As we step into the fifth year of WFG's much-anticipated Quarterly Economic Outlook webinar series, the platform continues to gather momentum as a vital hub for dialogue and discourse among title insurance and settlement services professionals. The webinar draws a diverse audience -- from real estate agents and brokers to title agents and mortgage lenders across the country -- providing them with a unique opportunity to engage directly with WFG's Chairman and Founder Patrick Stone and co-presenter Economist Dr. Bill Conerly.
In the Q4 edition of this engaging webinar, Stone delves into the heart of the current economic climate and its potential ripple effects on the real estate market, covering hot-button issues such as interest rates, inflation, recession, and government debt. Stone paints an optimistic picture of the real estate market, backed by encouraging signals like boosted home purchase sentiment, a surge in new home sales, and robust homeownership demand among millennials and Gen Z. The session wraps up with Stone's intriguing thoughts on the potential for a refi boom and factors that could shift his perspectives about the market. Here is a distilled summary of the key observations and forecasts Stone shared during WFG’s 4th Quarter Economic Outlook webinar.
Opening Commentary from WFG Chairman and Founder Patrick Stone
- Patrick Stone, along with Dr. Bill Conerly, found preparation for this presentation challenging due to the high degree of uncertainty and numerous hard-to-define issues.
- Stone highlights political dysfunction, global political issues, ongoing wars, and questions about our ability to fund our government as major challenges.
- Despite these hurdles, Stone sees signs of a turn in the real estate market, albeit subtle.
- There has been a significant change in attitude towards buying homes, with fewer people waiting for home prices or mortgage rates to drop.
- The Home Purchase Sentiment Index has shown a rise, indicating a more positive sentiment towards buying homes.
- Sales of newly constructed homes have increased and November saw the first annual growth in newly listed homes in 17 months.
- Still, Stone acknowledges, there is a long way to go.
- There has been a shift in real estate purchase demographics, with single women buying more homes than single men.
- Stone posits that home prices will not decrease due to the strong demand and limited supply.
- He anticipates an increase in sales next year and a decline in mortgage rates.
- He acknowledges a shift in societal norms with people becoming more settled and moving less frequently.
- The real estate market may see a boost from the large population of Millennials and Gen Z, who express strong desires to own a home.
- Stone is optimistic about mortgage rates dropping in 2024 and beyond and maintains a positive outlook for the real estate market.
- Despite his overall optimism, he does express concern over the amount of commercial real estate debt held by small banks.
- The commercial real estate sector has a lower delinquency rate than residential loans, but he acknowledges concerns over the office space market due to the pandemic.
- He sees no issues with the multi-family sector, though construction has slowed down.
- Stone expresses concern about the level of US government debt and the upcoming challenges with servicing this debt.
Question and Answer Segment
What’s driving your interest rate predictions? Is it the US economy, Chinese debt, wars? What other things are you looking at that we should be looking out for?
Patrick Stone’s response:
- Patrick Stone notes that the abatement of inflation has a positive impact on interest rates.
- He emphasizes that we are already part of a global economy, with the US being the key player.
- Globalization and an overall slowing down of the global economy could cause a decrease in demand, including in the US.
- Stone predicts a minor recession in the next year, triggered by negative economy trends in both Europe and China.
- This recession, while not overly painful, is expected to cause a decrease in rates, including mortgage rates.
Will home price affordability come back into a better range anytime soon?
Patrick Stone’s response:
- The return to home price affordability will not happen quickly.
- Historical comparison: In 1985, the median home price in the US was $86,800, approximately three times the median income. Interest rates were around 12%.
- Current situation: Today, the median home price is about $400,000, which is six times the median income. Despite lower interest rates, the cost of homes compared to the median income precludes many from buying.
- The issue: Home prices need to return to a more steady appreciation rate of 1-3% annually. Furthermore, there should be an increase in income and savings over time to improve affordability.
- Current trend: The cost of homes compared to the annual income or savings is still prohibitive for many potential homebuyers. Some need assistance, while others need increased income before they can afford to buy a home.
- Prediction: It may take three to five years to see significant progress towards improved home affordability.
We are seeing consequences of 12 years of artificially low rates in housing. So what do you think it will do to stocks?
Patrick Stone’s response:
- Most US corporations did not take undue advantage of the low rates.
- US corporations are well-financed and well-capitalized, placing them in a strong position.
- Low rates have boosted the ability of US companies to function and compete internationally.
- Reactions to global events differ between large US corporations and mid-size corporations and investors. Large corporations operating in the global marketplace tend to be more negative due to the slowing global market.
- On the other hand, mid-size companies and investors have a positive outlook.
- The low rates have been beneficial overall for businesses, without resulting in excessive or risky corporate debt.
- Overall, the low rates have proven to be beneficial for corporate America.
How do you see the upcoming 2024 elections possibly affecting the housing market?
Patrick Stone’s response:
- Patrick Stone doesn't foresee major impacts on the housing market in the 2024 elections unless there is a sweeping majority.
- With balanced representation in the House and Senate, Stone expects little change in the housing market.
- If Democrats gain significant control over Congress, Stone anticipates more liberalized laws or initiatives to make mortgages more accessible.
- He recalls the excesses prior to the Great Recession, such as stated income loans, and hopes the market won't return to such practices.
- Stone supports changes to the mortgage market and a variation in product types, but not extreme liberalization.
- At this time, Stone doesn't expect either party to seize a significant majority and strongly influence policy. Consequently, he predicts minimal election impact on the housing market.
Do we expect to see a lot of foreclosures next year?
Patrick Stone’s response:
- Patrick Stone does not foresee a significant increase in foreclosures next year.
- There are currently no alarming factors or causes for concern.
- A significant recession and substantial job loss would be necessary to drastically increase the foreclosure rate, which Stone does not anticipate.
- Approximately 50% of homes possess 50% equity, suggesting a more stable housing market than before the great recession.
- The current mortgage landscape does not mirror that which led to the Great Recession, with fewer "junk loans" in circulation.
- Over the past five years, two-thirds of all mortgage recipients had a FICO score over 760, a score that is less likely to lead to a foreclosure.
- Stone does not anticipate any factors that could dramatically impact the foreclosure rate in a negative way.
Do you project a refi boom and, if so, when?
Patrick Stone’s response:
- Patrick Stone does not foresee a refi boom, attributing this to the slow decrease in rates.
- He predicts refinancing for many mortgages made in the last few years at higher rates.
- This process, according to Stone, will be progressive and gradual, not an instantaneous event.
- The reduction of mortgage payments will occur because people will leverage the lower rates.
- Despite the anticipated dip in rates, Stone doesn't expect them to drop quickly enough to trigger a significant one-time event.
- He believes this transition will take some time.
Let me ask you the $64,000 question. What would make your opinion about the outlook change?
Patrick Stone’s response:
- Patrick Stone believes international tension and ongoing wars are significant factors affecting the global economy and, by extension, the United States.
- He notes that the media often underplays the impact of the global economy on the US.
- Stone is optimistic about potential economic growth if geopolitical issues abate and wars come to an end.
- He looks forward to seeing positive changes in the economy in the coming year if these issues are resolved.
What will make 2024 a happy new year?
Patrick Stone’s response:
- From a business perspective, Stone indicates that a drop in mortgage rates to under 6% in 2024 would significantly enhance his happiness.
Watch the video replay of WFG’s Q4 Economic Outlook webinar here, or download the full transcript here.
About Patrick Stone
Patrick Stone is Chairman and Founder of Williston Financial Group, the Portland, Oregon-based parent company of several national title insurance and settlement services providers, including WFG Lender Services and WFG National Title Insurance Company. Stone’s lengthy career in real estate and related services includes C-suite level positions with three public companies and serving as a director on two Fortune 500 boards. His senior executive management positions include nine years as president and COO of the nation’s largest title insurance company, chairman and co-CEO of a software company, and CEO of a real estate data and information company. Stone also served as vice-chairman of Metrocities Mortgage, a 2005 top-20 mortgage lender, and as chairman of The Stone Group, an Austin, Texas-based tenant-represented brokerage company. In 2013, Inman News named him one of the year’s “100 Most Influential People in Real Estate.” Stone received HousingWire’s coveted Vanguard Award for lifetime career achievement in 2019 and again in 2021, was recognized in 2019, 2020 and 2023 as a Lending Luminary by Progress in Lending, and was the recipient of October Research’s annual Leadership Award in 2020.