are investors and the market has yet to attract the usual proportion of first-time home buyers, but that may well be the next stage of this evolving market.
- As we look back to the past five years, what have we learned from the financial collapse? [FBN]
[Gerri] That’s a big question. There were lessons from the collapse and lessons from the reaction to the collapse. The fall of Lehman Brothers Sept. 15, 2008, was a long time in coming but its roots can be traced to the easy money and profits from the housing bubble that seduced an entire country.
Home buyers overloaded on mortgage debt in a market where anyone who could fog a mirror was granted entry. The nation’s largest investment banks and mortgage operators couldn’t believe their good luck in the collateralized mortgage market and sunk ever more money into ever more risky bets.
In the end, greed on all sides dealt the fatal blow. But over the past five years, we’ve been driven by a different emotion – fear. People who might have been homebuyers were fearful to get in a marketplace where prices had cratered. If no one had confidence, why should they? Banks have been gun-shy too, mostly afraid of what regulator might Bigfoot them next. That fear caused individual investors to miss out on the biggest opportunities in the stock and housing markets in 20 years.
The lessons are not to listen to the herd, do your own research, and, for goodness sakes, don’t let emotions make your most important investing decisions.
- What is the outlook on the housing market in the next five years to come? [FBN]
[Gerri] Five years is a long time to forecast, but I believe the market forces shaping up will be far different than the ones that shaped the financial crisis that started five years ago. The long period of super low interest rates is coming to an end. Rates have already moved 120 basis points higher in the past six months. Growth in the U.S. market has moderated. These days two percent to three percent GDP growth is considered by many to be expansive. Federal debt and higher taxes will continue to cap economic output.
The good news is that demand for housing is building. Household formation is expanding. All of that is good news for the housing market. We can only hope that the cycle won’t contain the super highs and super lows of the last one. I don’t believe it will.
Many years ago when the pain of the market crash was the deepest, a friend of mine told me that housing would never be a popular investment ever again because of the pain homeowners were feeling. I told him then and I still believe it now that the desire for homeownership is something many Americans feel and feel deeply – it is rooted in our communities and in our vision of us.
