(00:04) [Music] Welcome to Dearwood Realty YouTube channel. I'm John Schink, founder and manager of Dearwood Realty in St. Louis, Missouri. Tonight's going to be kind of interesting. We're going to look at an article, and I've sort of felt this with my buyers, and that is the feeling of wishing for a recession just so that you can afford to buy a house. We'll kind of go over it and talk about it, and I have some thoughts at the end. But let's get into the article here. It showed up on Yahoo. I've got a link to the article in my description. It says the situation is dire: nearly two-thirds of potential home buyers would welcome a recession if it meant lower mortgage rates. But here's what they're missing. I totally get this sentiment. It's very fascinating. With mortgage rates creeping into the 8% mark and home prices still high, many potential buyers are sitting on the sidelines until their prospects improve. These buyers can't do anything about this, right? The rates are up; they either buy a very expensive house right now or hope to find one that's more affordable later. The problem with that is the house prices keep going up, which makes it even worse due to inflation.

(01:31) The situation has become so unsustainable that 64% say they wouldn't even mind a recession if it helped them better afford a home by lowering mortgage rates, according to a Credit Karma study. When a majority of potential home buyers are wishing for a recession so they can afford a mortgage, you know the situation is dire. Although prospective buyers are feeling desperate, a recession could bring other changes to the economy that could potentially impede homeownership as well. Roughly 82% of respondents in the Credit Karma survey conducted by the Harris poll say the country is grappling with an unprecedented housing affordability crisis, and another three in five who've never bought a home don't think they'll ever be able to do so. I think this is a little bit off. The idea that you could not afford a house in your entire life is not reasonable. If you have a job at some point and you save at some point, something will go right for you. It's just not right now.

(03:08) It's also crucial to keep in mind that during a recession, employment typically goes through a slump as well. In that case, you can reasonably expect more layoffs and pay cuts, which could mean some hopeful buyers may not be able to afford or even secure a mortgage. According to the survey, nearly two in five respondents said they'd be willing to take on a side gig or restrict or stop spending on non-essential purchases if it would improve their chances. Some said they'd lock in a mortgage at a high rate in hopes that they can refinance later if rates go down, and others are considering getting an adjustable-rate mortgage instead, which usually comes with a lower rate but resets periodically depending on certain economic benchmarks like the Fed rate. If few are even moving in with family and friends for the first time to build up savings or are putting important life events like getting married or having kids on hold.

(04:47) When interest rates fall, you can expect mortgage rates to follow, meaning buyers may be able to secure mortgages with cheaper monthly payments. But that doesn't necessarily increase the availability of homes for sale, which has been quite low for a while. With lower supply, you can expect prices to stay high as well. There are simply not enough homes for sale, Lawrence Yun, NAR National Association of Realtors Chief Economist, said this summer. The market can easily absorb a doubling of inventory. It's also crucial to keep in mind that during a recession, employment typically goes through a slump as well. In that case, you can reasonably expect more layoffs and pay cuts, which could mean some hopeful buyers may not be able to afford or even secure a mortgage.

(06:11) There are other options when it comes to investing in real estate without buying a physical property as well. For example, you could buy shares in rental homes and vacation rentals for a much smaller minimal investment compared to purchasing a home. Or you could look into commercial real estate and own shares of institutional-quality properties leased by major retailers. Let me know what you think. Seriously, do you think it's okay to wish for a recession? If you don't know the consequences, you don't know what should end up happening, say you have no idea and you didn't really know what a recession means, then I can see that. But if you did know, are you really hoping that others will lose their jobs and encounter economic hardships so that you can buy a home? Let me know in the comment section. Thank you for watching, thank you for listening, and I'll catch you on the next one.