It's a great day at Jose Perez and Associates. My name is Jose Perez. I'm here to give you an update for the month of March. Now guys, today we're going to talk about fake news, particularly in real estate. I'm just tired of seeing all the doom and gloom articles out there, so we took our time to decipher some of them and want to share those with you guys today.
Are people using their homes as ATM's?
Today we're going to decipher some of the fake news out there. We're going to start with this article. This article here talks about how people are now using their home as an ATM because cash-out refinances are at an all-time high. Take a look at this chart, if you notice back in 2006, 89% of people out there were doing cash-out refinances. It was at an all-time high and right now, yes, we are at an 81% cash out refinance. So a lot of people are refinancing and cashing out. So that story will sell some website visits, it will also sell some newspapers and so on and so forth. But it doesn't really tell you the full story. What we did is we deciphered that story and here's what we found out. We found out that it's absolutely accurate.
There is 81% of homeowners out there doing cashout refinances it's at an all-time high. What we also found out is that the amount of money that people are tapping into their home equity for, is at a low. Last time we were at about $321 billion in cash out refinances back in 2006 right now, we're estimating about $55 billion. If you compare that to $321 that shows you that people have matured, people have learned from the mistakes and the things we went through in 2006 and we are no longer just going in there and cashing out for the purpose of buying a Louis Vuitton purse or buying a car, or whatever. People are tapping into their equity for good reasons, like paying for their kids' college tuition, maybe doing an addition or some upgrades to their house. So again, you read that article and at first glance, it just seems like, "oh my God, we're all using our homes as ATM's". But when you look further, you realize that as Americans we have matured and we're a lot better with our money.
Is there a Recession coming?
This second article, it talks about the recession and how it's coming and it's going to be worse than ever. Read the title on that. "Will the US Fall into a Recession by the End of 2020 Half of Business Economists Think so". Here's the thing, a recession does not mean that the property values are going to go down or that the real estate market is going to crash. In fact, recession's have sometimes been good for real estate. Our last recession was caused by the real estate market and that's the reason why the real estate market was affected by it.
Take a look at this chart. Let me show you what it did in the past. If we're to look at the last five recessions we went through the first one we went up, property values went up 4.5%. On the second one, they went up 1.9%. On the third one it went down 0.9%, not even 1%. The fourth one property values went up 4.8%. and the last one, property values got hit like 13.9% nationwide. And guess what? That's because the recession was caused by the real estate market.
Here's the thing, if we go into recession at the end of 2019 or 2020 the way folks are expecting it to happen, it's not going to be a hit. It potentially won't even affect the real estate market because it's not going to be caused by the real estate market.
I hope that makes sense and I hope you can see that these articles out there are focused on selling click-throughs on website visits, or they're also focused on selling newspapers.
Want more information?
If you're looking for an accurate market analysis of your particular neighborhood, please reach out to us. We'll be happy to provide that for you. As you can see, we understand the market to a great deal and we want to share that information with you. We cover from LA to Palm Springs. Feel free to visit our website www.joseperezandassociates.com or give us a call at (951) 444-5811 we'd love to chat with you. Until next time. Have a great day!